2022 C-MACC Coverage of Companies and Commodities
what we are talking about today
Daily Chemical Reaction
Hitching Up – North American Methanol Producer Benefits To Grow Beyond Regional Cost Advantages
We hold a long-term constructive view of North American methanol. Like ammonia, regional cost advantages will enable exports as global demand sources broaden faster than supply.
US natural gas prices remain under pressure while support signals in oil markets emerge mid-week despite demand concerns. This setting is a plus for North American chemical producers
We highlight continued weakness in Chinese spot lithium prices, which are considerably lower than four months ago, and the relative movements in US, Asia, and Europe butadiene spot prices.
We flag the ability to source waste as a limitation to the growth in advanced recycling, discuss blue hydrogen government funding skepticism, and generally highlight the geothermal market.
An era of “free money” is over, although Apple will still give you credit. Significant inflation that preceded higher interest rates will keep global economic growth in check for some time.
Facing The Sea – North American PE Exports To Likely Set Record In 2023, Cost Curve To Determine Profitability
North American polyethylene (PE) exports will likely hit a record level in 2023, enabled by its sizable cost advantage relative to Asia and Europe—global PE markets to reflect trough setting.
We flag significant moves by Aramco to push its business further downstream in refining and petrochemicals, with an array of growth projects underway for development in China.
We discuss the importance of a steep global ethylene cost curve for US polyethylene exporters and add to our thoughts about energy and chemical producers combining to extend value chains.
We discuss the challenges to producing green chemicals, specifically ammonia in Europe, as it appears to be under review at Adnoc. We also provide thoughts on growth in RNG markets.
China has boosted economic stimulus to spur growth, which appears highly needed in light of Maersk and SABIC commentary on demand. A global demand surge seems unlikely near term.
Global Chemical Update – Study Time!
Energy companies looking to push their value chains downstream into petrochemicals through M&A should take advantage of weak conditions in 2023 before a likely upturn in many polymer profit cycles.
North American chemical producers enjoy a sizable cost advantage relative to Asia and NW Europe. We flag the WoW drop in US natural gas and USGC ethane relative to Brent Crude and Ex-US naphtha.
US ethylene producers are profitable across all primary feedstocks, with ethane moving back into a cost-advantaged spot WoW relative to propane. Asia and European cracker margins remain negative.
what we are saying about tomorrow
ESG, Recycling & climate
With A Spotlight On Material Shortages – Efficient Use Matters
Was the IRA really intended to support the idea of banks of expensive electrolyzers sitting idle for 70% of the day? Profitable but a poor use of resources.
Not enough is being done to think this through – storage is the go-to solution but requires overbuilding of wind/solar and expensive batteries – more resources.
We would have much less of a critical mineral issue if they were used efficiently, and while this is a challenge, it is one worth pursuing – nuclear would help.
We also look at the benefits of modular and standardized production versus customized solutions – standardization can lead to much more profit.
Otherwise, the WPC conference is driving a lot of discussions around recycling and sustainability and furthered many energy transition conversations from CERA.
what we are covering
Sunday Thematic & weekly recap
Yikes! Could It Really Be Different This Time?
The projection at the WPC this week that polyethylene capacity will only operate at 80% rates in 2023 needs the context that this has not happened since 1982!
Weak demand growth and a surge in new capacity – especially in China – drove rates lower quickly and our inventory thesis would question any quick recovery.
Disbelief was the initial European reaction in the early 80s, but competition followed as did eventual break-even pricing; are we there again? It’s been 40 years.
We look at weak US polypropylene markets and margins but note that the chain has a margin because of cheap propane. Polyethylene is in better shape.
In energy transition, we look at the risk of underutilized expensive capacity and the inefficient use of hard to find materials.