Roundup | Chemical Distillate Lithium Run-Up to Start the Year; ICIS Outlook '26 on Value Chains Relevant to Commodity Chemicals 09 Jan 2026 14:39:14 ET CHEMICALCOMMENTARY Lithium prices have rallied to start the year, with lithium carbonate (battery-grade) prices rising ~14% YTD to ~$17k/t ex-VAT and lithium hydroxide prices rising ~19% YTD to ~$15k/t ex-VAT. ALB shares are up ~14% YTD on the bullish lithium sentiment even after a strong rally in 2H25. China's battery materials team notes downstream cathod ...

Core Insights - Petrobras and Braskem have signed long-term feedstock supply contracts valued at $17.8 billion, marking a significant milestone in the Brazilian petrochemical industry [1][2][18] Group 1: Overview of the Agreements - The agreements consist of two major contracts: one for petrochemical naphtha worth $11.3 billion and another for natural gas liquids (NGLs) worth $5.6 billion, set to commence in January 2026 [3][4] - The naphtha supply deal will provide 4.116 million tons in 2026, increasing to 4.316 million tons by 2030, ensuring a stable supply for Braskem's operations [5][6] Group 2: Strategic Shift and Expansion - Braskem is transitioning from naphtha to more competitive NGLs like ethane, aiming to enhance Brazil's position in global petrochemical production [2][11] - The $5.6 billion contract for ethane, propane, and hydrogen is crucial for expanding Braskem's Duque de Caxias facilities, expected to run for 11 years starting in 2026 [6][7] Group 3: Long-term Supply Commitments - From 2026 to 2028, Petrobras will supply 580,000 tons of ethylene equivalent annually, increasing to 725,000 tons per year starting in 2029, supporting Braskem's expansion plans [10][11] - Additional propylene supply agreements valued at approximately $940 million will further support Braskem's diverse production lines, ensuring access to necessary feedstocks [14][15] Group 4: Strategic Influence and Future Outlook - Petrobras is increasing its influence over Braskem as Novonor plans to divest its stake, indicating a trend of state-controlled entities shaping Brazil's petrochemical sector [12][13] - The collaboration between Petrobras and Braskem is expected to unlock nearly $800 million in investments, driving growth and modernization in the Brazilian petrochemical industry [7][18]

Group 1: Market Outlook - Citi has reduced the price target for Dow Inc. to $23 from $25, maintaining a Neutral rating due to a weakening polyethylene market [1] - The firm has also lowered estimates for other chemical companies, indicating price discounting in polyethylene and a negative outlook for PE-exposed companies in 2026 [1] Group 2: Financial Performance - In Q3 2025, Dow Inc. reported net sales of $10 billion, with growth in the Industrial Intermediates & Infrastructure segment [2] - The company achieved a $1 billion reduction in CapEx spending and completed a strategic partnership with Macquarie, selling a 49% equity stake in U.S. Gulf Coast infrastructure assets for approximately $3 billion [2] - Dow's operating cash flow was $1.1 billion, an increase of $330 million year-over-year, with $4.5 billion in cash and cash equivalents and $10 billion in available liquidity [3] - The company returned $249 million to shareholders through dividends in the quarter [3] Group 3: Company Overview - Dow Inc. is an American chemical company that produces coatings, industrial intermediates, plastics, and related products [4]

Core Insights - China's new petrochemical capacity is raising concerns about potential oversupply in the global market, which could negatively impact smaller petrochemical producers [1][3] - The forecast indicates an 18% increase in polyethylene production in China this year, significantly outpacing the expected 10% growth in demand, leading to a 13% decline in polyethylene imports [1][4] Industry Overview - China has become the world's largest producer of ethylene and polyethylene, having built seven petrochemical complexes in the last decade, surpassing the United States [2] - As the largest consumer of petrochemicals, China's imports reached 15 million tons last year, but increasing domestic production is shrinking the market for other producers [3] Future Projections - China's polyethylene production capacity is expected to grow by another 16% by 2026, potentially worsening the existing structural imbalance due to surplus production capacity [4] - Some new production capacity is being delayed, as seen with BASF's new petrochemicals plant in China, which has postponed its operations [4] Demand Dynamics - Petrochemicals are the primary driver of crude oil demand growth, accounting for 95% of total oil demand growth over the five years leading to 2024, with significant demand growth observed in China [5] - The rapid growth in petrochemical demand in China mirrors trends seen in other sectors like solar power and electric vehicles, where government support led to oversupply and overcapacity issues [5]

Financial Data and Key Metrics Changes - In Q3 2025, Braskem recorded consolidated recurring EBITDA of $150 million, which is 104% higher than in Q2 2025 [5][13] - The company's cash position at the end of the quarter was approximately $1.3 billion, sufficient to cover debt maturities over the next 27 months [6][18] - Corporate leverage stood at approximately 14.7 times at the end of Q3 2025, mainly due to lower EBITDA over the last 12 months [18] Business Line Data and Key Metrics Changes - In Brazil, recurring EBITDA was $205 million, a 35% increase from the previous quarter, driven by prioritization of higher value-added sales [7][8] - The utilization rate of the Green Ethylene Plant was 40%, down 31 percentage points from the previous quarter due to lower demand from Asian markets [8] - The Mexico segment had a recurring EBITDA of negative $37 million, impacted by higher idle expenses and lower provisions for fine receivable [11] Market Data and Key Metrics Changes - Utilization rates at petrochemical plants in Brazil were lower due to maintenance stoppages and production optimization strategies [4][6] - Resin sales in the Brazilian market decreased due to higher polyethylene imports and lower polypropylene demand [7] - The global macroeconomic scenario was marked by moderate growth, accelerated inflation, and high interest rates, impacting industrial activity in resin processing [6] Company Strategy and Development Direction - Braskem's resilience program aims to implement tactical initiatives to generate sustainable value, focusing on maximizing EBITDA and mitigating cash consumption [19][20] - The company is pursuing a transformation program structured around optimizing naphtha base, increasing gas base flexibility, and migrating to renewable products [19][24] - The Transform Rio project was approved to expand the Rio de Janeiro plant's capacity, expected to add 220,000 tons per year of ethylene capacity [25][27] Management's Comments on Operating Environment and Future Outlook - Management highlighted that the petrochemical industry is facing a prolonged downturn, with expectations of a challenging environment until at least 2030 [32][38] - The company anticipates a significant gap between supply and demand in the petrochemical industry, driven by expansions in China and the Middle East [38] - Despite negative outlooks, Braskem continues to advance its resilience project to enhance global competitiveness [39] Other Important Information - Braskem signed an agreement related to the Alagoas geological event, providing for a total payment of BRL 1.2 billion, with around BRL 139 million already paid [15][53] - The company has established 79 action plans globally, with potential for capturing around $400 million in EBITDA and $500 million in cash generation for 2025 [20][22] Q&A Session Summary Question: When will a decision on the restructuring be made? - The company is currently completing a diagnostic with external advisors, and no options are confirmed or discarded at this moment [44] Question: What was the main economic driver for weak resin volumes this quarter? - The demand for resins is strongly associated with Brazilian GDP, and a drop of about 4% is expected for the next months, with a recovery of about 3% for the following year [45] Question: What is the timeline and expected impact of the Transform Rio project? - The project will begin its engineering phase now and is expected to be completed by the end of 2028, potentially adding just under $200 million per year to EBITDA [47][48] Question: What is the status of the PRESIC bill? - The bill has been approved by the Chamber of Deputies and is awaiting urgent evaluation in the Senate, with hopes for approval by the end of 2025 [51] Question: Can you provide details about the Alagoas agreement? - The agreement involves a total payment of BRL 1.2 billion over a 10-year period, with initial installments respecting the company's projected financial condition [53]

Core Insights - LyondellBasell Industries N.V. reported strong third-quarter results, achieving a cash conversion rate of 135% and is on track to meet its $600 million cash improvement target by year-end [1][22]. - The company anticipates an increase in cash flow of at least $1.1 billion by the end of 2026, driven by ongoing operational improvements and strategic initiatives [1][20]. Financial Performance - Earnings per share for the third quarter were $1.01, with EBITDA reported at $835 million and cash from operating activities at $983 million [5][22]. - The company returned $443 million to shareholders through dividends during the quarter [5][22]. - Year-to-date cash generation improved significantly, with a total of $2.7 billion generated from operating activities over the past year [22]. Market Trends - Polyethylene (PE) demand is showing signs of recovery, with North American demand up 2.5% year-to-date compared to 2024, and European volumes up approximately 3% year-on-year [6][10]. - The global polyethylene market has consistently grown at a rate of over 3% for the past 35 years, driven by factors such as population growth and urbanization [9][10]. - Emerging markets, particularly in India and Africa, present significant long-term growth opportunities for polyethylene consumption [11]. Supply Dynamics - The global ethylene supply landscape is undergoing significant changes, with over 21 million tons of ethylene capacity expected to be closed or idled by 2028, representing about 10% of global supply [12][14]. - Capacity rationalization is particularly pronounced in Asia, with South Korea and Japan announcing substantial closures [12][13]. - The company is strategically positioned to benefit from these supply-side changes, focusing on cost-advantaged regions and enhancing operational efficiency [14]. Segment Performance - The Olefins and Polyolefins Americas segment reported EBITDA of $428 million, a 35% increase quarter-on-quarter, supported by improved demand and operational efficiency [26]. - The Advanced Polymer Solutions segment achieved EBITDA of $47 million, demonstrating resilience despite challenges in the automotive market [37]. - The Intermediates and Derivatives segment saw a sequential increase in EBITDA to $33 million, driven by improved margins in oxyfuels [33]. Strategic Initiatives - The company is committed to a disciplined capital allocation strategy, reducing 2026 capital expenditures to $1.2 billion while focusing on safe and reliable operations [18][19]. - Progress on the cash improvement plan is on track, with $150 million in fixed cost reductions achieved year-to-date [20][21]. - The construction of the Moertek One chemical recycling facility in Germany is ongoing, with major equipment deliveries underway [31].

Financial Performance - The company reported a net loss of $890 million, but a net income excluding identified items of $330 million[9] - Cash from operating activities was $983 million, with dividends of $443 million[9] - Non-cash asset write-downs totaled approximately $1.2 billion[10] - The company returned $443 million in dividends during 3Q25[26] Market Trends and Outlook - Mature markets are showing signs of recovery, with polyethylene demand in Europe up 3% year-to-date[13] - Capacity rationalization trends are accelerating, with expected ethylene capacity closures[19] - Announced and anticipated shutdowns represent approximately 10% of current global supply[22] - The company is targeting approximately 80% operating rates in 4Q25 for Olefins & Polyolefins – Americas[44] - The company is targeting approximately 60% operating rates in 4Q25 for Olefins & Polyolefins – Europe, Asia & International[47] - The company is targeting approximately 75% operating rates in 4Q25 for Intermediates & Derivatives[53] Cash Improvement Plan - The Cash Improvement Plan is on track to deliver the $600 million target of incremental cash flow during 2025[27]

Core Insights - LyondellBasell Industries N.V. (LYB) reported a loss of $890 million or $2.77 per share, contrasting with a profit of $573 million or $1.75 per share from the previous year [1] - Adjusted earnings were $1.01 per share, down from $1.91 year-over-year, but exceeded the Zacks Consensus Estimate of 80 cents [1][8] - Net sales for the quarter were $7,727 million, surpassing the Zacks Consensus Estimate of $7,493.9 million, but down approximately 10% from $8,604 million in the prior-year quarter [2] Segment Performance - The Olefins & Polyolefins — Americas segment saw revenues decline around 13% year-over-year to $2,606 million, beating the consensus estimate of $2,531 million [3] - Olefins & Polyolefins — Europe, Asia, and international segment revenues fell 8% year-over-year to $2,587 million, exceeding the consensus estimate of $2,293 million [3] - In the Intermediates and Derivatives segment, sales were $2,343 million, down roughly 13% year-over-year, but beating the consensus estimate of $2,325 million [4] - Advanced Polymer Solutions revenues were $870 million, a decline of around 3% year-over-year, missing the consensus estimate of $891 million [4] - The Technology segment's revenues were $115 million, marking a decline of roughly 21%, lagging behind the consensus estimate of $137 million [4] Financial Overview - LyondellBasell generated $983 million in cash from operating activities during the quarter [5] - The company spent $406 million on capital expenditures and returned $443 million to shareholders through dividends and share buybacks [5] - At the end of the quarter, LYB had $1.8 billion in cash and cash equivalents, along with $6.5 billion in total available liquidity [5] Future Outlook - For the fourth quarter, LyondellBasell anticipates reduced operating rates and seasonal impacts to affect results across most businesses [6] - Increased natural gas and feedstock costs are expected to pressure integrated polyolefins margins in North America, with soft industrial and consumer demand persisting in Europe [6] - The company is on track with its Cash Improvement Plan, targeting $600 million by 2025 and at least $1.1 billion by the end of next year [7] Stock Performance - LyondellBasell shares have declined by 47.8% over the past year, compared to a 27.4% decline in the Zacks Chemicals Diversified industry [9]

Core Insights - Polyethylene, polypropylene, and ammonia are expected to dominate global petrochemical project starts by 2030 due to strong economic growth and rising demand from various sectors such as packaging, automotive, medical, construction, and agriculture, particularly in China, India, and Iran [1] Polyethylene - A total of 127 polyethylene projects are anticipated to commence between 2025 and 2030, with most being new builds and a few expansions [2] - China is projected to lead globally, accounting for one-third of the upcoming polyethylene projects, all of which will be new builds and primarily under construction [2] - Iran and Russia are expected to follow with 20 and 17 projects respectively [2] Polypropylene - There are 121 polypropylene projects expected to start operations by 2030, with 118 being new builds and the remainder expansions of existing projects [4] - China will again lead, accounting for over 40% of these projects, with 35 currently under construction likely to commence operations by 2030 [4] Ammonia - Ammonia ranks next with 83 new build and nine expansion projects expected to begin operations by 2030 [5] - The US leads in project starts with 16 projects, followed by Australia and China, each with eight [5] - Currently, the US has three projects under construction, China has four, and Australia has one [5] Additional Information - Further details on petrochemical projects expected to come online from 2025 to 2030 can be found in GlobalData's report titled "Petrochemicals New-Build and Expansion Projects Outlook by Key Commodities, Region and Development Stage to 2030" [5]

Financial Data and Key Metrics Changes - In Q3, the company reported net sales of $10 billion, with EBITDA at $868 million, reflecting a sequential improvement despite being lower than the same period last year [5][6][7] - Cash provided by operating activities increased by $1.6 billion sequentially, driven by working capital improvements and advanced payments for low-carbon solutions [7][16] Business Line Data and Key Metrics Changes - The packaging and specialty plastics segment saw net sales decline year-over-year and sequentially, with operating EBIT at $199 million, primarily due to lower integrated margins [11][12] - The industrial intermediates and infrastructure segment experienced a 4% year-over-year decline in net sales but saw a sequential increase due to volume gains and lower planned maintenance activity [12][13] - Performance materials and coatings segment net sales were $2.1 billion, down 6% year-over-year and 2% sequentially, with operating EBIT decreasing due to upstream margin compression [14] Market Data and Key Metrics Changes - Global demand in the packaging market remains steady, with North America experiencing record domestic and export volumes, while Europe contracted [18][19] - The infrastructure sector faces soft market conditions across the U.S., Europe, and China, with mortgage rates in the U.S. remaining above 6% [18][19] Company Strategy and Development Direction - The company is focused on restoring core earnings and positioning for profitable growth, with over $6.5 billion in strategic actions and cash support planned [32][33] - The company is committed to being a low-cost producer, with over 75% of its global cracking capacity in a top-quartile cost position, expected to increase to approximately 80% [29][30] Management's Comments on Operating Environment and Future Outlook - Management noted a cautious operating environment with subdued business investment and consumer spending due to economic uncertainty, but anticipates potential positive influences from recent monetary policy shifts [18][21] - For Q4, the company expects EBITDA to be approximately $725 million, with anticipated headwinds from higher feedstock costs and normal seasonality impacting performance [21][22] Other Important Information - The company has completed significant strategic actions, including a $3 billion partnership for U.S. Gulf Coast infrastructure assets and a $1.4 billion bond issuance for financial flexibility [8][16] - The company is on track to deliver approximately $400 million in targeted cost savings this year, contributing to improved performance [9][10] Q&A Session Summary Question: Reconciliation of Q3 results - Management highlighted higher integrated margins and better-than-expected volume as key factors for exceeding expectations in Q3 [37][39] Question: Rationalization and project cancellations - Management provided insights on global capacity rationalization, particularly in ethylene supply, and noted potential delays in announced capacity in China due to market conditions [44][46] Question: Polyethylene demand - Polyethylene demand has remained stable, with strong performance in packaging and personal care segments, and expectations for continued stability [62][63] Question: Demand function and order books - October order books appear positive, with management maintaining a balanced outlook for Q4 sales and EBITDA guidance [73][75]