CEE petchem producers face mounting ethane-based competition: Erste

08 February 2013 15:58  [Source: ICIS news]

LONDON (ICIS)--Naphtha-dependent central and eastern European (CEE) petrochemical producers can expect mounting pressure on their margins from ethane-based competition during 2013, Erste Group Bank said on Friday.

The competitive factor, among other negatives, meant, for instance, that Poland's PKN Orlen faced a decline in its petrochemical model margin to €650/tonne ($867/tonne) in 2013 from €685/tonne in 2012, forecasting of the bank showed.

Orlen and other CEE petrochemical producers such as its Czech subsidiary Unipetrol are having to deal with expanding ethane-based capacities in both the Middle East, with its access to cheap gas, and the US, where the shale gas boom is seeing ethylene crackers switched from naphtha to cheaper ethane, Erste said.

“However, in the case of CEE petchems, there is the strong influence of Far East demand, and the latest Chinese data suggest a better environment, so that may bring some relief to margins,” said Tamas Pletser, an analyst at Erste.

Pletser has advised stock investors to avoid CEE refining and petrochemical groups, apart from Austria's OMV.

“The fundamental outlook [for these companies] deteriorated in the fourth quarter and was not followed by a real market correction, which we expect to come in the next 12 months,” he said.

“Refining margins nosedived during the quarter, while petrochemical margins eased from their October highs, although not as dramatically as refining ones,” he added.

Exceptionally, OMV shares were still at an attractive price even though “a tough 2013 will not be an exciting one for the Austrian company”, Pletser said.

($1 = €0.75)

By: Will Conroy
+44 20 8652 3214

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