We find US petrochemical feedstock costs in reverse relative to strength abroad, and varying degrees of end market strength. Further enticement for US producers to operate at capacity Three commodity market items to think about today: a) US natural gas weakness; b) global ethylene spot market support; c) US propylene strength Other items of note today range from oil-and-gas commentary, to Braskem polypropylene export views, to an array of downstream reports.
We frame recent shifts in upstream crude, natural gas and NGL values, and discuss the forward curves and why they may be (and likely are) wrong. We find chemical spot price support in China (polyethylene, both caustic soda & PVC, etc.) and view it as a near-term plus for US producers. Other items of note include an Ingevity business update, the US chemical freight carload uptick WoW and Sasol divestment commentary.
Braskem announces construction of its La Porte, TX polypropylene (PP) plant is complete – a significant supply addition in a weak demand period – we take a broadly cautious global view of the PP market in 2H20 and 2021. We discuss a business update from Solvay that notes relative strength in construction relative to autos and aerospace – these trends align with our view, and recent commentary from Huntsman and Sherwin Williams. Other items today range from naphtha markets seeing strength, the likely US June polyethylene contract uptick, and global chemical demand in limbo.
While expected, the completion of the SABIC acquisition by Aramco last week could drive meaningful and not necessarily helpful change for much of the chemical industry – given Aramco’s global expansion ambitions in Chemicals. Separately, as bids emerging for a share in the Sasol facility in Lake Charles, a different scale of transaction and driven by very different motivations, we discuss motivations and what might make sense for a buyer. Early signs of what is coming as companies likely emerge from this downturn with different perspectives, growth estimates and different stakeholder priorities.