Riders on the Storm – Flattening Global Chemical Cost Curve Adds to Oversupply Risk as Competitive Dynamics Shift

Companies Mentioned: Westlake, Repsol, Braskem, ONGC, ExxonMobil, Enterprise Products, Phillips 66, Aramco, ADNOC, Olin, Kem One, Air Products, Navigator, Sasol, Ocean Yield, INEOS, Reliance, Unioil Petroleum Philippines, WV Stahl, Sabic, BP, Wärtsilä, Huntsman, Dow, BASF, Covestro, Shintech, Formosa, OxyChem, Apollo, Bridge Investment
Commodities Mentioned: Crude Oil, Naphtha, Natural Gas, Ethane, Vinyls, Ethylene Di-Chloride (EDC), Polyvinyl Chloride (PVC), Polypropylene (PP), Hydrogen, Ammonia, Clean Fuels, Steel, Carbon Capture, CO2, Polyurethane (PU)

Key Findings

General Thoughts: The global chemical production cost curve reflects a flattening pattern YTD, with futures implying flatter conditions ahead. We discuss the general setting and other factors shifting the global cost curve.
Supply Chain/Commodities: With integrated EDC profits being negative if using purchased USGC ethylene, we make a positive case for PVC prices in late 1Q25. We also flag the risk of cheap Asia PP targeting Western markets.
Energy/Upstream: We discuss the Braskem initiative to invest in a fleet of naphtha and ethane carriers to lessen its current cost position, and we also discuss ONGC efforts to secure partners to help it import ethane in India.
Sustainability/Energy Transition: We discuss efforts from the German Steel Federation to push the newly elected German coalition toward an incentive policy to cut regional electricity prices and further discuss 45Q in the US.
Downstream/Other Chemicals: Building product markets and housing conditions are weak, which is well known, but we think better conditions are ahead, and we highlight a few PVC and PU producers likely to benefit in 2025.