How Do You Want It – Chemical Supply Is Not A 2024 Issue Unless You Want It Blue or Green

Companies Mentioned: Adnoc, Phillips 66, Covestro, BASF, Borealis, OMV, SABIC, Huntsman, Arcadium Lithium, Piedmont Lithium, Hanwha Solutions, Röhm, Stepan, Element Solutions, MP Materials, Posco, Zhejiang Xingxing New Energy, ExxonMobil, Fortescue, Anglo American, Jera, S-OIL, Ineos, Coterra Energy, Edison International, Essential Utilities, Oceaneering, Pembina, Tellurian, Axens, Chesapeake, Cheniere, Shell, Woodside Energy, Braya Renewable Fuels, Pregis, Vitol, Purefield Ingredients, Pratt Energy, GE Vernova
Commodities Mentioned: Lithium, Polypropylene, Polyethylene, Polyurethane, Butadiene, Iron Ore, Steel, Nickel, Crude Oil, Natural Gas, Propane, Naphtha, Butane, Hydrogen, SAF, Carbon, rPET

Key Findings

General Thoughts: Global chemical production significantly grew YoY in 4Q23, and this momentum continued into 2024 in the West and China: this suggests oversupply if demand does not meet early-year 2H24 expectations.
Supply Chain/Commodities: ADNOC and OMV have a chemicals problem to solve. It may be complex, but the benefit of getting it right is compelling – there may also be some low carbon opportunities from the combination.
Energy/Upstream: European natural gas prices are lower relative to the weak US, and the European naphtha premium is pulling as much LPG to Europe for ethylene production as can be consumed.
Sustainability/Energy Transition: We highlight the collapse in Europe carbon prices, nearing 1Q21 levels and ~40% off 2022/23 highs, and comment on global challenges with obtaining enough renewable and low-carbon power.
Downstream/Other Chemicals: We highlight European manufacturing sector weakness but recent improvement in US manufacturing, though from low levels, and discuss North American rail traffic movements by sector YTD.