For those who are too young to remember, OxyChems’ 30-year comment is because the company owned ethylene capacity in the late 80s and early 90s and would have made more during that extreme ethylene peak. This is likely the most money that the stand-alone vinyls business has made. The strength in the PVC could see some reversal if the inflation pressure remains high and housing-related spending slows, but the strength in the caustic market could persist, regardless of economic growth because of structural shortages and the challenges with imports.
Source: Occidental – 1Q22 Earnings Result Presentation, May 2022
Both the ICL results and the news that LyondellBasell is pushing out the April polyethylene price increase are demand red flags to us. ICL reported volume slowdowns in many segments in 1Q and many more segments than in which it saw growth. The strong results reflect higher prices not higher volumes. Pushing the polyethylene increase out, while feedstock costs remain persistently high suggests that LyondellBasell, and likely others, are getting significant customer pushback and this may reflect ample chain inventories. The run-up in polymer prices in the early part of the year was in part driven by supply chain concerns and worries over supply security, but with demand possibly plateauing, polymer buyers may feel some of the leverage moving back into their court. See more in today's daily report titled "Woah – April CPI Growth Moderates Relative To March; 2022 Demand Concerns Remain High".
Source: ICL – 1Q22 Earnings Results, May 2022
