Mat-Chem Notes for the Week Ended July 10, 2022



KEY HIGHLIGHTS
  • WTR-CMI last week. Weekly volatility on the market continued last week, with the Russell 2000 recouping previous week’s losses by appreciating 3.6% and the S&P 500 almost keeping pace with a 3.0% return. Our WTR-CMI index of 30 chemicals and materials technology companies declined 0.5% for the week and only five stocks managed to equal or exceed the S&P 500’s returns, led by LAC (up 8.0%) and including PLL (up 3.0%), both of whom likely benefited from China’s new BEV incentive program. SHW, AXTA, and PPG were also among last week’s winners, benefiting from signs of easing (sequential) raw material pressures and China’s new car sales bounce in June. PKE’s 2Q22 results and guidance may have disappointed versus expectations, resulting in the stock’s performance (5.4%) last week, while both CMP and KWR investors appear to have taken profit after previous week’s rally in both stocks.
  • Bio-ag financing. Last week we highlighted recent efforts by established ag-chem companies to build and expand their bio-based businesses. However, capital investments go beyond established players and are increasingly going toward emerging innovators, with close to $900 million being invested in global start-ups, primarily in North America and Europe, and primarily in areas of soil health, pesticides, and technologies that lower production costs. Over time, these companies may become viable stand-alone players or provide an acquisition target for larger, more established bio-ag players, such as BIOX and BHIL.
  • Government bureaucracies undeterred by reality. While one branch of EU bureaucracy is imposing deadlines and mandates intended to drive the transition away from ICE cars and fossil fuels in general, other branches are putting roadblocks in the way of industries looking to make that happen, such as lithium materials suppliers and battery manufacturers working on developing a regional supply chain of critical materials and components. It’s a good thing the timing of the multi-billion dollar investments being considered by various industry players provides time for the EU to adjust its policies before these investments head elsewhere.
  • Resin prices ease off. Polyethylene and polypropylene costs declined modestly W/W recently on lower raw material costs and slower demand. This may be an indicator that the worst of RM inflation may be behind.
WTR-CMI WEEKLY PERFORMANCE

Source: YCharts; July 8 close

WTR-CMI last week. Weekly volatility on the market continued last week, with the Russell 2000 recouping previous week’s losses by appreciating 3.6% and the S&P 500 almost keeping pace with a 3.0% return. Our WTR-CMI index of 30 chemicals and materials technology companies declined 0.5% for the week and only five stocks managed to equal or exceed the S&P 500’s returns, led by LAC (up 8.0%) and including PLL (up 3.0%), both of whom likely benefited from China’s new BEV incentive program. SHW, AXTA, and PPG were also among last week’s winners, benefiting from signs of easing (sequential) raw material pressures and China’s new car sales bounce in June. PKE’s 2Q22 results and guidance may have disappointed versus expectations, resulting in the stock’s performance (5.4%) last week, while both CMP and KWR investors appear to have taken profit after previous week’s rally in both stocks.

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