- Asian polymer prices steady: Asian polymer prices, reported this morning, are still holding up
reasonably well as LDPE prices remained flat at $900/t and LLDPE prices
declined by 3.6% to $800/t. Polypropylene prices declined by 1.7% to $895/t.
- US prices also
steady: US
HDPE prices and LDPE prices were unchanged from last week while LLDPE prices
declined by 3.3%.
- Monomer prices still
sliding: US spot
ethylene prices slid by 16% to $231/t while Asian prices declined by 5.5%. Asian propylene prices were 5.8% lower.
- Lower ethane providing relief: US ethane prices are trading at 9cpg, down
from 12cpg a week ago. We estimate that
US ethane cracking margins have declined by 17% from last week despite lower
ethane.
- Integrated polymer margins
rising: The
US integrated polymer margin has increased 6.5% as a result of the steady
polymer prices and falling ethane prices.
- Some relief in Base Chemicals: The slow (to no) decline in US
and Asian chemical prices should support prices and margins in the Base
Chemicals unit. We do expect these
prices will trend lower, however.
- LCCP margins lower: Sasol should be long of
around 56% of the LCCP cracker’s ethylene at this point as only the LLDPE and
MEG plants are consuming ethylene with the balance being sold. Overall, we would expect lower margins for
the LCCP at current prices.
- Ethane hedges far out of
the money:
Sasol has hedged ethane prices at 27cpg for 3Q and 24cpg for 4Q. Realised hedge losses should be in the order
of R1.2bn in 2H20 at current ethane prices.
- Sasol’s bond yields rising
rapidly:
Sasol’s US bond yields continue to rise, and the 4.5% November 2022 bond
is trading at a yield of 18.63%. We note
that Sasol’s 1-year credit default swap is at 718bp. The credit markets have closed to Sasol at
this point.
- Share price: We expect share price volatility compounded by volatility in oil
prices as well as the overall market. We
remain on a neutral.
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