what we are talking about today
Daily Chemical Reaction
Firing the Jets – USGC Production Should Surge as Skies Improve in Asia; Lifts Odds of 2H Turbulence
Multiple factors (expanding oil-to-gas ratio, surging Asia ethylene spot markets, etc.) move in favor of USGC petrochemical production and export hikes – the current landscape as notably favorable for US vinyl producers.
We discuss supply/demand mismatches leading to commodity price/margin volatility and our view that 2H20 per-unit profit headwinds will remain stiff.
Other items of note today range from oil-and-gas commentary, to concerns with Asia butadiene oversupply, to a possible Westlake vote of confidence.
Bracing For A Kick To The PP; China PVC Strength, Methanol Weakness
We examine the US polypropylene (PP) market ahead of planned increases in US and Asia production and amid mounting propylene supply.
We discuss increases in China polyvinyl chloride (PVC) spot values since the start of the week and comment to developments in the methanol market.
Other items of note range from commentary on propane, to length in butadiene, to our keeping an eye on USGC tropical storm Cristobal.
Positive Sentiment Gains Steam With Crude – Most 2H20 Sector Headwinds Remain Stiff
Brent Crude Oil prices are rising relative to natural gas values – a plus for the US chemical industry and likely to quicken production restarts into 2H20.
We provide takeaways from the Braskem 1Q20 release and earnings call – we discuss management Q&A comments about petrochemical oversupply.
Other items of note today range from oil-and-gas commentary, to efforts to re-shore some US supply chains, to the May US ethylene contract settlement.
what we are saying about tomorrow
C-MACC Scenarios & Persepctives
Revising Our Company Views – Relatively
The revision story may not be fully played out for some chemical companies and performance has been uneven, suggesting that a few stocks are oversold while others likely have downside.
Some of the “safety stocks” look too safe in terms of earnings revisions and in terms of performance and suggest a greater economic bounce back than is likely – greatest risk Albemarle, Air Products, Sherwin Williams, Ecolab.
Olin, Covestro and Mosaic have had some dramatic revisions – Mosaic looks oversold but Olin maybe not enough.
A look at 2H2020 and 1H2021 does not materially change the conclusions but reinforces how positive expectations are for stocks with a durable bias, which we find concerning, given our more conservative views on the rate of recovery.