Chemical Market Analysis
Focused and RelevantProviding value-added research and strategic consulting services using chemical industry expertise
2022 C-MACC Coverage of Companies and Commodities
what we are talking about today
Daily Chemical Reaction
Energy Transition Demand Losing To Global Economic Malaise – Good For Buyers Bad For Investment, For Now
The decline in critical mineral prices suggests that the macroeconomic backdrop has influenced demand more than energy transition growth. Lower prices favor stalling growth investments.
There is a risk that this continues through 2024, and the recovery after that exposes significant critical mineral shortages because of the investment lag – lithium looks OK, but others may not.
Ineos makes another opportunistic move in the US in a chemical market that is moving toward those willing to swing for the fences – we anticipate much more strategic movement in 24/25.
We see OPEC’s moves as a leading indicator of weaker growth and note South Korea oil import declines. We also look at LNG growth and how it will drive surpluses of US chemical feedstocks.
We comment on the carbon footprint of power-based hydrogen, who will buy decarbonized crops, why Mississippi may have a shot at hydrogen, and how US economic growth stays high.
An Unbalanced World: North American Cost Advantage Drives Output – High-Cost Regions Face Closures
Rising overseas production costs in 3Q23 spurred a production response from North American manufacturers, and the benefits are much more pronounced for this group than its customers.
The H.B. Fuller August-quarter (3QFY23) results missed expectations but reflect higher margins despite lower sales – input costs for non-integrated producers notably rose MoM in September.
Demand seasonally weakens in 4Q23 across most commodity chemical end markets, which we think will negatively impact Asia and European chemical producers, with Europe being worse off.
While higher crude oil values have proven favorable for North American commodity chemical profitability in September, it has put downward pressure on domestic refinery profitability MTD.
We discuss challenges facing the build-out of transmission infrastructure to support the energy transition, global CCS project growth, and mounting negative impacts from higher interest rates.
The Push and The Squeeze – 3Q23 Global Chemical Price Surge To Hurt Downstream Margins In Seasonally Weak 4Q
Non-integrated commodity chemical and specialty producers faced more input cost pressure in 3Q than planned mid-year due to higher feedstock costs and, in some cases, supplier outages.
Global chemical prices broadly increased in 3Q23, but some have substantially outperformed others, such as US propylene, which has outpaced overseas markets due to domestic outages.
Some chemical downstream markets, such as building products and those targeting energy efficiency, reflect more support than others – low-cost integrated producers are best in class.
We discuss a BP solar development set to provide energy to an ExxonMobil/SABIC chemical JV and China’s position as a low-cost renewable producer being a sizable risk for Western producers.
The negative impact of higher interest rates appears as a rising burden for global consumers, and some markets are shifting as a result, such as the move to smaller, cheaper homes in the US.
weekly sERVICE
Hydrogen Economy Update
IEA Projections Fail To Recognize The Near-Term Hurdles
Given our coverage of cost, permitting, and power challenges facing hydrogen, we are not surprised to see a slowdown in general news and new projects and slower progress on announced projects.
Assumptions for 2030 in the recent IEA study of hydrogen costs assume meaningfully lower power costs and equipment scale efficiencies – neither of which is evident today or looks likely soon.
We will not get the equipment scale efficiencies if we do not build the equipment, and the momentum today has the industry moving in the wrong direction to achieve that – alarm bells should be ringing.
But the IEA work shows one very clear economic reality: capacity factor for electrolyzers is critical, and with so many projects backed by wind and solar, delays are inevitable because the math fails.
None of the objectives suggested in the IEA study will be met unless the current momentum can be reversed, and as most of it is focused on costs, power, or electrolyzers, subsidies will need to rise.
Valuable insights for critical subjects
ESG, Recycling & Climate
Do We Have The Energy To Understand ESG Investing?
The outperformance and underperformance of ESG and anti-ESG stocks appear primarily based on whether you own oil and gas stocks – other factors seem small.
ESG/sustainable investing is losing its appeal because it is less clear what it means, and regulatory changes, expected to make it better, remain absent.
As the developed world states a desire to become less reliant on China, inflation and other challenges slow its progress while China charges ahead and lowers costs.
We note initiatives to reduce power consumption, especially in buildings, and question whether industrial conservation is good or bad relative to other efforts.
Otherwise, we look at the new Lego challenge, return to CCS, which is gaining momentum, look at power inefficiency, and what keeps European industry alive.
what we are covering
Sunday Thematic & weekly recap
With A Little Help From… OPEC+ Drove Sector Performance in Q3
Higher commodity prices drove the outperformance of the energy sector in 3Q23 – a headache for ESG funds, which mostly underperformed during the period.
It is hard to find something to recommend for Q4, but both the Industrial Gas group and the Water sector likely offer stability in the midst of uncertainty.