US chem shares jump, beating general market, crude
HOUSTON (ICIS)–US-listed shares of chemical companies rose on Tuesday, outperforming both the general stock market and oil prices.
The exceptions were US-based acetyls producer Celanese and US-based paints and coatings producer PPG. Stocks for both companies fell after they released their first-quarter earnings.
The table below shows the US-listed companies followed by ICIS.
|$ Change||% Change|
|Axalta Coating Systems||19.26||0.12||0.63|
The table below shows the major indices followed by ICIS.
|Dow Jones Industrial Average||24,101.55||-32.23||-0.13|
|Dow Jones US Chemicals Index||535.54||10.12||1.93|
|S&P 500 Chemicals Industry Index||537.65||9.60||1.82|
Brent futures rose , while West Texas Intermediate (WTI) fell, as shown in the following table.
Both remain exceptionally low as the market worries about the world running out of storage.
The problem is trickling down to US refiners, who are looking for floating storage.
If the world runs out of crude storage, then oil markets would lose a price floor.
This is important for chemical markets because their prices tend to follow those for oil.
Among the companies reporting first-quarter earnings, PPG reported a 22% year-on-year decline in first-quarter income.
Overall, PPG’s results reflect deterioration caused by the shutdown in China in February and the sudden decline in global demand in March. Second-quarter sales volumes will fall by 30-35%, PPG said. Demand should start improving in June.
Meanwhile, Celanese reported a 35.3% in Q1 net income.
Despite the decline in oil prices, Celanese’s plants in the US hold a significant feedstock advantage against plants that rely on coal and oil-based raw materials.
Still, Celanese is expecting a slower U-shaped recovery instead of a quicker V-shape.
Downstream demand from the auto sector for Celanese dropped by 80% in April when compared with 2019.
Like many companies, Celanese is delaying construction projects. Such steps help companies preserve liquidity.
Specifically, Celanese will delay construction of the new acetic acid plant and the expansion of its methanol production at its Clear Lake site in Texas by 18 months.
In Europe, chemicals stocks rallied in line with general markets as investors start to look past the lock-down period to a gradual thaw in economic activity.
Germany-based institute Ifo is projecting that the country’s GDP will contract by 6.6% this year, with a 12.2% crash in the second quarter expected to stand as the nadir of the downturn. The country’s economy is not expected to return to pre-pandemic levels until close to 2022.
In Asia, petrochemical share prices fell as oil extended its losses.
The Bank of Japan (BOJ) on Monday expanded its monetary policy easing to ease the coronavirus’ impact on Japan and the global economy.
Focus article by Al Greenwood
Additional reporting by Alex Snodgrass, Anna Matherne, Tom Brown and Nurluqman Suratman
Visit the ICIS coronavirus topic page for analysis of the impact on chemical markets and links to latest news.
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