PCG’s Olefins And Derivatives Segment To Stay Under Pressure In 1Q 2025 - CIMB

KUALA LUMPUR, March 21 (Bernama) -- Petronas Chemicals Group Bhd's (PCG) olefins and derivatives (O&D) segment is expected to remain under pressure in the first quarter (1Q) of 2025, with plant utilisation projected to hover around 70 per cent, excluding the Pengerang Petrochemicals Complex (PPC), CIMB Securities Sdn Bhd said.

In a note today, the brokerage firm said further investigations with industry players revealed that utility disruptions from an external party, Petronas Gas, had affected nitrogen and oxygen supply at PCG’s Kertih operations for about a month in January.  

This disrupted operations across all Kertih-based plants, including ethylene and olefins (PC Ethylene, PC Olefins, and PC LDPE), ammonia (PC Ammonia), and aromatics and derivatives (PC Aromatics, PC Glycols, and PC Derivatives).  

“The resulting unscheduled shutdowns led to production downtime, reducing output and sales volumes, driving revenue losses, and increasing operational costs,” it said.  

The Kertih plants have a combined capacity of 3.5 million tonnes per annum, representing about 81.1 per cent of the O&D segment’s total capacity, excluding PPC.  

On Jan 9, it was reported that PCG’s glycol ethers plant had suffered an unplanned shutdown, indicating potential disruptions at its Kertih operations. 

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CIMB Securities said PCG’s PPC has been fully offline since early February 2025 due to an unplanned shutdown caused by a feedstock supply disruption from the refinery that supplies ethylene and propylene to PPC.  

“At the fourth-quarter 2024 (4Q 2024) analyst briefing on Feb 21, PCG confirmed ongoing issues at the refinery and cracker, owned by the Petronas-Saudi Aramco joint venture, with maintenance activities currently underway,” it said.  

Meanwhile, Polymer update reported on Feb 6 and March 3, 2025, that Pengerang Refining and Petrochemical (PRefChem) had halted cracker operations for maintenance, with plans to resume in April 2025.  

The cracker has a production capacity of 1.2 million tonnes per year of ethylene and 609,000 tonnes per year of propylene.  

PCG clarified during its 4Q 2024 analyst briefing that PPC will only be eligible for a special feedstock discount from PRC (Petronas-Saudi Aramco JV) once PRC turns profitable, with terms subject to negotiation.  

“Our FY25 earnings forecast for PCG assumes no special feedstock discount will be granted, given the uncertain industry outlook and ongoing challenges at PRC that continue to hinder its profitability.  

“We anticipate PPC could secure the special feedstock discount starting in FY26F, supported by an improving industry outlook driven by stronger demand, slower capacity expansions, and better pricing dynamics, allowing PPC to achieve earnings before interest, taxes, depreciation, and amortisation (EBITDA) breakeven or positive EBITDA,” it said.  

Nevertheless, CIMB Securities maintained its ‘Buy’ rating on PCG but lowered its target price to RM4.41 from RM5.34, saying the market had already priced in the sector’s oversupply environment and PCG’s near-term earnings weakness.  

-- BERNAMA