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

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
Commodities Mentioned: Ethylene, Ammonia, Butadiene, Propylene, Silicon, ABS, Crude Oil, Coal, LNG, Natural Gas, Hydrogen, Carbon, Renewable Diesel, PET

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.