Could what we are seeing in metals happen in chemicals and polymers? Over the last few weeks, we have seen already high metals pricing spike even further, both because of production shortfalls and because of expectation of higher demand, especially in the renewables space, as conventional energy prices have spiked. We show a lithium example below, but note that after chaotic nickel trading last week and a halt to trading, the market has made some attempts to reopen this morning with renewed problems.
Source: Piedmont Lithium - March 2022 Investor Update, March 2022
As the second chart below shows, polyethylene margins are improving in all regions but from historic lows in Asia and Europe because of cost increases, and with facilities closed down or operating at lower rates because of higher costs, we could see prices move higher again. We do not have the capacity shortages for many polymers as we do with select metals, but we could availability limited by an inability to produce in regions where either costs are very high, or raw materials/utilities are simply not available. We would not want to be short basic chemicals or polymers today or the stocks of the producers, as a run-up in pricing looks more likely than a collapse, even with the recent pullback in crude oil. As with crude oil, we might see increased price volatility. See more in today's daily.
Source: Bloomberg, C-MACC Analysis, March 2022
