Petrochemical prices get boost in July: Al Rajhi Capital

Prices of most petrochemical products improved in Saudi Arabia during July following weak seasonal demand during Q2 2017, Al Rajhi Capital said in its monthly report on petrochemicals.

Polymers gained last month, as high-density polyethylene (HDPE) rose by 2.8 percent month-on-month (MoM), low-density polyethylene (LDPE) (+1.7 percent), and polypropylene (+3.3 percent), primarily due to higher upstream feedstock costs and improved demand.

“In August, Polymer price trends are likely to gradually pick up especially in Asia as sentiment of downstream buyers in India improves post GST implementation,” the brokerage firm added.

Titanium dioxide (TiO2) prices increased by 8.2 percent MoM to the highest level in 40 months at $2,825 per ton in July, with its feedstock Rutile unchanged, which is a positive sign for Tasnee’s near-term earnings.

Methanol prices kept flat in July, while urea prices extended their downtrend, declining by 2.6 percent MoM, which could impact the near-term profitability of Saudi Arabia Fertilizers Co. (SAFCO).

State-owned Saudi Aramco raised natural gas liquids (NGLs) prices for August, after a 24 percent rise in US Propane price in July.

“While the sharp increase in NGL price for August could increase feedstock costs of APCC and Yansab, going forward we expect NGLs prices to decline in September on weak demand during the summer season due to lower heating demand,” Al Rajhi Capital said.

Local Propane prices were raised by the major oil producer for August by $75 a ton, or 22 percent month-on-month to $420 per ton - the first increase since February 2017 which came ahead of the brokerage firm and market expectations.

Butane price also rose to $460 per ton, up 26 percent MoM.

“Based on our tracker model, we expect SIPCHEM and Tasnee to move higher in the near-term on improved product spread, while SAFCO and SABIC could trade lower, driven by lower spread,” analysts at Al Rajhi Capital said.