Daily Chemical Reactions

Good Directions – Chemical Sector Profit Views For 2023 Are Low, Risk-Adjusted Return Profiles In Focus
January 25, 2023
Commodities Mentioned:
Plastics (PVC, PP, PE, PU, PC, PET, etc.), Clean Energy Minerals, Carbon Dioxide, Hydrogen, Natural Gas/NGLs, Crude/Naphtha
Companies Mentioned:
Westlake, Dow, LyondellBasell, ExxonMobil, Shell, Braskem, Enterprise Products, Flint Hills, Methanex, Univar, Evonik, Henkel, Avantium, Azelis, Albemarle, OQ Chemicals, Schlumberger, Hess, Halliburton, Phillips 66, Pertamina, Pemex, Grupa Azoty, Technip Energies, Aramco, Maire Tecnimont, Woodside Energy, PKN Orlen, Sempra Energy, Siam Cement Group, Sasol, Orion Engineered Carbons, Lonza, Emerson, ProAmpac, ICL Group

Daily Chemical Reaction

Good Directions – Chemical Sector Profit Views For 2023 Are Low, Risk-Adjusted Return Profiles In Focus

Key Points:

  • Most chemical sector investors agree that 2023 will be a tough year and 2024 will be better, but long-term risk-adjusted return views vary significantly by product chain.
  • Greater product chain complexity and higher barriers to entry in Chlor-Vinyls at Westlake may be driving its stock outperformance relative to Dow and LyondellBasell.
  • We highlight polymer-to-feedstock ratios to show the outperformance in PVC and PE margins YTD relative to PP, and we flag US chemical rail traffic and PE export trends.
  • We highlight that wind and solar costs rise as a percentage of power generation partly due to the step-up in storage demand, which is discussed further in our ESG weekly.
  • Global container freight rates, on average, have reset to 2019 levels. We flag rising freight rates from China to Europe, while US to Europe rates are mostly unchanged.

See PDF below for all charts, tables and diagrams


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