Daily Chemical Reaction
Asia and Europe Commodity Chemical Equities To Likely Underperform The US Again In 2024
Key Findings
- General Thoughts: Low-cost feedstock positions and a relatively healthy domestic economy are poised to benefit US commodity chemical producers in 2024 – their peers in Asia and Europe face comparatively more challenges.
- Supply Chain/Commodities: We discuss Asia petrochemical prices, which reflect discounts to Europe and the US, and flag Phillips 66 comments on CP Chem and 1Q24 chemical operating rates, and other global producer reports.
- Energy/Upstream: Ex-US natural gas prices increased this week relative to US levels, and the oil-to-gas ratio remains wide. A collapse in these spreads is the most notable relative risk facing US chemical producers in 2024.
- Sustainability/Energy Transition: We discuss US state-level initiatives to advance chemical recycling, estimated premiums baked into short-term PPAs to show contrasts by duration and area, and slowing EV market trends.
- Downstream/Other Chemicals: The PMI for China, Europe, and the US improved in January 2024 relative to December 2023. However, the PMIs in Europe and China are still below 50, indicating an industrial contraction.
Exhibit 1: Since January 2022 (a month before the Ukraine/Russia conflict began), the C-MACC Asia Commodity Chemical Equity Index reflects similar performance relative to Europe – the US Index has relatively outperformed.
Source: Bloomberg, C-MACC Analysis, January 2024
See PDF below for all charts, tables and diagrams
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