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We remain more confident in the slope of the global chemical cost curve and supply improvement staying in favor of current low-cost producers in 1H24 than in a global demand uptick lifting all regions.
North American petrochemical producers enjoy a sizable production cost advantage relative to Asia and NW Europe, and we discuss Ex-US naphtha rising to a 2H23 high last week compared to US ethane.
Higher Ex-US prices will likely prove more supportive of US PVC prices in the near-to-medium term than US PP, whose domestic price is higher and has recently risen relative to NW Europe and Asia.
As the global financial backdrop deteriorates for those needing capital, large and small, cash management has become more critical – it is not a time to run out!
Further, with the possibility of any Trump administration rolling back some of the IRA programs, the risk of investing in something grant- or incentive-driven rises.
Among newer sustainability-focused companies, mostly SPACs, Origin Materials screens well, as cash conservation is a focus and products are cost-competitive.
We see a typical year-end softness in most commodity markets, energy, chemicals & crops, with international natural gas the hold out around winter fears.
Otherwise, we look at US natural gas production rising to meet LNG demand and discuss the now more complex path for hydrogen, plus ExxonMobil’s ambitions.
Battling The Bulge – Chemical Markets Battle Oversupply As Higher Project Costs & Demand Risks Attack Energy Transition
Global polymer, critical mineral, and crop prices have fallen from 2022 highs while financing costs and demand uncertainties have risen – a negative trend for global energy transition.
The current setting benefits integrated upstream energy to extend their product chains and take share from less fortified peers – we highlight ExxonMobil and a few of its growth initiatives.
We flag Deere 4QFY23 results, highlighting less farmer demand for new equipment amid lower crop prices and higher financing costs, and discuss why our ammonia view remains constructive.
Critical minerals supporting the energy transition have seen prices decline in 2023, and risk has risen for related growth projects based more on higher demand than risk-adjusted economics.
We discuss the rise in interest rates in the US and Europe relative to China, adding to Western manufacturer headwinds, the US existing home sale drop, and European economic headwinds.
Less Gobble, More Wobble – Polymer Prices Weaken As Feedstocks Fall, Supply Rises, Buyer Urgency Bobbles Lower
Higher crude oil prices and outages spurred a polymer price rebound in 3Q23 – many prices are still well above mid-2023 levels despite 4Q oil price weakness and signs of reviving production.
We discuss recent global price trends in polyethylene (PE) and polyvinyl chloride (PVC), as US PE appears more likely to fall further into 2024 than PVC, whose price is now near its YTD low.
We discuss ExxonMobil initiatives in lithium and its integrated push to expand its chemical business, and we show recent VAM margin support in the US helped by falling input costs.
We flag more examples of Western clean energy and material companies highlighting long-term demand optimism, needed supply security, and vague near-to-medium-term return goals.
We discuss Best Buy and Lowe’s results, noting a consumer push toward discounted products, and flag recent trends in gasoline and food prices ahead of the US Thanksgiving holiday.
Willingness to pay looks like the major stumbling block when it comes to hydrogen development as production incentives are driving investment in production equipment for which there is no demand.
Demand incentives may be the answer, but this is more taxpayer money – demand mandates may be the better solution and may provide the most economic pathways, but agreement is a challenge.
Small hydrogen projects, while not capital efficient, may be all that market demand needs today, but this leaves the equipment industry with a growing capacity overhang and no path to scale economies.
Otherwise, we question the headlong rush into hydrogen infrastructure in Europe, with many of the billions spent on pipelines likely to be wasted as distributed power and hydrogen evolves.
Polyethylene (PE) and Polyvinyl Chloride (PVC) spot prices fell more in the US than abroad WoW, but Polypropylene (PP) values strengthened WoW despite US propylene and Ex-US PP prices falling.
Domestic PP prices will likely see a rising amount of downward pressure relative to current levels into 2024, as domestic upstream outages dissipate and US producers face more Asia competition.
US and NW Europe methanol prices fell WoW relative to Asia, a more negative trend for European producers than in the US. US benzene also declined WoW but remains high relative to Ex-US levels.