Low Global Pricing Power Suggests Costs Matter Most in 2024: Energy Volatility Spells Trouble

Companies Mentioned: Covestro, Trinseo, BASF, Shell, Baystar, Sasol, Dow, ExxonMobil, CP Chem, LyondellBasel, Lotte, Westlake, OMV, Alcoa, LG Chem, Bora, Thirumalai Chemicals, Qilu Petrochemical, TotalEnergies, Corteva, Wacker, Chesapeake, Energy Transfer, Pembina Pipeline Corporation, TotalEnergies, Sinopec, ThaiOil, Talos Energy, Vitol, Cepsa, C2X, Enbridge, Apex, Brenmiller, Electriq Power, ZeroAvia, ScottishPower, SABIC, Linde, Siemens Gamesa
Commodities Mentioned: Benzene, Propylene, Ethylene, Aluminum, Polyethylene, Crude Oil, Olefin, Polyolefin, Naphtha, Hydrocarbons, LNG, Hydrogen, Renewable Power, Natural Gas, Polypropylene, PET, Hyrdogen, Biofuels, Carbon, Ammonia, Lithium

Key Findings

General Thoughts: US spot benzene prices have surged relative to Asia and Europe since late 2H23, putting its domestic non-integrated buyers at risk of margin pressure in 2H24 amid global derivative market oversupply.
Supply Chain/Commodities: We discuss the downtick in domestic benzene derivative styrene and MDI raw material margins, the impact of an Alcoa plant closure on caustic soda, and the OMV 4Q23 trading update.
Energy/Upstream: Global petrochemical capacity growth, led by China, reflects rising demand for crude oil, and we highlight and discuss IEA estimates for oil-based petrochemical feedstocks and demand growth by region.
Sustainability/Energy Transition: China’s renewable energy capacity additions will dwarf those in the EU, US, and India through 2028, per the IEA view, and we also discuss Ex-China wind turbine price trends through 2H23.
Downstream/Other Chemicals: We discuss rising freight rates to Europe, especially from China, because of route disruptions and flag greater North American chemical rail volume at the start of 2024 relative to 2023.

Exhibit 1: US spot benzene prices are higher than Asia and Europe, which is a negative for its non-integrated buyers.