【机构】汇丰银行HSBC
【篇幅】PDF154
【日期】20130722
【摘要】

Summary
Improving Chinese demand, cresting supply and trough valuations
make us more positive on the margin outlook for high-cost naphtha
crackers. We believe that in the medium term, Asian naphtha
crackers have the most upside potential to margins. We upgrade
Lotte Chem to OW (from N(V)) and raise our TP to KRW190,000
(from KRW170,000); Lotte and LG Chem (OW, TP KRW345,000)
are now our highest conviction calls across our GEM Chemical
universe, offering the best leverage to improving Chinese demand
and normalisation in naphtha cracker margins.

undeniably improving. On a rolling 12-month basis, Chinese plastic resin demand growth is at its
highest level since April 2011.
 We are at the crest of the near-term supply wave: Yes, there will be shale-based supply in the US.
However, that supply will not be ready until 2016/17 at the earliest. In the immediate term, all of the
six new world-scale crackers planned for start-up during the 2012/13 period are either already
running or at best one to two months away from commissioning. Over the next 18-24 months,
incremental capacity growth is composed of two conventional (non-coal-based) crackers. Of these
two, we see one, OPAL in India, at risk of significant start-up delays. This means that there is only
one firm world-scale cracker (Borouge in the UAE) scheduled to come on for an 18-month period
from the end of 3Q13. This, in our view, marks the crest of the current supply wave. With demand
improving and supply pressures starting to abate, we see room for margins to improve.
 Naphtha crackers have the most upside potential to margins: In a rising margin environment, we
believe that naphtha crackers have the most upside potential from current levels, with the butadiene
(C4) and aromatics (C6) chains being the biggest contributors. Despite current demand woes,
butadiene remains fundamentally supply constrained and all the 70% decline in butadiene prices over
the past 15 months has done is scare away those interested in investing in on-purpose butadiene
capacity. In the medium term, as auto and, by association, tyre demand returns to more normalised
levels, we expect to see a sharp increase in butadiene spreads. The same is broadly true for aromatics,
particularly benzene. A combination of factors – ranging from US shale oil production trends,
paraxylene oversupply, US gasoline and reformate demand, European cracker operating rate cuts and
LPG switching – are all driving relative benzene tightness. Furthermore, potential condensate splitter
investments in the US could result in naphtha oversupply and consequently lower naphtha pricing.
We have yet to witness concurrent tightness in both C4 and C6 chains as weak demand has prevented
both from occurring at the same time. However, in the medium term we see both butadiene and
benzene as tight relative to naphtha and believe that these product spreads have room to move up
significantly, driving margin gains for naphtha crackers.


Price versus proof 8
The valuation case for Asian
naphtha crackers 23
Company sections 31
CEEMEA Chemicals 32
Yansab 33
Industries Qatar 37
SABIC 41
National Industrialization Co (Tasnee) 46
Sidi Kerir 50
SIIG 53
National Petrochemical Company (Petrochem) 56
Advanced Petrochemical Company (APC) 59
Saudi Kayan 62
Chemanol 65
Sasol 68
Asian Chemicals 73
Lotte Chemical 74
LG Chemical 81
Kumho Petrochem (KKPC) 85
Hanwha Chemical 89
Formosa Plastics 93
Nan Ya Plastics (NYP) 97
Formosa Chem and Fibre 103
PTT Global Chemical 107
Indorama Ventures 110
Petronas Chemicals 113
Sinopec 117
PetroChina 122
Sinopec Engineering 126
LatAm Chemicals 133
Braskem 134
Alpek 138
Mexichem 142
Disclosure appendix 149
Disclaimer 152