CGSI Research said it is expecting factors such as lower polymer and monoethylene glycol prices to be potential de-rating catalysts.
PETALING JAYA: Analysts are expecting Petronas Chemicals Group Bhd
(PetChem) to continue facing a challenging operating environment this year.
CGS International Research (CGSI Research) said it is expecting factors such as lower polymer and monoethylene glycol (MEG) prices to be potential de-rating catalysts.
Another senior analyst contacted by StarBiz said: “The depreciating US dollar is anticipated to create negative impacts for the group, primarily due to its US dollar-denominated investments and costs.”
CGSI Research noted that polymer and MEG prices appear to be continuing to decline quarter-on-quarter so far this year, due to moderation in naphtha feedstock costs and continued market oversupply from the commissioning of new petrochemical plants that have outweighed the modest curtailment of plant operating rates at existing plants.
Meanwhile, it also noted that the US dollar has depreciated a further 2.7% to RM3.95 at the time of writing.
“PetChem also has a scheduled maintenance shutdown of the another ethane cracker in Kertih, Terengganu, in the second quarter of this year (2Q26) that may last 45 to 50 days.
“The shutdown of the first ethane cracker in Kertih in 4Q24 resulted in a shock loss after tax for the Kertih and Gebeng operations that quarter, and we think this may repeat in 2Q26,” the research house said.
CGSI Research, citing data from consultancy Chemical Market Analytics, said the naphtha cracker at Pengerang Refining Co Sdn Bhd (PRC), which is a 50:50 joint-venture between PETRONAS and Saudi Aramco, ran at only 60% to 70% utilisation last week.
This suggests that PetChem’s Pengerang Petrochemical Co Sdn Bhd (PPC) may be operating at similar rates, which is below the 85% to 90% optimal for minimising losses on earnings before interest and taxes.
“From late 4Q26, PRC and PPC will be undergoing a planned three-month maintenance shutdown, again with the potential to widen losses, in our view,” the research house added.
CGSI Research has an unchanged target price of RM2.94 and a “reduce” call for the stock. At the time of writing, PetChem was trading at RM3.34.
The research house also said the group’s 4Q25 core net losses could be wider than 3Q25’s, potentially missing current forecasts.
In addition to the unfavourable market dynamics, the US dollar also weakened against the ringgit by 3.5%, from RM4.21 as of last Sept 31, to RM4.06 as of last Dec 31, the research house said.
CGSI Research estimates translation losses on foreign exchange of about RM200mil for PetChem in 4Q25, which it does not exclude from core earnings.
By comparison, PetChem only reported a RM74mil foreign exchange loss in 3Q25, it added.
The company narrowed its net losses in 3Q25, with overall earnings improvement delivered by stronger operational performance, continued cost discipline and lower foreign exchange impact amid the challenging chemicals market.
During the quarter, the group’s plant utilisation rate improved to 90% from 77% in the preceding quarter, due to better plant performance despite the maintenance activity undertaken at PETRONAS Chemicals Fertiliser Sabah Sdn Bhd.
The group said then that it is expecting the operating environment to remain challenging in the near term, as the industry continues to contend with ongoing oversupply and subdued demand growth, leading to continued pressure on margins.
