The global economic slowdown, lockdowns in China, low seasonality, and new capacity addons will tend to put downward pressure on the chemical spreads in 4Q22. Nevertheless, the current valuations have already priced in those factors, we believe. Hence, we maintain our NEUTRAL sector rating with IVL as our preferred pick.
Weaker demand, low season, new capacity to squeeze 4Q22 spreads
The global economic slowdown, ongoing lockdowns in China, and low seasonality should exacerbate downward pressure on the chemical demand in 4Q22. Moreover, the commercial launch of new capacity and sustained high feedstock costs may squeeze spreads of some chemical products in 4Q22. Given these trends, we expect most chemical margins to soften YoY and remain stable (or soften slightly) QoQ during the quarter.