Thursday, January 20

Expanding 2-EHA to maximise Petronas Chemicals’ market share

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Apart from the production site in Kuantan, BASF also produces 2-EHA at its Verbund site in Ludwigshafen, Germany.

KUCHING: BASF Petronas Chemicals Sdn Bhd (BPC), a joint venture between BASF and Petronas Chemicals Group Bhd (Petronas Chemicals), intends to expand the annual production capacity of 2-Ethylhexanoic Acid (2-EHA) from 30,000 to 60,000 metric tonnes by 2024.

According to Petronas Chemicals managing director and chief executive officer Datuk Sazali Hamzah, 2-EHA has been an integral part of BPC’s growth and the expansion is planned to capture the growing market.

“The expansion is also in line with PCG’s sustainable growth strategy to expand our portfolio with higher value products.

“By leveraging the existing integration between BPC and other Petronas Chemicals plants in the Kuantan Verbund site, we are able to maximise our value chain by improving the quality and cost competitiveness of our products and continue delivering innovative solutions to our customers,” he said.

Acting as a chemical intermediate, 2-EHA is used as a compound in the production of synthetic lubricants as well as oil additives.

It is also used in functional fluids like automotive coolants, metal salts for paint dryers, plasticisers, stabilisers, catalysts, and other applications in various industries.

Apart from the production site in Kuantan, BASF also produces 2-EHA at its Verbund site in Ludwigshafen, Germany.

MIDF Amanah Investment Bank Bhd (MIDF Research) opined that the expansion could slightly cushion the impact of the current international supply chain disruption for raw materials, consequently improving demand recovery for industrial and manufacturing sectors dependent on petrochemical products, especially the automobile industry.

“We revise our target price for Petronas Chemicals to RM8.70 (previously RM8.03), based on a revised higher price earnings ratio (PER) of 21 times pegged to an earnings per share of 41.4 sen for FY2022.

“We believe that the higher PER is warranted given the improved economic outlook, hence we revert its PER to its five-year historical average.

“However, we do not believe that it should be any higher given the rise in crude oil prices which may affect the price of its input.”

MIDF Research reinstated its positive view with Petronas Chemicals, albeit the uncertainty of the Covid-19 pandemic impact, and the possible revision of Opec+ crude supply output amid surging demand.

“Petronas Gas had proven to benefit tremendously from the increasing price for polyethlene, urea and methanol products, amid the current oil and gas price hike,” it added.

“However, the risk of crude oil and natural gas prices volatility, as well as the uncertainty of the pandemic’s long-term impact, remains. Besides, we believe that all the positives have been priced in.”