N.A. Chems & Pkg’g "Takeaways from our petchem call with S&P" Spector

Research evidence excerpt

N.A. Chems & Pkg’g "Takeaways from our petchem call with S&P" Spector

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S&P's base forecast assumes that the Strait disruption continues into August and is Anojja Shah

expected to keep Middle East crude oil and feedstock production shut-in until Analyst

anojja.shah@ubs.comSeptember. S&P estimates this will push spot Brent toward ~$125–130/bbl in coming

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months (vs. ~$95/bbl currently). Feedstock shortages are constraining global refining

and cracking rates, with global ethylene operating rates falling into the mid–high 60% Gaurav Sharma

range in April (from 80% in February), an unprecedented drop, before recovering to the Associate Analyst

gaurav-l.sharma@ubs.com75-78% range in 4Q. It will take months post cease-fire for production to return to

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normal levels. S&P estimates global ethylene production will decline by ~5% this year.

Elevated freight costs, higher insurance, and long-term logistical risks will also support a Nicole Grueneberg

structurally higher petchem price outlook into 2027 which is similar to our forecast for Associate Analyst

nicole.grueneberg@ubs.com

next year.

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Demand destruction near term

S&P views PE demand as more insulated with consumption closely linked to packaging

while PP and PVC have seen more of a headwind especially into durable goods, autos

and building and construction. In the interim inventories are being worked down but are

approaching critical levels. This is most acute in Asia where countries are highly

dependent on imports of both crude oil and downstream polymers. Stopgap measures

in Japan and Korea have cushioned the local impact but their effectiveness/affordability

is likely to fade. China continues exporting aggressively (PE, PP, PVC), despite less