PTTCH expects strong demand

Today's Business News - Wednesday December 12, 2007

PTTCH expects strong demand

Lack of new supply keeps margins high

POST REPORTERS

PTT Chemical Plc, the petrochemicals subsidiary of PTT Plc, predicts high petrochemical product demand throughout the first six months of next year.

President and chief executive Aditheb Bisalbutr cited the limited amount of new capacity for olefins and high-density polyethylene. He also said that high demand in Asia was helping to maintain a high spread margin between feedstock and finished product prices.

The petrochemical cycle was hard to predict, said Mr Aditheb, citing the delays in completion of the company's petrochemical complex in the Middle East, as the operators were facing complex legal procedures.

The one-year delay in the high-density polyethylene development in Iran was also a factor. The project is a joint venture with the Siam Cement Group and the National Petrochemical Complex of Iran.

''Fortunately, our project's construction has been delayed only one year, which is less than the two years that we expected,'' he said.

This year the company is satisfied that its sales would meet a target of 70 billion baht, driven by better-than-expected monoethylene glycol prices (MEG).

PTTCH began producing MEG in August of this year, and at the time it was projecting prices at as high as $1,000 a tonne. However, in line with the explosion of a 2.7-million-tonne MEG plant in Saudi Arabia, spot prices peaked at $1,700 a tonne.

PTTCH has a capacity to produce 300,000 tonnes of MEG annually.

''We are confident that our sales will be at least 70 billion baht, thanks to high MEG prices, which are likely to stay at between $1,500 and $1,600 a tonne until the first half of next year,'' Mr Aditheb said.

MEG prices are projected to fall to $1,000 a tonne in April of next year when the Sabic MEG plant resumes production of 1.5 million tonnes, with an additional 1.5 million tonnes from the joint venture of Sabic and Mitsui.

PTTCH thought it would miss its sales target because of its longer-than-expected maintenance shutdown in the second quarter of this year.

For the first nine months of this year, PTTCH posted total sales of 49 billion baht, down 4% from 50.9 billion a year earlier, with net profits down by 19% to 10.4 billion baht.

Mr Aditheb added that the company planned to invest more overseas to increase its global competitiveness.

The company will focus on its core four lines of products _ olefins, polymers, specialty-grade plastics and oleo chemicals _ due to its expertise in those fields.

Following a price increase in line with high crude prices, the company has managed to maintain working capital of 15 billion baht. ''Therefore, the debenture we plan to issue next year should be below 10 billion baht, but we have yet finalise [the amount],'' he said.

The company's five-year investment plan from 2007 to 2011 is worth a total of 90 billion baht.

PTTCH shares closed yesterday on the Stock Exchange of Thailand at 124 baht, down two baht, in trade worth 342.3 million baht.

Bangkok Post