HOUSTON (ICIS)--US-listed chemical shares rose sharply for the second day in a row as the nation's Congress got closer to approving a $2tr stimulus bill intended to offset the downturn caused by the coronavirus (Covid-19).
The table below shows the major indices followed by ICIS.
|Dow Jones Industrial Average||21,200.55||495.64||2.39|
|Dow Jones US Chemicals Index||452.60||13.69||3.12|
|S&P 500 Chemicals Industry Index||457.77||9.85||2.20|
The $2tr coronavirus bill would come on top of the monetary stimulus that the Federal Reserve is injecting into the economy.
Many economists expect the US will fall into a recession, if it hasn't entered one already. Some estimate that Q2 GDP will fall by double digits.
The disease continues to spread despite restrictions and lockdowns imposed by the US and much of the world.
The following shows the number of cases in the US.
Source: US Centers for Disease Control and Prevention (CDC)
The following shows the cases in the world.
Source: World Health Organization (WHO)
The downturn will likely cause demand to fall for petrochemicals.
While the industry contends with the coronavirus, it is also dealing with the collapse of oil prices.
Brent settled at $27.39/bbl, up 24 cents.
US chemical producers are vulnerable to low oil prices because they rely overwhelmingly on ethane and other natural gas liquids (NGLs) as feedstocks.
As a result, US producers lose their cost advantage when oil prices fall in relation to gas. By contrast, much of the world stands to benefit, because they rely on oil-based naphtha.
In addition, petrochemical and polymer prices tend to follow crude oil with a time lag of about six weeks, according to the ICIS Petrochemical Index (IPEX). The index tracks 12 major petrochemicals and polymers.
Market activity for US paraffin wax remains muted because of oil-price volatility and the demand shock caused by the coronavirus.
Eastman is cutting capital expenditure (capex) as it keeps its focus on cash generation.
Global chemical production in February fell at an accelerated pace from January, led by a large decline in China and other countries because of the coronavirus.
In Europe, stock markets were mixed.
With the automobile industry currently out of production in most of Europe, petrochemicals are set to feel the pinch from a sector to which the industry sells around 20% of its production.
Another key petrochemicals end market, the construction industry, has asked the the European Commission to declare a force majeure for the sector.
In Asia, shares of petrochemical companies rose as it became apparent that the US had reached a deal for the stimulus package.
India is now on full lockdown, part of an attempt to control the spread of the coronavirus.
Spot CFR (cost and freight) Japan naphtha prices for first-half May delivery averaged at $207.00/tonne at early hours session on Wednesday, rising by a modest $7.50/tonne from the preceding day’s close.
Asia naphtha prices have already fallen by 60% since the start of the year at above $500/tonne CFR Japan.
The following shows the US-listed shares followed by ICIS.
|$ Change||% Change|
|Axalta Coating Systems||16.61||1.88||12.76|
Additional reporting by Amanda Hay, Stefan Baumgarten, Tracy Dang, Jonathan Lopez and
Visit the ICIS coronavirus topic page for analysis of the impact on chemical markets and links to latest news.
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