UPCYCLE ENDED: A KGI analyst said downstream demand from plastic-processing manufacturers has turned conservative amid trade issues between the US and China

Taipei Times
Date: Jul 01, 2019
By: Chen Cheng-hui  /  Staff reporter

The nation’s petrochemical industry is expected to continue facing the problem of slowing demand growth and accelerating supply growth next year, leading to more downside risks for earnings outlooks, analysts said.

Based on research conducted by analysts at Yuanta Securities Investment Consulting Co (元大投顧) and KGI Securities Investment Advisory Co (凱基投顧), the spreads of most petrochemical products — or the price gaps between raw materials and petrochemical products extracted from them — were below market expectations in the first half of the year, indicating worse-than-expected supply-and-demand dynamics around the world, and posing a potential risk to product prices and earnings.

“We expect more downside risks for the market’s earnings forecasts [for companies] during the period from the second half of 2019 to 2020, mainly due to a likely lower oil price range, a boost to supply from upcoming capacity expansion and weak demand,” Yuanta analyst Leo Lee (李侃奇) said in a report on Thursday last week.

The price of crude oil has become bearish since May because of rising supply from US output and weaker downstream demand amid the US-China trade dispute and recent US-India trade tensions, Lee said.    [FULL  STORY]