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2022 C-MACC Coverage of Companies and Commodities

what we are talking about today

Daily Chemical Reaction

Good Directions – Chemical Sector Profit Views For 2023 Are Low, Risk-Adjusted Return Profiles In Focus

Good Directions – Chemical Sector Profit Views For 2023 Are Low, Risk-Adjusted Return Profiles In Focus

Most chemical sector investors agree that 2023 will be a tough year and 2024 will be better, but long-term risk-adjusted return views vary significantly by product chain.

Greater product chain complexity and higher barriers to entry in Chlor-Vinyls at Westlake may be driving its stock outperformance relative to Dow and LyondellBasell.

We highlight polymer-to-feedstock ratios to show the outperformance in PVC and PE margins YTD relative to PP, and we flag US chemical rail traffic and PE export trends.

We highlight that wind and solar costs rise as a percentage of power generation partly due to the step-up in storage demand, which is discussed further in our ESG weekly.

Global container freight rates, on average, have reset to 2019 levels. We flag rising freight rates from China to Europe, while US to Europe rates are mostly unchanged.

Lithium: Stronger for Longer or Hubris Following A Blow Out Year: High Prices Encourage New Entrants

Lithium: Stronger for Longer or Hubris Following A Blow Out Year: High Prices Encourage New Entrants

Clean energy mineral forecasts are broadly bullish. We see near-to-medium-term conditions staying tighter than most chemical markets, but our view is not risk-free.

We discuss movements in Asia, Europe, and US natural gas prices and potential shifts considering European storage levels, the Freeport LNG restart, and future demand.

We provide a global production cost curve view for lithium and bromine. Albemarle and a few of its peers are well situated in this area, which lessens relative return risks.

We highlight the estimated benefits of Biden’s green subsidies through 2031 that will drive many markets, including hydrogen, inciting the envy of many foreign countries.

The US leading economic indicator index eroded into late 2022, and we flag 3M 2023 views, rising auto loan delinquencies, and a potential strengthening in US fuel prices.

Global Chemical Update – That Spells Relief! (For Some!)

Global Chemical Update – That Spells Relief! (For Some!)

US polyethylene (PE) and polyvinyl chloride (PVC) integrated margins have benefited from price support and cost relief in 1Q23 relative to 2H22. Polypropylene (PP) margins remain under pressure.  

NW Europe polymer prices reflect a falling premium to US (and Asia) levels, as the US exports its sizable cost advantage and Asia exports its oversupply to the detriment of European producer margins.  

US ethylene production based on ethane feedstock reflected more than a US$0.10/lb. margin last week, while all other US feedstocks and NW Europe and Asia naphtha reflect negative margins.

what we are saying about tomorrow

ESG, Recycling & climate 

Packaging: Spoilt for Choice but Choice Spoiling Progress

Packaging: Spoilt for Choice but Choice Spoiling Progress

What may look like procrastination in the packaging industry is likely more about too many options for more sustainable solutions and reluctance to choose.

Scale economies will lower the costs of widely adopted paths; biodegradable, designed for recycling, etc. Backing the wrong trend will be expensive.

Impatience is driving litigation, and the bigger named companies, like Dannon, will be the targets, regardless of progress – unclear if any trend is investible yet.

More ideal net-zero solutions and hydrogen hub proposals miss the practical economics of achieving desired goals – more natural gas for longer seems right.

We look at struggles in Europe managing social problems and energy transition together. We also look at banking challenges and ESG funding hurdles.

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what we are covering

Sunday Thematic & weekly recap 

Run Rabbit Run – The Chinese Rabbit is Fast, but The US Has Muscle

Run Rabbit Run – The Chinese Rabbit is Fast, but The US Has Muscle

The world’s optimists expect the Chinese rabbit to run hard, as its consumer spending helps offset western weakness to lead global economic growth in 2023.

Any hope for China in 2023 must come from local growth, in our view, as the global market will unlikely need Chinese durable goods export growth this year.

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