Commodity chem cycle going sideways - Citigroup

14 December 2006 18:32  [Source: ICIS news]

TORONTO (ICIS news)--The commodity chemicals cycle is going sideways or even slightly down, Citigroup analyst P.J. Juvekar said on Thursday.

 

Juvekar advised investors to focus on chemical companies with specific strengths, for example companies that have made good progress in cutting costs or realigning their product portfolios, and firms which are good at executing their strategies. 

 

Juvekar was briefing investors on Citigroup’s 2007 outlook for chemicals.

 

DuPont and Nalco are beginning to see positive impacts from their cost-cutting efforts, Juvekar said. “Both were late in the cost-cutting game but now they are seeing the [positive] impact in their earnings per share,” Juvekar added.

 

Other companies such as Air Products and Huntsman are repositioning their product portfolios, with Air Products exiting commodities and Huntsman divesting its ethylene business.

 

Meanwhile, companies such as Albemarle, Praxair, Celanese and Rohm and Haas are strong in executing their strategic plans. “At the end of the day it all comes down to superior execution,” Juvekar said.

 

Citigroup expects styrene and polystyrene markets to remain weak, with adverse impacts for companies such as Dow and Nova Chemicals.

 

Meanwhile, polyethylene terephthalate (PET) and polyvinyl chloride (PVC) are taking a turn for the worse, with likely impacts on Eastman and Georgia Gulf, for example.

 

Both PET and PVC product markets will be impacted by new capacities in China, Juvekar said. The PVC industry, for examples, will see some 3m tonne/year of new capacity coming online in China through 2007, mostly based on the older, highly-polluting acetylene process.

 

Going forward, China may not, by 2009, have enough demand for petrochemical commodities to soak up excess industry supply, Juvekar said, citing industry sources.

 

That could mean that upcoming Middle East capacity would be directed to European and North American markets, he added.

By: Stefan Baumgarten
+1 713 525 2653

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