Materials

Report by Alembic Global Advisors

Sulfuric acid is becoming a binding constraint for TiO₂, with potential Chinese export curbs reinforcing an already tightening market. Acid prices have doubled y/y to ~$280/t, with recent moves of ~$140/t in 2026 alone, driving a ~$400/t increase in cash costs for sulfate-route producers - pushing marginal Chinese capacity into loss-making territory. With ~80-85% of China’s TiO₂ output reliant on sulfate processing, the system is highly exposed, meaning acid shortages translate directly into lost production rather than margin compression from the market’s key swing supplier. As acid is increasingly diverted towards fertilisers and battery materials, TiO₂ is pushed into a residual demand bucket - implying lower operating rates, periodic shutdowns and reduced export availability. With demand relatively inelastic in the near term, the setup is a classic supply shock, supporting sustained pricing upside and favouring chloride producers such as Chemours and Tronox.

Materials

Report by Alembic Global Advisors

The TiO₂ industry is emerging from a prolonged destocking cycle into the early stages of recovery, with demand normalising and lean downstream inventories - particularly in coatings - setting up a restocking-driven uplift through 2026. While share prices have already rebounded meaningfully YTD, Hassan Ahmed believes the magnitude of prior declines and improving fundamentals leave room for further upside as volumes recover and pricing firms. Pricing traction is building alongside tightening supply, with over 700kt of capacity closures since 2023 and mounting cost pressure in China supporting discipline. Additional upside could come from anti-dumping measures disrupting Chinese exports and shifting share to Western producers. Hassan highlights Tronox as his preferred name and raises his target price on Chemours.

Materials

Report by Fermium Research

Frank Mitsch sees early signs of stabilisation in the chemicals sector, despite short interest sitting at 52-week (or longer) highs and persistent investor concerns around potential dividend cuts. While he remains cautious on Tronox and Huntsman’s payouts, he considers dividends from Dow and LyondellBasell to be safe. Roughly 60% of 1Q results landed within 4% of his expectations, with Olin, Corteva, FMC and Celanese leading on beats vs. the Street. Westlake was the notable miss, due to underperformance in its PEM segment, partly from unplanned downtime. After over two years of sector underperformance, exacerbated by the overreaction to Liberation Day, Frank believes the worst may be behind us; hence his recent upgrades (to Buy) on DOW, LYB and PPG. He has also been heartened by how the credit markets have been open to companies such as CE and OLN.

Materials

Report by Alembic Global Advisors

Chemical equities' performance is worse than anything we have seen in recessionary periods over the last 60 years, suggesting limited downside and significant upside for some. Sector balance sheets and cash flows are far better positioned today than in 2008/09. For 2023, Hassan Ahmed prefers companies that may benefit from catalysts (Tronox and Braskem), secular changes within their markets (Olin), or have high China / Europe exposure (Covestro and Tronox). He sees PureCycle as a high-risk / high-return play - TP $30 (300%+ upside).

Materials

Report by Alembic Global Advisors

Fears around demand destruction on the back of higher prices unfounded - Hassan Ahmed’s analysis suggests that a 50% boost in ore costs, all other costs remaining flat, could be offset by a 14% hike in TiO2 prices and a mere 4% hike in coatings prices. Current TiO2 prices are only slightly above their 17-year averages and 2008/2009 distress period-levels, while fundamentals remain healthy. Top pick is Tronox (benefits from higher TiO2 prices, but can also, via the firm's integration into feedstock ore, hold onto margin). Chemours and Venator also offer considerable upside.

Materials

Report by Alembic Global Advisors

Global economic stimulus, a weakening USD, rising vaccination rates and lean inventories are perfectly aligned for continued commodity chemical strength, with higher oil prices providing an additional tailwind. Multiple compression at Olin, Chemours, Huntsman and Tronox seems excessive, particularly when compared to earnings growth prospects. FCF yields at Venator, Braskem and Trinseo are very attractive. For 2022, Hassan Ahmed prefers companies that may benefit from activism/M&A-like catalysts (Braskem, Huntsman and Tronox), secular changes within their markets (Olin), or have underappreciated proforma earnings power (Trinseo and Westlake).

Materials

Report by Alembic Global Advisors

Markets are massively underestimating the positive impact of price rises in TROX’s key products (TiO2, pig iron and zircon). TiO2 price hikes alone could boost EBITDA by $582m YoY in 2021. Favourable supply/demand fundamentals mean that these higher prices are sustainable. Alembic raise their 2021 EPS forecast to $2.20 (from $1.70) and 2022 estimate to $3.05 (from $2.30). 12-month TP $29 (35% upside).