1H24 Chemical Producer Profit Gains In Europe At Risk Of Reversal, Global Sector Push To Integrate Underway

Daily Chemical Reaction

1H24 Chemical Producer Profit Gains In Europe At Risk Of Reversal, Global Sector Push To Integrate Underway

Key Findings

• General Thoughts: We discuss downstream and non-integrated European chemical producer profit strength that we view as likely short-lived and the continued global push to integrate into low-cost (& low carbon) feedstock.
• Supply Chain/Commodities: We highlight the Covestro push to integrate its production cost-effectively backward, OMV 2024 views of European chemical and polymer margins, and several other 1Q reports, including Clariant.
• Energy/Upstream: We discuss recent movements in crude oil and US, Europe, and Asia natural gas prices, and flag Enterprise Products growth investments, which we generally view as constructive for US chemical producers.
• Sustainability/Energy Transition: We highlight the ADM expectation for lower US ethanol and biodiesel margins in 2024, the benefits of bioproduct feedstock integration, and an LSB Industries clean ammonia project update.
• Downstream/Other Chemicals: We highlight crop price developments YTD, noting that the US plantings season is running ahead of expectations, and see crops increasingly competing with food for feedstock, spurring inflation.

Exhibit 1: Europe spot polyolefin integrated production margins have risen relative to Asia since mid-2023, and we think a reversal is likely ahead as low-cost supplies from North America and low prices from Asia target its markets.

Source: Bloomberg, C-MACC Analysis, April 2024

See PDF below for all charts, tables and diagrams