THAILAND INDUSTRY OUTLOOK 2023-25

Petrochemicals

กุมภาพันธ์ 2566
April 2023
วิจัยกรุงศรี
Krungsri Research
 Author

Thian Thiumsak

Senior Analyst
Thian.thiumsak@krungsri.com
+662 296 4742

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report are our own, which are not necessarily the opinions of Bank of Ayudhya
Public Company Limited and its affiliates. It reflects a judgment at its original date
of publication by Krungsri Research and are subject to change without notice.
 EXECUTIVE
SUMMARY
Recovery in the tourism sector and the reopening of China
will support domestic economic growth through 2023, and
this will feed into stronger demand for petrochemical
products. Ongoing expansion in both the domestic and global
economies will then add to demand growth and widen spreads
through 2024 and 2025. However, headwinds blowing against
the industry through the next few years will include: (i)
potentially worsening geopolitical tensions and an
accompanying rise in risk; (ii) lingering shortages of
semiconductors; (iii) volatility in global oil markets; and (iv) the
risk of oversupply, which may then depress both prices and
spreads. These factors may then drag on sales growth and keep
profits below prior trends.

Krungsri Research view

Recovery in the tourism sector and the reopening of China will

support domestic economic growth through 2023, and this will
help to underpin improving conditions for the Thai
petrochemicals industry. In 2024 and 2025, Thai producers
should be able to maintain satisfactory levels of turnover
thanks to ongoing growth in the domestic and international
economies. This will translate into strengthening demand, and
given this, spreads should widen. Thai players will also look to
expand vertically, integrating their operations from upstream
through to downstream production and on to related
industries. This expansion will take place both at home and
abroad (especially in high-potential markets in China,
Indonesia, and the CLMV nations), and this will then help to
smooth production planning.
 However, despite this positive outlook, Thai players are
exposed to risk arising from the cost of inputs, which is
expected to remain elevated. In addition, access to
feedstocks may become problematic since natural gas
reserves in the Gulf of Thailand will be depleted in the near
future. Operators will thus potentially face problems with
securing access to inputs and, should these need to be
imported, it is likely that manufacturers will have to pay
higher costs for both natural gas and crude oil. As such,
margins will likely weaken.

Krungsri Research 3
 Another factor that may limit the growth of the sector is the inward-looking policy of governments in
major export markets, especially in China, Indonesia and Vietnam, focusing on increasing self-reliance in
petrochemical production. At the same time, these countries also benefit from access to resources and
rapidly strengthening demand for plastic products. Thai producers may thus need to adjust their business
strategies by switching to a policy of engaging in joint partnerships with existing players in these markets. In
addition, manufacturers will be able to reduce their exposure to competition on price by moving out of the
commodity-grade market and instead shifting up the value chain to produce more specialized products.
 Over the medium- to long-term, some Thai producers may switch to the production of environmentally-
friendly bio-plastics since Thailand has abundant domestic sources of the biomass inputs (e.g., cassava,
palm, and sugarcane) that can be used as alternative feedstocks. These high added-value products are
currently gaining in popularity worldwide due to their ability to help reduce environmental problems, but as
a further incentive to manufacturers to change production, the Thai government is also making entry to this
market more attractive by offering investors targeted tax breaks.

Krungsri Research 4
Overview
The petrochemical manufacturing business is normally a large-scale operation that employs many
complicated and tightly interconnected industrial processes. It involves huge capital investment to establish a
petrochemical complex, which requires the use of advanced technology, and the sites that host these
complexes need to have access to a wide range of industrial-scale utilities. Given this, the payback period on
investment is relatively long.
Generally, the petrochemical industry is exposed to cyclical supply-demand conditions and prices, as the
desire to exploit economies of scale encourages large and intensive investment to meet anticipated future
demand. Decisions to expand existing facilities or invest in new sites are usually made when prices for
petrochemicals are high, and this would normally be when an expanding economy is feeding demand for these
products or when there is a supply shortage. But construction of a petrochemical complex normally takes 3-7
years, and if the anticipated demand fails to materialize upon completion, there would be excess supply in
the market. Global data suggest each natural cycle lasts between 6-9 years, but shocks in the world economy
could also affect the supply and demand sides of the equation. Recently, it has thus been harder to identify
cyclical movements within the industry at a global scale.

Figure 1: Petrochemical Value Chain

Petroleum

Petrochemical Industry

Feedstock Preparation

Upstream Petrochemicals

Intermediates

Downstream Petrochemicals

Consumer Products

Source: Krungsri Research

Krungsri Research 5
 Figure 2: Petrochemical Industry Cycle

New plants
come online
Oversupply Continue in hope
Losing pricing power Begin of competitive
devaluation
Oversize investment Defer new investment
Authorize new plants
High margins
Begin of investment

Demand exceeds
supply Selling asset
Start regaining
pricing power

Supply shortage Do nothing

Divest valuable
business
Source: Nexant, Krungsri Research

Investments in large global petrochemical complexes are typically made by players in the oil sector that use
petroleum products as feedstock. However, some petrochemical output can also be used as feedstock or as
primary ingredients in a wide range of industrial processes. The manufacturing process for petrochemicals can
be divided into four main stages:
Stage 1: Manufacturers of feedstock typically use products from the petroleum sector, including natural gas,
condensates (a product of gas distillation), and naphtha (from the distillation of crude oil). About half the
petrochemical production capacity uses naphtha as feedstock, which is especially common in facilities in Asia
and Europe. In North America and the Middle East, gas is the preferred feedstock because these areas are rich
in natural gas deposits. In addition, recent technological developments are allowing organic products such as
sugarcane, cassava and palm to be used as raw material in the production of bioplastics, and investment in
these sectors is expected to rise in the future (Figure 3).
Stage 2: Upstream petrochemical industries take feedstock and use them to produce precursor or preliminary
petrochemical products. These may be divided into two groups according to their molecular structure: (i)
olefins, which include methane, ethylene, propylene and other chemicals that have a base structure formed
from four carbon atoms (so-called ‘mixed C4’ chemicals); and (ii) aromatics, which include benzene, toluene and
xylene, and are used as inputs in the manufacture of other petrochemical products.
Stage 3: Intermediate petrochemical industries consume upstream products, both olefins and aromatics, and
process or combine them with other chemicals to produce intermediate products. Some major products in this
industry are vinyl chloride and styrene. These are sold to downstream industries.

Figure 3: Global Petrochemical Figure 4: Global Upstream Petrochemical

Feedstock Consumption in 2017 Capacity in 2021
(Total Capacity = 481 MTA)
Others 3%
C4 3%
Gas Oil 5%
Propylene Benzene
Ethane 20% 11%
34% Toluene 3%

Ethylene Xylene
Naphtha 32% 13%
45% Propane
8% Methanol
18%
Butane
5%

Source: CMAI Source: Bloomberg, Krungsri Research

Krungsri Research 6
 Figure 5: Global Demand for Petrochemicals

Construction Automotive 12%

14%

Medical 7%
Electronic
19% Security 6%

Houseware 4%
Packaging Footware 3%
28%
Others 7%

Source: Nexant, Krungsri Research

Stage 4: Downstream petrochemical industries take upstream and intermediate goods and use these to make
finished products for use in related sectors (Figure 5). Products consumed by the downstream petrochemical
industry can be sub-divided into four groups
 Plastic resin is the most commonly-used product in downstream industries, including packaging, automotive
manufacturing, construction material, and consumer goods. The most important plastic resins are
polyethylene, polypropylene, polyvinyl chloride (PVC), acrylonitrile butadiene styrene (ABS), polyethylene
terephthalate (PET), and polystyrene (PS).
 Synthetic fibers, for example polyester and polyamide or nylon fiber, are mostly consumed by the textiles
and packaging sectors.
 Synthetic rubber/elastomers are used in the manufacture of automotive parts, tires, and consumer goods.
Examples include styrene butadiene (SBR) and butadiene (BR).
 Synthetic coatings and adhesive materials, which include polycarbonate and polyvinyl acetate, are used in
construction and several other industries.

Table 1: Long-term Demand Sensitivity to Economic Growth

Product Growth

Ethylene 1.5*GDP

Propylene 2.0*GDP

Benzene 1.0*GDP

Xylene 1.5*GDP

HDPE 1.5*GDP

LDPE 2.0*GDP

PP 1.5*GDP
Source: Deutsche Bank

Krungsri Research 7
 Figure 6: Petrochemical Complex

HDPE

LDPE Packaging

LLDPE

Ethane PVC Construction

Ethylene
Propane Vinyl chloride Packaging, automotive,
PP
Cracker consumer goods, electronic
LPG Propylene
BR
Tire
Natural GAS Gas Separation NGL
Butadiene SBR

Condensate Acrylonitrile Automotive, consumer

ABS goods, electronic
LPG Styrene
Benzene
Oil Refinery Naphtha PS Packaging, consumer
Cumene
Gasoline goods, electronic
Aromatic EPS
Reformate Plant
Toluene
Phenol
Kerosene
Xylene EPA Polycarbonate

Diesel
Polyester/
PTA Packaging, Textile
PET
Gasoil

HDPE = High Density Polyethylene SBR = Styrene-butadiene rubber

Bitumen LDPE = Low Density Polyethylene ABS = Acrylonitrile Butadiene Styrene
LLDPE = Linear Low-density Polyethylene PS = Polystyrene
PVC = Polyvinyl Chloride EPS = Expanded Polystyrene
PP = Polypropylene PET = Polyethylene terephthalate
BR = Butadiene rubber

Source: Krungsri Research

Krungsri Research 8
The choice of feedstock made by the individual operator for a particular production process is strongly
influenced by the desired output because each feedstock has a different hydrocarbon composition and will
produce different petrochemical outputs. For example, using natural gas to produce ethylene yields about 80%
ethylene and 20% other products, whereas using naphtha yields only 30% ethylene and 70% other products
(Figure 7).
The major cost item in the sector is feedstock which comprises 60-70% of the total production cost. Power
and transportation account for another 15-20%, and the remaining 15-20% is attributable to fixed costs. Hence,
the production cost is largely dependent on the prices of oil and related products, making this a cost-based
industry and producers who are able to keep these under control will have a competitive advantage. More
specifically, production overheads, or cash cost, will depend on the type of feedstock used, the production
technology employed, and access to feedstock. Therefore, feedstock management is also an important factor in
determining costs, and locating production facilities on sites with easy access to raw materials and to markets
will reduce transportation overheads and improve competitive advantage.

Figure 7: Yields by Feedstock

%

100
80
60
40
20
0
Gas-based Coal Oil-based
Ethylene BTX Propylene Butadiene Pygas Others

Source: Macquarie Research

Table 2: Feedstock Comparison

Primary Feedstock Yields of Energy Uses

Pro Con
Sources Route Feedstock (GJ/tonne)

Natural Methane, LPG, 15-80% 5-14 Relatively cheaper; No product variety;

Gas Naphtha good yields of C-2 uneconomical bulk
transportation
Crude Oil Naphtha 50-70% 5-6 Wide product variety Relatively more expensive

Coal Methanol, Naphtha 40-70% 6-8 Relatively cheap; High investment;

abundant of raw materials environmental concerns

Source: Krungsri Research

Krungsri Research 9
The ability to manage complex investments is another important factor in determining business success. It
would allow manufacturers to better manage costs, reduce exposure to risks arising from fluctuations in
product prices, and plan production more effectively. Product flexibility also permits manufacturers to quickly
adjust production to meet changing demand, while large-scale operations allow manufacturers to benefit from
economies of scale and reduce the marginal cost of production.
The petrochemical market is extensive and globally interconnected. Hence, prices are normally based on a
combination of production costs and supply-demand dynamics on global exchanges. Global prices are largely
determined by ‘laggard-driven pricing’, which means the market price is set by the cost of producing the last
unit consumed. When the cost of the feedstock used in producing that last unit changes, this will thus have a
direct effect on prices of output. Research shows prices of upstream and downstream petrochemical products
have a 70–85% and 40-70% correlation, respectively, with the cost of feedstock.
The ‘spread’ of a particular petrochemical product refers to the difference between the product price and the
cost of raw material; this represents the gross profit margin for each product. However, most downstream
petrochemical industries have a product chain stretching from upstream products through intermediate to
downstream outputs, so when calculating profit, we must consider spreads for all the products in the supply
chain.

Figure 8: Feedstock by Region (2017)

%
100
Others
80 Gas Oil
Naphtha
60
Butane

40 Propane
Ethane
20

0
World North Western NE SE Europe Middle NE Asia SE Asia
America Europe Europe East

Source: CMAI

Figure 9: Structural Costs and Prices

USD

Price
Margins
Utility
Costs
Fixed
Costs

Raw
Material
Costs

Source: KPMG

Krungsri Research 10
Profitability is normally reflected by gross integrated margin (GIM). This is the difference between the total
value of petrochemical products less total cost of production. Hence, the GIM depends on the spreads of all
the products manufactured, which could rise or fall according to an operator’s cash cost and capacity
utilization. However, product mix will vary for different production sites and for different operators, which
makes is complicated to assess competitiveness by simply comparing GIM. This has prompted the use of cash
cost as the preferred metric for assessing competitiveness, specifically cash cost for ethylene because it is the
world’s most commonly produced upstream product at 32% of total global petrochemical output, and is used as
feedstock in a wide variety of processes.

Figure 10: Pricing in Petrochemical Industry

USD/tonne

Cash Costs

Market
Price

Q
Demand = Supply

Source: KPMG

Krungsri Research 11
The global petrochemical sector: In 2020, the global petrochemical sector had a market value of around USD
530bn, and that is expected to grow and exceed USD 700bn in 2025 (source: Grand View Research)1/. China
was both the biggest producer and consumer of petrochemicals in 2021 at 29% of global output and 28% of
consumption. The United States was the world’s single largest source of ethylene, hosting 19.5% of global
production capacity, followed by China (19.3%) (Figure 11).
Worldwide, petrochemical products are used in packaging (28% of output), electronics (19%), construction
(14%), automobiles (12%), and a range of other related sectors (27%). Demand for petrochemical products
typically grow 1-2 times faster than the general rate of growth in the economy.

Figure 11: Thailand’s Capacity of Ethylene Ranked the 9th in the World
MTA
2018 2021
40

30

20

10 5.5

0
China

Qatar
Saudi Arabia

Iran

Netherlands
United States

South Korea

UAE

Mexico
Japan

Singapore
India

Germany

Russia

Brazil
Canada

Taiwan

France

United Kingdom
Thailand

Source: Bloomberg

Thai petrochemical sector: In 2021, the Thai petrochemical sector had a total production capacity of 35
million tons, the largest in the ASEAN region and 16th largest in the world.
 In that year, they produced 13.4 million tons of upstream products, 8.5 million tons of intermediate goods,
and 13.3 million tons of downstream outputs.
 Naphtha is the main feedstock (68% of total feedstock consumption), while 69% of production capacity is for
olefins.
 Over 80% of Thai upstream and intermediate production is for domestic use as inputs for further
downstream processes. 45% of the downstream output is consumed within Thailand. The primary
consumers of downstream products in Thailand are the packaging sector (38% of the total), textile (18%),
automobile (12%), electronics (11%), and others (21%). The remaining 55% goes to the export markets
(largely in the form of plastic pellets or nurdles), the most important of which are China (31%), Japan (10%),
Indonesia (10%), Vietnam (9%) and India (8%).

Figure 12: Thailand’s Petrochemical Capacity

Upstream Intermediates Downstream
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
1999
1991
1993
1995
1997

2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021

Source: PTIT

1/ Grand View Research: Market Estimates and Trend Analysis (2021)

Krungsri Research 12
There are two major players in the domestic petrochemical sector: PTT group with 54% market share, and
SCG group with 29% share. These two have been competing to gain competitive advantages in manufacturing
and marketing by continually investing in related businesses in Thailand and overseas. PTT is linked to upstream
industries, including oil drilling, natural gas production, oil refining, and the production of a wide variety of
petrochemical products. The SCG group has stakes in companies that consume petrochemical inputs, such as
manufacturers of consumer goods and building materials. The smaller players are also active in the sector but
tend to focus on the production of intermediate and downstream goods. They include Thai companies, for
example Vinythai, and international operators or joint ventures with foreign companies such as Indorama,
Exxon, and MingDih.
However, Thailand has limited natural gas reserve, which is expected to be depleted in the near future. This
has prompted changes in the domestic petrochemical sector, including:
 Increasingly switching to using naphtha, a crude oil product, as a replacement feedstock. This will lead to a
change in the upstream product mix.
 Developing a greater range of new downstream products, especially higher value-added goods, and at the
same time, moving away from price competition. These are in line with the third phase of the development
plan for the sector for 2004-2018.
 Expanding production facilities in countries with access to raw materials and a sufficiently large domestic
market, including Indonesia, China, and America. An example is PTT Global Chemical’s investment to
construct a petrochemical complex in the United States to exploit the supply of cheap shale gas in the
region.

Figure 13: Thailand Upstream Petrochemical Capacity Table 3: Thai Petrochemical by Producers
in 2021
(Total Capacity = 13,222 KTA)

Acrylonitrile
Propylene
Butadiene

ABS/SAN
Ethylene

Benzene
Toluene

SBR/BR
Styrene

PS/EPS
Xylene

PVC
PTA

PET
PE

PP
Company
C4
3%
Benzene
11% PTTGC       
Propylene IRPC         
24%
PTT Group

TPX  
Toluene 3%
HMC  
P-xylene ThaiABS  
14% Thai styrenics 
Ethylene
41% PTT Asahi 
O-xylene 1% MOC     
Mixed Xylene 3% ROC    
SSMC 
BST  
SCG Group

Siam Mitsui 
Source: PTIT TPE 
SPE 
SSLC  
TPC 
TPP 
Siam Polystyrene 
SPRC 
Indorama  
TPT 
Others

Vinythai 
Styrolution 
Mingh Dhi 
Exxon 
Total                
PTT Group            
SCG Group             
Others       
Source: PTIT

Krungsri Research 13
Situation
In 2021, the petrochemicals industry recovered significantly, driven in large part by the easing of the Covid-19
pandemic following the successful worldwide rollout of vaccination programs. This resulted in a rebound in
economic conditions in the major economies of 6.0% in 2021 from a contraction of -3.3% in 2020. For the
petrochemical industry, this meant that growth rates jumped from 1.6% in 2020 to 5.7% a year later as strong
pent-up demand in the construction, automobile, and packaging industries was released. However, the world
economy’s journey to recovery hit a major roadblock in 2022 with the outbreak of war in Ukraine, and thanks
to Russia’s position as a major producer, this had significant impacts on the supply of oil and natural gas. The
sudden surge in prices that this supply disruption triggered added pressure on prices worldwide, pushing
inflation to 8.8%, its highest in over a decade. This situation was worsened by China’s pursuit of its zero-Covid
policy, causing lockdowns of major industrial areas. For 2022, global growth thus slowed to 3.4% (source: IMF),
and Krungsri Research estimates that overall demand for petrochemical products expanded by 3.0-3.2%.
The cost of inputs to the petrochemicals industry climbed through 2022 due to rising prices for crude oil and
natural gas from the Russia-Ukraine war. Crude oil prices were also affected by demand growth outpaced the
expansion in supply, which remained tight thanks to the limited production quotas that have been kept in place
by OPEC+ since 2020. Given this, average prices for Dubai Crude surged by more than 40% to USD 96.3/bbl
relative to their 2021 level and this then pushed up prices for naphtha (which is produced from crude) by 21.7%
YoY to an average of USD 788.7/tonne. Gas prices also spiked in the year, jumping 75.2% YoY to an average
price of USD 6.5 per 1 million BTU (MMBTU) (Figures 14 and 15). As a result of this discrepancy in the price
rises for oil and gas, manufacturers using naphtha as their primary input enjoyed cost advantages relative to
natural gas-based manufacturers.

Figure 14: Feedstock Prices

USD/bbl USD/MMBTU
140 10

Natural Gas (RHS) 9

120
8
100 7

80 6
5
60 WTI 4
40 3
2
20
1
0 0
Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22

Source: Bloomberg

Figure 15: Naphtha Prices

USD/tonne
1,200

1,000

800

600

400

200

0
Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22

Source: Bloomberg

Krungsri Research 14
Prices for most of the major petrochemical products in 2022 were pushed up by the higher cost of inputs
(Figure 16) as well as tighter supply due to some regional manufacturers with relatively higher cost of
production cutting their production capacity since this was no longer cost-effective. However, in the second half
of the year, price increases were restrained by a slowdown in demand for petrochemicals from increased fears
over the possibility of a recession. This made it increasingly difficult for manufacturers to pass on higher costs to
downstream markets, which helped to ease some of the pressure that has kept prices elevated. This downgrade
in the outlook was amplified by China’s continuation of its zero-Covid policy and the periodic lockdowns of
major urban and industrial centers, which then impacted the manufacturing sector and undercut demand for
downstream petrochemical products. In addition, prices were further affected by rising supply that came from:
(i) the diversion of exports from China to Southeast Asia by manufacturers in the Middle East, China, and South
Korea, and (ii) the new petrochemical facility in Malaysia, which began operations in the latter half of 2022. As a
consequence, both average prices and spreads for midstream and downstream products stayed flat or
declined. This is with the exception of PET, for which prices benefited from greater demand from the packaging
industry.

Figure 16: Petrochemical Prices (USD/tonne)

Upstream products Upstream products

2,500

2,000

1,500

1,000

500

0
Propylene

Styrene
Butadiene

Benzene

P-Xylene

Methanol

ABS
Toluene

PET
Acrylonitril

HDPE

PP

PVC

Naphtha
2018 2019 2020 2021 2022 PS
Source: Bloomberg, Krungsri Research

 Upstream petrochemical products:

Olefins
 Ethylene: Spreads contracted -23.3% from their level in 2021 to USD 270.8/tonne. The market was
impacted by both the global economic slowdown in the second half of the year and the impacts of Chinese
pandemic controls on demand for downstream products, while an easing of tight supply helped this return
to more normal conditions. The increase in ethylene prices therefore fell behind the run up in the cost of
inputs, leading to a tightening of spreads.
 Propylene: Spreads narrowed -37.8% to USD 208.4/tonne on an increase in Chinese supply (a large
Chinese manufacturer has begun commercial operations at a new production facility). Alongside this, the
market was undercut by weak demand for downstream products from China and from auto manufacturers
worldwide, which continued to be affected by semiconductor shortages.
Aromatic
 Para-xylene (PX): Spreads surged 52.4% to USD 305.3/tonne thanks to increased consumer concerns over
health and hygiene that translated into a decline in the reuse of packaging and an accompanying increase
in demand for the PET resin that is used in the manufacture of single use packaging for food and drinks.
Demand from downstream industries, and in particular from textile manufacturers (the largest consumer
of PX), also recovered steadily, while on the supply side, although some large manufacturers entered the
market, other players cut production capacity, and this too helped to bid up prices.
 Benzene: Spreads broadened 11.8% to USD 318.6/tonne on: (i) stronger demand from end users for the
manufacture of packaging, and electronics and consumer goods; and (ii) a tightening of supply that was
driven by a reduction in the US production and controls on energy consumption in China.

Krungsri Research 15
 Downstream petrochemical products:
 High density polyethylene (HDPE): Spreads slumped to USD 46.3/tonne, down -60.8% from their level in
2021. Demand for HDPE came under pressure due to the lockdowns imposed on major urban and
industrial areas in China, which then weighed on consumption by buyers in construction and piping, as
well as from fears over a global slowdown that were triggered by the run-up in inflation. Supply also
increased as greater capacity came online in China, Malaysia and the Middle East, while increases in the
cost of ethylene outpaced those of HDPE, adding further to pressure on spreads.
 Polystyrene (PS): Spreads contracted -33.3% to USD 378.7/tonne. The acceleration of Inflation that led to
consumers being more cautious over their spending resulted in demand from downstream industries to
soften, in particular from producers of electrical appliances, electronics, and auto parts. However, the
effect of this on prices was partly offset by the decision by Asian manufacturers to take production
capacity offline or to postpone increases in this as they looked to avoid excessive stockholding and to bring
this into line with more depressed market conditions.
 Polypropylene (PP): Spreads tightened to USD 136.1/tonne, down -54.9% on a combination of the general
slowdown in the world economy, weaker demand from downstream industries in China, and the tightening
of monetary policy in many countries, especially in Vietnam and Indonesia (major markets for PP).
 Polyethylene terephthalate (PET): Spreads narrowed -68.7% to USD 68/tonne. Manufacturers were not
unduly affected by the Covid-19 pandemic since PET is used to manufacture sanitary packaging for food
and drinks, while on the production side, constraints on power consumption in China caused supply to
tighten. However, the cost of PX, an important input into the manufacturing process, rose substantially
and this then impacted spreads.

Figure 17: Upstream Prices and Spreads of Selected Petrochemical Products (USD/tonne)

Ethylene Propylene Ethylene Propylene

1,500 600 P-xylene Benzene
P-xylene Benzene
1,300 500

1,100 400

900 300

700 200

500 100

300 0
Nov-19

Nov-20

Nov-21

Nov-22
Jul-19

Jul-20

Jul-21

Jul-22
Mar-19

Mar-20

Mar-21

Mar-22
Nov-21
Nov-19

Nov-20

Nov-22
Jul-19

Jul-20

Jul-21

Jul-22
Mar-19

Mar-20

Mar-21

Mar-22

Source: Bloomberg

Figure 18: Prices of Selected Petrochemical Products (USD/tonne)

1,500 1,500 1,800 1,500

PP PS
1,300 HDPE 1,300 1,600 1,300
PET
1,100 1,100 1,400 1,100

900 900 1,200 900

Ethylene Propylene
Styrene
700 700 1,000 700 PX

500 500 800 500

300 300 600 300

Mar-20

Jan-21

Mar-20

Jan-21

Mar-20

Jan-21
Sep-22

Sep-22

Sep-22
Nov-21
Apr-22

Nov-21
Apr-22

Nov-21
Apr-22
Aug-20

Jun-21

Aug-20

Jun-21

Aug-20

Jun-21

Mar-20

Jan-21

Sep-22
Aug-20

Jun-21
Nov-21
Apr-22

Source: Bloomberg

Krungsri Research 16
The Thai petrochemical industry was supported through 2022 by growth in the broader economy, driven
mainly by the recovery in the tourism sector, as well as by the abating of the pandemic, which then helped
demand recover in downstream industries including packaging, plastics, and medical devices. However, in the
second half of the year, markets felt the effects of a slowdown in growth of both the Thai and the global
economies, the continuation of China’s zero-Covid policy, which then suppressed demand in downstream
industries, and strong inflation that then dragged on domestic consumption and investment. Given this, overall
demand for petrochemical products softened. The situation for the industry in 2022 is summarized below.
 Having risen 10.1% in 2021, in 2022, sales of petrochemical products fell back by -12.5% to a total of 10.1
million tonnes, with sales of upstream and downstream products contracting by respectively -12.1% and
-13.0% to totals of 5.1 and 5.0 million tonnes (Figure 19). Exports also slipped -5.2% YoY by volume as a
consequence of: (i) the imposition of harsh lockdowns in important industrial regions in China, a major
export market for Thai manufacturers; (ii) rate hikes that were implemented around the globe in response to
rising inflation and that then suppressed economic growth and demand in industries that use petrochemicals
as an input; and (iii) supply chain disruptions that affected downstream consumers including the auto
assembly and electronics industries (Figure 20).

Figure 19: Thailand Domestic and Export Petrochemical Sales

Tonnes, m % YoY Tonnes, m % YoY

12 20 3 15
10 15
10
10
8 5 2
5
6 0
-5 0
4 1
-10
2 -5
-15
0 -20 0 -10
2018 2019 2020 2021 2022 2018 2019 2020 2021 2022
Upstream Downstream Upstream Downstream
Total growth (RHS) Total growth (RHS)

Note: Market consists of ethylene, propylene, benzene, toluene, PE, PP, and PET
Source: OIE, Krungsri Research

Figure 20: Thailand Monthly Industrial Index

120

100

80

60 Motor vehicles, trailers and semi-trailers

Computers and electronic products
40 Plastic container
Total index
20
Nov-18

Nov-19

Nov-20

Nov-21

Nov-22
Jul-18

Jul-19

Jul-20

Jul-21

Jul-22
Sep-18

Sep-19

Sep-20

Sep-21

Sep-22
Mar-18
May-18

Mar-19
May-19

Mar-20
May-20

Mar-21
May-21

Mar-22
May-22
Jan-19

Jan-20

Jan-21

Jan-22

Source: Office of Industrial Economics (OIE), Krungsri Research

Krungsri Research 17
 Output of petrochemicals contracted -10.8% to 15.2 million tonnes, with production of the two major
upstream products ethylene and propylene falling by -11.2% YoY and -14.2% YoY respectively. Output of
downstream goods was also affected by the closure of many facilities for maintenance (Figure 21).
 Industry profits narrowed for the major players (Figure 22) as prices and spreads came under pressure from
weaker demand, in particular from auto assemblers and manufacturers of electronics goods, which
continued to be affected by shortages of semiconductors. Alongside this, producers’ profits were also
affected by the continuing high cost of natural gas and crude, which then lifted the price of industrial inputs
(Table 4).

Figure 21: Thailand Petrochemical Output (million tonnes)

2021 2022
Upstream products Downstream products
5

0
Ethylene Propylene Benzene Toluene PE PP PET

Note: Market consists of ethylene, propylene, benzene, toluene, PE, PP, and PET
Source: OIE, Krungsri Research

Figure 22: EBITDA Margins of Key Thai Players and their Peers

%
Percentile 10-90%
30
Percentile 25-75%
Percentile 40-60%
25

20 Indorama

15

10

5 SCC
0 PTTGC

-5
1Q19

2Q19

3Q19

4Q19

1Q20

2Q20

3Q20

4Q20

1Q21

2Q21

3Q21

4Q21

1Q22

2Q22

3Q22

Source: Bloomberg, Krungsri Research

Krungsri Research 18
 Table 4: Global Prices and Spreads (USD/tonne)

Prices Spreads

2021 2022 % change 2021 2022 % change

Ethylene 1001.1 1059.5 5.8 352.9 270.8 -23.3

Propylene 983.4 997.0 1.4 335.3 208.4 -37.8

Butadiene 872.9 1018.7 16.7 224.8 230.1 2.4

Benzene 933.0 1107.3 18.7 284.8 318.6 11.8

P-Xylene 848.5 1094.0 28.9 200.3 305.3 52.4

Styrene 1192.4 1224.4 2.7 544.3 435.8 -19.9

HDPE 1119.2 1105.8 -1.2 118.1 46.3 -60.8

PP 1285.0 1133.1 -11.8 301.6 136.1 -54.9

ABS 2402.6 1724.2 -28.2 1401.5 664.7 -52.6

PET 1065.7 1161.9 9.0 217.2 68.0 -68.7

PS 1534.8 1462.1 -4.7 567.8 378.7 -33.3

PVC 1449.2 1114.5 -23.1 448.1 55.0 -87.7

Naphtha 648.2 788.7 21.7

Source: Bloomberg, Krungsri Research

Krungsri Research 19
Outlook
The IMF sees the global economy expanding by 2.8% in 2023, with growth accelerating to 3.0% and 3.2% in
2024 and 2025, though with volatility in crude oil prices expected due to high uncertainty around the outcome
of the Ukraine-Russia war. Nevertheless, the full reopening of China at the start of January 2023 will help to
underpin demand for petrochemicals to run to 1.5-2.5% in 2023 and then to 2.5-3.5% annually in 2024 and
2025 (Figure 23).
Prices for crude oil (a crucial input into petrochemicals production) are expected to remain elevated. The
International Energy Agency (IEA) forecasts demand will average 101.9 MMbbl/day through 2023, up from
100.5 MMbbl/day in 2022, thanks partly to the reopening of China. At the same time, supply will remain
constrained by the continuation of sanctions on Russia, which has announced a 0.5 MMbbl/day cut in exports
from March 1, 2023, onwards, thus taking around 0.5% of global supply off the market. In addition, to maintain
high prices, the OPEC+ group has agreed to a 2 MMbbl/day cut in output to run from November 2022 through
to the end of 2023 (Figure 24). In light of these market conditions, Krungsri Research projects that prices for
Dubai Crude will average USD 70-80/bbl through 2023 to 2025, while the World Bank sees prices for natural
gas averaging USD 6.2/MMBTU in 2023 and then softening slightly to USD 6/MMBTU in 2024 and 2025.
Tightness in oil markets will keep prices for naphtha elevated through 2023-2025, and so Krungsri Research
expects these to average USD 652/tonne in 2023 and then to weaken to USD 612/tonne and USD 565/tonne in
each of the following two years. This compares to prices that peaked at USD 788.7/tonne in 2022, which then
had significant impacts on the prices and spreads for midstream and downstream products.

Figure 23: Growth in Global Petrochemical Demand and in the World Economy (%)

7
6 Global economic
5 growth
4
3
2
1 Petrochemical demand growth
0
-1
-2
-3
-4
2018 2019 2020 2021 2022 2023F 2024F 2025F

Note: Global petrochemical demand consists of ethylene, propylene, benzene, butadiene, p-xylene, HDPE, PS, PP, PET, and PVC
Source: IMF, Bloomberg, Krungsri Research

Figure 24: Feedstock Prices (2023)

USD/bbl USD/MMBTU

90 5

85 4

80 3

75 2

70 Dubai Brent WTI Natural Gas (RHS) 1

65 0
5-Jan-23
1-Jan-23

9-Jan-23

2-Mar-23

6-Mar-23
10-Feb-23

14-Feb-23

18-Feb-23

22-Feb-23

26-Feb-23
2-Feb-23

6-Feb-23
13-Jan-23

17-Jan-23

21-Jan-23

25-Jan-23

29-Jan-23

10-Mar-23

Source: Bloomberg

Krungsri Research 20
With the global economic growth expected to slow to a historic low of 2.8% this year, prices for many of the
major petrochemical products will likely soften across 2023 (Figure 25). The continuing strength of inflation
will encourage consumers to be more cautious in their spending, and this will impact demand in some
downstream industries from petrochemical producers. At the same time, the market is also affected by
oversupply; the new production in China and India will add respectively 2.8 million tonnes and 5.7 million
tonnes to overall supply of HDPE and PP, although demand is predicted to expand by just 1.4 million tonnes and
2.8 million tonnes (source: CMA Energies). Meanwhile, the cost of inputs, for example, naphtha and
condensates, will decline at a slower rate, and so for many products, spreads will tighten.

Figure 25: Petrochemical Prices and Spreads (USD/tonne)

Price
Upstream products Intermediate and downstream products
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
Ethylene Propylene Butadiene Benzene P-xylene HDPE PP PET PS PVC

Spread
1,000

800

600
Figure 38: Revenue of Digital content
400

200

0
Ethylene Propylene Butadiene Benzene P-xylene HDPE PP PET PS PVC

2019 2020 2021 2022 2023F 2024F 2025F

Source: Bloomberg, Krungsri Research

Krungsri Research 21
Prices for petrochemical products should recover in 2024 and 2025 on a gradual expansion in the global
economy that will lift consumer spending power and boost demand from downstream industries. However,
within Asia, supply will continue to be affected by the increase in production capacity in a number of countries.
In many cases, this new capacity is either an expansion that had been previously planned but then delayed by
the Covid-19 pandemic or a vertical integration into petrochemicals by oil refineries in the Middle East that are
moving into the production of olefins (e.g., polyethylene and polypropylene) and aromatics (e.g., PX). This new
production is expected to extend capacity by 7-10% annually compared to average growth of just 3-5% over
2011-2019. However, imports of petrochemicals and plastic resins of China will fall from the base chemical self-
sufficiency program, and the excess supply affecting some product groups will thus mean that prices will remain
flat or edge up marginally, while spreads will strengthen only slowly. Krungsri Research estimates that over
2023 to 2025, spreads for the main products will perform as follows (Figure 26).

Figure 26: Spread Cycle Forecast of Petrochemicals products

Low but increasing spread High and increasing spread

0.3  Spreads that will be high
Upstream

A Change in spread ratio between 2019-21 and average of 2022-24

and that will widen: PVC
Intermediates and Downstream
 Spreads that will be low
0.1
and that will narrow:
PVC
Benzene Ethylene, Propylene,
Butadiene, Benzene, PX,
-0.1 HDPE, PP, PS, PET
PS

-0.3
HDPE PET

PP Propylene -0.5

Ethylene Butadiene
PX -0.7

-0.9
0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6

Ratio of spread in 2022-24 to an average of spread during 2013-2019

Source: Bloomberg, Krungsri Research

Krungsri Research 22
 Box 1 Outlook for major petrochemical products in 2022-2024

 Ethylene
Ethylene is the world’s most widely produced olefin, accounting for a quarter of all upstream production
globally. Total annual production capacity runs to some 160 million tonnes, with this split between East
Asia (24%), North America (22%) and the Middle East (19%). 60% of output is used as a feedstock in the
production of polyethylene, which is then used in packaging. In addition, ethylene is used to produce
ethylene oxide, ethylene dichloride and ethyl-benzene, which are also used in packaging and in the
construction industry.
The global slowdown is expected to translate into softer demand for ethylene through 2023, but the
market should revive over 2024 and 2025 in step with a more positive outlook for the world economy.
Demand will therefore increase by an average of 3% annually, but this will be against an expected
expansion in production capacity of 5% per year, with much of the latter coming from Asia, and
especially from China since the country is now pursuing a policy of cutting its dependence on imports of
chemicals. This discrepancy between supply and demand will undercut the price of ethylene, and
although the cost of inputs will also decline, the likely strength of crude markets will mean that this will
fall at a slower rate than ethylene itself. Given this, the ethylene-naphtha spread will tend to narrow.

Figure 27: Ethylene Demand and Supply

Tonnes, mn
Capacity Consumption
250 222 233
211
200 183 185 192

150

100

50

0
2017 2018 2019 2020 2021 2022E 2023F 2024F
Source: Bloomberg, Krungsri Research

 Polyethylene (PE)
Polyethylene is the most widely produced type of plastic pellet. The product itself is manufactured from
ethylene, and 70% of the output is used in the packaging industry.
Demand for polyethylene is expected to move in line with a softening of the global economy and grow
at an average rate of 2.8% annually. However, this will lag behind the expansion in production capacity,
which is forecast to rise by an average of 6% per year as new facilities come online in China, India, the
US, and Southeast Asia. As a consequence, the market will be affected by a supply glut that will keep
prices low, and because polyethylene prices will fall faster than those for ethylene, spreads will narrow.

Figure 28: Polyethylene Demand and Supply

Tonnes, mn
Capacity Consumption 67
70 63
60
53 54 56
60
50
40
30
20
10
0
2017 2018 2019 2020 2021 2022E 2023F 2024F
Source: Bloomberg, Krungsri Research

Krungsri Research 23
 Propylene
Propylene is the second most widely manufactured olefin (after ethylene), and it can be made from
naphtha, LPG and coal. 65% of output is used to make polypropylene, a plastic that is mostly used in auto
assembly, although propylene is also used as an input into the production of industrial and consumer
goods.
The market for propylene is expected to come under pressure from a combination of weaker demand
and a supply glut. Thus, growth in production capacity should average 4.7% per year, with this being
especially concentrated in China, while demand is forecast to rise at the lower rate of 3% annually. As
such, both propylene prices and spreads are likely to weaken.

Figure 29: Propylene Demand and Supply

Tonnes, mn Capacity Consumption

200
149 156
150 142
123 125 130

100

50

0
2017 2018 2019 2020 2021 2022E 2023F 2024F

Source: Bloomberg, Krungsri Research

 Benzene
This is derived from naphtha, and with 63 million tonnes of production capacity worldwide, it is the most
commonly manufactured of the aromatic petrochemicals. Around 50% of output is used as an input into
the production of ethyl-benzene, which is in turn used to produce polystyrene. Another 20% goes to the
production of cumene, used in packaging, construction materials, and household goods.
Production capacity and demand will grow at average annual rates of around 2.6% and 2.7%,
respectively, in line with steady growth in the consumption of downstream products such as PS and
ABS. Because problems with oversupply are less pronounced than for olefins, pressure on prices and
spreads will be less intense.
 Polystyrene
This is another downstream aromatic. Polystyrene is produced from styrene monomer, and current global
production capacity runs to 11 million tonnes per year. The primary consumers of this are manufacturers
of electronics, packaging, and construction supplies.
Demand is forecast to rise by an average of 2.3% per year, while growth in production capacity will fall
behind at around 1% annually. The cost of styrene has decreased (styrene is produced from benzene
and so prices for these move in parallel) and so spreads will tend to remain stable or broaden slightly.

Krungsri Research 24
 Xylene
Xylene (an aromatic) is an important product for Thai petrochemical players. More than two-thirds of
xylene is produced as a byproduct of oil refining, although this can also be manufactured from naphtha.
The most important end uses are in manufacturing polyester (for textiles) and PET (for packaging).
Demand for xylene is expected to increase by 2.8% annually, but at 9%, growth in production capacity
will race ahead. Much of this will be in China, thanks to the official policy of increasing national self-
reliance in the chemical industry. The market has thus been affected by a worsening supply glut since
the 2020-2021 Covid-19 pandemic, and this will pull down prices. Moreover, the cost of inputs is likely
to remain high, and so spreads will narrow very sharply.

Figure 30: Xylene Demand and Supply

Tonnes, mn
Capacity Consumption
110
98
100 90
90 82
80
70
60 52 51 54
50
40
30
20
10
0
2017 2018 2019 2020 2021 2022E 2023F 2024F

Source: Bloomberg, Krungsri Research

Krungsri Research 25
The domestic market for petrochemicals will see a gradual improvement through 2023, helped by recovery in
the tourism sector, which Krungsri Research believes will boost foreign arrivals by more than 35% in the year,
and the forecast 3.3% growth in the Thai economy (up from 2.6% in 2022). In addition, the reopening of China, a
major export market for Thai producers, will also add to demand from downstream industries (e.g., packaging
and plastics). However, the world economy is showing signs of weakness, and this together with the expansion
in production capacity and resulting supply glut will put pressure on spreads, so any broadening of these will be
strictly limited. In 2024 and 2025, an improvement in the global outlook will help to lift the industry, while the
expected 3.0-4.0% growth in the Thai economy will add to the demand for petrochemical products and help to
absorb the excess supply weighing on the market. This will then support prices and will assist in bringing spreads
back to their pre-Covid-19 level.
Factors restricting growth in demand for petrochemical products will include government measures to reduce
the consumption of single-use plastics. This will particularly affect manufacturers of downstream products, most
notably producers of polyethylene (PE), polypropylene (PP), and polyethylene terephthalate (PET). The domestic
industry will also feel pressure from new production capacity coming from China, and so Krungsri Research sees
demand on domestic and export markets increasing by respectively 1.5-2.5% and 0.5-1.0% annually over the
three years between 2023 and 2025 (Figure 31).

Figure 31: Thailand Petrochemical Market

Tonnes, mn %

18 Production (RHS) Domestic consumption Export 15

10
17
5

16 0

-5
15
-10

14 -15
2018 2019 2020 2021 2022 2023F 2024F 2025F

Note: Market consists of Ethylene, Propylene, Benzene, Toluene, PE, PP, and PET
Source: OIE, Krungsri Research

Krungsri Research 26
Players will tend to move towards producing high-value-added specialty products to meet stronger demand
most obviously from the new S-curve industries (e.g., for the production of EVs and EV parts, batteries,
charging stations, robotic units, and medical equipment). Phase 4 of the government’s plan for the development
of the petrochemical industry (2022-2026) promotes the production of biodegradable and recycled plastics as a
way of improving the industry’s competitiveness, and manufacturers will exploit new market opportunities by
making greater investments in the production of these.
A range of factors have the potential to affect prices and spreads of petrochemical products in the coming
period. (i) Geopolitical risk may worsen, with this potentially originating from an extension or degradation of
the Russia-Ukraine war, the Taiwan dispute, or the deepening polarization of the global economy as it bifurcates
into US and Chinese areas of control. This would then add to supply chain disruption and through this, drag on
domestic and global growth. (ii) The continuation of sanctions on Russia by Western powers may encourage
the country to divert exports of petrochemical products to Asia, especially to China, which would then eat into
Thai exporters’ market share. (iii) Problems with semiconductor shortages may last longer than expected, and
if this is the case, demand from major downstream consumers of petrochemical outputs (e.g., auto assemblers
and manufacturers of electronics goods) may be affected. (iv) Global oil markets may be subject to significant
volatility, which would then cause periodic uncertainty over the cost of inputs. (v) Supply will tend to expand,
especially from new Chinese capacity. For example, the China National Petroleum Corp., China’s largest oil
company, is responding to the need to ‘go green’ and to cut its carbon footprint by shifting from oil production
to petrochemicals. Production capacity will thus expand by an estimated 3.1 million tonnes by 2025, with this
including raised output of ethylene, propylene, and butadiene, as well as new production of high value-added
goods such as polyolefin, ethylene vinyl acetate, and styrene-butadiene rubber. Naturally, this may then affect
demand for Thai products. (vi) The US and EU are imposing restrictions on trade that are motivated by their
climate change policies, and these will restrict imports to these areas of products that are linked to the
emission of greenhouse gases. This will then impact demand for petrochemicals and other products in
petrochemical supply chains.
Changing circumstances within the industry and in the wider business world will also pose challenges to
players in the petrochemicals sector, and how they respond to these will help to determine their future
market position. Within the industry, businesses are increasingly shifting to the use of new technology to add
value to their processes and to respond to the need to use renewable energy. This is then helping to support
downstream industrial consumers, especially those manufacturing packaging, automobiles and electronics, as
these industries evolve in response to the emergence of the bio-circular-green (BCG) economy. The outcome of
this is that the market is shifting from an earlier demand for commodity-grade goods to a greater need for
specialty products and with this, the petrochemical industry is being forced to change. Deloitte thus estimates
that by 2033, although the overall market for petrochemicals will have grown by some 3.0% per year, demand
for specialty petrochemical products will have expanded by 4.5% annually. External influences on the sector are
developing as a result of the shift from supply-driven consumption to demand-driven production, which is
then altering the nature of competition within the sector; whereas in the past, competitiveness was built on an
ability to source inputs and control costs, this is increasingly now a result of a player’s ability to produce a wide
variety of products that successfully meet market needs, to build relationships with businesses in other sectors,
and to develop and exploit new technologies and processes. These latter factors will then help to determine
profitability in the coming period.

Krungsri Research 27
KRUNGSRI RESEARCH

Macroeconomic Team Industry Team

Sujit Chaivichayachat Pimnara Hirankasi, Ph.D.
Head of Macroeconomic Research Head of Industry Research

Churailuk Pholsri Taned Mahattanalai

Senior Economist (Forecasting) Senior Analyst (Digital)

Thansin Klinthanom Poonsuk Ninkitsaranont

Economist Senior Analyst (Healthcare, Mobile Operators)

Piyanuch Sathapongpakdee
Senior Analyst (Transport & Logistics)

Analytics & Intelligence Team
Pimnara Hirankasi, Ph.D.
Acting Head of Analytics and Intelligence
Research
Narin Tunpaiboon
Senior Analyst (Power Generation, Modern Trade,
Chemicals, Medical Devices)
Thian Thiumsak
Senior Analyst (Energy, Petrochemicals)

Nathanon Ratanathamwat Puttachard Lunkam

Senior Analyst
Senior Analyst (Construction Contractors,
Construction Materials, Hotels, Industrial Estate)
Sathit Talaengsatya
Patchara Klinchuanchun
Senior Analyst
Senior Analyst (Real Estate)
Chinnakrit Ampornpannawat
Analyst
Chaiwat Sowcharoensuk
Senior Analyst (Agriculture)
Parinya Mingsakul
Analyst
Wanna Yongpisanphob
Analyst (Automobile,
Electronics & Electrical Appliances)

MIS and Reporting Team Prapan Leenoi

Thamon Sernsuksakul Analyst (ESG)

Administrator
Suppakorn Kornboontritos
Chirdsak Srichaiton Analyst (Agriculture, Food & Beverages)

MIS Officer

Wongsagon Keawuttung
MIS Officer