Cast Away – Middle East Logistic Issues Drive Asia Oversupply, Benefit Western Markets

Companies Mentioned: Dow, ExxonMobil, LyondellBasell, Formosa Plastics, Shin-Etsu, Trinseo, Innova, Henkel, Wacker, Indorama Ventures, Kraton, Ineos, Lifezone Metals, Triton Minerals, ADM, Advanced Petrochemical, Sibur, PetroChina, Synthomer, Trafigura, BP, Petrobangla, CNX, Enbridge, Excelerate Energy, Greenfire Resources, Adani, New Fortress Energy Resources, Saudi Aramco, Trans Mountain Pipeline, ADNOC, QatarEnergy, Phillips 66, Avista, Aviation H2, Air Liquide, TotalEnergies, ABB, Amazon, AlphaReal
Commodities Mentioned: Polypropylene, Polyethylene, Ethylene, Butyl Acetate, Polyvinyl Chloride, Propylene, Lithium, Phenol, Silicon, Copper, Styrene, Nickel, Rubber, Helium, Sodium Silicate, Urea, MDI, TDI, Oil, Coal, Naphtha, Ethane, Propane, Ammonia, Methanol, Hydrogen, Carbon, Natural Gas, Steel

Key Findings

General Thoughts: Asia petrochemical producers face rising oversupply risk from conflicts in the Middle East re-routing global shipping, as it limits product flows to Europe and spurs lower-cost USGC polymer export demand.
Supply Chain/Commodities: The global propylene market is much tighter relative to ethylene amid production issues, and we highlight that PE-to-ethylene spreads rose in early 2024 while PP-to-PGP spreads contracted.
Energy/Upstream: Brent crude oil and Ex-US natural gas values have strengthened mid-week, while US natural gas prices have relatively collapsed, approaching US$2/mmbtu, benefiting US petrochemical producer margins.
Sustainability/Energy Transition: We discuss US wind power market developments, flag a few global news items about the build-out of hydrogen production in Europe, and opine on EU and UK carbon price weakness YTD.
Downstream/Other Chemicals: We discuss global shipping container rates, highlighting strength in China to US East Coast and Europe routes as displaying the most strength, and Baltic Exchange Index freight rate trends YTD.