Mat-Chem Notes for the week ended December 19, 2021



KEY HIGHLIGHTS
  • WTR-CMI last week. The markets had a rough outing last week. Concerns about the Omicron variant of COVID-19, and inflation data prompting a more hawkish outlook by the Fed, led to declines in the Russell 2000 (1.7%) and the S&P 500 (1.9%). Our WTR-CMI index underperformed both the broader measures, falling (3.0%) for the week.
  • Winners and losers. IOSP was the top gainer in our index last week, rising 2.9% in a down market. MTX’s announcement of two new satellite plant orders in Asia contributed to the stock’s 2.3% increase. On the other hand, EMN rose 1.8% following a positive mention by BofA. Overall, only 8 of 30 stocks in our index posted a positive return for the week. Lithium stocks were the big losers after Goldman Sachs downgraded many of them on valuation and supply concerns. LAC fell (14.4%), LTHM (13.8%), and ALB (12.4%). PLL avoided a double-digit decline, dropping (8.8%) after it released an upbeat Bankable Feasibility Study (BFS).
  • Inflation picks up steam. The Producer Price Index (PPI) increased 9.6% during 12 months through Nov-21, compared with a year ago. It does not look like it’s about to crest, with trucking rates still on the rise, and intermediate and specialty chemical companies such as BASF announcing up to 35% price increases starting December. Given these pressures, we would not be surprised to see PPI inflation rising to low teens, with CPI approaching double digits as we go through 2022.
  • Another lineup change to the WTR-CMI index. Two companies in our index—CCMP and HXOH—announced agreements to get acquired by Entegris (NYSE: ENTG) and American Securities LLC, respectively. The $133/sh in cash and 0.4506/sh in ENTG stock deal for CCMP values the company at $6.5B, with CCMP holders owning 9% of the combined company’s stock. The $30/sh purchase price for HXOH represents a 15% premium, and the transaction completes its short journey as a publicly traded company. We have replaced these companies in our index with American Vanguard (NYSE: AVD)—a formulator, manufacturer, and marketer of mostly off-patent active ingredients for agricultural markets in the US and internationally—and Ingevity (NYSE: NGVT)—a manufacturer of activated carbon, and pine- and rosin-derived chemicals, mostly for the construction industry.
WTR-CMI WEEKLY PERFORMANCE

WTR-CMI last week. The markets had a rough outing last week. Concerns about the Omicron variant of COVID-19, and inflation data prompting a more hawkish outlook by the Fed, led to declines in the Russell 2000 (1.7%) and the S&P 500 (1.9%). Our WTR-CMI index underperformed both the broader measures, falling (3.0%) for the week.

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