Oil price boosts SCG chemical's revenue stream

Feedstock prices have also been heading higher, in line with oil prices, which have more than doubled so far this year.

The price of polypropylene, for example, has gone from about US$1,000 (Bt33,400) per tonne at the start of the year to $2,200, while high-density polyethylene is now at $1,900 per tonne, up from $1,200.

The company had to cut its ethylene production by 10 per cent in the first half to maintain profitability, since the feedstock price was increasing faster than product prices.

"We turned to importing more ethylene from the Middle East to produce downstream products," president Cholanat Yanaranop said yesterday.

The rising feedstock price forced most plants to throttle back on output and the lower supply will likely cause prices to move up. "The global economy is expected to grow at a slower pace than last year, but the petrochem sector did fine in the first half due to tight regional supply," he said.

To cushion the impact of the next down cycle, SCG Performance Chemicals is set up to focus on high-value added (HVA) products with heftier profit margins.

Yuttana Jiamtragan, managing director of SCG Performance Chemicals, said the company planned to boost its sales from Bt8.7 billion estimated for this year to Bt25 billion by 2013, when it will account for 30 per cent of SCG Chemical's revenue.

With leading international partners, it will invest Bt1.5 billion in research and development to expand HVA product capacity over five years.