Global Chemicals Cracker: A More Constructive Backdrop

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Global Chemicals Cracker: A More Constructive Backdrop

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31 Jul 2026 00:00:00 ET │ 35 pages

Global Chemicals Cracker

A More Constructive Backdrop

CITI'S TAKE

Sebastian Satz, CFA AC

A solid start to earnings season suggests conditions for upstream chemicals +44-203-569-3662

have been improving. Pricing and volumes have generally come in better sebastian.satz@citi.com

than expected, while management commentary points to stable demand

trends and no signs of demand destruction. While any benefits from the Ranulf Orr, CFA

ME-conflict are likely to prove temporary, macro indicators continue to +44-20-7986-3922

improve, supporting the case for a gradual recovery in underlying demand. ranulf.orr@citi.com

Margin trends remain mixed, however, with spreads still under pressure

across regions and higher oil prices posing a near-term headwind. Omi Pallavi

+44-20-7508-1367

A more constructive backdrop — The earnings season has so far been reasonably omi.pallavi@citi.com

supportive for upstream chemical names, with both pricing and volumes generally Patrick Cunninghamtrending better. BASF sees no material change in demand trends heading into Q3

and no signs of demand destruction. While this offers some support to our view that +1-212-816-6684

the Middle East conflict could provide the sector with a degree of breathing space, patrick.cunningham@citi.com

management also noted that the recent escalation has not reignited concerns over Oscar Yee

product availability. As a result, higher oil prices are likely to weigh on margins, as

+852-2501-2473reflected in Oscar's Asian price basket, while remaining supportive for U.S. ethylene

producers. Additional support comes from the proposed EU ETS reforms, which oscar.yee@citi.com