A Change Is Gonna Come – Most Expect Weak 2H Before Rebound Next Year, Typical View Amid Soft 3Q Conditions!

Daily Chemical Reaction

A Change Is Gonna Come – Most Expect Weak 2H Before Rebound Next Year, Typical View Amid Soft 3Q Conditions!

Key Points:

• Most chemical producers anticipate a weak 2H23 before improvement in 2024 – we view some markets, such as fertilizer and selectively in specialties, as better poised to improve than others.
• Commodity chemical prices (and margins) fell in late 2Q23 and into 3Q, and most expect lower QoQ results in 3Q – Lyondell views its O&P margins as now bouncing around the cycle bottom.
• The uptick in oil prices relative to natural gas has recently increased optimism for higher US chemical margins in August – a near-term trend favoring commodity chemical equity values.
• We follow our evaluation of Linde and Air Liquide 2Q23 results last week with thoughts on the Air Products posting and the likely reasons APD has underperformed peers since August 2020.
• Chemical end market demand views remain varied, with most casting a negative global view of 2H23 beyond autos and seasonal farm input demand – we remain most positive on agriculture.

See PDF below for all charts, tables and diagrams