Petrochemical product prices witnessed an increase in December after showing a mixed trend in the previous month, according to a Al Rajhi Capital report.

Polymer products such as HDPE (+2.2 per cent m-o-m, +11.4 per cent y-o-y), LDPE (+2.4 per cent and +21.7 per cent), polypropylene (+1.9 per cent and +24.9 per cent) that are key to most Saudi Petchem firms under coverage, increased in December, primarily due to supply outages in Asia.

Other basic petrochemical products such as methanol (+19.5 per cent m-o-m), benzene (+13.7 per cent m-o-m) and styrene (+1.7 per cent m-o-m) continued to advance in December.

Urea prices surged 4.3 per cent to $245/mt, a level last seen in December 2015, driven by closure of a few fertiliser plants in China.

On the cost front, naphtha prices witnessed a steep gain of 12 per cent in December after remaining almost unchanged in November.

While propane and butane prices declined (2.6 per cent m-o-m and 4.5 per cent, respectively) in December, Aramco has set the prices for propane and butane significantly higher at $435/mt (+14.5 per cent m-o-m) and $495/mt (+17.9 per cent) for January.

Aramco’s January propane prices peaked to December 2015 level, while Butane prices reached to the highest level since December 2014. Significant increase was seen in US propane (+23.3 per cent m-o-m) and butane prices (+47 per cent) in December.

While, spreads have increased for most of our coverage companies in December, we are a bit cautious on companies using NGLs as feedstock like APC and Yansab, as rising propane and butane prices for January could lower the product spread for these companies.

There will be limited upside for the stocks in the coming weeks unless petchem product spreads increase significantly higher from current levels.

Sipchem to trade higher in the short-term on higher pricing spread trend, while APCC could see some weakness.