O Canada! Cheap Alberta Natural Gas Benefits Its Chemical Producers, Supports Dow’s Regional Growth Ambitions

Daily Chemical Reaction

O Canada! Cheap Alberta Natural Gas Benefits Its Chemical Producers, Supports Dow’s Regional Growth Ambitions

Key Findings

• General Thoughts: Alberta natural gas prices have fallen substantially relative to US Henry Hub levels YTD, adding to the Canadian cost advantage in an already advantaged North American market relative to Asia and Europe.
• Supply Chain/Commodities: We discuss the Dow 3Q business update that comments on production issues, weak European margins, cost benefits surrounding its Canadian projects, and Adnoc’s downstream ambitions.
• Energy/Upstream: We highlight negative natural gas prices in the Permian in light of upcoming pipeline capacity expansions to bring it to global consumers and compare natural gas prices across major North American markets.
• Sustainability/Energy Transition: The cost of electrolyzer systems is falling, but the cost differences between the West and China remain significant. We also highlight the strength YoY in 1H24 corporate clean energy PPAs.
• Downstream/Other Chemicals: We highlight the global trend underway to cut interest rates amid generally weak conditions, especially in Europe, and flag slightly higher wholesale prices in the US in August than expected.

Exhibit 1: Alberta natural gas reflects a discount to Henry Hub, which has elevated YTD and is at the high end of the 2015-2021 range. Cheap Alberta natural gas prices support regional chemical growth projects, such as at Dow.

Source: Bloomberg, C-MACC Analysis, September 2024

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