We focus on the building products industry today and it is interesting to note the convergence of the S&P Building Products index and Westlake over the early part of this year, as Westlake has been recognized for its building products footprint, partly aided by the company’s re-segmenting with the last quarterly earnings. The company has reached an all-time high stock price over the last few weeks and has certainly been a great preferred pick for us over the last two years. As interest and mortgage rates rise, we may see a slowdown in home buying as there is generally a good correlation, but this often leads to more home projects as consumers choose not to move and improve what they have.
Source: Bloomberg, C-MACC Analysis, March 2022
Lumber prices have been volatile over the last couple of years and are taking another hit this week from the higher interest rates. However, prices remain very high versus history, and this could be good for some of the alternate recycled polymer uses that we discuss in today's ESG and climate report.
In addition to its building products business, the base chemicals dynamics look quite good for Westlake, with PVC margins very strong in the US and polyethylene pricing likely to turn positive again in the US this month. The company has PVC production in Europe and this will likely be facing significant cost pressure, but the US margin strength should more than offset in 1Q 2022. For more see today's daily report.