Improved Q2 earnings by Asian petrochem makers may be the high point for 2009

13-Jul-09

Q2 earnings have improved for Asian petrochemical makers, but the unclear outlook for global economic recovery as well as increased capacities coming on stream in China and Middle East in H2-09 makes it difficult for the companies to persist with healthy sales and profits. As per ICIS, the high levels of profits attained in Q2-09 could be the peak levels for the year. Increased crude values and delays in start-ups of plants in China and the Middle East pushed chemical prices higher, helping earnings in the April-to-June period. Demand was much stronger than expected due to China’s stimulus package and the weakening of the Korean Won that made its exports more competitive. A supply glut in the region coupled with weak demand may render it difficult for companies to improve performance as compared to this quarter. H2 outlook for petrochemical businesses [could] slow down on lower petrochemical prices and a narrower margin spread due to new supplies in the region.