Daily Chemical Reaction
Western Spot Polyolefin Margins Rise in August Amid Supply Concerns, Capacity Is Not the Issue!
Key Findings
- General Thoughts: US integrated spot polyolefin margins reflect YTD highs and levels above the high end of the 2023 and pre-COVID 2016-2020 range – we think higher levels will be difficult to achieve absent more outages.
- Supply Chain/Commodities: We discuss Canadian manufactured product exports, including chemical trade flows, considering a potential Canadian rail strike, and we flag strength in Western ethylene values relative to Asia.
- Energy/Upstream: US gasoline and diesel prices reflect a downward trend since March 2024, a plus for domestic fuel consumers but not for its crude oil refiners, who have recently seen their profitability contract near YTD lows.
- Sustainability/Energy Transition: We highlight Chinese dominance in the offshore wind market, dwarfing other significant global countries/regions, and discuss recent SAF, biodiesel, and ethanol plant cancellations and delays.
- Downstream/Other Chemicals: We highlight a Canadian rail map to consider with discussions of the pending rail strike, recent USD weakness, and home-product retailer Lowe’s following Home Depot to cut its 2024 outlook.
Exhibit 1: US spot polyolefin margins have surged to record highs, with the potential impact of a Canadian rail strike, still active Hurricane season, and ethylene and propylene strength on the USGC offering some support to US prices.
Source: Bloomberg, C-MACC Analysis, August 2024
See PDF below for all charts, tables and diagrams
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