North America Commodity Chemicals: Middle East Peace Narrative Pressures Commodities Outlook

Research evidence excerpt

North America Commodity Chemicals: Middle East Peace Narrative Pressures Commodities Outlook

North America Commodity Chemicals

24 June 2026 Citi Research

Exposure to the US Auto and Construction Markets: CE's Acetyl and EM

divisions have housing and auto as their key end markets. A reversal of the

recovery in US housing and auto end markets would be a headwind.

If the impact on the company from any of these factors differs from our base

case expectations, the stock could have difficulty achieving our target price or

could increase more than we expect.

Dow Inc

Company description

Dow is the spin out of DowDuPont's Materials Science business and is one of

the largest producers of ethylene and plastics globally. The company also

holds leading positions in ethylene oxide and derivatives, MDI/polyurethanes,

and silicones.

Investment strategy

We rate Dow at Buy for the following reasons: 1) Commodity prices and

margins haved moved higher and despite some normalization from the peak

Dow should benefit from better margins and higher operating rates from

advantaged North American production; 2) A narrow conflict should still raise

the floor for global prices as prices need to respond to justify additional

production to meet demand; Dow is also likely to benefit across its other

intermediate chemicals as prices respond; 3) While Dow is likely to have

steeper losses from its ME & Southeast Asia JVs, the long-term outlook for

advantanged US/Can production, including its Path2Zero project, looks

stronger given potential added risk for Middle East projects and China's

feedstock dependency on the region. 4) The higher floor and ongoing cost and

productivity measures minimizes the risk of dividend coverage and potentially

sets Dow on a path to deleveraging.

Valuation