Battling The Bulge – Chemical Markets Battle Oversupply As Higher Project Costs & Demand Risks Attack Energy Transition

Daily Chemical Reaction

Battling The Bulge – Chemical Markets Battle Oversupply As Higher Project Costs & Demand Risks Attack Energy Transition

Key Points:

• Global polymer, critical mineral, and crop prices have fallen from 2022 highs while financing costs and demand uncertainties have risen – a negative trend for global energy transition.
• The current setting benefits integrated upstream energy to extend their product chains and take share from less fortified peers – we highlight ExxonMobil and a few of its growth initiatives.
• We flag Deere 4QFY23 results, highlighting less farmer demand for new equipment amid lower crop prices and higher financing costs, and discuss why our ammonia view remains constructive.
• Critical minerals supporting the energy transition have seen prices decline in 2023, and risk has risen for related growth projects based more on higher demand than risk-adjusted economics.
• We discuss the rise in interest rates in the US and Europe relative to China, adding to Western manufacturer headwinds, the US existing home sale drop, and European economic headwinds.

Exhibit #1: Global commodity prices are lower relative to the start of 2022, while financing costs and end-consumer demand uncertainties have increased – a negative for energy transition.

Source: Bloomberg, C-MACC Analysis, November 2023

See PDF below for all charts, tables and diagrams