Looking down the table below of chemical company’s reports, its hard to be very optimistic about the outlook. The first half of the year disappointed, as I noted in August. Then Q3 saw major volatility as the hedge funds and high frequency traders played their games in the oil market – prices weakened as demand slowed, but then the story about another effort at an OPEC-Russia quota deal pushed oil prices back up again.
This meant that companies did a small amount of stock-building over the summer, when normally they would be using less due to the holiday period. But there was no major demand pull from the downstream end of the value chain. Of course, some companies still did relatively well – either because of luck, in being at the right place at the right time, or because they have a very robust strategy.
For most, however, the chart above from analysts Investec confirms the market weakness with which they have struggled in recent weeks, as Paul Satchell describes. His Volume Proxy indicator is showing a downturn in all 3 regions – most unusual for this time of year, when companies are normally operating at high rates to complete orders before the Christmas break. As Satchell comments:
“The index has proved to be good at indicating a turn in chemicals activity. It has shown surprising weakness in Europe over the past two weeks.
“The relatively benign operating environments enjoyed by many chemicals companies since late 1Q16 have led to a degree of complacency in the investment community. The paucity of negative surprises during that period has been implicitly taken as indicating demand robustness, a view with which we have never felt comfortable. If, as now looks possible, 4Q delivers a surprise negative end to 2016, the sector would be at risk of down-rating.”
His message parallels that being sent by the American Chemistry Council’s Capacity Utilisation data. Prudent companies and investors will already be preparing for a recession in 2017, as well as for major disruption as President-elect Trump’s radical new policies get closer to being enacted.
Advanced. “Weighed down by declines in polypropylene prices”
Air Products. “Higher volumes driven by the Saudi joint venture were counterbalanced by lower energy pass-through and currency headwinds”
Akzo Nobel. “The market environment remains uncertain with challenging conditions in several countries and segments. Deflationary pressures and currency headwinds are expected to continue”
Alpek. “Subpar polyester segment results amid unfavourable oil and feedstock prices”
Arkema. “Improved margins at its high performance materials and coating solutions segments”
Asahi Kasei. “Lower styrene sales”
BASF. “Current volatile and challenging environment”
BP. “ Petrochemicals business, delivered resilient results”
Braskem. “Lower earnings across many of its divisions and headwinds from local currency appreciation”
Celanese. “Low acetyls chain utilisation rates in China and modest growth in North America and Europe”
Chemours. “Costs fell faster than sales”
Chemtura. “Cost of goods falling faster than sales”
Clariant. “Mid-term target of reaching a position in the top tier of the specialty chemicals industry”
Covestro. “Despite booming operating profits posted during the quarter – Covestro’s pricing power continued to fall”
Croda. “Demand remains subdued in a number of its end-markets”
DSM. “High margins at its materials division”
Dow. “Higher restructuring costs and lower divestiture gains”
DuPont. “Volumes rose 3% year on year, despite a tough macro-economic backdrop”
Eastman. “Continued competitive pressures due to lower oil prices and weak demand in Asia Pacific”
Evonik. “Lower raw material prices were passed on to customers”
ExxonMobil. “Tighter margins and higher maintenance expenses”
WR Grace. “Overall margin improvement and strong cash flow”
Hexion. “Slowdown in oilfield drilling”
Honeywell. “Higher sales volumes for catalysts and “productivity net of inflation”
Huntsman. “declines in earnings for polyurethances, performance products and advanced materials”
IRPC. “Increase in volumes failed to offset the decline in product prices.”
Idemitsu Kosan. “Narrowing of margins for styrene and other products”
Kemira. “Lower sales amid improved margins and lower fixed costs”
Kronos. “Rise in sales and the decline in cost”
LG Chem. “Weighed down partly by a stronger won”
Linde.” The group will be rolling out a new cost saving plan”
Methanex. “Average realised methanol price declined 27% year on year”
Mexichem. “Decline in costs was not large enough to offset the decline in sales
Mitsui. “Strong domestic demand”
Olin. “Higher costs for natural gas and purchased ethylene”
Oxychem. “lower sales volumes and higher costs”
PKN Orlen. “Lower petrochemical and refining product margins and sales”
PPG. “Broad deceleration of growth trends, where most of our coatings businesses experienced lower growth rates compared to the second quarter,”
PetroRabigh. “Weighed by lower petrochemical prices as well as plant turnarounds.”
PolyOne. “Higher restructuring and acquisition-related charges and a weaker performance for its specialties division”
Praxair. “Cost reduction actions in response to weaker underlying industrial activity in the Americas and Asia”
Reliance. “Higher sales volumes for catalysts and “productivity net of inflation”
Repsol. “Sales of petrochemical products rose”
SABIC. “Lower sales prices and lower sales volumes”
Sahara. “Sales declined while expenses increased”
Saudi Kayan. “Higher production and sales, as well as lower feedstock costs”
Siam Cement. “Strong performance in its core chemicals business”
Shell. “Stronger base chemicals industry conditions driven by tight supply in the Tosoh. “Improved trading conditions”
United States and Asia and improved operating performance in Europe”
Sherwin-Williams. “Revenue growth on a comparable basis slowed sequentially”
Sipchem. “Production cost increased due to higher gas feedstock, fuel and energy prices”
Solvay. “Softer demand in some our markets compared to last year”
Stepan. “Struggling surfactants sales in Europe and Latin America could not offset higher polymers sales”
Synthos. “Profitability of its styrenics businesses squeezed”
Teijin. “Concerns about further deceleration in economic growth cannot be dispelled, based on potential risks including protracted negotiations on the UK’s exit from the EU and economic corrections in response to the China’s excessive levels of investment,”
Trinseo. “Costs fell faster than sales”
Tronox. “Costs fell much faster than sales”
Unilever. “Economic fundamentals remain weak and volatile”
Unipetrol. “Full production are expected by the end of October”
Univar. “An overall sluggish economy”
Versalis. “Unfavourable trading environment with worsening margins of cracker, polyethylene and styrene”
Vopak. “Positive business developments”
Wacker. “Stronger demand for chemicals and semiconductor silicon wafers”
Westlake. “Transaction and integration costs from the purchase of rival Axiall”
Williams. “Higher olefins margins, lower operating and maintenance expenses”
Yansab. “Higher sales volumes and lower feedstock costs”