Global Market Analysis

The Cost To Be The Boss – Is Cost Position The Sole Determinant of Winners & Losers In 2024?

February 15, 2024

Companies Mentioned: CF Industries, Avient, Osaka Soda, Cosmo Energy Holdings, EQUATE, Hecla, Hanwha Solutions, Henkel, Kansai Paint, Nissan Chemical, Orion, OxyChem, Takasago, DSM-Firmenich, Idemitsu, Kumho Petrochemical, Arc Resources, Adnoc, BP, Cenovus Energy, Chevron, Energy Transfer, GasLog, Cheniere, NuStar Energy L.P., New Fortress Energy, Shell, Uniper, Venice Energy, Woodside Energy, Williams, Albemarle, ExxonMobil, Anaergia, Adani Green Energy, Codelco, Borealis, ConocoPhillips, Eastman, Tesla
Commodities Mentioned: Ethylene, Propylene, Benzene, Butadiene, Nickel, Phenol, TDI, Paraxylene, Caustic Soda, Ammonia, Natural Gas, Crude Oil, Propane, LPG, LNG, Naphtha, Lithium, Hydrogen, Carbon, Copper, R-PE, R-PET, Ethanol, E-Methanol

Daily Chemical Reaction

The Cost To Be The Boss – Is Cost Position The Sole Determinant of Winners & Losers In 2024?

Key Findings

General Thoughts: Relative cost position has become a major discussion topic in terms of YTD margin support and profit outlooks for 2024, as many global chemical markets have sub-optimal production rates amid ample supply.
Supply Chain/Commodities: CF Industries 4Q23 results and outlook commentary focus on the North American ammonia production cost advantage. European ethylene cutbacks tightening Western co-product markets.
Energy/Upstream: We discuss the recent plummeting of US natural gas prices as it relates to LNG exports and Ex-US natural gas prices, and highlight relative support in crude oil prices, favoring many US industries.
Sustainability/Energy Transition: Albemarle’s 4Q23 results and outlook reset – is it enough? EIA estimates on battery storage, and the likely struggle at CF Industries to find green power in southern Louisiana.
Downstream/Other Chemicals: Deere comments on farmer equipment cutbacks amid higher financing costs YoY, the YTD downtrend in crop prices, and the drop in US industrial production MoM in January.

Exhibit 1: Since mid-4Q23, CF Industries equity has outperformed the S&P 500 Fertilizer & Agricultural Chemical Index, corn prices, and movements in domestic ammonia raw material margins when considered on a combined basis.