Brass In Pocket (I’m Special) – Specialty Chemicals Time To Shine In 2024? Energy Market Weakness Suggests Cost Relief     

Daily Chemical Reaction

Brass In Pocket (I’m Special) – Specialty Chemicals Time To Shine In 2024? Energy Market Weakness Suggests Cost Relief

Key Points

• Specialty chemical companies have faced myriad demand and cost concerns during the past two years, which has kept equity values in check – cost improvement is likely for most in 2024.
• Global commodity chemical prices are falling, following energy and feedstock prices lower – US commodity chemical producers remain notably cost advantaged relative to Europe and Asia.
• We discuss why we think parts of the Fertilizer and Agricultural chemical market are likely to outperform others in 2024, and why we hold a constructive global industrial gas market view.
• North American chemical rail traffic trends signal the exporting of the US cost advantage while net new China chemical capacity announcements suggest its supply ambitions have not waned.
• We highlight varying hydrogen 45V views following leaked IRS guidance, US propane hitting a YTD high relative to WTI crude oil, and discuss numerous relevant macroeconomic developments.

Exhibit #1: Since the start of 2022, Industrial gas company equities have outperformed the S&P 500 and the S&P 500 Chemical Index, with Specialty Chemicals being the notable underperformer.

Source: Bloomberg, C-MACC Analysis, December 2023

See PDF below for all charts, tables and diagrams