Sunday Thematic & Weekly Recap

A Cascade Of Trouble In Europe; Few Industries Will Be Unscathed, Including Autos
May 12, 2024
Commodities Mentioned:
Styrene, Polystyrene, Autos, Ethylene, Polyethylene, Naphtha, Crude Oil, Polypropylene, Hydrogen, Ammonia, Waste, Biomass, Hydropower, Wind, Solar
Companies Mentioned:
AmSty, Trinseo, BMW, Daimler, VW, Porsche, INEOS, Shell, LyondellBasell, Braskem, ADNOC, Aramco, Huntsman, Chandra Asri, Glencore, Covestro, OMV, Borealis, ExxonMobil, Chevron

C-MACC Sunday Thematic and Weekly Recap

A Cascade Of Trouble In Europe; Few Industries Will Be Unscathed, Including Autos

  • While we primarily focus on the struggles of the chemical industry in Europe, its economic challenges extend downstream because operating costs are high, and its basic industries must pass through costs to customers.
  • The EU seems to be paying little attention to the de-industrialization discussions that the chemical industry is championing – maybe it will feel different when the auto industry is struggling, which is quite likely! 
  • The same challenge will likely face other high-cost regions for chemical production, though most of these do not face the same strict decarbonizing plans that exist in Europe, which are raising costs and causing shutdowns.
  • The opportunity is clear for low-cost regions to move more products into Europe. If Europe responds by erecting trade barriers, the net results will be much higher consumer costs and likely slower growth.
  • Otherwise, we look at possible pricing creep for US polyethylene distancing reported pricing from real pricing, why the AmSty assets may be stranded, the poor economic of intermittent hydrogen, and more on power.

Exhibit 1: Commodity chemical performance versus C-MACC estimated cost curve positioning – each story is different, but the positioning is interesting – note that there are no Europe-based public commodity chemical companies. 

Source: Bloomberg, C-MACC Analysis, May 2024

See PDF below for all charts, tables and diagrams

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