Thai SCG Chems runs most plants at full rates – president

SINGAPORE (ICIS)–Thailand’s Siam Cement Group (SCG) is currently running most of its petrochemical plants at full capacity, with margins getting a boost from tight regional supply, a company executive said on Thursday.

“The crackers are running at virtually full rates to meet supply and demand balance,” SCG Chemicals president Cholanat Yanaranop told ICIS.

The company has two crackers in Rayong province via its joint venture with US major Dow Chemical. Its 800,000 tonne/year cracker is operated via Rayong Olefins (ROC), while the other 900,000 tonne/year unit is run by Map Ta Phut Olefins Company (MOC).

The crackers were running at around 90% of capacity in the first quarter of this year, according to Yanaranop.

The ROC cracker is scheduled to undergo a 40-day turnaround in the fourth quarter of this year, but the shutdown period is not immediately available, he said.

Naphtha cracking is expected to stay competitive with global crude oil prices likely to remain relatively low in the near term, according to Yanaranop.

“Petrochemicals are cyclical by nature and is currently in an upcycle as a result of the low investment in crackers, which improves margins as supply is tightened,” he said.

While the global economy has slowed down, it continues to grow amid concerns over China’s slowdown, the UK’s vote to leave the EU and the upcoming US elections, the SCG Chemicals executive said.

“Demand may be affected by the global economic slowdown but [petrochemical] margins are still good due to limited capacity additions,” Yanaranop said.

Although China’s economic growth has decelerated mainly due to a slowdown in its manufacturing sector, the country’s private consumption and service sector are still supported by urbanisation and higher average wages, he said.

“Next year, we expect a squeezed gap [margins], but continuing tight supply will help keep the margin healthy. Expect to see good margins for the next few years with a slight dip in 2018 due to US supply additions,” he added.

Global chemicals units are expected to run at above 90% of capacity notwithstanding the surge in US capacity in 2018, he said.

“About two-thirds of propylene supply addition is dominated by on-purpose projects in China but strong demand will support global operating rates,” he said.

SCG Chemicals – a subsidiary of Thai conglomerate SCG – produces intermediate chemicals including styrene monomer, purified terephthalic acid (PTA) and methyl methacrylate acid (MMA) as well as downstream products such as polyethylene (PE), polypropylene (PP), polyvinyl chloride (PVC) and polystyrene (PS).

In the first quarter, SCG Chemicals’ net profit surged 82% year on year to Bt8.98bn, even as revenues barely increased to Bt47.8bn as lower selling prices of products offset higher sales volumes.

Its earnings before interest, tax, depreciation and amortisation (EBITDA) margin rose to 24.4%, up from 22.6% in the same period a year earlier as raw material prices continued to drop, according to Yanaranop. 

Source: ICIS plants and projects database

Interview article by Nurluqman Suratman

Picture: Cholanat Yanaranop joined SCG in 1985. (Source: SCG Chemicals)