The decline in propylene and ethylene values is worth consideration today as it provides proof, along with the feedstock comments in today's daily report, that US commodity chemical producers are on average facing margin pressure WoW. We noted in yesterday's research that China prices were rising amid production cuts, but demand remains a notable concern. As production rises from current levels in 1H22, this will put downward pressure on Asia chemical prices and also translate into lower US export values.
Suppose the logistical issues begin to clear between regions and freight rates revert more toward 2019 levels. In that case, this will inevitably result in US premium petrochemical prices declining from current premium levels toward Asia values. All in, US commodity chemical producer margins will face difficulties in 2022 to hold 2021 levels. We view the loss of upward commodity price momentum YoY in 2022 as a plus for specialty producers, such as Sherwin-Williams, PPG, Axalta, and Akzo-Nobel, in coatings along with other non-integrated downstream producers.
Source: Bloomberg, C-MACC Analysis, October 2021