2022 has started very strongly for US chemical and polymer producers, in part because demand growth remains very robust based on early reads from those that have reported earnings, and in part because of the ever-increasing competitive edge that the US is enjoying over Asia – see exhibit below. US producers can maintain strong margins in the US, while easily pushing any surpluses into export markets where local suppliers cannot compete. At the same time, higher production costs and very high logistic costs make it almost impossible for those regions with capacity surpluses to move products into the US, and it is challenging also to move products into Europe. If this production and logistic cost environment persist, not only should US prices stabilize, but for select companies – those with a strong US production bias – we should see estimates for 2022 start to rise.
Source: Bloomberg, C-MACC Analysis, February 2022
Axalta’s earnings report highlights broad industrial and manufacturing strength outside the well-documented problems in the Auto OEM space. Some of the growth that Axalta saw outside OEM is very high and reflects the better GDP numbers in 4Q 2021 in the US, and is supported by many of the strong demand indicators that others have announced. Like others, Axalta is bullish for 2022 with strong demand growth expected to continue (absent the wild card of auto OEM). For more see today's daily report.
Source: Axalta 4Q21 Earnings Release Presentation, February 2022
