All Along The Watchtower – Cost Position & Integration Gain Focus Amid Globally Embattled Commodity Markets

Key Findings

General Thoughts: The substantially advantaged US ethylene cost position and recent production issues impacting domestic merchant ethylene supplies favor US ethylene capacity expansions and value-chain integration efforts.
Supply Chain/Commodities: We discuss news that Shintech is considering investing in a new ethylene production facility on the USGC and an SQM business update that puts forth another bearish lithium price view for 2H24.
Energy/Upstream: European natural gas prices are near a YTD high and have increased since 2Q24 relative to US natural gas prices, and we discuss recent weakness in European naphtha prices relative to LPG since May 2024.
Sustainability/Energy Transition: We discuss proposed US production limits on plastics and the mounting challenges facing global power deployments that we think will hinder their ability to keep pace with demand.
Downstream/Other Chemicals: We discuss the US housing market and recent weakness in mortgage rates that are yet to spur a surge in mortgage applications and sales – optimism for improvement in 2025 looks broadly high.