More Or Less!?! – US Petrochemical Inventory Positioning Complex; Weather Risk Says More, Fundamentals Say Less!

Companies Mentioned: Heartland Polymers, LyondellBasell, PPG, Braskem, Pinnacle Polymers, OQ Chemicals, Methanex, Enterprise Products, Phillips 66, Shell, Cheniere, Aramco, ReNew, Issaquena Green Power, Lummus, FREYR Battery
Commodities Mentioned: Propylene, Polypropylene, Methanol, Oxo-Alcohols, Crude Oil, Natural Gas, LNG, Hydrogen, Solar Power, EVs, Batteries, Wind Power, Coal, Grain, Metallic Ores, Minerals

Key Findings

General Thoughts: Our fundamental view towards most domestic petrochemical markets is negative; however, uncertainties surrounding weather events, global demand, and oil prices could create a highly volatile 2H24.
Supply Chain/Commodities: We provide a few follow-up views on the US May propylene and polypropylene (PP) contract settlement following those discussed in our C-MACC/PXi polymer price expectations report in late May.
Energy/Upstream: US refinery margins are lower relative to 2022 and 2023 levels but above in 2019, and we expect strong run rates to continue, absent outages, which bodes well for refinery-based chemical production.
Sustainability/Energy Transition: We flag ReNew clean energy developments in India after joining its earnings call this morning, falling solar prices, and we highlight a battery capacity shutdown in Europe due to weak demand.
Downstream/Other Chemicals: We discuss a few indicators suggesting US economic health could be moderating and the complexities surrounding inventory positioning as weather risk says more, while fundamentals say less.