All Shook Up – Fundamental Indicators Favor Commodity Market Weakness In 2H24 Amid Increased Production

Daily Chemical Reaction

All Shook Up – Fundamental Indicators Favor Commodity Market Weakness In 2H24 Amid Increased Production

Key Findings

• General Thoughts: While some US polymer market followers likely can’t help falling in love with price (and margin) strength through July, fundamental trends imply the current “love me tender” period will moderate by year-end.
• Supply Chain/Commodities: Global critical mineral markets, including copper, desire a little less conversation and much more action from buyers, and many Asia Ex-China chemical producers fight to get out of heartbreak hotel.
• Energy/Upstream: We highlight Brent crude oil, US natural gas, USGC ethane, and USGC propane price trends and their futures market prices as reference points to discuss our global petrochemical cost curve views through 2025.
• Sustainability/Energy Transition: As many Western markets cast China as the devil in disguise due to its dominant clean product positions, we view their climate goals and cutting their dependence on China as mutually exclusive.
• Downstream/Other Chemicals: We discuss the potential for a Canadian rail strike, which could disrupt chemical and other product flows to/from the region, and weak crop prices pushing farmers to search for good luck charms.

Exhibit 1: Brent crude oil weakness MoM in August, declines in US (& global) manufacturing, and prospects of increased supply to put downward pressure on domestic spot polymer prices in 2H24 absent unplanned outages.

Source: Bloomberg, C-MACC Analysis, August 2024

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