Daily Chemical Reaction
Leader Of The Pack – Linde Outperformance Since 1995 Is More About Discipline Than Luck
- General Thoughts: While many companies rapidly expanded energy transition efforts amid surging expectations in 2022/23, Linde took a more patient and balanced approach that has served its shareholders well over time.
- Supply Chain/Commodities: We compare Linde and Air Products’ 4Q results and 2024 outlooks. We also discuss lingering issues with inventory destocking and demand across many product chains, as noted by FMC and DuPont.
- Energy/Upstream: We discuss BP 4Q23 results and the investor appetite for hybrid oil and gas/energy transition stories, and we highlight Ex-US naphtha price weakness relative to USGC ethane, favoring chemical production.
- Sustainability/Energy Transition: Linde shares our skeptical view towards the rapid build-out of economical green hydrogen amid high costs, the lack of premium prices to spur returns, and more cost-advantaged blue production.
- Downstream/Other Chemicals: We highlight an article discussing weak China export prices as a concern, an item we have noted regularly, as the China export support is due to higher volume more than offsetting lower prices.
Exhibit 1: Linde equity has significantly outperformed peer industrial gas companies and the S&P 500 since 1995.
Source: Bloomberg, C-MACC Analysis, February 2024
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