Daily Chemical Reactions

Global Cost Curve Shifts Drive Recent Profit Variances – US Ethylene Advantage Rises, Ammonia Advantage Lessens
December 12, 2023
Commodities Mentioned:
Plastics (PVC, PP, PE, PU, PC, PET, etc.), Clean Energy Minerals, Carbon Dioxide, Hydrogen, Natural Gas/NGLs, Crude/Naphtha
Companies Mentioned:
Nova Chemicals, Dow, ExxonMobil, Chevron Phillips Chemical, LyondellBasell, Westlake, Oxy, Yara, CF Industries, Nutrien, LSB Industries, BASF, Shell, SK Innovation, Arkema, Neste, Draslovka, OMV, Synthos, Posco, Orlen, PPG, OQ Chemicals, Kemira, Adnoc, Mitsubishi Heavy Industries, Lithium Australia, Elkem, Solvay, Sumitomo Chemical, Azelis, Unigel, Braskem, Nickel Industries, Unilever, Wanhua Chemical, Pertamina, Petrobras

Daily Chemical Reaction

Global Cost Curve Shifts Drive Recent Profit Variances – US Ethylene Advantage Rises, Ammonia Advantage Lessens

Key Points

  • US integrated polyethylene (PE) producer margins reflect strength relative to the global avg. producer margin in 4Q23 – US PE prices have fallen, but its production cost has declined more.
  • The recent decline in European natural gas prices is lowering its production costs for ammonia, methanol, and Chlor-Alkali relative to still advantaged US levels and favors lower Western prices.
  • We discuss weakness in China’s lithium prices and rising news flow about EV producers cutting prices amid falling costs to spur demand, a potential headwind for critical mineral expansions.
  • We discuss the outcomes from COP28, emissions (not fossil fuels) being the enemy, and the challenges of creating a “fair” carbon price that shifts industrial- and transport-level behavior. 
  • US farmers are likely to shift plantings more to soybeans relative to corn in 2024, a near-term headwind for ammonia, though implied corn support will be constructive in the medium term.

Exhibit #1: Falling input costs relative to the global avg. benefits US integrated PE margins in 2H23.

Source: Bloomberg, C-MACC Analysis, December 2023

See PDF below for all charts, tables and diagrams


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