Sprockets! European Chemical Challenges Are Severe, Attracting Those With Low-Cost Feedstocks & Products

Daily Chemical Reaction

Sprockets! European Chemical Challenges Are Severe, Attracting Those With Low-Cost Feedstocks & Products

Key Points:

• European chemical producers face the challenge of high-cost production positions in globally oversupplied markets, and current trends suggest the region will underperform again in 2024.
• Adnoc may appear like a successful rapper evaluating multiple places to deploy its newfound “bling,” but its strategy to backward-integrate high-cost assets with low-cost feedstock is sound.
• Recent Brent crude oil and European natural gas price weakness have cut production costs for many EU chemical producers, but North America’s costs have decreased more on a relative basis.
• China holds a significant investment lead relative to most other countries in clean energy and product manufacturing, and the ability for Western countries to catch up quickly is unlikely.
• The European economy faced a challenging environment in 2023, following a very difficult 2022, and we discuss forecasts calling for improvement, but far from a robust setting, in 2024.

Exhibit #1: European ethylene production margins remain notably below the global average.

Source: Bloomberg, C-MACC Analysis, December 2023

See PDF below for all charts, tables and diagrams