PVC margins are at an 8-year high

KARACHI: During June 2019, Polyvinyl Chloride (PVC) margins went up by 28.6% MoM to USD 513/ton. However, Purified Terephthalic Acid (PTA) and Polyester Staple Fiber (PSF) margins registered a decline of 11.9% MoM and 6.2% MoM to settle at USD 190/ton and USD 308/ton, respectively.

“The change in margins will have positive implications for Engro Polymer and Chemicals Limited (EPCL) while negative for Lotte Chemical Pakistan Limited (LOTCHEM) and ICI Pakistan Limited (ICI),” an analyst at Arif Habib Limited said.

PSF margins decreased by 6.2% MoM during June 2019 to USD 308/ton. The downturn in margins was due to 6.9% MoM decline in PSF prices. However, the prices of PTA and Mone Ethylene Glycol (MEG) also declined by 9.0% MoM and 2.6% MoM, respectively.

Decline in PTA prices was witnessed due to soft buying trends in major markets like China coupled with bearish upstream Paraxylene (PX) prices. In addition to this, the persistently dull regional buying sentiment pushed down the MEG prices. During 1HCY19, PSF margins rose by 24.6% YoY to an average of USD 329/ton.

PVC margins are at an 8-year high, increasing by 28.6% MoM to USD 513/ton during June 2019. The rise in PVC margins was led by 19.2% MoM decline in Ethylene prices. In addition to this, PVC prices inclined by 3.4% MoM.

Ample product availability and persistent buying sentiment pushed down the Ethylene prices. During 1HCY19, PVC margins jumped up by 31.4% YoY to an average of USD 416/ton.

PTA margins went down by 11.9% MoM to USD 190/ton. The decline in margins was owed to 9.0% MoM decline in PTA prices. However, Paraxylene (PX) prices also declined by 8.0% MoM. During 1HCY19, margins went up by 4.8% YoY to an average of USD 164/ton.

“PVC and PTA margins are currently hovering around USD 539/ton and USD 206/ton, respectively. However our long term assumptions are set at USD 325/ton and USD 140/ton, respectively,” the analyst added.

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