Maybank IB said market conditions for fertiliser (urea) and methanol are slightly better, — Reuters
PETALING JAYA: The bearish demand-supply fundamentals of the global petrochemicals industry are likely to persist for another two years as new capacity coming onstream far exceeds demand growth across key value chains.
As a result, Maybank Investment Bank Research (Maybank IB) has maintained its negative recommendation on the sector and sell calls on the two main listed entities, Lotte Chemical Titan Holding Bhd
(LCTitan) and Petronas Chemicals Group Bhd (PetChem).
The position comes after the research outfit had a petrochemical products knowledge-sharing session on Jan 27 with PetChem officials.
The outlook session reinforced the research firm’s bearish outlook for olefin and derivative product prices, as waves of capacity additions are expected to continue suppressing polyethylene operating rates at least from 2026 to 2028.
The period should see capacity additions significantly outpace demand growth over the next three years.
Both LCTitan and PetChem produce such products.
Monoethylene glycol’s outlook is a little better, as demand growth is expected to exceed capacity additions in 2027 to 2028, despite near-term oversupply expectations in 2026.
The research house added that market conditions for fertiliser (urea) and methanol, which are produced by PetChem, are slightly better, with demand growth for methanol likely to outpace capacity additions from 2026 till 2030.
It said operating rates should increase steadily from 66% to 70% from 2026 to 2030 for methanol.
“For urea, capacity additions are forecast to eclipse demand every year from 2026 to 2030 due to muted demand growth prospects, resulting in declining operating rates from 79% to 77% over the same time period,” the research house noted.
Hence, Maybank IB believes the downcycle may prolong in 2026, and as such, it expects PetChem’s share price weakness to persist if the company continues to report quarterly losses, and LCTitan may stay loss-making as polyethylene-naphtha spreads remain narrow.
Additionallt, it has a target price (TP) of RM2.38 a share for PetChem and a TP of 35 sen a share for LCTitan.
Meanwhile, McKinsey & Company said the global chemical sector outperformed the broader global equity markets from 2004 to 2023, but all the gains have been erased in the past three years.
While the chemical industry has grown, its growth has been more than offset by heavy capital investments and decreasing margins.
The advisory firm said China’s move to accelerate investment in recent years in many chains including polyethylene, polyurethane, polystyrene and polyols has also reshaped global supply–demand balances.
That said, moves by the industry to consolidate and reduce supply through measures such as the mothballing or closure of older and higher-cost crackers have helped calm investors and led to margins moving toward breakeven in Asia in certain supply chains.
These efforts have, however, not yet meaningfully changed major supply-demand balances, the McKinsey report added.
Year-to-date, LCTitan’s and PetChem’s share prices have dropped 5%.
For the third quarter ended Sept 30, 2025 (3Q25), LC Titan reported a net loss of RM197.86mil on revenue of RM2.45bil.
Meanwhile, PetChem 3Q25 reported a net loss of RM289mil on revenue of RM6.79bil.
On its outlook, PetChem said 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.
