Yikes! Could It Really Be Different This Time?

C-MACC Sunday Thematic & Weekly Recap 161

Yikes! Could It Really Be Different This Time?

• The projection at the WPC this week that polyethylene capacity will only operate at 80% rates in 2023 needs the context that this has not happened since 1982!
• Weak demand growth and a surge in new capacity – especially in China – drove rates lower quickly and our inventory thesis would question any quick recovery.
• Disbelief was the initial European reaction in the early 80s, but competition followed as did eventual break-even pricing; are we there again? It’s been 40 years.
• We look at weak US polypropylene markets and margins but note that the chain has a margin because of cheap propane. Polyethylene is in better shape.
• In energy transition, we look at the risk of underutilized expensive capacity and the inefficient use of hard to find materials.

See PDF below for all charts, tables and diagrams