Chemical sector margins narrow on Middle East disruption

August 01, 2026 (MLN): Petrochemical margins across Pakistan's chemical sector came under fresh pressure through July, with PVC-ethylene and PTA-PX spreads both narrowing week-on-week as feedstock costs climbed faster than product prices, weighed down by disruption to global energy and trade flows stemming from the Middle East conflict.

The squeeze is seen as negative for listed players including Engro Polymer and Chemicals (EPCL), Lotte Chemical Pakistan (LOTCHEM), and Lucky Core Industries (LCI), with a caution that a full normalization of petrochemical trade and supply chains could take several months, contingent on how the conflict evolves.

According to a JS Global report, naphtha prices extended their climb through July, up 25% month-on-month and 38% year-on-year, as crude oil disruption pushed feedstock costs higher across the value chain.

PVC-ethylene margins stayed weak, holding below US$300/ton as of 30-July. Ethylene prices jumped 11% month-on-month to around US$925/ton, while PVC prices stayed largely range-bound, dragging the spread down 2% week-on-week.

The brokerage noted that PVC demand remains subdued amid elevated inventories and cautious buying, limiting producers' ability to pass on higher input costs even as geopolitical tensions keep raw material prices elevated, a trend flagged as negative for EPCL.

PTA-PX margins also narrowed, falling roughly 6% week-on-week as PX prices rose sharply to near US$1,140/ton in July, outpacing a comparatively slower increase in PTA prices to around US$860/ton  a development seen as negative for LOTCHEM.

PSF margins fared worse still, retreating to US$118/ton their lowest level since 22-April after having rebounded to around US$264/ton in recent months.

The decline was driven by a sharp rise in feedstock costs, with PTA and MEG prices up 12% and 21% month-on-month respectively, while PSF prices held steady.

JS Global flagged the trend as negative for LCI, with elevated raw material costs likely to keep PSF segment profitability subdued.

Copyright Mettis Link News