Methanol is one of a few chemicals that is directly impacted by the price of natural gas, and as the chart below shows, the pain in China (and in Europe) is extreme and it is unlikely that any facilities that require imported natural gas – or local gas with prices based on imports – are operating today. The volume and margin opportunities for those companies connected to low priced natural gas – the US, the Middle East, and other niche locations such as Trinidad, are as good as they have ever been and we are a little surprised that Methanex did not push a little harder with US pricing, given that export netbacks are likely surging. Urea and ammonia are in the same boat and prices are much higher, but the US is a net importer and international prices are directly impacting the US price.
Source: Bloomberg, C-MACC Analysis, March 2022
We show the HB Fuller slide as we are not surprised by the working capital movements and see this as one of the more general divers of demand growth over the last year as entire value chains have elected to hold more inventory – in part because of the demand growth (that the inventory build is helping to create) and in part because of the break-down of supply chains. A reversal of the working capital move would cause a demand growth collapse, as it has in past cycles and this is a risk. However, with supply chains still a mess and now the added disruption of the war in Central Europe, we do not see this as a short-term risk. The World will need to calm down a lot before companies risk operating with less cushion. For more see today's daily report.
Source: H.B. Fuller 1Q22 (February Month Ended) Results Presentation, March 2022
