Titan's prospect for 2008~2010.

In this article, I'll list down the reasons why I think that Titan's prospect in the next two years is quite positive.

Base on the nature of its business, Titan's profit growth can only come from two ways. First, the increase of production capacity. Second, a higher polymer-naphtha spread.

About the capacity.
last year, Titan's newly acquired subsidiary -- PT Titan, only produced about 100 KT of polymer during the whole year, while its capacity is 450 KTA. This year (2007), the production of this subsidiary is expected to be around 200KT, still below 50% of its whole capacity. I believe that, under the management of Titan, this subsidiary will able to utilise 100% of its capacity by the end of 2009. This represent a 20% increase in total production of Titan Group from today.

In December 2007, Titan will start two new plants - a propylene plant (115KTA) and a butadiene plant (100 KTA). The product from the butadiene plant will be directly sold to customers. The propylene produced by the new 115KTA plant will most probably being used as raw material to Titan's PP plant. So, I'm expecting Titan to take some "debottlenecking" process to increase its PP plant capacity by another 100KTA, maybe within two years.

As a conclusion, I think Titan Group's production output will increase by about 40% by the end of 2009.

About the Polymer-naphtha spread
The spread is affected by the supply-and-demand condition of polymer. As we have seen, the polymer-naphtha spread showed a gentle uptrend in the past few years. This show that the growth of demand for plastics is slightly faster than the growth of supply.

Seeing that global economy will continue growing for the next few years (leading by the strongth growth in China), the growth of demand for plastics is there. In fact, a lots of petochemical companies now are having their expansion plan, and new production plants is being constructed in a lots of country/area, just to grab this growing market of polymers.

However, according to the information available now, most of these new production plants are still in the early stage of construction. They are scheduled to start production only around 2010~2011. In this two years (before all these companies complete their expansion plan), Titan has a chance to enjoy a higher polymer-naphtha-spread, due to the strong demand growth and the slow growth of supply.