Daily Chemical Reactions

Puff The Magic Dragon, Lives By The Sea, Blowing Cheap Products & Deflation Your Way
February 8, 2024
Commodities Mentioned:
Steel, PET, Methanol, Polypropylene, Aluminum, Benzene, Propylene, Ammonia, Ethylene, Crude Oil, Natural Gas, PGP, Propane, Carbon, Hydrogen, Lithium
Companies Mentioned:
Air Liquide, Dow, Axalta, ONGC, Shell, Asahi Kasei, ArcelorMittal, Compass Minerals, Lotte Fine Chemical, Braskem, Repsol, Ravago, Kao, JSR, Sherritt, UPL, BP, ConocoPhillips, ExxonMobil, SK Innovation, TotalEnergies, Petrobras, Murphy, Air Products, EnerSys, Eni, Ford, Canva, Eneos, LG Chem, GM, SolarWinds, Syngenta, Vestas, Li Metal, Neste, Chevron, Fluor, GLC Recycle, Google

Daily Chemical Reaction

Puff The Magic Dragon, Lives By The Sea, Blowing Cheap Products & Deflation Your Way

Key Findings

  • General Thoughts: Chinese consumer price deflation YoY in January 2024 is a plus for its exports and global consumers but negative for Western manufacturers and their energy transition plans amid cheap alternatives.
  • Supply Chain/Commodities: We discuss Lotte Fine Chemical 4Q23 results, the recent strength in US spot benzene, and why US natural gas cost weakness is not translating into higher margins for many amid falling global prices.
  • Energy/Upstream: We highlight the YTD strength in US refinery margins amid some production issues, the recent movement in refinery-grade propylene relative to polymer-grade, and US and Asia propane market developments.
  • Sustainability/Energy Transition: We discuss why there are not enough carbon offsets to solve all problems and why you cannot economically compete with Taylor Swift and Bill Gates (and other incremental buyers) in this area.
  • Downstream/Other Chemicals: We flag the Maersk business updates, discuss global freight rates, where strength has mostly occurred between China, the US, and Europe, and show North American chemical rail traffic trends.

Exhibit 1: China’s consumer prices suffer biggest fall since 2009 as deflation risks stalk the economy. While the US CPI slowed in 2H23 relative to 1H23, the US CPI rose relative to the China CPI to hold a spread above 2002-2019 levels.

Source: Bloomberg, C-MACC Analysis, February 2024 *Latest US CPI posting Dec. 2023, Latest China CPI posting Jan. 2024

See PDF below for all charts, tables and diagrams


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