We will expand on the Olin results and some of the benefits and potential pitfalls of the revised strategy in our Sunday piece as we can draw some comparisons (some good and some bad) from other corporate examples over time. For now, it is working and few would have predicted a $50+ stock for Olin a year ago. Some market fundamentals are working in Olin’s favor, but much of the success is coming from a more radical approach to customer engagement and avoidance of customers generating minimal returns, regardless of what that means for production. So far this is a great first act from the new leadership of Scott Sutton – we will talk about what a second act may need to look like on Sunday.
Source: Olin 3Q21 earnings presentation, October 2021
Separately, what has been a very good story from Celanese has been tainted a little by rising costs, especially in China, and no real signs of when those costs may fall. Celanese and others consuming methane-based methanol in China and Europe can push through prices to cover the extreme spike in marginal feedstock costs, but they open up a major competitive disadvantage with the US by doing so. Celanese will benefit from higher margins in the US, but it may not offset the struggles in Asia in 4Q. That said, Celanese has made a great case for stronger margins and EBITDA in 2020, and the initial response in the stock has been positive. One point worthy of mention is that the company does not expect much new acetic acid capacity globally, talks about the global market growing at around 600,000 tons per year, and then reminds us that it is adding 1.3 million tons of capacity in the US (so 2 years of global growth in one facility). It is a common commodity error to assume you are the only one with the economics to build. Contrast this with the Olin capacity closures and you see one company gambling that their capacity will be the only new capacity, keeping the market balanced and another closing capacity to ensure that it remains balanced. See more in today's daily report.
