High Grade Basic Materials Weekly

Research evidence excerpt

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High Grade Basic Materials Weekly

Week ended July 31, 2026

Industry Overview

HG Basic Materials spreads finished 2 bps wider w-o-w

HG Basic Materials spreads finished 2 bps wider w/w, performing roughly in-line with

the Corp Index. Paper & Packaging and Metals both slightly outperformed, while

Construction / Building Materials and Chemicals both finished in-line.

31 July 2026

High Grade Credit

North America

Basic Materials

SHW & NUE beat, but tight spreads leave us cautious

In Chems, Sherwin Williams (SHW) reported an EBITDA beat and raised FY26 earnings

guidance. Still, we see fundamentals as challenged near term on weak end-market

demand in housing and elevated raw material inflation, a view management's cautious

commentary largely affirmed. Commentary on its attempted joint bid for Akzo Nobel

does alleviate some M&A overhang. However, with SHW spreads trading ~5 bps inside

the Corp Index, we see levels as too rich and affirm our UW rec, though remain MW the

notes due 2047 given dislocated pricing. In Metals, NUE also reported an EBITDA beat.

Fundamentals continue to strengthen, supported by ~$500mm of incremental 2026

EBITDA from four growth projects placed in service in 2025, an upward revision to its

2026 shipment outlook, improved steel products backlog visibility into 2027, and

declining capex. That said, with NUE trading ~5 bps inside the Single-A index and inside

diversified miners BHP and RIOLN, we see spreads as largely full and affirm our MW rec.

LYB earnings beat; DOW to stable from neg at S&P

On Friday morning, LyondellBasell (LYB) announced 2Q26 EBITDA ~19% above

consensus. The company provided it plans to repay $500mm of notes due in September

‘26 at maturity. Management expects volatility in the petchems chain to remain a factor

and sees uncertainty extending into 2027. While LYB does not see demand deterioration,

uncertainty on near-term pricing could impact buying patterns. Away from LYB, we

highlight Dow Inc (DOW) who saw its BBB- rating at S&P stabilized (from a neg outlook)

on Thursday. The revision reflects S&P's forecast for FFO to total debt to rise above

15% this year.…