Commodity chemical values increase while US feedstock values fall due to storm-linked US production issues. Though US per-unit profit margins reflect multi-year highs on paper, low production rates limit returns for most. We flag pertinent chemical sector corporate items (e.g., Koppers, Solvay, Oxychem, Siegfried, Chemtrade Logistics, & Venator profit postings; Dow, MEGlobal, Westlake, & Covestro facility updates; OQ Chemicals price hikes) This report’s other relevant items include evaluating the recent surge in Ex-US naphtha relative to USGC ethane, several updates on global ESG initiatives, and comments on current foreign currency exchange trends.
We discuss several 4Q20 reports and corporate outlooks that comment on an array of supply chain issues recently jolted further by US winter storms. We foresee a production response, but timing remains in question. We flag pertinent chemical sector corporate items (e.g., AdvanSix, Sasol, Covestro, China Sunsine, Orion Engineered Carbons, Petronas Chemicals, Versalis, & Westlake profit postings; Multiple production & price updates) This report’s other relevant items include the surge in USGC spot ethylene relative to Asia since late 2020, several indicators incentivizing US chemical producers to lift operating rates quickly, and container freight rates from China to the US and Europe reflecting near decade highs.
US commodity chemical values broadly reflect price premiums to avg. Asia values. We foresee polymer values meeting in the middle of the current range between these regions into late 1H21 before seeing weakness on avg. in 2H21. Other items highlighted in this report: Ex-US naphtha values rise relative to USGC ethane WoW; USGC spot ethylene and PGP values relative to Asia; China spot polymer prices rise as US production issues jolt global markets.
We will cover the power issues in Texas – and which have delayed this report – next week – once the dust settles. There are lots of strong opinions on what went wrong at the moment, and not much analysis – we will provide some ideas We focus on valuation this week and what it may do for the mountains of available capital looking for an ESG home – many are looking to shine a bright (socially conscious) light on their image and investment, regardless of cost. We also take a look at both hydrogen and CCS as they both figure meaningfully in the objectives of both Shell and Bill Gates’ investments – this is also likely to be part of the Texas power solution (but more on that later).