US chems pummelled as Dow Jones falls 5.86% into bear market

Author: Al Greenwood

2020/03/11

HOUSTON (ICIS)--US-listed chemical shares fell sharply on Wednesday as the Dow Jones Industrial Average fell by 5.86%, entering a bear market and ending the longest bull run in its history.

The declines deepened after the World Health Organization (WHO) declared the coronavirus (Covid-19) a pandemic.

Meanwhile, the oil market took another blow from the latest forecasts published by OPEC and the Energy Information Administration (EIA).

The table below shows the major indices followed by ICIS.

Close on 11 Mar Change %
Dow Jones Industrial Average 23,553.22 -1,464.94 -5.86
S&P 500 2,741.38 -140.85 -4.89
Dow Jones US Chemicals Index 492.81 -22.65 -4.39
S&P 500 Chemicals Industry Index 499.35 -21.65 -4.16

The Dow Jones has fallen by more than 20% from its recent high, entering a bear market, Bloomberg reported. The S&P 500 is only points away from a bear market.

For the Dow Jones, its drop from an all-time high to an all-time low was the fastest on record, taking just 19 sessions, the Wall Street Journal reported.

The Dow Jones reached another milestone. It and the S&P 500 each have changed by at least 2.75% for 10 of the past 13 trading sessions. The following chart illustrates volatility for the Dow Jones Industrial Average.

The violent swings continued as the coronavirus continued to spread in the US and the rest of the world.

The following compares the global cases reported on Tuesday with those reported on 4 March.

World 10-Mar 4-Mar
Cases 113,702 90,869
Death 4,012 3,112
Nations 110 73

Source: WHO

The following shows the growth in US cases.

11-Mar 4-Mar
Cases 938 80
Death 29 9
States 38 13

Source: Centers for Disease Control and Preventions (CDC)

Measures adopted to control the spread of the coronavirus have restricted travel, lowering demand for oil.

OPEC has slashed its 2020 crude demand growth forecasts for the second consecutive week down to nearly nothing.

At the same time, talks between OPEC and Russia to extend a production-cut agreement have collapsed. Unless the two sides reach a new agreement, both sides could produce oil without constraint starting on 1 April.

The US Energy Information Administration (EIA) raised its forecast for OPEC oil production to 29.2m bbl/day from April through December, up from 28.7m bbl/day during the first quarter of 2020.

Second-quarter prices will be $37/bbl before rising to $42/bbl in the second half of the year, the EIA said.

Given the gloomy outlook, oil prices gave up most of their gains from Tuesday. Brent closed at $35.79 and WTI closed at $32.98.

US chemical producers are vulnerable to low oil prices because their feedstock advantage starts to erode when crude prices fall in relation to those for natural gas.

The US relies predominantly on ethane and other natural gas liquids (NGLs) as feedstock, while much of the world relies overwhelmingly on oil-based naphtha.

As a result, when oil prices fall in relation to gas, US producers could see margins decline.

At the same time, chemical companies are contending with the disruptions from the coronavirus, which is lowering demand for their products and disrupting their supply chains.

Many fell by double-digit rates on Monday, with Dow and others falling by more than 20%.

They made up some ground on Tuesday before falling again.

The following shows the performance of the US-listed chemical stocks followed by ICIS.

Name $ Current

Price

$ Change % Change
AdvanSix Inc 9.33 -0.81 -7.99
Axalta Coating Systems Ltd 20.32 -1.76 -7.97
Braskem SA ADR repr Class A 9.21 -1.53 -14.25
Celanese Corp Class A 80.64 -5.62 -6.52
Dow Inc 27.99 -3.41 -10.86
DuPont de Nemours Inc 36.66 -1.46 -3.83
Eastman Chemical Co 47.51 -4.23 -8.18
H.B. Fuller Co 32.83 -2.79 -7.83
Huntsman Corp 16.16 -1.09 -6.32
Ingevity Corp 38.8 -2.09 -5.11
Kraton Corp 7.35 -0.47 -6.01
Kronos Worldwide Inc 7.89 -0.28 -3.43
LyondellBasell Industries NV 54 -5.74 -9.61
Methanex Corp 17.38 -1.49 -7.9
NewMarket Corp 397.22 -20.74 -4.96
Olin Corp 10.9 -1.07 -8.94
PolyOne Corp 20.16 -1.92 -8.7
PPG Industries Inc 97 -4.98 -4.88
RPM International Inc 63.49 -3.55 -5.3
Sherwin-Williams Co 520.14 -25.88 -4.74
Stepan Co 76.6 -5.26 -6.43
The Chemours Co 10.66 -0.88 -7.63
Trinseo SA 16.82 -0.73 -4.13
Tronox Holdings PLC 5.84 -0.68 -10.43
Univar Solutions Inc 12.78 -0.84 -6.17
Venator Materials PLC 2.07 -0.31 -13.03
Westlake Chemical Corp 38.43 -3.33 -7.97

Visit the ICIS coronavirus topic page for analysis of the impact on chemical markets and links to latest news.

Thumbnail image shows medical staff register a new patient at a temporary hospital converted from 'Wuhan Livingroom' in central China's Hubei Province.
Photo by CHINE NOUVELLE/SIPA/Shutterstock

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