Daily Chemical Reactions

A Shell Game Or A Magician’s Hat Filled With Disappearing Acts & Surprise Rabbits?
July 5, 2024
Commodities Mentioned:
Polyethylene, Polypropylene, Ethylene, LDPE, Natural Gas, LNG, Crude Oil, EVs, Batteries, Wind Power, Solar Power, Nuclear Power, Ammonia
Companies Mentioned:
Shell, Chandra Asri Capital, Glencore, Aramco, ExxonMobil, Dow, LyondellBasell, Nova Chemicals, Borealis, Westlake, OMV, Macquarie, BYD, Porsche, Sabic

Daily Chemical Reaction

A Shell Game Or A Magician’s Hat Filled With Disappearing Acts & Surprise Rabbits?

Key Findings

  • General Thoughts: We discuss the Shell 2Q business update and its global strategic movements as we see global energy and chemical sector restructuring activity staying elevated amid efforts to spur growth and returns.
  • Supply Chain/Commodities: The Shell indicative chemical margin shows a similar 1H24 development relative to 1H23, but US weather risk and regional cost curve differences could result in a notably different 2H24 than 2H23.
  • Energy/Upstream: Recent Brent crude oil strength relative to US natural gas is a plus for North American chemical producer profits relative to Europe, and we compare global refinery and ethylene margin trends since 2011.
  • Sustainability/Energy Transition: The low-carbon transition is advancing but likely to fall short of expectations, especially in the West, and we discuss surging electricity demand amid power supply and infrastructure delays.
  • Downstream/Other Chemicals: The Drewry global container freight rate index hit a fresh YTD high this week, and we also discuss record-setting Hurricane Beryl and why it has elevated concerns about hurricane season in 2024.

Exhibit 1: Shell highlights an uptick in 2Q24E indicative chemical margins but a downtick in refinery margins.

Source: Shell – 2Q24 Business Update – Indicative margins approximate Shell’s global margin performance (including equity-accounted associates) calculated by the company using third-party databases. The actual margins realized by Shell vary due to factors including local market effects, maintenance, operating decisions, etc.; Company Results, C-MACC Analysis, July 2024

See PDF below for all charts, tables and diagrams

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