Chemical Industry Update (PPG, SHW, VAL, ALB, ASH)
January 05, 2010 9:58 AM
Analysts at Longbow Research have released their monthly report on the chemical industry. According to the report the chemical industry will face rising raw material costs in 2010 after a period of low raw material costs and stable pricing.
Resin prices have been rising throughout 2009 due to the rising feedstock costs, tightening supply and steadying demand according to the report. Apart from these, paint companies such as PPG Industries Inc. (NYSE: PPG), Sherwin-Williams Company (NYSE: SHW) and The Valspar Corporation (NYSE: VAL) have been feeling the squeeze as titanium dioxide producers have been steadily increasing prices throughout the year.
The report mentions that energy costs have been rising steadily and will affect those companies also that have little exposure to raw materials as energy and transportation costs make up an appreciable portion of COGS. Analysts believe that many of the recent strong results in the chemical industry were fueled primarily by lower raw material costs and restructuring. Analysts believe that companies such as Albemarle Corporation (NYSE: ALB), The Valspar Corporation, Ashland Inc. (NYSE: ASH), Ecolab Inc. (NYSE: ECL), FMC Corporation (NYSE: FMC), Sigma-Aldrich Corporation (NASDAQ: SIAL) and Lubrizol Corporation (NYSE: LZ) are positioned to outperform their peers but earnings will remain a risk until volume recovery materializes.
Analysts at Longbow believe that companies with exposure to housing, construction and auto manufacturing are at most risk for underperformance. This includes Spartech Corporation (NYSE: SEH), Ferro Corporation (NYSE: FOE), PolyOne Corporation (NYSE: POL), A. Schulman Inc (NASDAQ: SHLM), H.B.Fuller Company (NYSE: FUL), PPG Industries Inc. and Sherwin-Williams Company.
