We follow our September 1 research, Wake Me Up When September Ends (Though It May Get Worse In 4Q22!) – Chemical Profits Face Narcolepsy, to close the month with updated views of 4Q22 and why we think sector profit estimates remain too high. We highlight the Williams reiteration of 2022 profit guidance, as the energy space remains quite profitable, in contrast to chemicals, and we discuss energy price trends. We discuss the trends favoring Navigator Holdings and Enterprise Products to boost its US ethylene exports and that Trinseo is mulling the closure of EU styrene capacity. The C-MACC clean energy mineral index declined ~2% MoM in September, but the pace of change is moderating. We also highlight the Talos Energy expansion in CCS. We study US consumer spending trends, flag the nearly 20yr high seen in US mortgage rates, and discuss why our chemical end market demand concerns are high near term.
Consumer affordability indicators are braking amid rising borrowing costs and low confidence, positioning auto markets to hit a brick wall with chemical suppliers in tow. Lame Duck Oil! Despite high prices and political pressure, the lack of attractive long-term returns is working against capital-intensive investment to boost oil production. We discuss why LyondellBasell’s decision not to restart its Berre, France cracker until 2023 is not surprising. We also flag recent methanol contract postings from Methanex. Government programs intending to spur green power and associated infrastructure continue to mount, and we advise focusing on programs with a competitive edge. We highlight CarMax and Bed Bath & Beyond business updates, continued US Dollar strength relative to other major currencies, and inflation mismanagement in the UK.
Global polymers and many other commodity chemicals have mostly fallen back to pre-covid levels. However, producer margins remain compressed amid high energy prices. We discuss energy market trends and news that Mexico plans to build an LNG export hub in the Gulf of Mexico to serve Europe, which will likely depend on US natural gas. Despite recent cost relief, we are more concerned with higher 4Q commodity chemical production costs than rebounding global demand spurring chemical price increases. We discuss European geothermal development ambitions, green hydrogen producers by region and method and related developments, and recent EU CO2 price weakness. US 10yr treasury yields touch 4%, the first time this has happened in roughly 14 years. US home prices also declined MoM in July, and German business sentiment is falling.
This is likely the wrong time for politicians to experiment with political theory, but inexperienced ones might try. The world is in bad shape, and it could get worse. Managing inflation/recession will not work while trying to be popular; tough fiscal/monetary action is needed, which scares many insecure leaders today.