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Tough road in 2016

Posted on August 24, 2016 at 10:17 PM Comments comments (107)
So far in 2016 the year has started well below expectations driven by recklessly aggressive competitors determined to increase their market share volume, with no regard to their impact on profit and pricing, in combination with customers unwilling to comply with their contractual commitments. This would be known as the fallacy of the sunk cost, by chasing pricing down a diminishing return spiral of smaller incremental margin.
Beginning in Q2 we maybe seeing the first evidence of an inflection point.              I would expect the 3 levers of the petrochemicals business trading environment to improve compared to Q4 2015 and YTD 2016. Demand, supply and raw materials.
Demand should improve as we move in the coatings season in northern hemisphere summer. Compared to 2015 I would expect healthier volume driven by both restocking and end use improvement seasonally and compared to prior months.
Raw materials will begin to lift as olefins respond to outages in the US cracker TA ( Turn Around ) Season this Spring. By year end many consultants expect Crude to be $50 PBBL ( IHS, WoodMcK  )
Downstream Oxo intermediates supply will tighten as we enter the US Oxo TA season for 2016. According to TCEQ all the main US players, as well as several Asian producers are scheduling work this next few months.
Bottom line we do know from experience the business climate does not remain static, that conditions will change. Open question, are we at the inflection point?

If your cloudy about the next steps to improve your business performance or not sure about the state of the commodity chemical business your participating please reach out for me on cell or email. My rates are reasonable.


Steve Friedewald