Aug 23, 1999|
Does the petrochemicals sector offer value?
The recent hype in stock prices and news reports which look favourable towards the petrochemical sector need to be put in context.
A sharp increase in raw material prices (naphtha up 57% YoY), seasonal maintenance shutdowns, low inventory levels in addition to a mild demand rise had resulted in a significant increase in both Asian and domestic petrochemical prices during the 1Q (April-June) of this fiscal. While raw material prices continue rising sharply, the re-commencement of capacities has now ensured flat product prices, resulting in a margin squeeze.
Domestically, a seasonal demand slowdown has also significantly increased producer level inventories. Going ahead, a 9% - 11% p.a. increase in Asian capacities will continue to outstrip demand. In fact, the capacity increases in India are even more excruciating. Indian cracker capacity will increase by 50% - 60% within a short one year span taking India's ethylene capacity up from 6% of Asian capacity to 10%.
In this environment, petrochemical companies need not be the best investment for those seeking exposure to commodities and a recovery in the Indian economy. Cement, on the other hand, may be a better sector to invest in given the strong demand, lower planned capacities, and the fact that cement prices in India are not protected by tariff barriers but, instead, cement imports are restricted due to high transportation costs.
More Views on News
Sorry! There are no related views on news for this company/sector.
Aug 7, 2017
The data tells us quite a different story from the one the government is trying to project.
Aug 10, 2017
Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.
Aug 8, 2017
Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 7, 2017
Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407