Weather Issues/Risk Could Spur Better Near Term Results For Some, But Look Out Below If The Risks Dissipate!

Daily Chemical Reaction

Weather Issues/Risk Could Spur Better Near Term Results For Some, But Look Out Below If The Risks Dissipate!

Key Findings

• General Thoughts: Weather event risk and logistic issues could offset the flatter global chemical production cost curve to spur prices/inventory in the near term, but underlying fundamentals mostly point to lower prices ahead.
• Supply Chain/Commodities: We flag recent strength in US and Brazil spot PVC relative to Asia and Europe and discuss weather issues in Mexico and event risk more generally amid elevated US hurricane season concerns.
• Energy/Upstream: We highlight the recent strength in global natural gas prices relative to Brent Crude oil and the improvement in Europe and Asia natural gas relative to US levels that holds mixed benefits for chemical producers.
• Sustainability/Energy Transition: We highlight the significant growth in proposed carbon capture projects in the US, UK, and Canada relative to other areas, and our global hydrogen focused work planned for June and July.
• Downstream/Other Chemicals: Maersk lifts its profit guidance for 2024 based on freight rate strength, and we discuss WoW movements between China and Western markets that reflect continued rate strength into June.

Exhibit 1: Brent Crude Oil prices have contracted relative to natural gas since reaching multi-year relative highs in 1H24, suggesting downward pressure on Ex-US naphtha values relative to USGC ethane in the near-to-medium term.

Source: Bloomberg, C-MACC Analysis, June 2024

See PDF below for all charts, tables and diagrams