April 6, 2022

Q1 Chemical M&A Deals

Chemical Deal Results

Seems like a slow quarter; lots of deals in Q4 2020 in anticipation of tax changes . . .

http://www.chemicaldeals.com/Results.aspx?searchtext=&quarter=1st+Quarter+2022

April 4, 2022

Trucking Issues

Dow transport index drops nearly 5% on concerns of freight downturn

Index loses more than 771 points as freight issues take it on chin

Mark SolomonFriday, April 1, 2022 3 minutes read

Listen to this article 0:00 / 4:49 BeyondWords

The Dow Jones Transportation Average fell out of bed Friday, dropping nearly 5% in one of the index’s worst single-day performances in recent history.

The 20-stock index fell $771.72 to close the session at $15,511.30. 

J.B. Hunt Transportation Services Inc. (NASDAQ: JBHT) fell more than 9.6%, Landstar System Inc. (NASDAQ: LSTR) declined 7.3%, Norfolk Southern Corp. (NYSE: NSC) dropped 6.79%, and Old Dominion Freight Line Inc. (NASDAQ: ODFL) fell 6.76%. At its low point of the session, about 15 minutes before the 4 p.m. ET close, the index was down by more than $800 from Thursday’s closing price.

Virtually all of the damage came from the freight side of the index. The six airlines making up the index came through relatively unscathed, with Southwest Airlines Co. (NYSE: LUV) actually posting a gain in the session.

The decline came as the Department of Labor reported Friday that the number of truck transportation jobs fell in March after 21 consecutive monthly gains. The seasonally adjusted figures came in at 1,550,800 jobs, a decline of 4,900 jobs and the first month-to-month drop since April 2020, when the U.S. economy was collapsing as the COVID-19 pandemic took hold. There was no company-specific news that could be seen as triggering such an extreme drop.

Equity markets in general shrugged off the decline in the index. The Dow Jones Industrial Average, the Standard & Poor’s 500 Index and the NASDAQ posted gains in volatile intraday trading.

The transport index had rebounded in recent weeks, mirroring a recovery in the overall equity market through most of March after pronounced weakness in January and February. The index hit $16,579 on Jan. 4 before falling for the balance of the month and well into February. The index troughed at $14,523 on Feb. 23, the day before Russia launched its invasion of Ukraine. It reversed course from there, peaking at $16,573 on March 29 before posting three consecutive days of declines.

The index is well below its 52-week closing high of $17,039.38, set last Nov. 2.

The index was created in July 1884 by Charles Dow, and initially consisted of nine railroads and two non-rail companies. The index’s composition at its inception reflected railroads’ dominance in interstate commerce and the industry’s profound importance to the country’s growth.

The index has long been viewed as a leading indicator of the broad market’s direction, mainly because economic demand shows up first in shipping order books. Over the decades, freight recessions have presaged broad economic recessions.

The freight industry, and especially the trucking sector that dominates it, is notoriously cyclical. In an op-ed on Thursday, FreightWaves Founder and CEO Craig Fuller predicted an imminent freight recession. Fuller cited data from FreightWaves’ SONAR platform showing a steep decline in the rate of tender rejections for contract truckload services. The drop of nearly 500 basis points in one month reflects a sharp drop in shipping activity, less demand for carriers’ services and the effective end of carriers calling the shots as to which loads they will accept or reject, Fuller wrote.

The tender rejection rate fell 1.3% during the last week of March alone, historically one of the best periods of the year for carriers, according to SONAR data.

In an op-ed the week before, Fuller predicted a “bloodbath” in the truckload market with demand destruction wiping out many operators that had either entered the market or over-expanded during the last two to three boom years.

Anthony Smith, FreightWaves’ chief economist, said that goods demand will continue to be impacted as consumers shift more of their spending to services such as travel. In addition, there is still a lot of upstream inventory in the hands of manufacturers, wholesalers and distributors, Smith said. Cargo owners that opted to fill up warehouses to keep buffer stock on hand are saddled with more inventory than they need and aren’t eager to ramp up their orders, he added.

Carriers and third-party logistics providers also shoulder some of the blame for growing in a “sloppy manner” over the past couple of years, Smith said. Highly elevated rates during that period “covered up a lot of mistakes that will hit much harder in the next few months,” he said.

The FREIGHTWAVES TOP 500 For-Hire Carriers list includes Transportation Services (No. ), J.B. Hunt (No. 4), Landstar System (No. 6) and Old Dominion Freight Line (No. 9).

April 4, 2022

Trucking Issues

Dow transport index drops nearly 5% on concerns of freight downturn

Index loses more than 771 points as freight issues take it on chin

Mark SolomonFriday, April 1, 2022 3 minutes read

Listen to this article 0:00 / 4:49 BeyondWords

The Dow Jones Transportation Average fell out of bed Friday, dropping nearly 5% in one of the index’s worst single-day performances in recent history.

The 20-stock index fell $771.72 to close the session at $15,511.30. 

J.B. Hunt Transportation Services Inc. (NASDAQ: JBHT) fell more than 9.6%, Landstar System Inc. (NASDAQ: LSTR) declined 7.3%, Norfolk Southern Corp. (NYSE: NSC) dropped 6.79%, and Old Dominion Freight Line Inc. (NASDAQ: ODFL) fell 6.76%. At its low point of the session, about 15 minutes before the 4 p.m. ET close, the index was down by more than $800 from Thursday’s closing price.

Virtually all of the damage came from the freight side of the index. The six airlines making up the index came through relatively unscathed, with Southwest Airlines Co. (NYSE: LUV) actually posting a gain in the session.

The decline came as the Department of Labor reported Friday that the number of truck transportation jobs fell in March after 21 consecutive monthly gains. The seasonally adjusted figures came in at 1,550,800 jobs, a decline of 4,900 jobs and the first month-to-month drop since April 2020, when the U.S. economy was collapsing as the COVID-19 pandemic took hold. There was no company-specific news that could be seen as triggering such an extreme drop.

Equity markets in general shrugged off the decline in the index. The Dow Jones Industrial Average, the Standard & Poor’s 500 Index and the NASDAQ posted gains in volatile intraday trading.

The transport index had rebounded in recent weeks, mirroring a recovery in the overall equity market through most of March after pronounced weakness in January and February. The index hit $16,579 on Jan. 4 before falling for the balance of the month and well into February. The index troughed at $14,523 on Feb. 23, the day before Russia launched its invasion of Ukraine. It reversed course from there, peaking at $16,573 on March 29 before posting three consecutive days of declines.

The index is well below its 52-week closing high of $17,039.38, set last Nov. 2.

The index was created in July 1884 by Charles Dow, and initially consisted of nine railroads and two non-rail companies. The index’s composition at its inception reflected railroads’ dominance in interstate commerce and the industry’s profound importance to the country’s growth.

The index has long been viewed as a leading indicator of the broad market’s direction, mainly because economic demand shows up first in shipping order books. Over the decades, freight recessions have presaged broad economic recessions.

The freight industry, and especially the trucking sector that dominates it, is notoriously cyclical. In an op-ed on Thursday, FreightWaves Founder and CEO Craig Fuller predicted an imminent freight recession. Fuller cited data from FreightWaves’ SONAR platform showing a steep decline in the rate of tender rejections for contract truckload services. The drop of nearly 500 basis points in one month reflects a sharp drop in shipping activity, less demand for carriers’ services and the effective end of carriers calling the shots as to which loads they will accept or reject, Fuller wrote.

The tender rejection rate fell 1.3% during the last week of March alone, historically one of the best periods of the year for carriers, according to SONAR data.

In an op-ed the week before, Fuller predicted a “bloodbath” in the truckload market with demand destruction wiping out many operators that had either entered the market or over-expanded during the last two to three boom years.

Anthony Smith, FreightWaves’ chief economist, said that goods demand will continue to be impacted as consumers shift more of their spending to services such as travel. In addition, there is still a lot of upstream inventory in the hands of manufacturers, wholesalers and distributors, Smith said. Cargo owners that opted to fill up warehouses to keep buffer stock on hand are saddled with more inventory than they need and aren’t eager to ramp up their orders, he added.

Carriers and third-party logistics providers also shoulder some of the blame for growing in a “sloppy manner” over the past couple of years, Smith said. Highly elevated rates during that period “covered up a lot of mistakes that will hit much harder in the next few months,” he said.

The FREIGHTWAVES TOP 500 For-Hire Carriers list includes Transportation Services (No. ), J.B. Hunt (No. 4), Landstar System (No. 6) and Old Dominion Freight Line (No. 9).

April 1, 2022

Wanhua Overview

WANHUA CHEMICAL(600309)SERIES 1：ON THE WAY TO BECOMING A GLOBAL CHEMICAL LEADER DRIVEN BY INNOVATION AND PROJECT INVESTMENT

类别：公司 机构：中国国际金融股份有限公司 研究员：Xiongwei JIA/Qichao ZHAO/Xiaofeng QIU/Di WU/Yaping XIAO/Yilin HOU 日期：2022-03-29

　　Action

    　　We think Wanhua Chemical’s （Wanhua） recent share price correction presents opportunities for investment in the medium and long term. The company has made breakthroughs in technologically challenging production techniques and developed technologies on its own by leveraging its sound innovation system and sustained R&D spending. Meanwhile, Wanhua relies on heavy capex to further expand production capacity of its core products, build an integrated presence in the value chain, and achieve industrialized production of new products. These moves have helped Wanhua continue to expand its scale. We estimate that new projects that the firm has planned to build since end-2021 require capex of more than Rmb80bn. We calculate based on current product prices that these projects may generate revenue of over Rmb140bn after coming online. In our view, Wanhua’s mid- and long-term growth is highly visible thanks to its sustained R&D, innovation, and heavy capex for the coming years. We think Wanhua is on the way to becoming a global chemical leader.

    　　Reasoning

    　　We are not pessimistic about 2022 earnings from methylene diphenyl diisocyanate （MDI） and toluene diisocyanate （TDI）。 Wanhua further expands capacity to increase market share.

    　　No new MDI or TDI facilities are scheduled to start production in 2022 across the globe. We expect MDI and TDI demand to continue to rise amid global economic growth. Europe accounts for 27% and 28% of global MDI and TDI capacity. We think rising natural gas prices in Europe could increase MDI and TDI costs, thus boosting Chinese exports of these two chemicals. Meanwhile, Wanhua’s polyurethane projects had a capacity utilization rate of 100% in 2021, and Covestro’s polyurethane output recovered gradually in 4Q21. We think leading firms have strong capabilities in balancing sales volume and prices.

    　　We are not pessimistic about Wanhua’s 2022 earnings from MDI and TDI. Covestro expects global MDI demand to expand at a 6% CAGR in 2021-2026. We believe global new MDI capacity before 2026 should mainly come from Wanhua. We think Wanhua’s MDI projects in Ningbo and Fujian （2.2mtpa） are likely to come on stream in the coming years. We expect Wanhua to further expand its market share by leveraging its global lead in low cost levels.

    　　Wanhua continues to expand and solidify its petrochemical business to pave the way for building an integrated presence along the value chain. In order to expand its presence to cover the full value chain and generate synergies, the company has built world-class propylene oxide （PO） and acrylic ester （AE） integrated facilities and a 1mtpa ethylene project （including the relevant chemicals）。 Earnings from this ethylene project declined recently due to higher crude oil prices. However, profit from the PO-AE integrated facilities remained decent thanks to favorable supply-demand conditions of acrylic acid and esters. Wanhua’s planned ethylene phase 2 project targets the high-end polyolefin market. The firm’s 400ktpa propylene oxide project and 480ktpa bisphenol A （BPA） project are also designed to produce polyether polyol and polycarbonate, in addition to propylene oxide and BPA. We think these petrochemical projects will likely further expand Wanhua’s coverage along the value chain.

    　　A large number of technologically-challenging industrialization projects on new materials:

    　　In the market for aliphatic diisocyanate （ADI） series products, Wanhua shifted from being a follower to a leader in 2021. Prices of these products increased notably as overseas facilities were hit by force majeure events. We think ADI will likely remain an important earnings source for Wanhua’s new material business.

    　　We expect the firm’s 40,000t nylon 12 project to start production in 2-3Q22, thus helping Wanhua gain a foothold in the nylon 12 market that has long been dominated by foreign firms. Wanhua’s citral and derivatives project is slated to come online in 2023. We think the company’s aromatics business may launch a large number of new products by leveraging its citral product. Wanhua is ahead of peers in pushing for import substitution of POE, and its POE project is now in the industrialization stage.

    　　In addition, the company also expanded its presence in cathode materials for lithium-ion batteries. We believe new-energy materials are likely to become an important growth driver for Wanhua in the next stage of development.

    　　Financials and valuation

    　　We leave our earnings forecasts unchanged. The stock is trading at 10.4x 2022 and 8.3x 2023e P/E. We maintain an OUTPERFORM rating and our TP of Rmb135, offering 73% upside and implying 18.0x 2022e and 14.5x 2023e P/E.

    　　Risks

    　　MDI and TDI prices lower than expected; earnings from petrochemical business decline significantly; progress in new projects slower than forecasted.

http://stock.finance.sina.com.cn/stock/go.php/vReport_Show/kind/search/rptid/701882322876/index.phtml

April 1, 2022

Wanhua Overview

WANHUA CHEMICAL(600309)SERIES 1：ON THE WAY TO BECOMING A GLOBAL CHEMICAL LEADER DRIVEN BY INNOVATION AND PROJECT INVESTMENT

类别：公司 机构：中国国际金融股份有限公司 研究员：Xiongwei JIA/Qichao ZHAO/Xiaofeng QIU/Di WU/Yaping XIAO/Yilin HOU 日期：2022-03-29

　　Action

    　　We think Wanhua Chemical’s （Wanhua） recent share price correction presents opportunities for investment in the medium and long term. The company has made breakthroughs in technologically challenging production techniques and developed technologies on its own by leveraging its sound innovation system and sustained R&D spending. Meanwhile, Wanhua relies on heavy capex to further expand production capacity of its core products, build an integrated presence in the value chain, and achieve industrialized production of new products. These moves have helped Wanhua continue to expand its scale. We estimate that new projects that the firm has planned to build since end-2021 require capex of more than Rmb80bn. We calculate based on current product prices that these projects may generate revenue of over Rmb140bn after coming online. In our view, Wanhua’s mid- and long-term growth is highly visible thanks to its sustained R&D, innovation, and heavy capex for the coming years. We think Wanhua is on the way to becoming a global chemical leader.

    　　Reasoning

    　　We are not pessimistic about 2022 earnings from methylene diphenyl diisocyanate （MDI） and toluene diisocyanate （TDI）。 Wanhua further expands capacity to increase market share.

    　　No new MDI or TDI facilities are scheduled to start production in 2022 across the globe. We expect MDI and TDI demand to continue to rise amid global economic growth. Europe accounts for 27% and 28% of global MDI and TDI capacity. We think rising natural gas prices in Europe could increase MDI and TDI costs, thus boosting Chinese exports of these two chemicals. Meanwhile, Wanhua’s polyurethane projects had a capacity utilization rate of 100% in 2021, and Covestro’s polyurethane output recovered gradually in 4Q21. We think leading firms have strong capabilities in balancing sales volume and prices.

    　　We are not pessimistic about Wanhua’s 2022 earnings from MDI and TDI. Covestro expects global MDI demand to expand at a 6% CAGR in 2021-2026. We believe global new MDI capacity before 2026 should mainly come from Wanhua. We think Wanhua’s MDI projects in Ningbo and Fujian （2.2mtpa） are likely to come on stream in the coming years. We expect Wanhua to further expand its market share by leveraging its global lead in low cost levels.

    　　Wanhua continues to expand and solidify its petrochemical business to pave the way for building an integrated presence along the value chain. In order to expand its presence to cover the full value chain and generate synergies, the company has built world-class propylene oxide （PO） and acrylic ester （AE） integrated facilities and a 1mtpa ethylene project （including the relevant chemicals）。 Earnings from this ethylene project declined recently due to higher crude oil prices. However, profit from the PO-AE integrated facilities remained decent thanks to favorable supply-demand conditions of acrylic acid and esters. Wanhua’s planned ethylene phase 2 project targets the high-end polyolefin market. The firm’s 400ktpa propylene oxide project and 480ktpa bisphenol A （BPA） project are also designed to produce polyether polyol and polycarbonate, in addition to propylene oxide and BPA. We think these petrochemical projects will likely further expand Wanhua’s coverage along the value chain.

    　　A large number of technologically-challenging industrialization projects on new materials:

    　　In the market for aliphatic diisocyanate （ADI） series products, Wanhua shifted from being a follower to a leader in 2021. Prices of these products increased notably as overseas facilities were hit by force majeure events. We think ADI will likely remain an important earnings source for Wanhua’s new material business.

    　　We expect the firm’s 40,000t nylon 12 project to start production in 2-3Q22, thus helping Wanhua gain a foothold in the nylon 12 market that has long been dominated by foreign firms. Wanhua’s citral and derivatives project is slated to come online in 2023. We think the company’s aromatics business may launch a large number of new products by leveraging its citral product. Wanhua is ahead of peers in pushing for import substitution of POE, and its POE project is now in the industrialization stage.

    　　In addition, the company also expanded its presence in cathode materials for lithium-ion batteries. We believe new-energy materials are likely to become an important growth driver for Wanhua in the next stage of development.

    　　Financials and valuation

    　　We leave our earnings forecasts unchanged. The stock is trading at 10.4x 2022 and 8.3x 2023e P/E. We maintain an OUTPERFORM rating and our TP of Rmb135, offering 73% upside and implying 18.0x 2022e and 14.5x 2023e P/E.

    　　Risks

    　　MDI and TDI prices lower than expected; earnings from petrochemical business decline significantly; progress in new projects slower than forecasted.

http://stock.finance.sina.com.cn/stock/go.php/vReport_Show/kind/search/rptid/701882322876/index.phtml