Mat-Chem Notes for the Week Ended January 9, 2022



KEY HIGHLIGHTS
  • WTR-CMI last year. The first full week of trading saw the S&P 500 decline 2.6% and the Russell 2000 lose 4.5%. While only seven of the 30 stocks in our WTR-CMI index posted gains for the week, the index outperformed the broader markets, declining 2.4%.
  • Winners and losers. News of Chinese approval for its leading surfactant appears to have contributed to a 4.5% gain in IOSP’s stock price for the week. Improved outlook for aerospace highlighted in PKE’s earnings release may have been the catalyst for its stock and that of HXL, as they finished up 3.0% and 3.7%, respectively. On the other hand, LAC was the worst performer in our index, falling 13.1% despite announcing that Millennial Lithium Corp. (OTC: MLNLF) shareholders have approved its acquisition by LAC. LTHM also fell a significant 8.0%. ALB and PLL, too, posted losses, albeit not as steep, of 4.1% and 3.9%, respectively, underscoring the inherent volatility of lithium stocks.
  • Global paint market growth looks promising. A recent report forecasts above-GDP growth for industrial coatings. The $85B market is expected to grow at a 3.4% CAGR (2021-2028) to $107B. While this is good medium-term news for leading coatings companies such as SHW, AXTA, PPG and RPM, we note that 2022 may be a difficult year as the industry works to pass on higher input costs while dealing with near-term margin pressures and still-present labor and logistical constraints.
  • A price increase to start the year. ALB announced a price increase in its Catalysts business, citing higher energy and metal costs, and tightness in chlor-alkali markets as the reasons. We expect such announcements to be a common feature in 2022 as companies rush to recoup their margins and profits in an inflationary environment.
  • Deepening ties. PPG announced an agreement with Home Depot (NYSE: HD) to expand its presence in the channel with the addition of pro paint (for professional customers) across the latter’s network of big-box stores. The required channel fill should have a positive impact on 1H22 paint volumes for PPG, and may contribute to a stronger year overall.
WTR-CMI WEEKLY PERFORMANCE

WTR-CMI last year. The first full week of trading saw the S&P 500 decline 2.6% and the Russell 2000 lose 4.5%. While only seven of the 30 stocks in our WTR-CMI index posted gains for the week, the index outperformed the broader markets, declining 2.4%.

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