2022 C-MACC Coverage of Companies and Commodities
what we are talking about today
Daily Chemical Reaction
Cornfield Chase – Farm Input Market Fundamentals Find Support, Sustainable Farming Needs Incentives To Sprout
Oversupplied fertilizer and crop input markets have weighed on producer profit YTD, but crop developments suggest farmer spending is unlikely to halt – tighter markets are likely ahead.
Sustainable farming practices will be challenging to implement broadly without improvement in incentives flowing directly to farmers – we highlight Nestle’s efforts as a positive development.
US Ammonia prices and producer profit have mostly fallen from 2021-2022 highs to the high end of the 2016-2020 range, while most European producers face an unprofitable 2Q23 setting.
Long-term demand forecasts for clean ammonia vary significantly, even among ammonia producers – we flag three ammonia producers’ May/June investor presentations as examples.
US chemical and grain rail traffic fell last week and is lower YTD than 2022, but there has been improvement in motor vehicles and parts. We also discuss rail trends for North America overall.
Global Polymer Spreads Have Danced To More Normal Levels, Except Europe PVC, Where Ominous Music Plays
Global polymer spreads have mostly returned to the 2014-2020 range, with an outlier being the NW Europe PVC price premium relative to the US – we expect it to remain wide into 2H23.
US PP prices of fallen relative to NW Europe and Asia levels during the past two years, and we foresee more abundant global PP keeping regional price differences in the 2014-2020 range.
We discuss the EIA short-term energy outlook expecting modestly higher US natural gas prices through 2024 and surging oil imports into China though it looks to be exporting imported LNG.
The USDA issued its U.S. National Clean Strategy & Roadmap, and we highlight and discuss multiple charts and findings from its research that we will follow with a more thorough analysis.
We discuss the decline in Chinese exports in May, the recent increase in the US trade deficit, greater German manufacturer input availability, and views on global consumer health.
Ethylene Blues: Global Oversupply Worsening And Contagion Spreading Downstream – US Costs Help
The global ethylene industry faces a considerable challenge with oversupply amid a sluggish demand setting – Europe faces much stiffer headwinds than most of Asia and North America.
US spot ethylene spot prices have fallen to a multi-year low, though domestic producers are still profitable. We highlight the US spot and contract setting relative to NW Europe and Asia.
NW Europe and Asia naphtha values reflect multi-year highs relative to USGC ethane, but this regional feedstock ratio excludes likely Chinese benefits from sourcing discounted Russian crude.
Solar and wind projects appear relatively easy to finance – this environment could rapidly lead to the broadening of inefficient projects and a greater reliance on storage than most envision.
The global cost of shipping cargoes declined rapidly in May, and we discuss commentary from Hapag-Lloyd, Old Dominion Freight Lines, and other news to frame the state of this market.
what we are saying about tomorrow
ESG, Recycling & climate
Lawyer Up: With ESG Initiatives Losing Steam, Enter The Lawyers
As we watch the “anti-woke” lobby in the US cause investors to step back from the responsibility they should never have wanted in the first place; enter litigation.
Asset Managers should not be the drivers of policy or policy compliance – their job is to best serve the needs of their clients, and making money comes first.
Idealist shareholders will always be outnumbered, and activists and NGOs that want climate action will logically turn to the courts if governments let them down.
Separately we look at electric ethylene, cheaper than carbon abatement in some parts of Europe but still likely at the top of the cost curve without cheap power.
Otherwise, we question French PET recycling, the limits of pyrolysis, the benefits of CCS scale in the US, crazy solar investments, and some carbon trading.
what we are covering
Sunday Thematic & weekly recap
Reviving US Manufacturing: Are The Hurdles Too High?
Despite the political consensus that we need more US manufacturing, our metrics display major challenges – US jobs grew in May but outside manufacturing.
Service industry jobs are driving the tight US labor market, and as spending rises with new employment, imports will rise again if domestic manufacturing lags.
Manufacturing companies are cutting jobs because of the economic slowdown, but these may not be the skills needed by future IRA and infrastructure initiatives.