Daily Chemical Reactions

Global Cost Curve Support Lessens North American Chemical Margin Downside Risk, But Will It Last?
April 2, 2024
Commodities Mentioned:
Ethylene, Ammonia, Butadiene, Propylene, Silicon, ABS, Crude Oil, Coal, LNG, Natural Gas, Hydrogen, Carbon, Renewable Diesel, PET
Companies Mentioned:
Dow, ExxonMobil, CP Chem, LyondellBasell, OxyChem, Westlake, Braskem, INEOS, Nippon Steel, Sanyo Chemical, Avient, Chandra Asri, Kuraray, MP Materials, Next Wave Energy, Sabic Fujian Petrochemical, Sumitomo Chemical, Syngenta, TPC Group, Enterprise Products, QatarEnergy, APA Corporation, ADNOC, Sunbridge, Enbridge, PetroChina, Pembina Pipeline, SLB, ChampionX, Borealis, Jera, Microsoft, Google, Aker Carbon Capture, AdvanSix, AFYREN, Ahlstrom, ACWA Power, Anaergia, Aspen Power, Orizon

Daily Chemical Reaction

Global Cost Curve Support Lessens North American Chemical Margin Downside Risk, But Will It Last?

Key Findings

  • General Thoughts: North American chemical producers close a better-than-expected 1Q24 to rising concerns with greater production and falling margins ahead – cost curve support in 2Q is needed to curb downside risk for most.
  • Supply Chain/Commodities: We discuss the significant decline in spot polymer-grade propylene (PGP) values into 2Q24 amid prospects of improved supply availability, which we view as negative for US polypropylene (PP) prices.
  • Energy/Upstream: We highlight the YTD improvement in crude oil prices relative to US, Europe, and Asia natural gas, the value of NW Europe spot naphtha relative to US natural gas, and a few relevant energy sector headlines.
  • Sustainability/Energy Transition: We discuss energy transition prospects for China in Africa and the considerable headwinds facing energy transition in Europe related to chemical and other heavy CO2-emitting industries.
  • Downstream/Other Chemicals: Industrial production figures for March are mixed globally, with strength in China and the US but weakness in Japan and Europe. We also highlight global freight rate developments YTD.

Exhibit 1: The global cost curve improved for North American ethylene producers in 1Q24 relative to Asia (& Europe).

Source: Bloomberg, C-MACC Analysis, April 2024

See PDF below for all charts, tables and diagrams

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