Up, Up & Away, or A Western Polyolefin Margin Sinking Ahead? Europe’s Balloon is Most at Risk!

Companies Mentioned: SQM, Arlanxeo, AkzoNobel, Brenntag, Bayegan, Lummus, Sumitomo Chemical, Ube, Chemours, Covestro, Clariant, ADNOC, OMV, Oneok, ExxonMobil, Devon Energy, Chevron, TotalEnergies, Technip Energies, Saipem, Aramco, Uniper, Plug Power, Origin Materials, Shell, Altius Renewable Royalties, First Solar, South32, Energy Valut, Fisker, Petronas, GE, Linde Engineering, Yara, Ørsted, Equinor, Hydrovolt, Polymer Resources
Commodities Mentioned: Oxo-Alcohols, Caustic Soda, Acesulfame Potassium, Methyl Amine, Polyethylene, Polypropylene, Polyvinyl Chloride, Sulfuric Acid, Nickel, Graphite, Crude Oil, Natural Gas, LPG, Coal, Naphtha, Ethane, Hydrogen, Carbon, SAF, Ammonia, Methanol, PET, Biofuel

Key Findings

General Thoughts: Western polyolefin price strength following 4Q23 global logistical constraints, supply cuts, and recent cost curve movements are benefiting its producers and, most notably, US producers relative to Asia YTD.
Supply Chain/Commodities: We discuss why Western commodity market price strength is a plus for its producers YTD but negative for non-integrated downstream chemical producers and how this trend could reverse by 2H24.
Energy/Upstream: Naphtha prices in Europe and Asia are similar, showing that price differences (not cost) are the recent cause of Europe’s and Asia’s ethylene margin differences, and we discuss the US’ relative cost advantage.
Sustainability/Energy Transition: We discuss why recent Western-market virgin polymer price strength is a plus for recycler economics and highlight Plug Power 4Q23 results and other relevant global market updates.
Downstream/Other Chemicals: We discuss contracted manufacturer activity in Europe and China relative to the US and a report showing that raw material shortages for European industry have continued for some in 1Q24.