National oil and gas conglomerate PTT Plc says it's feeling pressure from the US-China trade war as disruptions to supply chains for resins complicate the group's plastics business.
PTT is responding by cutting operating costs and enhancing efficiency.
Chief operating officer Auttapol Rerkpiboon said the impact of the trade conflict has gradually spread to several PTT subsidiaries, particularly petrochemicals and oil refining.
The plastic resin in olefins and aromatics supply chains is a fundamental raw material for everyday-use plastic for packaging, film, fibres, building materials and textiles.
Mr Auttapol said PTT is trying to keep operating costs lean under the group's operating excellence plan for the six mainstream subsidiaries: PTT Exploration and Production Plc, PTT Global Chemical Plc, Thai Oil Plc, IRPC Plc, PTT Oil and Retail Business Plc and Global Power Synergy Plc.
He said the firms are collaborating by consolidating transport among crude oil, refined oil and biofuels.
"We have faced several difficulties over the last 25 years, from the 1997 Asian financial crisis to the 2007 subprime crisis and the great flood of 2011," Mr Auttapol said.
The plan does not have a specific target for how much costs should be cut, but he said the group last year gained an additional margin of 10 billion baht by controlling costs.
In the long term, the group is considering pivoting to producing higher-grade plastics for auto and electrical parts, as well as engineering plastic.
Mr Auttapol said PTT is considering adding more non-oil revenue -- from subsidiary Amazon Coffee, restaurants and ready-to-eat food -- to offset the very low retail margins of oil.
PTT subsidiary IRPC reported that the trade war would narrow the margins of finished products and raw material prices.
The quickest measure to mitigate the issue is to promote competitiveness from inside the country, said Nidcha Jirametthanakij, senior executive vice-president at IRPC.
Gross profit from the integrated oil refinery segment dropped to US$5.70 per barrel at the end of the first quarter this year, down from $7.10 quarter-on-quarter and $7.60 year-on-year.
Petrochemicals' gross integrated profit margin at the end of March was $1.90 per barrel, down sharply from $5.90 quarter-on-quarter and $5.40 year-on-year.
Last year, IRPC directly exported plastic pellets to China at 20% of annual output, but the impact from the trade war will increase the figure this year.
Mrs Nidcha said another quick measure is to monitor when Chinese exporters move their production bases out of China to avoid the high US tariffs. IRPC will approach those exporters for purchase orders.
This year the company will continue ongoing projects and investments to improve production facilities, revamp oil refining processes and upgrade IT systems to reduce operating costs.
Over the past three years, IRPC has spent $40 million on its Catalyst Cooler Project to improve the oil refining process and could increase margins by a further $0.30 per barrel. The commissioning operation would be done in the second half of this year.
