Europe chem stocks rise but prices fall as fears of long-term downturn take hold
2020-03-31    [Source:ICIS]

    European chemicals stocks and bourses bucked the trend in commodities on Monday after crude fell more than 12% and approached the $20/bbl mark, dragging chemicals prices down.

    Investors are starting to fear the coronavirus pandemic will cause more, and longer, shutdowns than initially expected as western economies battle to contain contagion rates.

    The hit to global manufacturing is expected to be large.

    Some European countries tightened restrictions on people’s mobility over the weekend, with Spain now having joined Italy in shutting most of its manufacturing sectors, bar those considered “critical infrastructure” of which chemicals is included.

    On Monday, crude oil Brent futures for delivery in May traded in the European afternoon at $21.87/bbl, down $3.06/bbl or 12.2% compared with Friday’s (27 March).

    With key end markets for chemicals like automobiles and construction now shut, or at very reduced rates, the main chemicals building blocks continue posting price falls with the second quarter set to be difficult for the industry.

    Naphtha traded on Monday afternoon at $141/tonne, down by 10.8%.

    Benzene and styrene fell and 6.8% and 8%, respectively, to $200/tonne and $400/tonne.

    Shares in major chemicals and fertilizers companies listed in Europe’s Stoxx 600 index fared much better on Monday, however, up nearly 4% in the afternoon.

    BASF, Yara, Brenntag and AkzoNobel all rose by more than 3%.

    Bourses also had a positive day, bar Madrid’s Ibex 35 which fell almost 2% after the extended shutdowns were imposed.

    London’s FTSE 100 was up nearly 1%, Frankfurt’s DAX almost 2% and Paris’ CAC 40 was higher by 0.60%.

    Milan’s FTSE MIB was up 0.30%; the Italian authorities are increasingly confident that after three weeks of quarantine the pandemic is at or near its peak.

    With assumptions for a deep downturn in the second quarter already discounted by analysts and investors alike, attention is turning to the third quarter and whether measures are needed to contain the pandemic over to July.

    “Indeed going forward now, the bad news will come from the real time data and [companies] earnings reports that could in some cases create existential risks. The good news will come from a run of slower new virus case growth numbers and mortality rates around the world,” said equity analysts at Germany’s investment bank Deutsche Bank on Monday.

    “If investors can get some visibility on when western economies can re-open and what the pace of such re-openings will look like, then they are more likely to look through the worst of the upcoming news.”

    While the Chinese authorities are showing more confidence that a return to normality is within reach, other Asian countries are facing increasing coronavirus cases and a lockdown of cities across the region are growing.

    Many citizens among India’s 1.3bn-strong population are already struggling to make ends meet under the 21-day quarantine imposed last week, prompting fears the coronavirus emergency will be compounded by a humanitarian one.

    Asian petrochemicals listed companies fell on Monday.

    Author: Jonathan Lopez

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