Mat-Chem Notes for the Week Ended September 18, 2022



KEY HIGHLIGHTS
  • WTR-CMI last week. Reversing the prior week’s trend, the stock market pulled back last week following the release of disappointing inflation data, with the Russell 2000 and the S&P 500 losing 4.5% and 4.8% of their value, respectively. Our WTR-CMI index of 30 chemicals and materials technology stocks underperformed the broader market by declining 7.2% for the week. EMN’s preannouncement of lower 3Q22 and 2022 expectations drove the stock down nearly 15% and eight of the 30 stocks in our index posted double-digit declines. With all stocks in our WTR-CMI index losing value last week, PKE, AVD, and CTVA delivered relative outperformance by declining less than 2%.
  • Even ag-chem majors are retrenching. While the overall tone of CTVA’s Investor Day held last week was positive, highlighted by the rollout of a robust R&D pipeline and an announcement of additional $2 billion in share repurchases (on top of existing $1.5 billion authorization), management also laid out plans for coping with slowing economic growth and high inflation expectations by exiting 35 countries and trimming its workforce by 5%.
  • Tale of two regions. While US passenger vehicle sales in August edged up Y/Y and new car registrations in the EU grew by 4.4% last month, Y/Y growth of passenger vehicles in China was 36% in August following the end of a two-month lockdown of Shanghai and a reduction in the gasoline tax at the end of June. Although the remaining four months of 2022 will feature easy Y/Y comps, given the depressed state of the global auto industry at the end of 2021, slowing economic growth and high energy prices may keep the recovery muted, with questions remaining with respect to 2023. PPG and AXTA may therefore continue to underperform, given their large exposure to the automotive and transportation markets.
  • CMP stepping up its lithium game. Having previously previewed its ambitions of becoming a lithium supplier to the EV battery industry using its existing Salt Lake resources, CMP picked EnergySource Minerals as its direct lithium extraction (DLE) technology provider and announced a $252 million strategic investment by Koch Minerals & Trading, LLC (KM&T) to help finance Phase 1 of its lithium project.
WTR-CMI WEEKLY PERFORMANCE

Source: YCharts as of September 17 close

• WTR-CMI last week. Reversing the prior week’s trend, the stock market pulled back last week following the release of disappointing inflation data, with the Russell 2000 and the S&P 500 losing 4.5% and 4.8% of their value, respectively. Our WTR-CMI index of 30 chemicals and materials technology stocks underperformed the broader market by declining 7.2% for the week. EMN’s preannouncement of lower 3Q22 and 2022 expectations drove the stock down nearly 15% and eight of the 30 stocks in our index posted double-digit declines. With all stocks in our WTR-CMI index losing value last week, PKE, AVD, and CTVA delivered relative outperformance by declining less than 2%.

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