“Operating environment for both downstream businesses, refining and petrochemicals, has been challenging for the previous six quarters. Q1 FY20 was particularly tougher with geopolitical pressures exacerbating crude markets. New supplies, global economic slowdown and trade tensions weighed on product prices and margins,” RIL said in its key operating highlights for the quarter.
“Our first quarter earnings were strong despite weak global macro-economic environment and challenging hydrocarbon market conditions. Our downstream businesses delivered resilient performance in an environment of slower demand growth and incremental supplies. The performance reflects the benefits of deep refining and petrochemicals integration, chain economics and feedstock flexibility,” said RIL chairman and managing director Mukesh D Ambani.
Describing the backdrop and operational highlights of the polyester chain business, RIL said paraxylene (PX) prices declined 16 per cent quarter-on-quarter (Q-o-Q) amidst bearish sentiments following commercial start-up of new PX units in China. PX-Naphtha delta decreased 35 per cent Q-o-Q ($ 353/MT) owing to firm naphtha prices, however on Y-o-Y basis PX-Naphtha delta improved by 5 per cent.
PTA markets were healthy supported by tight supplies and improved downstream operating rates in China. While prices declined 5 per cent Q-o-Q, margins improved by 47 per cent Q-o-Q to $213/MT, due to soft PX prices. Margin continued to remain above 5-year average.
MEG markets witnessed sluggish trend amidst high China port inventory through the quarter. However, towards the quarter-end improved polyester operating rates aided depletion of China port inventory. During the quarter, average MEG prices slipped 10 per cent Q-o-Q, weakening delta over naphtha by 29 per cent Q-o-Q ($ 203/MT), however lower ethane prices helped in negating impact on RIL.
During the quarter, polyester markets witnessed revival in demand amidst improved margins and decline in raw material cost. Producers maintained high operating rates, supported by a low inventory base. Polyester filament yarn prices remained largely stable, Q-o-Q margins at RIL improved by 20 per cent ($ 286/MT) led by lower raw material prices. Slower than expected demand in PSF markets exerted downward pressure on prices by 5 per cent Q-o-Q, resulting in 2 per cent Q-o-Q drop in margins ($ 185/MT); albeit it was firmer (21 per cent) Y-o-Y basis.
Domestic filament and staple fibre demand growth remained stable amidst fluctuation in raw material prices. On Y-o-Y basis filament demand grew by 3 per cent and staple fibre demand rose to 1 per cent.
Fibre intermediate production during Q1 FY20 dipped 10 per cent Y-o-Y to 2.3 MMT due to planned shutdown of PX and MEG plants, while polyester production declined 2 per cent Y-o-Y at 0.72 MMT. (RKS)
Fibre2Fashion News Desk – India
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