Given the lack of forward-looking information to the contrary, we see significant optimism in chemical company outlooks as 4Q 2020 earnings season comes to a close – near-term extreme demand and pricing strength is the driver. Immediate surroundings and near-term data tend to influence sector views, so the optimism is understandable – the risk is that consumer spending shifts toward travel from other goods & services as vaccines rise; signs are already there. There has been a step up in focus on recycling, partly due to high virgin plastic prices – the higher demand exposes the limited available recycled volumes of many polymers, despite rising volumes of plastic waste – no simple solution exists.
We find global petrochemical producers positioning to best capture the near-term increase in prices, while concurrently dedicating more capital to longer-term ESG efforts. This balancing act is trickier than most appreciate. We flag pertinent chemical sector corporate items (e.g., BASF, Indorama, Ineos, & Orbia profit postings; Wanhua MDI production update; Multiple facility updates, price hike announcements, & capital deployment items) This report’s other relevant items include ExxonMobil testing Advanced Recycling of Plastic Waste at its Baytown facilities, to the price movement in naphtha relative to a few up-and-downstream factors, to global dry-bulk shipping rates reflect a five-year high for the time of year per our research.
US commodity tightness is impacting global markets and resulting in a rebalancing of leaner global supply chains. This report discusses the supply response and product targeting US shores despite elevated freight rates. We flag pertinent chemical sector corporate items (e.g., Arkema, Element Solutions, Kraton, Rayonier Advanced Materials, Indorama Ventures & Univar profit postings; Multiple facility update & price hike updates) This report’s other relevant items include evaluating the recent collapse in US refinery rates and chemical rail traffic, a general global view of methanol markets and contract nominations, and comments on capital investment in US recycling initiatives increasing amid limitations on exported plastic waste.
“The math doesn’t work” is a regular retort when discussing many things related to ESG, energy transition, and climate – everything costs more. Governments and associated regulators should focus on mechanisms that create alignment. This would have a greater impact on behavior and on iterating towards an acceptable finish line than guessing what a 2050/2060 solution might look like. In Bill Gates’ book, he states that we know the challenges, but not all the solutions yet. If it becomes both economically and socially bad to emit greenhouse gas and to create plastic waste – environmental and economic goals are aligned. Nothing will be achieved without some economic alignment and possible economic sacrifice.