C-MACC Sunday Thematic & Weekly Recap 80
US Chemicals & Polymers – A New Age Or Just Another Peak?
- Certain aspects of the 2020/21 US Chemical and Polymer margin surge qualify for an “it’s different this time” perspective but only for a while. Change is coming.
- The end of the UK lockdown reflects a shift in consumer spending that will likely carry worldwide. Durable good shortages will eventually dissipate, some abruptly.
- Global freight constraints may impede chemical price “normalization” between regions – longer-term if investment is needed, but shorter-term if demand ebbs.
- Our research discusses potential shifts in propylene demand growth from the effects of its elevated price versus ethylene, given product substitution options.
- In our ESG work, we call for more accounting and fewer “science-based” assertions, with a particular focus on likely renewable power price inflation.
Peaks and troughs in the commodity chemical and polymer industries are often triggered by something unforeseen, and it is frequently an off-trend move in demand. The last 18-months have certainly seen some unforeseen shifts in demand as well as supply caused by a variety of factors, not just the changing buying habits that have come with COVID. We have seen some shifts in trade, some significant shifts in inventory, and on top of that an unusual level of supply disruptions. The net effect has driven the US chemical industry to peak profits while the global balance looks oversupplied – this is new! We could have chosen several charts for Exhibit 1, but think of the propylene price difference between Asia and the US this way – despite 5-year high propane prices, you could in theory take US propane to Asia, convert it to propylene, and then ship it back to the US profitably today.
Last week we discussed 26 Chemicals and related products and 109 Companies.
See PDF below for all charts, tables and diagrams