Yellen’s Yelling, But Not Wrong! China Exporting Deflation Poses Many Challenges for The West

Companies Mentioned: Linde, CF Industries, Nutrien, Shell, LyondellBasell, Covestro, Mitsui Chemicals, ExxonMobil, Olin, Westlake, Aramco, Valero, Enterprise Products, ARC Resources, Enbridge, Revo, Ineos, Mitsui OSK, Pembina, Formosa Petrochemical, Borosil Renewable, Tesla, Encavis, Baker Hughes, Kraft Heinz, Air Products, Aniva, Atlas Copco
Commodities Mentioned: Crude Oil, Natural Gas, LNG, Ethylene, PET, Chlor-Alkali, PVC, Sulfur, Phenol, Brent, Ethane, Lithium, Coal, Carbon, Ammonia

Key Findings

General Thoughts: China’s continued push in manufacturing is creating global oversupply and undercutting prices in many manufactured goods, posing challenges for manufacturers elsewhere and their clean product transition.
Supply Chain/Commodities: We discuss the Shell business update, expecting improved QoQ chemical and refinery margins in 1Q, which generally aligns with our view, and why Europe continues to face considerable challenges.
Energy/Upstream: We highlight recent movements in crude oil and global natural gas prices while also flagging 1Q24 refinery margin strength in the US amid outages and gasoline prices hitting their highest levels in six months.
Sustainability/Energy Transition: We discuss the overbuilding occurring in many clean product chains, such as in battery manufacturing and the US utility push driving renewable capacity additions relative to other factors.
Downstream/Other Chemicals: The recent strength in the China PMI is not good news if it comes in the form of cheap product exports and oversupply rather than being demand-driven, and we further discuss this global issue.