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4 Chemical Stocks Set to Pull Off a Beat This Earnings Season

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Chemical companies’ third-quarter results are expected to reflect the upturn in demand across major end-use industries from the coronavirus lows. The chemical industry faced the heat from a significant downturn in demand during the first half of 2020 as lockdowns and travel restrictions amid the pandemic brought global economic activities to a near-standstill. However, with the reopening of the major economies around the world, demand for chemicals started to pick up from the third quarter last year on a rebound in economic activities worldwide. The recovery continued to gain steam this year on an upswing in global industrial activities. Chemical companies are seeing a strong rebound in demand in key end-use markets including automotive, construction and electronics. Strong demand in automotive and construction, the two major chemical-consuming markets, is likely to have driven their volumes and top lines in the third quarter. The automotive industry has witnessed a speedy recovery after the virus-led slump on the back of strong pent-up demand. Despite the semiconductor crunch, chemical makers are enjoying healthy demand from the automotive market. The construction sector has also recovered on the restart of projects that were stalled earlier partly due to supply chain disruptions. Strength is being witnessed in residential construction globally, supported by lower interest rates and higher demand for new properties due to the rising trend of work from home. Companies in the chemical space are also expected to have benefited, in the third quarter, from higher demand for chemicals and materials across healthcare and packaging markets, thanks to coronavirus. However, chemical companies’ third-quarter results are expected to reflect the impacts of raw material cost inflation as well as higher supply chain and logistics costs. Supply chain disruptions due to coronavirus and weather-related events have led to a spike in raw material costs. Supply tightness continues for a number of key raw materials, including several resins, natural gas, propylene, butadiene and glass fiber. The lingering impacts of supply chain and logistic bottlenecks, exacerbated by the recent unfavorable weather events globally and the resurgence of coronavirus infections, are expected to be reflected in the September quarter. Hurricane Ida dealt another blow to the supply chain. Force majeures and plant shutdowns associated with Ida are expected to have further squeezed the supply of raw materials........

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