Daily Chemical Reaction
Commodity Chemical Profit Collapse In 4Q23 Unlikely As Harsh As 4Q22, But Likely Needed For A More Positive 1H24
- North American commodity chemical profits have risen relative to the start of 2023, exceeding low mid-year expectations in 3Q23, as the global production cost curve steepened in its favor.
- With more global capacity coming online and demand facing challenges, we view a flattening global chemical production cost curve, driven by lower crude oil values, as a significant profit risk.
- We observe more commentary on supply-driven crude oil price support than otherwise but argue that most demand views likely remain too optimistic, suggesting downward price pressure.
- The global build-out of clean hydrogen and ammonia facilities has faced headwinds, partly due to challenges with sourcing high-capacity-factor green power and increasing project costs.
- We also highlight North American RNG capacity by feedstock, discuss global manufacturing trends, and general concerns with the Chinese economy that are unlikely to be fixed quickly.
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