Daily Chemical Reactions

Don’t It Make My Green Eyes Blue – Western Natural Gas Weakness Favors Blue Over Green
January 23, 2024
Commodities Mentioned:
Copper, Copper, Lithium, Butadiene, Gold, Propylene Oxide (PO), Olefins, Polymers, Oil, Coal, Natural Gas, Propane, Ethane, Gasoline, Diesel, Ammonia, Hydrogen, Carbon, Recycled Plastics, PET, Ethanol, LNG, Polypropylene, Sodium- ion, Biodiesel
Companies Mentioned:
Dow, BASF, Ineos, Ganfeng Lithium, Reliance, SABIC, Wanhua, Orion, OMV, ADNCO, Atul, Aekyung Petrochemical, Lynas, Lanxess, Golden Minerals, PrefChem, Shell, LS Power, Vertex Energy, Halliburton, Pemex, Sinopec, Sunoco, NuStar Energy, Exxon, Chevron, TotalEnergies, ADNOC, Arkema, Ecovyst, Eni, AquaVentus, Venture Global, SolarEdge, Solvay, Stellantis, ExxonMobil, Fortescue, Epsilon Carbon, Lhyfe

Daily Chemical Reaction

Don’t It Make My Green Eyes Blue – Western Natural Gas Weakness Favors Blue Over Green

Key Findings

  • General Thoughts: Global natural gas prices have declined on an absolute basis and relative to Western power prices since 2H23, boosting blue and grey hydrogen economics and adding challenges to many green projects.
  • Supply Chain/Commodities: We discuss the relative strength of copper compared to lithium, the SABIC push to expand petrochemical production in China, and comment on global production rates for a few chemical chains.
  • Energy/Upstream: We flag the support WoW in crude oil values and Asia natural gas prices compared to Europe and US natural gas, strength in US propane relative to ethane, and Europe naphtha relative to US natural gas.
  • Sustainability/Energy Transition: We flag our hydrogen cost model, the potential manufacturing tax benefits from 45-X, the significant drop in EU carbon prices YTD, and discuss a Plug Power plant startup in Georgia.
  • Downstream/Other Chemicals: Middle East tension and related logistical issues are spurring global freight rates, though most rate strength is between China, the US, and Europe. We also show US and China currency trends.

Exhibit 1: US and European natural gas prices fell notably YoY in 2023 relative to regional power prices.

Source: Bloomberg, C-MACC Analysis, January 2024

See PDF below for all charts, tables and diagrams

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