Chemical Sector Profit Outlooks Require Oil Prices To Stay High & Global Demand To Take Off – Are These Mutually Exclusive?

Daily Chemical Reaction

Chemical Sector Profit Outlooks Require Oil Prices To Stay High & Global Demand To Take Off – Are These Mutually Exclusive?

Key Findings

• General Thoughts: North American commodity chemical producer optimism increased in 1Q24 relative to most in Europe and Asia, partly due to recent cost curve developments and still optimistic demand outlooks for 2H24.
• Supply Chain/Commodities: We discuss 1Q24 results and our business views for LyondellBasell in olefins and polyolefins in North America and Europe, ExxonMobil in Chemicals, Olin in Chlor-Vinyls, and Yara in Ammonia.
• Energy/Upstream: We flag Chevron, ExxonMobil, TotalEnergies, and Phillips 66 1Q results, and we discuss global feedstock and refining trends spurring chemical production in some areas, notably where there is price support.
• Sustainability/Energy Transition: We discuss the push among chemical producers into advanced and mechanical recycling, noting the importance of sourcing ample low-cost waste that will likely determine long-term success.
• Downstream/Other Chemicals: We highlight Eastman end-market demand views, which reflect similarities with most of its peers, forming a consensus for macroeconomic improvement in 2H24, and flag several macro trends.

Exhibit 1: The North American ethylene cost advantage relative to Europe (& Asia) is spurring 2024 optimism among its producers, while lower European natural gas (& Asia logistic issues) are lifting ambition in a few other value chains.

Source: Bloomberg, C-MACC Analysis, April 2024

See PDF below for all charts, tables and diagrams