Daily Call

REP- 300 March 15, 2018

Petrochemical Margins Chemicals

PTA Margins up by 7% MoM in Mar’18
PSF Margins Margins Remained Green in Mar’18
PSF Margins Based on two (2) weeks data, margins of Polyester Staple Fiber (PSF), Polyvinyl Chloride
USD/ton Average Margins
330 (PVC) and Purified Terephthalic Acid (PTA) registered a growth of 11.5% MoM (USD
300 275/ton), 1.8% MoM (USD 358/ton) and 7.2% MoM (USD 167/ton), respectively. The
270 monthly changes in margins are positive for ICI Pakistan Limited (ICI) and Lotte Chemical
240 Pakistan Limited (LOTCHEM).
210
Exhibit: Petrochemical Margins
180
150
(USD/ton) Mar-18* Mar-17 YoY Feb-18 MoM 1QCY18 1QCY17 YoY
Apr-17

Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17

Feb-18
Mar-18

PSF Margins 275 289 -4.7% 247 11.5% 254 224 13.5%
May-17
Jun-17

Jan-18

PVC Margins 358 407 -12.0% 352 1.8% 325 389 -16.6%
PTA Margins 167 103 61.7% 156 7.2% 150 101 48.4%
Source: Source: Bloomberg, Yarn Merchants Source: Bloomberg, Yarn Merchants Association, * two weeks data
Association, AHL Research
PSF Margins up by 11.5% MoM to USD 275/ton
Based on the latest two (2) weeks data, PSF margins have registered a growth of 11.5%
PVC Margins
MoM (down by 4.7% YoY) to an average of USD 275/ton during the month of Mar’18. The
PVC Margins rise in margins was witnessed amid downturn in MEG (-4.4% MoM) prices which offset the
USD/ton Average Margins
500 impact of higher PTA prices (+1.4% MoM). On the other side, PSF prices also inched up by
450
1.5% MoM, thus expanding the margins by 11.5% MoM. During 1QCY18, margins
400
350 registered a growth of 13.5% YoY.
300
PVC Margins up by 1.8% MoM to USD 358/ton
250
200 After making a low of USD 234/ton in Jan’18, PVC margins have jumped up to USD 358/ton
150 based on two (2) weeks data of Mar’18. Data reveals that the margins are up by 1.8% MoM.
Nov-17
Dec-17
Apr-17

Jul-17
Aug-17
Sep-17
Oct-17

Feb-18
Mar-18
May-17
Jun-17

Jan-18

Although, Ethylene prices were also up by 0.6% MoM to USD 1,213/ton, the rise in margins
was driven by higher PVC prices (up by 1.0% MoM) to USD 970/ton on average compared
Source: Bloomberg, AHL Research to USD 960/ton in Feb’18. During 1QCY18, margins registered a decline of 16.6% YoY.

PTA Margins up by 7.2% MoM USD 167/ton

PTA Margins
During Mar’18 (based on two weeks), PTA margins displayed an increase of 7.2% MoM to
PTA Margins USD 167/ton (up by 61.7% YoY). The rise in margins was owed to higher PTA prices (1.4%
USD/ton Average Margins
170 MoM) tagged with stable Paraxylene (PX) prices at USD 948/ton. During 1QCY18, margins
160 registered a growth of 48.4% YoY.
150
140 Exhibit: Petrochemical Margins During Month of March
130
(USD/ton) Mar-15 Mar-16 Mar-17 Mar-18
120
500
110 407
100 400 358
289 275
Apr-17

Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
May-17

Jul-17

Feb-18
Mar-18
Jun-17

Jan-18

300 261 252

223 206
200 167
Source: Bloomberg, AHL Research 88 87 103
100
-
PSF Margins PVC Margins PTA Margins
Analyst Source: Bloomberg, Yarn Merchants Association, AHL Research
Rao Aamir Ali
Outlook & Recommendation
amir.rao@arifhabibltd.com
PVC and PTA margins currently hover around USD 352/ton and USD 173/ton, respectively
+92-21-32461106
and will settle at USD 325/ton and USD 120/ton in the longer run, we view. We have a “BUY”
www.arifhabibltd.com call on LOTCHEM with a Dec’18 target price of PKR 11.0/share.

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 Daily Call
March 15, 2018
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 Daily Call
March 15, 2018
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