Chemicals and Market Impact

We note the volatility in ethylene in the chart below and point out that ethylene sits in a precarious no-mans-land in the US with pricing neither reflecting costs nor incremental value in use. The downside to generating buying interest in Asia is significant – more than 25% - but an incremental buyer in the US could pay much more than the current price – in many cases to meet export obligations, let alone for domestic sales. We would expect the volatility to continue, with a downside from better production rates and upside from more constraints – demand fluctuations are likely immaterial relative to the impact that supply moves could have. See more in today's daily report.

Source: Bloomberg, C-MACC Analysis, July 2021