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what we are talking about today

Daily Chemical Reaction

Global Chemical Update – Soul to Squeeze

Global Chemical Update – Soul to Squeeze

NW European Natural Gas prices have surged higher following their mid-2H22 flop, a risk we noted in our early 4Q22 research for European chemical production but a net plus for US exporters.

Global nitrogen/ammonia fertilizer prices held up WoW, helped by rising production costs, which were considerably higher in NW Europe relative to the US. A notable plus for domestic producers.

USGC ethane values rose relative to Ex-US naphtha values WoW, flattening the global ethylene cost curve a bit at the feedstock level. US natural gas also surged higher compared to Brent Crude.

Global polymer values, on average, were modestly lower WoW, with polypropylene values seeing the most significant decline per our model, while polyethylene reflected the most support.

Happy Thanksgiving, But A Likely Cold December Ahead – Global Chemical Profits To Shiver Into 2023

Happy Thanksgiving, But A Likely Cold December Ahead – Global Chemical Profits To Shiver Into 2023

The global commodity chemical market reflects oversupplied conditions in late 4Q22, heightening the risk of a further profit weakness into yearend if energy prices inflate.

The increase in global natural gas prices WoW is a notable concern for North American chemical producers, as it implies a flatter global production cost curve into yearend.

We highlight global ethylene production margins and cost curve developments by region in 2022, though most global product markets reflect oversupply.

We highlight the cost curve displaying major CO2 mitigation strategies and discuss our concerns with the acceptance of premium “green” prices near term in some products.

We discuss the Deere business update and 2023 outlook showing a continuation of benefits from a strong farm economy that aligns with our agriculture sector view.

Heading South – US Polypropylene Contracts Fall, Downward Pressure To Persist Relative To Propylene

Heading South – US Polypropylene Contracts Fall, Downward Pressure To Persist Relative To Propylene

North American polypropylene (PP) prices face downward pressure as more domestic and global production and logistic improvements position supply to outpace demand.

We discuss the Shell petrochemical development in the Northeast US, which benefits from a low-cost ethane feedstock market that could support more chemical projects.

We discuss recent contract price declines for US PP and propylene and why we continue to take a cautious view of PP markets as availability improves into 2023.

We discuss our concerns with recycled polymer profits, as prices fall relative to costs, and we highlight a direct air capture (DAC) development in Louisiana worth noting.

Global container freight rates on avg. continue to trend toward 2019 levels as global supply indicators improve, working against many manufacturer price hike outlooks.

what we are saying about tomorrow

ESG, Recycling & climate 

Capital Costs are Driving Investments Rather Than Operating Costs

Capital Costs are Driving Investments Rather Than Operating Costs

The number of inefficient projects relying on free power or large incentives to drive acceptable projected returns is rising. Operating costs will matter long term!

The hope of free electric power is behind many decisions, but power demand estimates keep rising, suggesting that free power is decades away in large volume.

More and more analyses and opinions are emerging around limiting reliance on China for batteries, but battery materials and components also need attention.

Recycling is having a bad quarter as virgin polymer prices fall in the West – many projects risk financial challenges as costs are fixed, and margins are collapsing.

We also look at the first large DAC project on the Gulf Coast, some more forecasts for ammonia demand, and many substantial looming ESG goals.

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what we are covering

Sunday Thematic & weekly recap 

The Outsiders Risking The Future Of Chemical Profitability

The Outsiders Risking The Future Of Chemical Profitability

It is very unusual to see new petrochemical projects announced at the beginning of a cyclical low – last week, we saw two – both likely driven by unique factors.

Potential returns may not be attractive enough for incumbent chemical players, but they might be a better alternative for others – oil companies and mid-stream.

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