Daily Call

REP- 300 July 5, 2019

Petrochemical Margins Chemicals

PVC Margins are at an 8-Year High
PSF Margins During Jun’19, Polyvinyl Chloride (PVC) margins went up by 28.6% MoM to USD 513/ton.
USD/ton PSF Margins However, Purified Terephthalic Acid (PTA) and Polyester Staple Fiber (PSF) margins
Average Margins registered a decline of 11.9% MoM and 6.2% MoM to settle at USD 190/ton and USD
370
340 308/ton, respectively. The change in margins will have positive implications for Engro
310 Polymer and Chemicals Limited (EPCL) while negative for Lotte Chemical Pakistan Limited
280 (LOTCHEM) and ICI Pakistan Limited (ICI).
250
Exhibit: Petrochemical Margins
220
(USD/ton) Jun-19 Jun-18 YoY May-19 MoM 1HCY19 1HCY18 YoY
190
PSF Margins 308 266 16.0% 329 -6.2% 329 264 24.6%
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18

Apr-19
Jul-18

Feb-19
Mar-19

May-19
Jan-19

Jun-19

PVC Margins 513 301 70.3% 399 28.6% 416 317 31.4%
PTA Margins 190 203 -6.5% 216 -11.9% 164 156 4.8%
Source: Source: Bloomberg, Yarn Merchants
Source: Bloomberg, Yarn Merchants Association
Association, AHL Research
PSF Margins down by 6.2% MoM
PSF margins decreased by 6.2% MoM during Jun’19 (USD 308/ton). The downturn in
PVC Margins margins was due to 6.9% MoM decline in PSF prices. However, the prices of PTA and Mone
USD/ton PVC Margins Ethylene Glycol (MEG) also declined by 9.0% MoM and 2.6% MoM, respectively. Decline in
Average Margins PTA prices was witnessed due to soft buying trends in major markets like China coupled
555
510 with bearish upstream Paraxylene (PX) prices. In addition to this, the persistently dull
465 regional buying sentiment pushed down the MEG prices. During 1HCY19, PSF margins
420 rose by 24.6% YoY to an average of USD 329/ton.
375
330 PVC margins are at an 8-year high
285 PVC margins are at an 8-year high, increasing by 28.6% MoM to USD 513/ton during Jun’19.
240
The rise in PVC margins was led by 19.2% MoM decline in Ethylene prices. In addition to
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18

Apr-19
Jul-18

Feb-19
Mar-19
Jan-19

May-19
Jun-19

this, PVC prices inclined by 3.4% MoM. Ample product availability and persistent buying
sentiment pushed down the Ethylene prices. During 1HCY19, PVC margins jumped up by
Source: Bloomberg, AHL Research
31.4% YoY to an average of USD 416/ton.

PTA Margins PTA margins down by 11.9% MoM to USD 190/ton

PTA margins went down by 11.9% MoM (USD 190/ton). The decline in margins was owed
PTA Margins
USD/ton Average Margins to 9.0% MoM decline in PTA prices. However, Paraxylene (PX) prices also declined by 8.0%
230
MoM. During 1HCY19, margins went up by 4.8% YoY to an average of USD 164/ton.
210
190 Exhibit: Petrochemical Margins During Month of June
170
(USD/ton) Jun-15 Jun-16 Jun-17 Jun-18 Jun-19
150
130
600 513
110
500 419
90
400
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18

Apr-19
Jul-18

Feb-19
Mar-19

May-19
Jan-19

Jun-19

308 301
300 247 262 271 266 261
203 190
200 135 120
Source: Bloomberg, AHL Research 79 111
100
-
PSF Margins PVC Margins PTA Margins
Analyst Source: Bloomberg, Yarn Merchants Association, AHL Research
Rao Aamir Ali Outlook & Recommendation
[email protected] PVC and PTA margins are currently hovering around USD 539/ton and USD 206/ton,
+92-21-32461106 respectively. However our long term assumptions are set at USD 325/ton and USD 140/ton,
respectively. We have a “BUY” call on LOTCHEM and EPCL with a Dec’19 target price of
www.arifhabibltd.com
PKR 25.3/share and PKR 46.3/share, respectively.

1
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 Daily Call
July 5, 2019
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