Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Asia petrochemical
Impact of Japan earthquake: bigger
issue than plant closures
Replacement demand in Japan to be substantial
While we expect petrochemical plant closures to have an immediate impact on
petrochemical margins, we believe the market is missing the bigger picture –
Japan’s incremental replacement demand post the earthquake. We believe
the impact on the global petrochemical supply-demand balance is substantial
enough for us to turn more positive on our mid- to long-term view on the
petrochemical sector. While the depth of physical and emotional damage left
by the earthquake and tsunami in Japan is still unfathomable, we attempt to
address the incremental demand that could stem from the recent catastrophe
by analysing the 1995 Kobe earthquake impact.
Tighter supply-demand balance driven by demand
We expect the petrochemical utilization rate to accelerate to near 90% by 2014
from 2010’s 83% level, driven by stronger demand growth from Japan. Our
analysis of incremental demand stemming from the Japan earthquake leads us
to believe additional 750ktpa of ethylene demand could be generated over the
next 4~5 years, representing 13% of incremental demand growth based on our
forecast.
Taking ethylene as a benchmark, Japan’s average CAGR has been 0.5%, but
during the reconstruction period after the Kobe earthquake, 4.6% CAGR was
achieved for the infrastructure replacement demand. We expect a wide range of
petrochemical demand to be stimulated as a result of the Japan earthquake,
including for polyethylene (PE), polypropylene (PP), PET, PVC and ABS.
Plant closures are temporary but meaningful impact in ST
While we believe the demand from Japan for the next 4~5 years will have a
more meaningful impact on the global petrochemical market, we expect supply
constraint stemming from petrochemical plant shutdowns in Japan to also tighten
the supply-demand balance in the short term. Japan is a net exporter of major
petrochemical products, but with multiple shutdowns in place, the impact on the
export market could be meaningful, if the period of chemical plant closures
prolongs. Based on the recent findings by CMAI, 2.4mtpa of ethylene capacities
are currently lost, which represent 1.7% of global ethylene capacity.
Honam Petrochemical is our top pick in Korea chemicals
We reiterate our positive view on Honam Petrochemical with Won510,000 as a
new target price. We believe Honam Petrochemical is best leveraged to the
chemical cycle, and expect earnings momentum to take effect from this year.
Despite ongoing upgrades in consensus earnings, we believe the street is still
overly bearish on Honam’s earnings outlook, which is also evident on 1Q11
earnings expectations. We believe 1Q11 earnings will surprise the market,
thereby triggering rounds of earnings upgrades.
Among Asia petrochemicals, we also like PTTCH, Nan Ya Plastics, and Reliance
Industries.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Asia petrochemical
Impact of Japan earthquake: bigger
issue than plant closures
Replacement demand in Japan to be substantial
While we expect petrochemical plant closures to have an immediate impact on
petrochemical margins, we believe the market is missing the bigger picture –
Japan’s incremental replacement demand post the earthquake. We believe
the impact on the global petrochemical supply-demand balance is substantial
enough for us to turn more positive on our mid- to long-term view on the
petrochemical sector. While the depth of physical and emotional damage left
by the earthquake and tsunami in Japan is still unfathomable, we attempt to
address the incremental demand that could stem from the recent catastrophe
by analysing the 1995 Kobe earthquake impact.
Tighter supply-demand balance driven by demand
We expect the petrochemical utilization rate to accelerate to near 90% by 2014
from 2010’s 83% level, driven by stronger demand growth from Japan. Our
analysis of incremental demand stemming from the Japan earthquake leads us
to believe additional 750ktpa of ethylene demand could be generated over the
next 4~5 years, representing 13% of incremental demand growth based on our
forecast.
Taking ethylene as a benchmark, Japan’s average CAGR has been 0.5%, but
during the reconstruction period after the Kobe earthquake, 4.6% CAGR was
achieved for the infrastructure replacement demand. We expect a wide range of
petrochemical demand to be stimulated as a result of the Japan earthquake,
including for polyethylene (PE), polypropylene (PP), PET, PVC and ABS.
Plant closures are temporary but meaningful impact in ST
While we believe the demand from Japan for the next 4~5 years will have a
more meaningful impact on the global petrochemical market, we expect supply
constraint stemming from petrochemical plant shutdowns in Japan to also tighten
the supply-demand balance in the short term. Japan is a net exporter of major
petrochemical products, but with multiple shutdowns in place, the impact on the
export market could be meaningful, if the period of chemical plant closures
prolongs. Based on the recent findings by CMAI, 2.4mtpa of ethylene capacities
are currently lost, which represent 1.7% of global ethylene capacity.
Honam Petrochemical is our top pick in Korea chemicals
We reiterate our positive view on Honam Petrochemical with Won510,000 as a
new target price. We believe Honam Petrochemical is best leveraged to the
chemical cycle, and expect earnings momentum to take effect from this year.
Despite ongoing upgrades in consensus earnings, we believe the street is still
overly bearish on Honam’s earnings outlook, which is also evident on 1Q11
earnings expectations. We believe 1Q11 earnings will surprise the market,
thereby triggering rounds of earnings upgrades.
Among Asia petrochemicals, we also like PTTCH, Nan Ya Plastics, and Reliance
Industries.
No comments:
Post a Comment