Deutsche Bank
Markets Research
North America
United States
Industrials
Chemicals/Commodity
Periodical
Railcar &
PetroChemical
Update
Date
18 September 2017
US Chemical Shipments -3.1%.
Ethane down 1 c/gal to 25 c/gal
Railcar loadings 4-week moving average -3.1%. Weekly loadings up 3.3%
________________________________________________________________________________________________________________
Deutsche Bank Securities Inc.
Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should
be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should
consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST
CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 083/04/2017.
David Begleiter
Research Analyst
(+1) 212 250-5473
david.begleiter@db
Katherine Griffin
Research Associate
(+1) 212 250-7265
katherine-a.griffin@db
David Huang
Research Associate
(+1) 904 520-5307
david-a.huang@db
Top picks
Ashland (ASH.N),USD64.02 Buy
Eastman Chemical (EMN.N),USD84.96 Buy
Trinseo (TSE.N),USD68.00 Buy
Source: Deutsche Bank
Weekly Price Performance
-8.00%-3.00%2.00%
ECLMON
DDTSE
EMNWLKP
OLNCBT
S&PCOMPPX
CCAXTA
HUNCMP
SHWGRA
KROPPG
XLBFMC
OMNLYB
CEFUL
POTASH
APDMOS
FOEALB
DOW
Source: Factset, Deutsche Bank
We maintain our equal-weight stance on
the sector
Within the chemicals sector, our top ideas
are Eastman Chemical (EMN, $84.96, Buy,
TP $95), Trinseo (TSE, $68.00, Buy, TP
$74) and Ashland (ASH, $64.02, Buy, TP
$75).
The 4-week moving avg of chemical railcar loadings decreased 3.1% in Week
#37 (ended 09/09/2017) vs. a 2.9% decrease the prior week. Loadings YTD are
up 0.25%. Chemical railcar loadings represent 20% of total US chemical
shipment tonnage (followed by trucks, barges, and pipelines), offering a trend
of broader chemical industry activity and demand. The more volatile measure
of weekly loadings increased 3.3% YoY (versus a 21.3% decrease in the prior
week) and increased 16.1% sequentially (vs. a 20.8% decrease in the prior
week).
Ethane prices down 1 c/gal to 25 c/gal. Propane up 4.5 c/gal to 87.5 c/gal
Ethane prices were down 1 c/gal last week to 25 c/gal (vs its fuel value of 20
c/gal). While US ethane supply/demand (s/d) fundamentals remain loose,
ethane rejection, which peaked at 500-600k bpd in 1H16, has declined
following the September ˉ16 start-up of Enterprise Products 200k bpd ethane
export facility in Houston. Starting in Q4ˉ17, we expect US ethane s/d
fundamentals to tighten further, driven by 600k bpd of new demand from the
start-up of 8 greenfield ethylene crackers in ˉ17-ˉ19. As the market tightens,
we expect ethane to trade toward its historical premium of ~10c/gal vs its fu
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