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what we are talking about today

Daily Chemical Reaction

Cross Road Blues – Western Commodity Chemical Profit Surges, But The Equities Fail to Keep Pace

Western commodity chemical industry profitability remains near historic highs, but equity performance in this subsector has underperformed peers. We discuss headwinds facing commodity sector equity performance in 2H21.
We highlight pertinent chemical sector corporate updates (e.g., Celanese, Braskem, Honeywell, Posco Chemicals, TPI Composites, & other items).
Sector demand indicators broadly remain robust, but we flag varied cost inflation and a mixed demand setting facing chemical product chains in 2H21.
We find numerous ESG announcements worth mention, ranging from the WoW decline in EU CO2 prices to multiple global project updates.
Along with publishing our latest ESG weekly, we launch a multi-client initiative on carbon abatement in conjunction with the Power Research Group.
We note numerous other pertinent chemical sector items in this report.

No Line On The Horizon – Optimistic Demand Views & Supply Chain Issues Stand Out With 2Q Reports

Commodity chemical producer 2Q result comments are broadly optimistic, while downstream/specialty producers flag cost inflation and input sourcing issues. We discuss the Dow 2Q business update and multiple sector reports.
We highlight pertinent chemical sector corporate updates (e.g., Dow, Alpek, Givaudan, Sika, BASF, Kureha, Evonik, & other business news).
Sector end-demand indicators remain broadly strong, but we flag several logistic items and other indicators showing varied sub-sector momentum.
We flag several ESG items worth mention, ranging from IEA research on empowering cities toward net-zero to views of electrifying the airline industry.
Along with publishing our latest ESG weekly, we highlight our multi-client initiative on carbon abatement in conjunction with the Power Research Group.
We note numerous other relevant chemical sector items in this report.

Cover Me Up – Global Chemical Cost Curve Trends Gain Focus Amid Price Inflation, 2H Profit Outlooks

This research report comments on a few significant global petrochemical feedstock trends. We add to our views from early July that focused on natural gas/NGL values trending upwards in 3Q, with many now at new 2021 highs.
We highlight business updates from AkzoNobel, Daimler, and Sleep Number that display continued supply chain issues in 2H21.
We highlight pertinent chemical sector corporate items (e.g., Sika, Dow, Sinopec, Olin, Linde, Braskem, Indorama, & other producer news).
Carbon prices in Europe have fallen MTD but remain notably higher YTD – we highlight a few CO2 market drivers & other relevant ESG news items.
We highlight the US Housing start uptick MoM in June, elevated air travel bookings in 2H21, and other indicators signaling still healthy demand.

what we are saying about tomorrow

ESG, Recycling & climate 

Global Divisions Widen On Climate Policy: US In A Tough Spot

As the rubber hits the road on real climate change action and investment, divisions are widening and not just between the believers and the deniers.
If different agendas today lead to very different actions taken by 2025, divisions will be wider still and the US, in particular, could find itself lagging & more isolated
CCS may be the only big win available to the Biden Administration – it is not a perfect solution but it has bipartisan support and it will work
We make a case for a dramatic increase in the chemical recycling of plastics as it is likely that this initiative will be less painful for consumers than the alternatives
Otherwise, we talk about carbon offsets, more blue hydrogen, ESG pressure on the banks, and more political compromises that will be necessary

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what we are covering

Sunday Thematic & weekly recap 

Stocking Up: Inventory Build Bubble Should Stall But Not Fall

Our discussions suggest the inventory build that supply chain disruptions have prompted will peak shortly, but it is unlikely to reverse quickly
Investments to diversify supply chains will take time and while we wait we would expect a larger inventory cushion than we have seen over the last decade.
Manufacturing investment in the US and Europe would be broadly positive for the chemical and polymer industry but Industrial Gases should do best.
While it may be time to fold on the chemical sector from an investment perspective for a while, we are less convinced that historical proxies work anymore
We propose a different recycling thesis – one that maximizes pyrolysis and minimizes consumer responsibility – it is more likely to work.

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