Is This the Start of the (Basic Chemical) Breakdown – Again?

C-MACC Sunday Theme and Weekly Recap

Is This the Start of the (Basic Chemical) Breakdown – Again?

• Several years ago, we wrote an early-year piece suggesting that another quite severe chemical downcycle was imminent. COVID then turned the world on its head, and supply chain issues that followed drove an upcycle.
• But fundamentals – i.e., underlying capacity versus demand were never that strong, and margins in Asia (and Europe) have reflected that for the last two years. Absent some sort of “event” the oversupply could spoil 2025.
• Estimates for next year assume a seasonal rebound and a better year for 2025, while supply and some early protectionist moves suggest this is unlikely – as do recent reassessments of possible economic growth in 2025.
• Most severe industry downturns have been triggered by a “shock” – a spike in oil prices, a global recession, a pandemic, etc., should we get one in 2025, the actual oversupply may drive a couple of years of greater pain.
• Otherwise, we take our monthly look at critical minerals, discuss power for data centers, show more concerns for the German auto industry, predict the demise of green hydrogen in Europe (again), and discuss recycling. 

Exhibit 1: Only Trinseo in the chart below has a valuation that reflects trough earnings expectations, in our view, and even this may be too low because of overly bullish earnings projections.

Source: Bloomberg, C-MACC Analysis, December 2024

See the PDF below for all charts, tables, and diagrams