Daily Chemical Reactions

A Disruption Function – Transitory Western Supply Issues Spur 1Q Global Avg. Refining & Ethylene Margins
March 7, 2024
Commodities Mentioned:
Ethylene, Propylene, Benzene, Polypropylene, Polyvinyl Chloride, VC, Polyethylene, Phosphate, Phthalic Anhydride, Orthoxylene, Natural Gas, Crude Oil, Hydrogen, Carbon, Lithium, Ethanol, Bio-Nylon, Aluminum
Companies Mentioned:
Indorama, Invista, Elementis, Bachem, BASF, Bondalti, Brenntag, Chemours, Azelis, Jiutian Chemical, Jubilant Ingrevia, Lotte Chemical, Mitsui Chemicals, Mitsubishi Gas Chemical, PhosAgro, Repsol, Zeon, Tasnee, Aramco, Crescent Energy, Enbridge, ExxonMobil, TotalEnergies, QatarEnergy, ADNOC, Sinopec, Tellurian, Tallow Oil, Avangrid, Origin Materials, Borealis, BayWa, BYD, Climeworks, Compass Minerals, Copenhagen Infrastructure Partners, Rivian, Flux Power, Hartree Partners (UK) Ltd., Hive Energy

Daily Chemical Reaction

A Disruption Function – Transitory Western Supply Issues Spur 1Q Global Avg. Refining & Ethylene Margins

Key Findings

  • General Thoughts: Western crude oil refinery and integrated ethylene margins have surged YTD relative to Asia amid an array of outages and logistic issues – this could set the stage for substantial oversupply later this year.
  • Supply Chain/Commodities: We discuss Elementis 2023 results and its view of coating volume trends, note the strength in US spot PGP relative to ethylene mid-week, and the US PP-to-PGP spread reflecting multi-year lows.
  • Energy/Upstream: US crude oil refinery margins have increased notably YTD, while domestic operating rates have fallen. We discuss Brent crude oil and global natural gas values YTD, noting recent European gas price strength.
  • Sustainability/Energy Transition: We highlight persistent weakness in US ethanol production margins, forward German power prices showing higher levels in 2H24, and global Clean-tech manufacturer oversupply led by China.
  • Downstream/Other Chemicals: China’s manufactured goods exports reflect strength; however, the improvement shows an increased volume of low-priced goods, notably hurting the profits of Asia-ex-China manufacturers.

Exhibit 1: Global refinery and ethylene margins have risen from their 2H23 lows – demand is not the primary driver.

Source: Bloomberg, C-MACC Analysis, March 2024

See PDF below for all charts, tables and diagrams

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