Daily Chemical Reaction
Chemical Profit Weakness & Market Woes: Weak 2H23 Expected, But Risk Remains High; Best To Stay Selective!
- Global chemical sector margins fell in late 2Q23 relative to 1H23 highs, and most now expect margin pressure to persist in 2H23 – ammonia and PVC reflect less risk than the sector average.
- We take a constructive view of commodity chains where prices have sunk to a level that will force production rationalizations, especially in Europe, and net capacity additions are limited.
- Though most anticipate weak chemical markets in 2H23, we argue that conditions could be worse than many estimates in some product chains, such as polypropylene and polystyrene.
- We discuss the surge in China crude imports, notably from Russia, which we estimate will push its spot lower on the global chemical cost curve, keeping many product chains under pressure.
- The decline in critical mineral prices in 1H23 will lift capacity growth challenges, working in favor of tighter global conditions ahead for battery and related energy storage developments.
See PDF below for all charts, tables and diagrams