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Our most recent publications are summarized in the blocks below and you can browse through all our reports to the right of the blocks. We encourage you to request a trial for full access to our research.

Special Affair – Weak Chemical Sector Conditions Persisted Into 1Q; Falling Feedstock Costs Help Some

Special Affair – Weak Chemical Sector Conditions Persisted Into 1Q; Falling Feedstock Costs Help Some

US consumer spending fell for the second consecutive month in December, led by a drop in durable goods demand – most chemical chains remain bloated in 1Q23.

We discuss the significant weakness in US natural gas prices during the past 30 days, which is a plus for US petrochemical producers relative to those in Europe and Asia.

Chemical sector 4Q reports and 2023 outlooks suggest that some chemical product chains are much leaner than others, and we flag our constructive view of Chlor-Vinyls.

Eastman highlights progress on its circular economy milestones in 2022 and targets for 2023, though investor confidence appears low in this project’s risk-adjusted returns.

We highlight that Airbus is hiring to help with product delays, while many other durable goods producers, such as Intel and Hasbro, foresee a weaker demand setting.

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Rock The Boat – Cost Curve Movements & Outages May Keep Prices Afloat, Squeeze Specialty Margins

Rock The Boat – Cost Curve Movements & Outages May Keep Prices Afloat, Squeeze Specialty Margins

The global chemical production cost curve has risen during a period of production cuts to deal with oversupply, setting up a potential cost rebound for downstream buyers.

We discuss Chevron’s decision to repurchase ~20% of its stock and lift its dividend and why energy transition and downstream Capex growth will outpace upstream efforts.

We highlight Dow, Axalta, Sherwin-Williams, Valero, and other 4Q22 reports and 2023 outlooks, and we discuss a few commodity chemical price developments in 1Q23.

We add to baseload power commentary in our latest ESG weekly, flagging the recent Form Energy news, and we comment on Dow and Mura Technology initiatives.

We highlight relative macroeconomic data postings and regional chemical sector demand views, and we note recent US exporter benefits from a weakening US dollar.

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Power Base: We Are Sailing Too Close to The Wind (and Sun)

Power Base: We Are Sailing Too Close to The Wind (and Sun)

The Europeans are closer to wind and solar tipping points and are concerned about baseload power and the exorbitant cost of getting there with wind and solar.

Alternative and accepted baseload low-carbon power is needed – hydro can help but not enough. Nuclear and natural gas with CCS are both logical and economical.

Meanwhile, the incentive war is heating up as the IRA pulls investments to the US. In our view, Europe does not have the cash to compete – the UK has options.

Recycling headlines are picking up as our anticipated shortfalls of recycled materials is more broadly recognized – some economics get worse each day.

We also discuss the lithium market, its value, and emissions. We also highlight the likely decline in auto and EV demand and its likely impact on many in 2023.

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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.

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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.

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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.

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