Thailand's naphtha-based petrochemicals margins were set to come under pressure due to crude oil price rises in Q416. Although this will benefit ethane-based producers, 2017 is likely to see a stabilisation of naphtha-ethylene spreads. Going into 2017, we anticipate demand growth from the construction and automotive sectors, but this will be softened by slower economic growth.
Chemicals operations are being weighed down by higher costs of feedstock naphtha and lower production volumes. Prices of naphtha - the main feedstock for petrochemical production in Thailand's naphtha crackers - had solid gains going into Q416, depressing product spreads that had been strong in previous quarters. However, this should also ease up pressure on ethane-based cracking, which has struggled to compete with naphtha-based derivatives.
Thailand's chemicals trade balance is going further into deficit as the petrochemicals sector struggles with competitiveness. In the first 10 months of 2016, the chemicals trade deficit totalled THB64.3bn, representing a rise of 61.3% y-o-y with exports falling 2.0% y-o-y to THB572.9bn and imports rising 2.0% to THB637.2bn. With plans for greater naphtha use from existing refineries and downstream diversification, Thailand is attempting to address the problems and support future growth while defending margins. Although naphtha is rising in cost, in the long-term it still holds some cost advantages that Thai producers are keen to exploit.
According to Thailand's production indices, in 10M16, ethylene output declined 2.9% y-o-y, but propylene was up 7.4%. In the polymer sector, there was strong growth in polypropylene (PP), polystyrene and PVC output which grew 6.0%, 6.5% and 1.8% respectively, but polyethylene was down 0.2% reflecting reduced feedstock. A scheduled 40-day shutdown of SCG's 800,000tpa Map Ta Phut cracker in Q416 should help tighten the market, although not sufficient to reverse the decline in margins. PTT Global Chemical (PTTGC) continues to invest in production capacity expansion in Thailand. This includes expanding its Map Ta Phut petrochemical hub in Rayong province, where capacity is expected to increase by as much as 9% in 2016.
In spite of issues of competitiveness in the domestic market, Thai petrochemicals producers saw their global profits grow strongly in Q316 with profit margins increasing on the back of lower costs and changes in foreign exchange. In Q316, SCG posted a 57% y-o-y surge in net profit to THB14.1bn, supported by strong performance in its core chemicals business which posted a 74% y-o-y surge in third-quarter profit to THB11.9bn. Meanwhile, PTT reported a stronger net profit of THB26.97bn (USD762.5mn). This compared with loss of THB26.6bn in Q315. PTT's profit from its natural gas business, which accounted for 36% of operating income, doubled to THB15bn, while earnings from petrochemical and refining business jumped 87% y-o-y.
Adding value will be crucial to advancing the value of Thai petrochemicals and securing the value chain in order to support downstream end-use industries. IRPC is looking into producing high rubber PP for the automotive sector with a new unit expected to come online by end-2017.
PTTGC is planning to add capacities of 500,000 tonnes per annum (tpa) of ethylene, 261,000tpa of propylene and 100,000tpa of C4, including butadiene from 2020, utilising 1.5mn tpa of naphtha from its refineries that is currently utilised by SCG. It is also set to double the company's linear low density polyethylene (LLDPE) production capacity to 800,000tpa from 2018.
In BMI's Q117 Asia Pacific Petrochemicals Risk/Reward Index, Thailand's score has been revised downwards by 0.2 points to 68.3 points due to a decline in its market risk score. Country risk has suffered in recent quarters due to a worsening external environment, while market risk has suffered from the declining competitiveness of the country's petrochemicals industry. However, it retains its sixth place, behind Taiwan and ahead of India.
The Thailand Petrochemicals Report has been researched at source, and features BMI Research's market assessment and independent forecasts for key petrochemicals sub-sectors. The report also analyses the impact of regulatory changes, recent developments and the background macroeconomic outlook and features competitive landscapes comparing companies by products and services, sales, market share, investments, projects, partners and expansion strategies.
BMI's Thailand Petrochemicals Report provides industry professionals and strategists, sector analysts, trade associations and regulatory bodies with independent forecasts and competitive intelligence on the Thai petrochemicals industry.
- Benchmark BMI's independent petrochemicals industry forecasts to test other views - a key input for successful budgetary and planning in the Thai petrochemicals market.
- Target business opportunities and risks in the Thai petrochemicals sector through our reviews of latest industry trends, regulatory changes and major deals, projects and investments in Thailand.
- Assess the activities, strategy and market position of your competitors, partners and clients via our Company Profiles (inc. KPIs and latest activity).
BMI Industry View
Summary of BMI’s key industry forecasts, views and trend analysis, covering the petrochemicals markets, regulatory changes, major investments, projects and company developments.
Industry SWOT Analysis
Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the petrochemicals sector and within the broader political, economic and business environment.
BMI Industry Forecasts
Historic data series (2009-2013) and forecasts to end-2019 for key industry and economic indicators, supported by explicit assumptions, plus analysis of key risks to the main forecasts. Indicators include:
- Energy: Oil production (‘000 b/d), oil consumption (‘000 b/d), net oil exports (‘000 b/d), gas production (bcm), gas consumption (bcm), net gas exports (bcm), oil refinery capacity (‘000 b/d).
- Petrochemicals: Ethylene capacity (‘000 tpa), ethylene production (‘000 tpa), ethylene consumption (‘000 tpa), polyethylene capacity (‘000 tpa), polypropylene capacity (‘000 tpa), polyvinyl chloride capacity (‘000 tpa), polyolefins consumption (‘000 tpa).
- Oil Products Prices: Price forecasts for all major oil-based products (USD/bbl) at major global energy trading hubs.
- Economic: Nominal GDP (USDbn), real GDP growth (%), GDP per capita (USD), population (mn), unemployment (%), exchange rate (against USD).
BMI’s Petrochemicals Risk Reward Index
BMI’s Risk Reward Indices provide investors (both corporate and financial) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors, with each position explained.
Structure, size and value of the industry sector; overview of the industry landscape and key players; assessment of the business operating environment and the latest regulatory developments.
Industry Trends & Developments
Evaluation of company and sector-wide developments, including key projects (as well as expansion plans), latest company financial details and proposed international ventures.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
Global & Regional Market Overview
Analysis of the key trends driving the global industry, including worldwide output/capacity and demand analysis across ethylene, polyethylene, polyvinyl chloride, polystyrene, polyethylene terephthalate and polypropylene. The regional analysis looks at the implications of local and global trends on specific company activity.
Sub-sectors covered by the Petrochemicals Reports include:
Oil & Gas, Oil Refining, Olefins (ethylene, propylene), Polyolefins (polyethylene, polypropylene), Polyvinyl Chloride, Polystyrene
Please note – not all country Reports cover all sub-sectors – see website for details.
The Petrochemicals Market Reports are based on a network of primary sources, such as multilateral organisations (ACC, APLA, Cefi c, ICCA, ICMA), national chambers of commerce and industry, national statistical offi ces, government ministries and central banks, and multinational companies.
*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.