BUDAPEST: Spot prices for Petrochemicals during December exhibited an uptrend both on month-on-month basis year-on-year, led by higher crude price and supply outages. Average Petrochemical product prices for a basket of major products gained 6.0 percent MoM and 24 percent YoY in December, according to Investment Bank SICO’s ‘Petrochemical Roundup’.
Ethylene was up 12.1 percent on MoM and 3.5 percent YoY. Propylene (+6.5 percent MoM, +42 percent YoY), HDPE (- 1.8 percent MoM, +8.3 percent YoY), LDPE (-1.3 percent MoM, +21.4 percent YoY), LLDPE (-1.2 percent MoM, +8.9 percent YoY), Polypropylene (-0.5 percent MoM, +23.7 percent YoY), Styrene (+4.9 percent MoM, +34.8 percent YoY) and Methanol rose (+16.1 percent MoM, +39.6 percent YoY) in December.
The Saudi Petrochemicals Index (SASEPETR) gained 2.8 percent during the month, underperforming the broader Tadawul benchmark, which gained 3.0 percent.
All stocks ended the month on a positive note with the exception of SABIC which declined 3.1 percent due to lower than expected 2H16 dividend payout. In Qatar, Industries Qatar closed 11.9 percent higher in December, outperforming the broader QSE index by 5.3 percent.
Methanex raised January methanol prices by $80/ton, positive read for SIPCHEM. Methanex, world’s largest producer and supplier of methanol, raised its Asian contract price by $80/ton to $430/ton for January 2017. This price is the highest in two years, compared to $435/ton for November 2014. The spot price in China, the world’s largest importer of methanol, reached $355/ton last week. The monthly prices issued by Methanex are considered as an indicative price for other players, as well as for the spot market.
Positive read for Sipchem as Methanol is its primary product and stock reacted positively to the news, closing +5.5 percent yesterday. Methanol prices have gained recently due to higher coal and supply outages in US. We believe positive impact of higher methanol is priced in SIPCHEM valuation as the stock is trading at 18.0x 2017 EPS, 25 percent premium to the sector median Sahara Petrochemicals established Sahara marketing company.
Sahara Petrochemicals has established an affiliate (Sahara Marketing Company) which specializes in marketing petrochemicals with an ownership of 100 percent of the company with capital of SAR500,000. The Company activities are selling and exporting industrial chemicals and petrochemicals, also commercial undertakings and marketing on behalf of the others. This step is within the framework of a strategy of Sahara to take advantage of growth in the marketing of petrochemical products and to reduce the cost of marketing and expanding by marketing of products from other companies.
