As Avient and the linked paint article remind us, there are sectors of the US chemical industry that rely on imported products – in these cases pigments, and the supply chain challenges and logistic delays have caused production problems in the US and price increases in 2021. The automotive segment of the paint industry has seen lower demand because of the auto OEM production slowdown, and pigment shortages and price spikes would likely have been worse if automakers had been running at full rates. There is no sense of impending relief in the logistic issues as we go through 4Q earnings reports and we could continue to see issues for a while. This should be good for US-based pigment suppliers, but while Chemours, Venator, and Tronox all have capacity in the US, they also have capacity outside the US which likely faces some supply chain challenges.
Source: Avient 4Q21 Earnings Release Presentation, February 2022
Separately, the Dupont release is another great example of a company facing net demand growth – which should be good – but then penalized by raw material and logistic issues. The net growth was good, albeit small, in the context of a company with reasonable auto OEM exposure, but the inability to pass through higher costs quickly is common among the more specialty chemical companies and further cost inflation will likely drag on margins through 2022, even if demand growth remains robust. DuPont is suggesting that raw material and logistic inflation in 1Q 2022 will look similar to 4Q 2021. For more see today's daily report.
Source: DuPont 4Q21 earnings release presentation, February 2022
