Daily Chemical Reactions

Back To The Futures – Implied Chemical Cost Curve Flattens To 2017/18 Levels, Europe Would Continue To Face Biff
May 22, 2024
Commodities Mentioned:
Propylene, Ethylene, Propane, PDH, Polypropylene, PVC, Polymers, Crude Oil, Natural Gas, Ethane, LNG, Hydrogen, Ammonia, SAF
Companies Mentioned:
Dow, Enterprise Products, Invista, Braskem, Pinnacle Polymers, PPG, OQ Chemicals, Celanese, Oxy, ExxonMobil, Shree Pushkar Chemicals & Fertilisers, Aramco, LyondellBasell, Nova Chemicals, Westlake, Olin, ADNOC, Shell, TotalEnergies, Phillips 66, Chesapeake, Amazon, Deloitte, REPowerEU, Google, Meta, Microsoft, Salesforce, Yara

Daily Chemical Reaction

Back To The Futures – Implied Chemical Cost Curve Flattens To 2017/18 Levels, Europe Would Continue To Face Biff

Key Findings

  • General Thoughts: We discuss chemical feedstock futures markets and implied chemical cost curve developments through 2025 to loosely gauge sector sentiment toward global fundamentals and growth capital deployments.
  • Supply Chain/Commodities: We highlight US spot ethylene and propylene values and futures prices through 2025, considering current global spot prices and the substantial US ethylene chain advantage relative to Asia and Europe.
  • Energy/Upstream: We look at Brent Crude and US natural gas, propane, and ethane prices and their futures prices through 2025, which suggests lower global chemical prices and downward US petrochemical margin pressure.
  • Sustainability/Energy Transition: We see power and offtake challenges keeping many clean product projects, such as hydrogen, from positive FIDs, and challenges limiting timely electricity grid growth lacking appreciation.
  • Downstream/Other Chemicals: Despite recent cost relief, we discuss the drop off in European manufacturer competitiveness as its mature domestic markets and limited export capabilities keep its industry in a tough spot.

Exhibit 1: The Brent Crude and US Natural gas futures market suggests a substantial oil-to-gas ratio drop by YE 2025.

Source: Bloomberg, C-MACC Analysis, May 2024

See PDF below for all charts, tables and diagrams

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