With the linked Ashland release, we see another example of a downstream chemical maker struggling with higher input costs and general logistic constraints, and an inability to push through pricing quickly enough to avoid a margin squeeze. The opaqueness that Ashland discusses concerning some of the planning metrics for the near-term is impacting forecasts and estimates for many more companies than just Ashland but given the costs and the supply chain challenges, all are encouraged to push through pricing aggressively, and this suggests that we are far from done with the materials inflationary pressures that we have discussed at length in prior reports and the higher costs of some of these specialty chemicals will start to impact customer margins through 2022. Almost all the earnings reports that we see discuss strong end-market demand and whether this is final customer pull-through or a need to address chain inventory or both, it should support further price initiatives. For more on our inflation views see Inflation (Especially Energy Costs) – Biggest 2022 Wildcard.
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.