One of the key messages from the World Petrochemical Conference is that it is not an oil shortage, it is a commodity shortage, and we show our key metals index (updated through February) again in the chart below. We will update this again at the end of March (when consistent data is available) and given what has happened to both lithium and nickel prices we would expect a jump in the March index.
Source: Bloomberg, C-MACC Analysis, March 2022
To assume that commodity chemicals can remain separate from this is a mistake in our view and even with the surpluses in Asia, input costs are driving commodity chemicals prices higher internationally and we would expect the negative trend in the chart below for the US to reverse quite quickly, especially as the US demand outlook remains very strong.
Source: Bloomberg, C-MACC Analysis, March 2022
The fertilizer price increases that have been driven by the high global natural gas prices are likely here to stay for a while as grain shortages, especially wheat will be an encouragement to maximize, and with the higher crop prices most farmers, while unhappy with the price rises for fertilizers should be able to pay for it. With incremental crop prices rising, yield improvement has a very high incremental return for farmers in most regions today. The crop price trends should also boost demand for crop protection chemicals and for GMO seeds where the trait focuses on higher yield. For more see today's daily report.