Petrochemical business holds key to the still-strong 1QFY18 profit

Even though refinery business (contributing around 17% of total EBITDA) came under pressure from increased crude premium tracking higher crude oil prices while Singapore market GRM in 1QFY18TD fell 5% q-q to US$6.9/barrel compared to US$7.2/barrel in 4QFY17, they were offset by higher product spreads in petrochemical business in 1QFY18TD as (i) in olefins business (accounting for about 60% of total EBITDA) HDPE price grew 13% q-q to US$1,383 and LLDPE price rose 5% q-q to 1,249US$ as a result of rising demand driven largely by (a) China’s growing demand following its ban on imports of recycled plastic from developed countries and (b) the maintenance shutdown at its plants in India and Iran, and (ii) in aromatics business (representing about 15% of total EBITDA) paraxylene spreads climbed 6% q-q to US$380 and benzene spreads rose 7% to US$334 due to tight supply following the postponement of a petrochemical plant in China and a steady rise in demand.