With the rapid jump in international natural gas and oil prices, we would see very concerted efforts to raise basic chemicals and polymer prices in Europe and Asia and will have a positive knock-on effect for the US. In our weekly catalyst report on Monday, we showed that ethylene producers outside the US were all losing money, especially in Europe and Asia. Some European demand will already be lower, because of curtailed product exports to Russia and Ukraine, but producers will want to cover costs at a very minimum and consequently, will be trying to match price increases with cost increases and if possible do a bit better than that. All of this will create a greater margin umbrella for the US, and US exporters selling directly into international markets will see export margins step up and may see incremental opportunities to export more, assuming that the freight rates are not too onerous for incremental containers.
Source: Bloomberg, C-MACC Analysis, March 2022
Most of the European companies will be focused on operations first right now – do we have enough feedstock? – how much has demand been impacted by the slowdown in central Europe and Russia associated with the conflict? – how secure are our supply chains for both inputs and outputs? Etc. Not only will the Europeans be facing lost export opportunities, but the jump in fuel and food prices locally will likely change spending habits, most likely lowering demand for durables. European polymer producers, for example, may be trying to raise prices today while their customers face the conflicting challenges ensuring that they have enough supply, but adjusting for possible demand slowdowns. This is a particularly difficult time to plan as a manufacturing company. See more in today's daily report.