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).