We find recent working capital issues among chemical end-product sellers has accelerated initiatives to enhance supply chain visibility and efficiency – the expanding radar of home product producers in this area is worth notice. We highlight several corporate items worthy of note (e.g. DSM, LG Corp, Chandra Asri, Koppers, IMCD, Flugger & Aramco updates; Lukoil, SABIC, ExxonMobil, Neste, Petrobras, Lukoil & STADLER strategic news; etc.) Other items today range from US chemical rail traffic reflecting a five-year high for this time of year, to strength in Asia polypropylene and methanol, to the latest US consumer spending update that reflects declining momentum.
In this report, we discuss the 2H20 advance in global chemical sector per-unit margins and the “leftovers are for quitters” view gaining momentum in some product chains into a year-end – 1H21 could see many trend reversals. We discuss numerous corporate news/update items (e.g. potential Sabic specialty business IPO; Elementis rejects take-over bid; Indorama, SQM, Clariant & Sinopec updates; multiple supply-chain announcements, etc.). Other sector items worth note range from the latest US propylene contract settlement, to strength in the ACC Chemical Activity Barometer (CAB), to the upward trend in Brent crude oil values relative to US natural gas.
Polymer prices are broadly moving higher in Asia to start the week amid concern of rising crude-based production costs, some lingering supply chain constraints, and expectations for derivative demand improvement. We note multiple relevant corporate items (e.g. Cabot & Cepsa business updates; Methanex, PTTGC & Sinopec price hike news; Covestro, Eastman, Elementis, Invista, Petronas, Sasol, Solvay & Wacker strategic moves, etc.) Other items in this report range from our discussion of US chemical sector volume trends in October, to tight European olefins amid plant outages, to the continued flow of ESG geared sector press releases (see our perspectives work from yesterday discussing plastic recycling and paper alternatives in LINK).
Over the last two weeks we have seen headlines supporting every possible outcome – “Biden good for Chemicals”, “Biden bad for Chemicals”, Biden good for Trade”, “Biden bad for Trade”, “Good for Europe”, “Bad for Europe”, etc. Apparently, you can skin this cat any way you want to! It is hardly surprising to see this, given the lack of clarity in Washington in general and the risk that we might not fully understand the balance of power for a couple of months. There is lots of room to speculate and a large vacuum in which to work We do not expect much to happen to impact the chemicals industry either positively or negatively, in part because the incoming administration has much bigger problems to deal with, COVID and the Economy. Energy and climate policy will likely be incremental and manageable, given need for bi-partisan agreement. Trade is where the hard work may need to be done