Daily Chemical Reaction
North America Ethylene Chain Cost Advantage Significant To Asia & Europe, But Not Without Risk Of Turbulence In 2024
- The US ethylene production cost advantage is sizable relative to Asia and Europe, and its spot and contract ethylene prices are below Asia and Europe, which is a plus for its derivative spreads.
- Crude oil and Ex-US natural gas values rose relative to US natural gas values in 3Q23, boosting chemical prices and US sector profit. Oil and Ex-US natural gas prices have fallen from 2H23 highs.
- We foresee downward pressure on global chemical prices moving into 2024 amid more global production and still tepid demand, putting negative pressure on domestic chemical margins.
- We also discuss why blue production should be viewed constructively as an enabler of clean product transition and why emission reductions should be more in focus than fossil fuel cuts.
- German sentiment toward trade/exports continued to shrink in November, and we flag the surge in US manufacturer unfilled orders but a drop in new orders and weak China macro trends.
Exhibit #1: The US contract ethylene price declined in line with US spot values in November, staying below Asia’s and Europe’s spot levels, partly showing the sizable US ethylene chain cost advantage.
Source: Bloomberg, C-MACC Analysis, December 2023
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