Chemicals: Is the worst behind us?
Materials
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.
Edition: 212
- 30 May, 2025
Chemicals: Natural gas price spike concerns overblown
Materials
This decade could see US ethylene margins even stronger than last decade's lofty margins - in addition to discussing how the crude oil-to-natural gas price ratio remains squarely in the US chemical industry’s favour, Hassan Ahmed contends that higher margins are sustainable, particularly keeping in mind that 79% of all ethylene capacity expected to come online between 2021-2026 will be based in the cost-disadvantaged regions of Asia and Europe. His analysis suggests that as much as 21% of this incremental capacity is at risk of being cancelled or delayed, which bodes well for Dow Inc (TP $75), LyondellBasell (TP $120) and Westlake (TP $140).
Edition: 134
- 29 April, 2022