US commodity chemical industry profit peaked in 2021, with a YoY drop ahead for the industry in 2022. This view has been a critical negative case against sub-sector investment – we discuss why sentiment is turning positive. We highlight pertinent energy, chemical, and other corporate updates (e.g., PPG, LyondellBasell, KPIC, SABIC, ExxonMobil, Ecolab, BASF, & others). We note relevant ESG items, ranging from thoughts on Houston CCS to our research titled, Sustainable Fuels – Fields of (Achievable) Dreams. We also highlight our 2H21 Thematic report discussing the Houston CCS project titled Carbon Capture For Houston: ExxonMobil Assembles a Team. We discuss numerous other pertinent chemical sector items in this report.
US ethylene cracker co-product values have generally reset relative to their historical ties with Asia. We discuss why this lessens risk with US commodity chemical profits in 1H22 and adds to a constructive sub-sector view. We highlight pertinent energy, chemical, and other corporate updates (e.g., New Hope Energy, Asian Paints, Danimer Scientific, H.B. Fuller & others). We note relevant ESG items, ranging from developing trends in renewable energy to several ESG sector industry investment trends worth notice. We also highlight yesterday’s weekly ESG thematic titled, Sustainable Fuels – Fields of (Achievable) Dreams. We discuss numerous other pertinent chemical sector items in this report.
Chemical producer business updates highlight persistent efforts to push prices to recover higher costs. This report discusses several factors that could keep the inflationary conditions in motion, favoring US premium prices. We highlight pertinent energy, chemical, and other corporate updates (e.g., Ashland, Axalta, Eastman, Freeport LNG, EQT, Covestro, BP, & others). We note relevant ESG items, ranging from the construction of a notable chemical recycling facility in France to several renewable industry updates. We also highlight our weekly ESG thematic published later today in LINK. We discuss numerous other pertinent chemical sector items in this report.
Renewable fuels have a very bright future in our view, but the focus will likely move away from capturing high credits like LCFS towards aviation fuel globally. Despite forays into electric and hydrogen power for aircraft, sustainable, low carbon jet fuel will likely dominate decarbonization efforts for many decades. Electricity and fuel cells will eat into gasoline and diesel demand quickly (next 10-15 years), but renewable (ground) transport fuel demand will still rise. Carbohydrate and waste-based fuels will be necessary; the current scale is small, and the investments needed are huge; newer/lower-cost technologies will emerge. Otherwise, we look at Eastman’s plans in France, more on renewable fuels, further ESG investing challenges, and ExxonMobil’s net-zero ambitions.
The US commodity chemical cost advantage remains significant relative to Asia, and several factors favor Ex-US polymer price support – a plus for US producers. While 2022 is unlikely to be as profitable for US chemicals as 2021, commodity producers should do well, while others will see profit lag with inflation pressure. The situation looks much less pleasant for producers in Asia, with overcapacity, high raw materials costs, and very high freight cost barriers to export. Otherwise, we flag several pertinent energy transition & ESG issues, including our new biofuels index launch and Eastman’s ambitious recycling plans for France. We also discuss ExxonMobil’s net-zero proposal (could it give ExxonMobil an edge?), and a week of varied macro news, including very negative rail freight data.