Daily Chemical Reactions

Low-Cost Existing Chemical Production Positions Help De-Risk Sustainable Growth Efforts; Dow Is In A Good Spot!
May 21, 2024
Commodities Mentioned:
Polyethylene, Ethylene, Polypropylene, Propylene, Polystyrene, LDPE, Natural Gas, NGLs, Crude Oil, Naphtha, Ethane, LPG, Biofuels, Resin, Hydrogen, Carbon Capture, PVC, EVs, Batteries
Companies Mentioned:
Dow, Aramco, ADNOC, Covestro, Braskem, ExxonMobil, SABIC, LyondellBasell, Chemanol, MOL, CoolCo, GAIL, Enbridge, Crescent Energy, Chevron, Hess, Petrobras, PureCycle, Freepoint, SCG Chemicals, Eastman, Lubrizol, Ford, Ineos, Air Products

Daily Chemical Reaction

Low-Cost Existing Chemical Production Positions Help De-Risk Sustainable Growth Efforts; Dow Is In A Good Spot!

Key Findings

  • General Thoughts: Low-cost, integrated polymer producer optimism is high toward decarbonizing and growing circular product offerings while generating attractive returns as high-cost producer restructurings mount globally.
  • Supply Chain/Commodities: We highlight takeaways from a recent Dow investor event, global PE spot market trends, and why optimism in the ethylene market is likely still too high and could prolong many needed closures.
  • Energy/Upstream: We discuss the recent drop in USGC ethane prices relative to US natural gas and the increase in Ex-US naphtha relative to the price of Brent Crude oil, along with flagging the regional cost positions at Dow.
  • Sustainability/Energy Transition: We discuss the push among virgin polymer producers to push circular solutions into their product suites and flag Graham Copley’s attendance at a hydrogen conference in Houston this week.
  • Downstream/Other Chemicals: Global freight rates have rebounded from 2Q24 lows but are below 1H24 highs, and we highlight the recent trade disputes between China and the US and Europe, adding to market uncertainty.

Exhibit 1: US polyethylene (PE) integrated production margins reflect cost advantages last seen in the 2011-2014 period relative to the global average integrated PE producer – most in Asia and Europe are below the average.

Source: Bloomberg, C-MACC Analysis, May 2024

See PDF below for all charts, tables and diagrams

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