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SCB Securities

Petrochemical price monitor

Ethylene and derivative prices steady WoW at 52-week highs. Ethylene price

was US$1,465/t on higher feedstock cost (naphtha) and tight availability in the

region. PE prices were unchanged WoW and remain high amidst steady demand

and limited product availability. Propylene price rose 0.9% WoW on improved

regional buying trends while the price of downstream PP was steady WoW as

buyers were reluctant to restock and adopted a wait-and-see strategy. Weaker

demand from China remained the key factor hindering PE prices.

Production cut and higher feedstock cost drove PX price. PX price rose 4.7%

WoW to a 13-week high of US$1,260/t. This was the highest WoW change since

March 2014 due to higher feedstock cost, especially for Isomer MX for stand-alone

producers that have to import feedstock from others. We believe another factor is

the production cuts by regional PX producers. According to an industry source, the

operating rate of PX plants in Asia may be slashed from 89% in 2013 to 82% in 2014

in response to the excess supply in the region.

PET/PTA spread fell to 22-week low. Integrated PET/PTA spread continued to

plunge 13% WoW to a 22-week low of US$244/t due to higher feedstock cost, both

PX and MEG. This was despite higher PTA price (+3.5% WoW) due to production

cuts at several regional PTA plants in response to weak margins driven by the high

cost of feedstock PX and weak downstream polyester demand trends.

Investment view: The petrochemical sector (-2.1% WoW) underperformed the

market (-1.6% WoW), as prices of two key players, PTTGC and IVL, fell 2.4-2.5% WoW.

We believe the sell-off of petrochemical stocks is overdone given the marginal impact

from domestic politics. The weaker Thai baht will also benefit these operators since

most product prices are quoted in US$. We continue to like PTTGC best due to its

undemanding valuation at only 9x 2014'sP/E vs. >15x of regional peers.

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