S&P Global – Chemicals Credit Outlook, 2024

The report by the S&P Global - Chemicals Credit Outlook for 2024 highlights several key points. Firstly, it states that the petrochemical industry will remain in a cyclical downturn for a longer period than expected, with supply and demand challenges continuing throughout 2024. The recovery in the sector is now projected to occur in mid-2024. Factors such as macroeconomic uncertainty, a slowdown in China, weak demand, and pricing pressure will persist, although they are expected to lessen to some extent in 2024. Another significant factor mentioned is the deepening impact of destocking in the chemical industry. Buyers have relied on existing inventory for longer than anticipated, resulting in lower-than-expected chemical volumes sold in the previous year. The report also makes key assumptions for 2024. It forecasts a slight slowdown in global economic growth, with the global GDP projected to grow at a rate of 2.8% compared to 3.3% in 2023. This is attributed to slower growth in the U.S. and Asia-Pacific regions. Additionally, profitability is expected to drag in 2024, with U.S. producers trailing Middle Eastern counterparts but outperforming those in Europe and Asia-Pacific. Furthermore, fertilizer prices are predicted to remain broadly stable due to affordability normalization, limited capacity additions, and reduced Chinese exports. The risks associated with the baseline scenario are also mentioned. Poor growth could halt or reverse the recovery in credit metrics in 2024, and destocking and recessionary conditions may negatively impact demand in key markets. There is also a warning about rising interest rates making debt market access and affordability difficult for speculative-grade credits. Lastly, the outlook for European petrochemicals is bearish beyond 2024, necessitating capacity rationalization and improved competitiveness through the rebalancing of older, less efficient plants.