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1、 2566THAILAND INDUSTRY OUTLOOK 2023-25PetrochemicalsKrungsri ResearchApril 2023Subscribe UsAuthorThian ThiumsakSenior AnalystT+662 296 4742 All material presented in this report,unless specifically indicated otherwise,is under copyright to Krungsri Research.None of the material,nor its content,nor a

2、ny copy of it,may be altered in anyway,or copied to any other party,without the prior express written permission of Krungsri Research.This document is based on public information believed to be reliable.Nevertheless,Krungsri Research would not affirm the accuracy and completeness of this information

3、.We accept no liability whatsoever for any direct or consequential loss arising from any use of this document or its content.Information,opinions and estimates contained in this report are our own,which are not necessarily the opinions of Bank of Ayudhya Public Company Limited and its affiliates.It

4、reflects a judgment at its original date of publication by Krungsri Research and are subject to change without notice.DisclaimerFor research subscription,EXECUTIVE SUMMARYRecovery in the tourism sector and the reopening of China will support domestic economic growth through 2023,and this will feed i

5、nto stronger demand for petrochemical products.Ongoing expansion in both the domestic and global economies will then add to demand growth and widen spreads through 2024 and 2025.However,headwinds blowing against the industry through the next few years will include:(i)potentially worsening geopolitic

6、al tensions and an accompanying rise in risk;(ii)lingering shortages of semiconductors;(iii)volatility in global oil markets;and(iv)the risk of oversupply,which may then depress both prices and spreads.These factors may then drag on sales growth and keep profits below prior trends.Recovery in the to

7、urism sector and the reopening of China will support domestic economic growth through 2023,and this will help to underpin improving conditions for the Thai petrochemicals industry.In 2024 and 2025,Thai producers should be able to maintain satisfactory levels of turnover thanks to ongoing growth in t

8、he domestic and international economies.This will translate into strengthening demand,and given this,spreads should widen.Thai players will also look to expand vertically,integrating their operations from upstream through to downstream production and on to related industries.This expansion will take

9、 place both at home and abroad(especially in high-potential markets in China,Indonesia,and the CLMV nations),and this will then help to smooth production planning.However,despite this positive outlook,Thai players are exposed to risk arising from the cost of inputs,which is expected to remain elevat

10、ed.In addition,access to feedstocks may become problematic since natural gas reserves in the Gulf of Thailand will be depleted in the near future.Operators will thus potentially face problems with securing access to inputs and,should these need to be imported,it is likely that manufacturers will hav

11、e to pay higher costs for both natural gas and crude oil.As such,margins will likely weaken.Krungsri Research viewKrungsri Research3Krungsri Research4Another factor that may limit the growth of the sector is the inward-looking policy of governments in major export markets,especially in China,Indones

12、ia and Vietnam,focusing on increasing self-reliance in petrochemical production.At the same time,these countries also benefit from access to resources and rapidly strengthening demand for plastic products.Thai producers may thus need to adjust their business strategies by switching to a policy of en

13、gaging in joint partnerships with existing players in these markets.In addition,manufacturers will be able to reduce their exposure to competition on price by moving out of the commodity-grade market and instead shifting up the value chain to produce more specialized products.Over the medium-to long

14、-term,some Thai producers may switch to the production of environmentally-friendly bio-plastics since Thailand has abundant domestic sources of the biomass inputs(e.g.,cassava,palm,and sugarcane)that can be used as alternative feedstocks.These high added-value products are currently gaining in popul

15、arity worldwide due to their ability to help reduce environmental problems,but as a further incentive to manufacturers to change production,the Thai government is also making entry to this market more attractive by offering investors targeted tax breaks.Overview5Krungsri ResearchThe petrochemical ma

16、nufacturing business is normally a large-scale operation that employs many complicated and tightly interconnected industrial processes.It involves huge capital investment to establish a petrochemical complex,which requires the use of advanced technology,and the sites that host these complexes need t

17、o have access to a wide range of industrial-scale utilities.Given this,the payback period on investment is relatively long.Generally,the petrochemical industry is exposed to cyclical supply-demand conditions and prices,as the desire to exploit economies of scale encourages large and intensive invest

18、ment to meet anticipated future demand.Decisions to expand existing facilities or invest in new sites are usually made when prices for petrochemicals are high,and this would normally be when an expanding economy is feeding demand for these products or when there is a supply shortage.But construction

19、 of a petrochemical complex normally takes 3-7 years,and if the anticipated demand fails to materialize upon completion,there would be excess supply in the market.Global data suggest each natural cycle lasts between 6-9 years,but shocks in the world economy could also affect the supply and demand si

20、des of the equation.Recently,it has thus been harder to identify cyclical movements within the industry at a global scale.PetroleumConsumer ProductsPetrochemical IndustryUpstream PetrochemicalsIntermediatesDownstream PetrochemicalsFeedstock PreparationFigure 1:Petrochemical Value ChainSource:Krungsr

21、i ResearchKrungsri Research6Investments in large global petrochemical complexes are typically made by players in the oil sector that use petroleum products as feedstock.However,some petrochemical output can also be used as feedstock or as primary ingredients in a wide range of industrial processes.T

22、he manufacturing process for petrochemicals can be divided into four main stages:Stage 1:Manufacturers of feedstock typically use products from the petroleum sector,including natural gas,condensates(a product of gas distillation),and naphtha(from the distillation of crude oil).About half the petroch

23、emical production capacity uses naphtha as feedstock,which is especially common in facilities in Asia and Europe.In North America and the Middle East,gas is the preferred feedstock because these areas are rich in natural gas deposits.In addition,recent technological developments are allowing organic

24、 products such as sugarcane,cassava and palm to be used as raw material in the production of bioplastics,and investment in these sectors is expected to rise in the future(Figure 3).Stage 2:Upstream petrochemical industries take feedstock and use them to produce precursor or preliminary petrochemical

25、 products.These may be divided into two groups according to their molecular structure:(i)olefins,which include methane,ethylene,propylene and other chemicals that have a base structure formed from four carbon atoms(so-called mixed C4 chemicals);and(ii)aromatics,which include benzene,toluene and xyle

26、ne,and are used as inputs in the manufacture of other petrochemical products.Stage 3:Intermediate petrochemical industries consume upstream products,both olefins and aromatics,and process or combine them with other chemicals to produce intermediate products.Some major products in this industry are v

27、inyl chloride and styrene.These are sold to downstream industries.Figure 2:Petrochemical Industry CycleAuthorize new plantsNew plants come onlineDivest valuable businessContinue in hopeDo nothingOversize investmentOversupplyDefer new investmentSelling assetSupply shortageHigh marginsBegin of competi

28、tive devaluationStart regainingpricing powerLosing pricing powerBegin of investmentDemand exceeds supplySource:Nexant,Krungsri ResearchFigure 3:Global Petrochemical Feedstock Consumption in 2017Ethane34%Propane8%Butane5%Naphtha45%Gas Oil 5%Others 3%Source:CMAIFigure 4:Global Upstream Petrochemical C

29、apacity in 2021Ethylene32%Propylene20%C4 3%Benzene11%Toluene 3%Xylene13%Methanol18%Source:Bloomberg,Krungsri Research(Total Capacity=481 MTA)7Krungsri ResearchStage 4:Downstream petrochemical industries take upstream and intermediate goods and use these to make finished products for use in related s

30、ectors(Figure 5).Products consumed by the downstream petrochemical industry can be sub-divided into four groupsPlastic resin is the most commonly-used product in downstream industries,including packaging,automotive manufacturing,construction material,and consumer goods.The most important plastic res

31、ins are polyethylene,polypropylene,polyvinyl chloride(PVC),acrylonitrile butadiene styrene(ABS),polyethylene terephthalate(PET),and polystyrene(PS).Synthetic fibers,for example polyester and polyamide or nylon fiber,are mostly consumed by the textiles and packaging sectors.Synthetic rubber/elastomer

32、s are used in the manufacture of automotive parts,tires,and consumer goods.Examples include styrene butadiene(SBR)and butadiene(BR).Synthetic coatings and adhesive materials,which include polycarbonate and polyvinyl acetate,are used in construction and several other industries.Figure 5:Global Demand

33、 for PetrochemicalsPackaging28%Electronic19%Construction14%Automotive 12%Medical 7%Security 6%Houseware 4%Footware 3%Others 7%Source:Nexant,Krungsri ResearchSource:Deutsche BankTable 1:Long-term Demand Sensitivity to Economic GrowthProductGrowthEthylene1.5*GDPPropylene2.0*GDPBenzene1.0*GDPXylene1.5*

34、GDPHDPE1.5*GDPLDPE2.0*GDPPP1.5*GDPFigure 6:Petrochemical ComplexPackagingConstructionPackaging,automotive,consumer goods,electronicTireAutomotive,consumer goods,electronicPackaging,consumer goods,electronicPackaging,TextileVinyl chlorideAcrylonitrileStyreneCumenePTAPhenolEthylenePropyleneButadieneBe

35、nzeneTolueneXyleneAromatic PlantCrackerEthanePropaneNaphthaReformateLPGNGLLPGGasolineKeroseneDieselGasoilBitumenOilCondensateGas SeparationRefineryHDPE=High Density PolyethyleneLDPE=Low Density PolyethyleneLLDPE=Linear Low-density PolyethylenePVC=Polyvinyl ChloridePP=PolypropyleneBR=Butadiene rubber

36、SBR=Styrene-butadiene rubberABS=Acrylonitrile Butadiene StyrenePS=PolystyreneEPS=Expanded PolystyrenePET=Polyethylene terephthalate8EPANatural GASHDPELDPELLDPEPVCPPBRSBRABSPSEPSPolycarbonatePolyester/PETKrungsri ResearchSource:Krungsri Research9Krungsri ResearchThe choice of feedstock made by the in

37、dividual operator for a particular production process is strongly influenced by the desired output because each feedstock has a different hydrocarbon composition and will produce different petrochemical outputs.For example,using natural gas to produce ethylene yields about 80%ethylene and 20%other p

38、roducts,whereas using naphtha yields only 30%ethylene and 70%other products(Figure 7).The major cost item in the sector is feedstock which comprises 60-70%of the total production cost.Power and transportation account for another 15-20%,and the remaining 15-20%is attributable to fixed costs.Hence,the

39、 production cost is largely dependent on the prices of oil and related products,making this a cost-based industry and producers who are able to keep these under control will have a competitive advantage.More specifically,production overheads,or cash cost,will depend on the type of feedstock used,the

40、 production technology employed,and access to feedstock.Therefore,feedstock management is also an important factor in determining costs,and locating production facilities on sites with easy access to raw materials and to markets will reduce transportation overheads and improve competitive advantage.

41、Source:Macquarie ResearchFigure 7:Yields by Feedstock020406080100Gas-basedCoalOil-basedEthyleneBTXPropyleneButadienePygasOthers%Table 2:Feedstock ComparisonPrimarySourcesFeedstockRouteYields of FeedstockEnergy Uses(GJ/tonne)ProConNaturalGasMethane,LPG,Naphtha15-80%5-14Relatively cheaper;good yields

42、of C-2No product variety;uneconomical bulk transportationCrude OilNaphtha50-70%5-6Wide product varietyRelatively more expensiveCoalMethanol,Naphtha40-70%6-8Relatively cheap;abundant of raw materialsHigh investment;environmental concernsSource:Krungsri Research10Krungsri ResearchThe ability to manage

43、 complex investments is another important factor in determining business success.It would allow manufacturers to better manage costs,reduce exposure to risks arising from fluctuations in product prices,and plan production more effectively.Product flexibility also permits manufacturers to quickly adj

44、ust production to meet changing demand,while large-scale operations allow manufacturers to benefit from economies of scale and reduce the marginal cost of production.The petrochemical market is extensive and globally interconnected.Hence,prices are normally based on a combination of production costs

45、 and supply-demand dynamics on global exchanges.Global prices are largely determined by laggard-driven pricing,which means the market price is set by the cost of producing the last unit consumed.When the cost of the feedstock used in producing that last unit changes,this will thus have a direct effe

46、ct on prices of output.Research shows prices of upstream and downstream petrochemical products have a 7085%and 40-70%correlation,respectively,with the cost of feedstock.The spread of a particular petrochemical product refers to the difference between the product price and the cost of raw material;th

47、is represents the gross profit margin for each product.However,most downstream petrochemical industries have a product chain stretching from upstream products through intermediate to downstream outputs,so when calculating profit,we must consider spreads for all the products in the supply chain.Sourc

48、e:CMAIFigure 8:Feedstock by Region(2017)Figure 9:Structural Costs and PricesSource:KPMG020406080100WorldNorthAmericaWesternEuropeNEEuropeSE Europe MiddleEastNE AsiaSE AsiaOthersGas OilNaphthaButanePropaneEthaneMarginsFixed CostsUtility CostsRawMaterialCostsPriceUSD%11Krungsri ResearchProfitability i

49、s normally reflected by gross integrated margin(GIM).This is the difference between the total value of petrochemical products less total cost of production.Hence,the GIM depends on the spreads of all the products manufactured,which could rise or fall according to an operators cash cost and capacity

50、utilization.However,product mix will vary for different production sites and for different operators,which makes is complicated to assess competitiveness by simply comparing GIM.This has prompted the use of cash cost as the preferred metric for assessing competitiveness,specifically cash cost for et

51、hylene because it is the worlds most commonly produced upstream product at 32%of total global petrochemical output,and is used as feedstock in a wide variety of processes.Source:KPMGUSD/tonneQDemand=SupplyMarketPriceCash CostsFigure 10:Pricing in Petrochemical Industry12Krungsri ResearchThe global p

52、etrochemical sector:In 2020,the global petrochemical sector had a market value of around USD 530bn,and that is expected to grow and exceed USD 700bn in 2025(source:Grand View Research)1/.China was both the biggest producer and consumer of petrochemicals in 2021 at 29%of global output and 28%of consu

53、mption.The United States was the worlds single largest source of ethylene,hosting 19.5%of global production capacity,followed by China(19.3%)(Figure 11).Worldwide,petrochemical products are used in packaging(28%of output),electronics(19%),construction(14%),automobiles(12%),and a range of other relat

54、ed sectors(27%).Demand for petrochemical products typically grow 1-2 times faster than the general rate of growth in the economy.Figure 11:Thailands Capacity of Ethylene Ranked the 9th in the World 5.5010203040United StatesChinaSaudi ArabiaSouth KoreaIranIndiaJapanGermanyThailandCanadaRussiaTaiwanSi

55、ngaporeBrazilNetherlandsUAEFranceQatarUnited KingdomMexico20182021MTASource:Bloomberg1/Grand View Research:Market Estimates and Trend Analysis(2021)Thai petrochemical sector:In 2021,the Thai petrochemical sector had a total production capacity of 35 million tons,the largest in the ASEAN region and 1

56、6th largest in the world.In that year,they produced 13.4 million tons of upstream products,8.5 million tons of intermediate goods,and 13.3 million tons of downstream outputs.Naphtha is the main feedstock(68%of total feedstock consumption),while 69%of production capacity is for olefins.Over 80%of Tha

57、i upstream and intermediate production is for domestic use as inputs for further downstream processes.45%of the downstream output is consumed within Thailand.The primary consumers of downstream products in Thailand are the packaging sector(38%of the total),textile(18%),automobile(12%),electronics(11

58、%),and others(21%).The remaining 55%goes to the export markets(largely in the form of plastic pellets or nurdles),the most important of which are China(31%),Japan(10%),Indonesia(10%),Vietnam(9%)and India(8%).Source:PTIT05,00010,00015,00020,00025,00030,00035,000199119931995199719992001200320052007200

59、9201120132015201720192021UpstreamIntermediatesDownstreamFigure 12:Thailands Petrochemical Capacity13Krungsri ResearchThere are two major players in the domestic petrochemical sector:PTT group with 54%market share,and SCG group with 29%share.These two have been competing to gain competitive advantage

60、s in manufacturing and marketing by continually investing in related businesses in Thailand and overseas.PTT is linked to upstream industries,including oil drilling,natural gas production,oil refining,and the production of a wide variety of petrochemical products.The SCG group has stakes in companie

61、s that consume petrochemical inputs,such as manufacturers of consumer goods and building materials.The smaller players are also active in the sector but tend to focus on the production of intermediate and downstream goods.They include Thai companies,for example Vinythai,and international operators o

62、r joint ventures with foreign companies such as Indorama,Exxon,and MingDih.However,Thailand has limited natural gas reserve,which is expected to be depleted in the near future.This has prompted changes in the domestic petrochemical sector,including:Increasingly switching to using naphtha,a crude oil

63、 product,as a replacement feedstock.This will lead to a change in the upstream product mix.Developing a greater range of new downstream products,especially higher value-added goods,and at the same time,moving away from price competition.These are in line with the third phase of the development plan

64、for the sector for 2004-2018.Expanding production facilities in countries with access to raw materials and a sufficiently large domestic market,including Indonesia,China,and America.An example is PTT Global Chemicals investment to construct a petrochemical complex in the United States to exploit the

65、 supply of cheap shale gas in the region.Ethylene41%Propylene24%C43%Benzene11%Toluene 3%P-xylene14%O-xylene 1%Mixed Xylene 3%Figure 13:Thailand Upstream Petrochemical Capacityin 2021Source:PTIT(Total Capacity=13,222 KTA)Table 3:Thai Petrochemical by ProducersEthylenePropyleneButadieneBenzeneTolueneX

66、yleneStyrenePTAPEPVCPPSBR/BRABS/SANPS/EPSPETAcrylonitrilePTTGC IRPC TPXHMCThaiABS Thai styrenicsPTT AsahiMOC ROC SSMCBSTSiam MitsuiTPESPESSLCTPCTPPSiam PolystyreneSPRCIndoramaTPTVinythaiStyrolutionMingh DhiExxon PTT GroupSCG GroupOthersCompanyTotalPTT GroupSCG GroupOthersSource:PTITSituation14Krungs

67、ri ResearchIn 2021,the petrochemicals industry recovered significantly,driven in large part by the easing of the Covid-19 pandemic following the successful worldwide rollout of vaccination programs.This resulted in a rebound in economic conditions in the major economies of 6.0%in 2021 from a contrac

68、tion of-3.3%in 2020.For the petrochemical industry,this meant that growth rates jumped from 1.6%in 2020 to 5.7%a year later as strong pent-up demand in the construction,automobile,and packaging industries was released.However,the world economys journey to recovery hit a major roadblock in 2022 with

69、the outbreak of war in Ukraine,and thanks to Russias position as a major producer,this had significant impacts on the supply of oil and natural gas.The sudden surge in prices that this supply disruption triggered added pressure on prices worldwide,pushing inflation to 8.8%,its highest in over a deca

70、de.This situation was worsened by Chinas pursuit of its zero-Covid policy,causing lockdowns of major industrial areas.For 2022,global growth thus slowed to 3.4%(source:IMF),and Krungsri Research estimates that overall demand for petrochemical products expanded by 3.0-3.2%.The cost of inputs to the p

71、etrochemicals industry climbed through 2022 due to rising prices for crude oil and natural gas from the Russia-Ukraine war.Crude oil prices were also affected by demand growth outpaced the expansion in supply,which remained tight thanks to the limited production quotas that have been kept in place b

72、y OPEC+since 2020.Given this,average prices for Dubai Crude surged by more than 40%to USD 96.3/bblrelative to their 2021 level and this then pushed up prices for naphtha(which is produced from crude)by 21.7%YoY to an average of USD 788.7/tonne.Gas prices also spiked in the year,jumping 75.2%YoY to a

73、n average price of USD 6.5 per 1 million BTU(MMBTU)(Figures 14 and 15).As a result of this discrepancy in the price rises for oil and gas,manufacturers using naphtha as their primary input enjoyed cost advantages relative to natural gas-based manufacturers.USD/bblFigure 15:Naphtha PricesSource:Bloom

74、bergFigure 14:Feedstock PricesSource:Bloomberg012345678910020406080100120140Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22WTINatural Gas(RHS)USD/MMBTU02004006008001,0001,200Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21

75、 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22USD/tonne15Krungsri ResearchPrices for most of the major petrochemical products in 2022 were pushed up by the higher cost of inputs(Figure 16)as well as tighter supply due to some regional manufacturers with relatively higher cost of production cuttin

76、g their production capacity since this was no longer cost-effective.However,in the second half of the year,price increases were restrained by a slowdown in demand for petrochemicals from increased fears over the possibility of a recession.This made it increasingly difficult for manufacturers to pass

77、 on higher costs to downstream markets,which helped to ease some of the pressure that has kept prices elevated.This downgrade in the outlook was amplified by Chinas continuation of its zero-Covid policy and the periodic lockdowns of major urban and industrial centers,which then impacted the manufact

78、uring sector and undercut demand for downstream petrochemical products.In addition,prices were further affected by rising supply that came from:(i)the diversion of exports from China to Southeast Asia by manufacturers in the Middle East,China,and South Korea,and(ii)the new petrochemical facility in

79、Malaysia,which began operations in the latter half of 2022.As a consequence,both average prices and spreads for midstream and downstream products stayed flat or declined.This is with the exception of PET,for which prices benefited from greater demand from the packaging industry.Source:Bloomberg,Krun

80、gsri ResearchFigure 16:Petrochemical Prices(USD/tonne)05001,0001,5002,0002,500PropyleneButadieneBenzeneTolueneP-XyleneMethanolAcrylonitrilStyreneHDPEPPABSPETPSPVCNaphtha20182019202020212022Upstream productsUpstream productsUpstream petrochemical products:OlefinsEthylene:Spreads contracted-23.3%from

81、their level in 2021 to USD 270.8/tonne.The market was impacted by both the global economic slowdown in the second half of the year and the impacts of Chinese pandemic controls on demand for downstream products,while an easing of tight supply helped this return to more normal conditions.The increase

82、in ethylene prices therefore fell behind the run up in the cost of inputs,leading to a tightening of spreads.Propylene:Spreads narrowed-37.8%to USD 208.4/tonne on an increase in Chinese supply(a large Chinese manufacturer has begun commercial operations at a new production facility).Alongside this,t

83、he market was undercut by weak demand for downstream products from China and from auto manufacturers worldwide,which continued to be affected by semiconductor shortages.AromaticPara-xylene(PX):Spreads surged 52.4%to USD 305.3/tonne thanks to increased consumer concerns over health and hygiene that t

84、ranslated into a decline in the reuse of packaging and an accompanying increase in demand for the PET resin that is used in the manufacture of single use packaging for food and drinks.Demand from downstream industries,and in particular from textile manufacturers(the largest consumer of PX),also reco

85、vered steadily,while on the supply side,although some large manufacturers entered the market,other players cut production capacity,and this too helped to bid up prices.Benzene:Spreads broadened 11.8%to USD 318.6/tonne on:(i)stronger demand from end users for the manufacture of packaging,and electron

86、ics and consumer goods;and(ii)a tightening of supply that was driven by a reduction in the US production and controls on energy consumption in China.16Krungsri ResearchDownstream petrochemical products:High density polyethylene(HDPE):Spreads slumped to USD 46.3/tonne,down-60.8%from their level in 20

87、21.Demand for HDPE came under pressure due to the lockdowns imposed on major urban and industrial areas in China,which then weighed on consumption by buyers in construction and piping,as well as from fears over a global slowdown that were triggered by the run-up in inflation.Supply also increased as

88、 greater capacity came online in China,Malaysia and the Middle East,while increases in the cost of ethylene outpaced those of HDPE,adding further to pressure on spreads.Polystyrene(PS):Spreads contracted-33.3%to USD 378.7/tonne.The acceleration of Inflation that led to consumers being more cautious

89、over their spending resulted in demand from downstream industries to soften,in particular from producers of electrical appliances,electronics,and auto parts.However,the effect of this on prices was partly offset by the decision by Asian manufacturers to take production capacity offline or to postpon

90、e increases in this as they looked to avoid excessive stockholding and to bring this into line with more depressed market conditions.Polypropylene(PP):Spreads tightened to USD 136.1/tonne,down-54.9%on a combination of the general slowdown in the world economy,weaker demand from downstream industries

91、 in China,and the tightening of monetary policy in many countries,especially in Vietnam and Indonesia(major markets for PP).Polyethylene terephthalate(PET):Spreads narrowed-68.7%to USD 68/tonne.Manufacturers were not unduly affected by the Covid-19 pandemic since PET is used to manufacture sanitary

92、packaging for food and drinks,while on the production side,constraints on power consumption in China caused supply to tighten.However,the cost of PX,an important input into the manufacturing process,rose substantially and this then impacted spreads.Figure 17:Upstream Prices and Spreads of Selected P

93、etrochemical Products(USD/tonne)Source:Bloomberg3005007009001,1001,3001,500Mar-19Jul-19Nov-19Mar-20Jul-20Nov-20Mar-21Jul-21Nov-21Mar-22Jul-22Nov-22EthylenePropyleneP-xyleneBenzene0100200300400500600Mar-19Jul-19Nov-19Mar-20Jul-20Nov-20Mar-21Jul-21Nov-21Mar-22Jul-22Nov-22EthylenePropyleneP-xyleneBenze

94、neFigure 18:Prices of Selected Petrochemical Products(USD/tonne)3005007009001,1001,3001,500Mar-20Aug-20Jan-21Jun-21Nov-21Apr-22Sep-22HDPEEthylene3005007009001,1001,3001,500Mar-20Aug-20Jan-21Jun-21Nov-21Apr-22Sep-22PPPropylene6008001,0001,2001,4001,6001,800Mar-20Aug-20Jan-21Jun-21Nov-21Apr-22Sep-22PS

95、Styrene3005007009001,1001,3001,500Mar-20Aug-20Jan-21Jun-21Nov-21Apr-22Sep-22PETPXSource:Bloomberg17Krungsri ResearchThe Thai petrochemical industry was supported through 2022 by growth in the broader economy,driven mainly by the recovery in the tourism sector,as well as by the abating of the pandemi

96、c,which then helped demand recover in downstream industries including packaging,plastics,and medical devices.However,in the second half of the year,markets felt the effects of a slowdown in growth of both the Thai and the global economies,the continuation of Chinas zero-Covid policy,which then suppr

97、essed demand in downstream industries,and strong inflation that then dragged on domestic consumption and investment.Given this,overall demand for petrochemical products softened.The situation for the industry in 2022 is summarized below.Having risen 10.1%in 2021,in 2022,sales of petrochemical produc

98、ts fell back by-12.5%to a total of 10.1 million tonnes,with sales of upstream and downstream products contracting by respectively-12.1%and-13.0%to totals of 5.1 and 5.0 million tonnes(Figure 19).Exports also slipped-5.2%YoY by volume as a consequence of:(i)the imposition of harsh lockdowns in import

99、ant industrial regions in China,a major export market for Thai manufacturers;(ii)rate hikes that were implemented around the globe in response to rising inflation and that then suppressed economic growth and demand in industries that use petrochemicals as an input;and(iii)supply chain disruptions th

100、at affected downstream consumers including the auto assembly and electronics industries(Figure 20).Figure 19:Thailand Domestic and Export Petrochemical Sales Note:Market consists of ethylene,propylene,benzene,toluene,PE,PP,and PETSource:OIE,Krungsri Research-20-15-10-50510152002468101220182019202020

101、212022Tonnes,m%YoYUpstreamDownstreamTotal growth(RHS)-10-5051015012320182019202020212022Tonnes,m%YoYUpstreamDownstreamTotal growth(RHS)Figure 20:Thailand Monthly Industrial Index20406080100120Mar-18May-18Jul-18Sep-18Nov-18Jan-19Mar-19May-19Jul-19Sep-19Nov-19Jan-20Mar-20May-20Jul-20Sep-20Nov-20Jan-21

102、Mar-21May-21Jul-21Sep-21Nov-21Jan-22Mar-22May-22Jul-22Sep-22Nov-22Motor vehicles,trailers and semi-trailersComputers and electronic productsPlastic containerTotal indexSource:Office of Industrial Economics(OIE),Krungsri Research18Krungsri ResearchOutput of petrochemicals contracted-10.8%to 15.2 mill

103、ion tonnes,with production of the two major upstream products ethylene and propylene falling by-11.2%YoY and-14.2%YoY respectively.Output of downstream goods was also affected by the closure of many facilities for maintenance(Figure 21).Industry profits narrowed for the major players(Figure 22)as pr

104、ices and spreads came under pressure from weaker demand,in particular from auto assemblers and manufacturers of electronics goods,which continued to be affected by shortages of semiconductors.Alongside this,producers profits were also affected by the continuing high cost of natural gas and crude,whi

105、ch then lifted the price of industrial inputs(Table 4).Figure 21:Thailand Petrochemical Output(million tonnes)Source:Bloomberg,Krungsri ResearchNote:Market consists of ethylene,propylene,benzene,toluene,PE,PP,and PETSource:OIE,Krungsri Research012345EthylenePropyleneBenzeneToluenePEPPPET20212022Upst

106、ream productsDownstream productsFigure 22:EBITDA Margins of Key Thai Players and their Peers-50510152025301Q192Q193Q194Q191Q202Q203Q204Q201Q212Q213Q214Q211Q222Q223Q22SCCIndoramaPercentile 10-90%Percentile 40-60%Percentile 25-75%PTTGC%19Krungsri ResearchPricesSpreads20212022%change20212022%changeEthy

107、lene1001.11059.55.8352.9270.8-23.3Propylene983.4997.01.4335.3208.4-37.8Butadiene872.91018.716.7224.8230.12.4Benzene933.01107.318.7284.8318.611.8P-Xylene848.51094.028.9200.3305.352.4Styrene1192.41224.42.7544.3435.8-19.9HDPE1119.21105.8-1.2118.146.3-60.8PP1285.01133.1-11.8301.6136.1-54.9ABS2402.61724.

108、2-28.21401.5664.7-52.6PET1065.71161.99.0217.268.0-68.7PS1534.81462.1-4.7567.8378.7-33.3PVC1449.21114.5-23.1448.155.0-87.7Naphtha648.2788.721.7Source:Bloomberg,Krungsri ResearchTable 4:Global Prices and Spreads(USD/tonne)Outlook20Krungsri ResearchThe IMF sees the global economy expanding by 2.8%in 20

109、23,with growth accelerating to 3.0%and 3.2%in 2024 and 2025,though with volatility in crude oil prices expected due to high uncertainty around the outcome of the Ukraine-Russia war.Nevertheless,the full reopening of China at the start of January 2023 will help to underpin demand for petrochemicals t

110、o run to 1.5-2.5%in 2023 and then to 2.5-3.5%annually in 2024 and 2025(Figure 23).Prices for crude oil(a crucial input into petrochemicals production)are expected to remain elevated.The International Energy Agency(IEA)forecasts demand will average 101.9 MMbbl/day through 2023,up from 100.5 MMbbl/day

111、 in 2022,thanks partly to the reopening of China.At the same time,supply will remain constrained by the continuation of sanctions on Russia,which has announced a 0.5 MMbbl/day cut in exports from March 1,2023,onwards,thus taking around 0.5%of global supply off the market.In addition,to maintain high

112、 prices,the OPEC+group has agreed to a 2 MMbbl/day cut in output to run from November 2022 through to the end of 2023(Figure 24).In light of these market conditions,Krungsri Research projects that prices for Dubai Crude will average USD 70-80/bbl through 2023 to 2025,while the World Bank sees prices

113、 for natural gas averaging USD 6.2/MMBTU in 2023 and then softening slightly to USD 6/MMBTU in 2024 and 2025.Tightness in oil markets will keep prices for naphtha elevated through 2023-2025,and so Krungsri Research expects these to average USD 652/tonne in 2023 and then to weaken to USD 612/tonne an

114、d USD 565/tonne in each of the following two years.This compares to prices that peaked at USD 788.7/tonne in 2022,which then had significant impacts on the prices and spreads for midstream and downstream products.Figure 23:Growth in Global Petrochemical Demand and in the World Economy(%)Note:Global

115、petrochemical demand consists of ethylene,propylene,benzene,butadiene,p-xylene,HDPE,PS,PP,PET,and PVCSource:IMF,Bloomberg,Krungsri ResearchFigure 24:Feedstock Prices(2023)Source:Bloomberg-4-3-2-101234567201820192020202120222023F2024F2025FGlobal economic growthPetrochemical demand growth0123456570758

116、085901-Jan-235-Jan-239-Jan-2313-Jan-2317-Jan-2321-Jan-2325-Jan-2329-Jan-232-Feb-236-Feb-2310-Feb-2314-Feb-2318-Feb-2322-Feb-2326-Feb-232-Mar-236-Mar-2310-Mar-23DubaiBrentWTINatural Gas(RHS)USD/bblUSD/MMBTU21Krungsri ResearchWith the global economic growth expected to slow to a historic low of 2.8%th

117、is year,prices for many of the major petrochemical products will likely soften across 2023(Figure 25).The continuing strength of inflation will encourage consumers to be more cautious in their spending,and this will impact demand in some downstream industries from petrochemical producers.At the same

118、 time,the market is also affected by oversupply;the new production in China and India will add respectively 2.8 million tonnes and 5.7 million tonnes to overall supply of HDPE and PP,although demand is predicted to expand by just 1.4 million tonnes and 2.8 million tonnes(source:CMA Energies).Meanwhi

119、le,the cost of inputs,for example,naphtha and condensates,will decline at a slower rate,and so for many products,spreads will tighten.Figure 38:Revenue of Digital contentFigure 25:Petrochemical Prices and Spreads(USD/tonne)02004006008001,0001,2001,4001,6001,800EthylenePropyleneButadieneBenzeneP-xyle

120、neHDPEPPPETPSPVC02004006008001,000EthylenePropyleneButadieneBenzeneP-xyleneHDPEPPPETPSPVC20192020202120222023F2024F2025FPriceSpreadUpstream productsIntermediate and downstream productsSource:Bloomberg,Krungsri Research22Krungsri ResearchPrices for petrochemical products should recover in 2024 and 20

121、25 on a gradual expansion in the global economy that will lift consumer spending power and boost demand from downstream industries.However,within Asia,supply will continue to be affected by the increase in production capacity in a number of countries.In many cases,this new capacity is either an expa

122、nsion that had been previously planned but then delayed by the Covid-19 pandemic or a vertical integration into petrochemicals by oil refineries in the Middle East that are moving into the production of olefins(e.g.,polyethylene and polypropylene)and aromatics(e.g.,PX).This new production is expecte

123、d to extend capacity by 7-10%annually compared to average growth of just 3-5%over 2011-2019.However,imports of petrochemicals and plastic resins of China will fall from the base chemical self-sufficiency program,and the excess supply affecting some product groups will thus mean that prices will rema

124、in flat or edge up marginally,while spreads will strengthen only slowly.Krungsri Research estimates that over 2023 to 2025,spreads for the main products will perform as follows(Figure 26).Figure 26:Spread Cycle Forecast of Petrochemicals productsSource:Bloomberg,Krungsri ResearchEthylenePropyleneBut

125、adieneBenzenePXHDPEPPPVCPETPS-0.9-0.7-0.5-0.3-0.10.10.30.20.40.60.81.01.21.41.6UpstreamIntermediates and DownstreamLow but increasing spreadHigh and increasing spreadA Change in spread ratio between 2019-21 and average of 2022-24Ratio of spread in 2022-24 to an average of spread during 2013-2019Spre

126、ads that will be high and that will widen:PVCSpreads that will be low and that will narrow:Ethylene,Propylene,Butadiene,Benzene,PX,HDPE,PP,PS,PET211222233183185192050100150200250201720182019202020212022E2023F2024FCapacityConsumptionFigure 27:Ethylene Demand and SupplyTonnes,mnFigure 28:Polyethylene

127、Demand and Supply606367535456010203040506070201720182019202020212022E2023F2024FCapacityConsumptionTonnes,mnSource:Bloomberg,Krungsri ResearchSource:Bloomberg,Krungsri ResearchOutlook for major petrochemical products in 2022-2024Box 1EthyleneEthylene is the worlds most widely produced olefin,accounti

128、ng for a quarter of all upstream production globally.Total annual production capacity runs to some 160 million tonnes,with this split between East Asia(24%),North America(22%)and the Middle East(19%).60%of output is used as a feedstock in the production of polyethylene,which is then used in packagin

129、g.In addition,ethylene is used to produce ethylene oxide,ethylene dichloride and ethyl-benzene,which are also used in packaging and in the construction industry.The global slowdown is expected to translate into softer demand for ethylene through 2023,but the market should revive over 2024 and 2025 i

130、n step with a more positive outlook for the world economy.Demand will therefore increase by an average of 3%annually,but this will be against an expected expansion in production capacity of 5%per year,with much of the latter coming from Asia,and especially from China since the country is now pursuin

131、g a policy of cutting its dependence on imports of chemicals.This discrepancy between supply and demand will undercut the price of ethylene,and although the cost of inputs will also decline,the likely strength of crude markets will mean that this will fall at a slower rate than ethylene itself.Given

132、 this,the ethylene-naphtha spread will tend to narrow.23Krungsri ResearchPolyethylene(PE)Polyethylene is the most widely produced type of plastic pellet.The product itself is manufactured from ethylene,and 70%of the output is used in the packaging industry.Demand for polyethylene is expected to move

133、 in line with a softening of the global economy and grow at an average rate of 2.8%annually.However,this will lag behind the expansion in production capacity,which is forecast to rise by an average of 6%per year as new facilities come online in China,India,the US,and Southeast Asia.As a consequence,

134、the market will be affected by a supply glut that will keep prices low,and because polyethylene prices will fall faster than those for ethylene,spreads will narrow.PropylenePropylene is the second most widely manufactured olefin(after ethylene),and it can be made from naphtha,LPG and coal.65%of outp

135、ut is used to make polypropylene,a plastic that is mostly used in auto assembly,although propylene is also used as an input into the production of industrial and consumer goods.The market for propylene is expected to come under pressure from a combination of weaker demand and a supply glut.Thus,grow

136、th in production capacity should average 4.7%per year,with this being especially concentrated in China,while demand is forecast to rise at the lower rate of 3%annually.As such,both propylene prices and spreads are likely to weaken.24Krungsri ResearchBenzeneThis is derived from naphtha,and with 63 mi

137、llion tonnes of production capacity worldwide,it is the most commonly manufactured of the aromatic petrochemicals.Around 50%of output is used as an input into the production of ethyl-benzene,which is in turn used to produce polystyrene.Another 20%goes to the production of cumene,used in packaging,co

138、nstruction materials,and household goods.Production capacity and demand will grow at average annual rates of around 2.6%and 2.7%,respectively,in line with steady growth in the consumption of downstream products such as PS and ABS.Because problems with oversupply are less pronounced than for olefins,

139、pressure on prices and spreads will be less intense.PolystyreneThis is another downstream aromatic.Polystyrene is produced from styrene monomer,and current global production capacity runs to 11 million tonnes per year.The primary consumers of this are manufacturers of electronics,packaging,and const

140、ruction supplies.Demand is forecast to rise by an average of 2.3%per year,while growth in production capacity will fall behind at around 1%annually.The cost of styrene has decreased(styrene is produced from benzene and so prices for these move in parallel)and so spreads will tend to remain stable or

141、 broaden slightly.Figure 29:Propylene Demand and Supply142149156123125130050100150200201720182019202020212022E2023F2024FCapacityConsumptionSource:Bloomberg,Krungsri ResearchTonnes,mnXyleneXylene(an aromatic)is an important product for Thai petrochemical players.More than two-thirds of xylene is prod

142、uced as a byproduct of oil refining,although this can also be manufactured from naphtha.The most important end uses are in manufacturing polyester(for textiles)and PET(for packaging).Demand for xylene is expected to increase by 2.8%annually,but at 9%,growth in production capacity will race ahead.Muc

143、h of this will be in China,thanks to the official policy of increasing national self-reliance in the chemical industry.The market has thus been affected by a worsening supply glut since the 2020-2021 Covid-19 pandemic,and this will pull down prices.Moreover,the cost of inputs is likely to remain hig

144、h,and so spreads will narrow very sharply.25Krungsri ResearchFigure 30:Xylene Demand and SupplyTonnes,mn8290985251540102030405060708090100110201720182019202020212022E2023F2024FCapacityConsumptionSource:Bloomberg,Krungsri ResearchThe domestic market for petrochemicals will see a gradual improvement t

145、hrough 2023,helped by recovery in the tourism sector,which Krungsri Research believes will boost foreign arrivals by more than 35%in the year,and the forecast 3.3%growth in the Thai economy(up from 2.6%in 2022).In addition,the reopening of China,a major export market for Thai producers,will also add

146、 to demand from downstream industries(e.g.,packaging and plastics).However,the world economy is showing signs of weakness,and this together with the expansion in production capacity and resulting supply glut will put pressure on spreads,so any broadening of these will be strictly limited.In 2024 and

147、 2025,an improvement in the global outlook will help to lift the industry,while the expected 3.0-4.0%growth in the Thai economy will add to the demand for petrochemical products and help to absorb the excess supply weighing on the market.This will then support prices and will assist in bringing spre

148、ads back to their pre-Covid-19 level.Factors restricting growth in demand for petrochemical products will include government measures to reduce the consumption of single-use plastics.This will particularly affect manufacturers of downstream products,most notably producers of polyethylene(PE),polypro

149、pylene(PP),and polyethylene terephthalate(PET).The domestic industry will also feel pressure from new production capacity coming from China,and so Krungsri Research sees demand on domestic and export markets increasing by respectively 1.5-2.5%and 0.5-1.0%annually over the three years between 2023 an

150、d 2025(Figure 31).26Krungsri ResearchFigure 31:Thailand Petrochemical Market-15-10-50510151415161718201820192020202120222023F2024F2025FProduction(RHS)Domestic consumptionExportNote:Market consists of Ethylene,Propylene,Benzene,Toluene,PE,PP,and PETSource:OIE,Krungsri ResearchTonnes,mn%Players will t

151、end to move towards producing high-value-added specialty products to meet stronger demand most obviously from the new S-curve industries(e.g.,for the production of EVs and EV parts,batteries,charging stations,robotic units,and medical equipment).Phase 4 of the governments plan for the development of

152、 the petrochemical industry(2022-2026)promotes the production of biodegradable and recycled plastics as a way of improving the industrys competitiveness,and manufacturers will exploit new market opportunities by making greater investments in the production of these.A range of factors have the potent

153、ial to affect prices and spreads of petrochemical products in the coming period.(i)Geopolitical risk may worsen,with this potentially originating from an extension or degradation of the Russia-Ukraine war,the Taiwan dispute,or the deepening polarization of the global economy as it bifurcates into US

154、 and Chinese areas of control.This would then add to supply chain disruption and through this,drag on domestic and global growth.(ii)The continuation of sanctions on Russia by Western powers may encourage the country to divert exports of petrochemical products to Asia,especially to China,which would

155、 then eat into Thai exporters market share.(iii)Problems with semiconductor shortages may last longer than expected,and if this is the case,demand from major downstream consumers of petrochemical outputs(e.g.,auto assemblers and manufacturers of electronics goods)may be affected.(iv)Global oil marke

156、ts may be subject to significant volatility,which would then cause periodic uncertainty over the cost of inputs.(v)Supply will tend to expand,especially from new Chinese capacity.For example,the China National Petroleum Corp.,Chinas largest oil company,is responding to the need to go green and to cu

157、t its carbon footprint by shifting from oil production to petrochemicals.Production capacity will thus expand by an estimated 3.1 million tonnes by 2025,with this including raised output of ethylene,propylene,and butadiene,as well as new production of high value-added goods such as polyolefin,ethyle

158、ne vinyl acetate,and styrene-butadiene rubber.Naturally,this may then affect demand for Thai products.(vi)The US and EU are imposing restrictions on trade that are motivated by their climate change policies,and these will restrict imports to these areas of products that are linked to the emission of

159、 greenhouse gases.This will then impact demand for petrochemicals and other products in petrochemical supply chains.Changing circumstances within the industry and in the wider business world will also pose challenges to players in the petrochemicals sector,and how they respond to these will help to

160、determine their future market position.Within the industry,businesses are increasingly shifting to the use of new technology to add value to their processes and to respond to the need to use renewable energy.This is then helping to support downstream industrial consumers,especially those manufacturi

161、ng packaging,automobiles and electronics,as these industries evolve in response to the emergence of the bio-circular-green(BCG)economy.The outcome of this is that the market is shifting from an earlier demand for commodity-grade goods to a greater need for specialty products and with this,the petroc

162、hemical industry is being forced to change.Deloitte thus estimates that by 2033,although the overall market for petrochemicals will have grown by some 3.0%per year,demand for specialty petrochemical products will have expanded by 4.5%annually.External influences on the sector are developing as a res

163、ult of the shift from supply-driven consumption to demand-driven production,which is then altering the nature of competition within the sector;whereas in the past,competitiveness was built on an ability to source inputs and control costs,this is increasingly now a result of a players ability to prod

164、uce a wide variety of products that successfully meet market needs,to build relationships with businesses in other sectors,and to develop and exploit new technologies and processes.These latter factors will then help to determine profitability in the coming period.27Krungsri ResearchKRUNGSRI RESEARC

165、HMacroeconomic TeamSujit ChaivichayachatHead of Macroeconomic ResearchChurailuk PholsriSenior Economist(Forecasting)Sathit TalaengsatyaSenior AnalystIndustry TeamPimnara Hirankasi,Ph.D.Head of Industry ResearchTaned MahattanalaiSenior Analyst(Digital)Piyanuch SathapongpakdeeSenior Analyst(Transport&

166、Logistics)Narin TunpaiboonSenior Analyst(Power Generation,Modern Trade,Chemicals,Medical Devices)Puttachard LunkamSenior Analyst(Construction Contractors,Construction Materials,Hotels,Industrial Estate)Patchara KlinchuanchunSenior Analyst(Real Estate)Wanna YongpisanphobAnalyst(Automobile,Electronics

167、&Electrical Appliances)Chaiwat SowcharoensukSenior Analyst(Agriculture)Analytics&Intelligence TeamPimnara Hirankasi,Ph.D.Acting Head of Analytics and Intelligence ResearchThamon SernsuksakulAdministratorChirdsak SrichaitonMIS OfficerWongsagon KeawuttungMIS OfficerMIS and Reporting TeamPoonsuk Ninkit

168、saranontSenior Analyst(Healthcare,Mobile Operators)Nathanon RatanathamwatSenior AnalystChinnakrit AmpornpannawatAnalystThian ThiumsakSenior Analyst(Energy,Petrochemicals)Parinya MingsakulAnalystPrapan LeenoiAnalyst(ESG)Thansin KlinthanomEconomistSuppakorn KornboontritosAnalyst(Agriculture,Food&Beverages)