U.S. chemical earnings to be pressured by weak industrial demand
Chinese overcapacity squeezes margins, deepens global supply glut
Investors watching cost control, recovery signals in calls
By Katha Kalia
Oct 22 (Reuters) - U.S. chemical companies are likely to post another quarter of subdued earnings as tariffs, weak industrial demand and Chinese overcapacity squeeze margins and sentiment across the sector.
Major producers including LyondellBasell LYB.N, Dow DOW.N, Sherwin-Williams SHW.N, Celanese CE.N and Eastman Chemical EMN.N are expected to post weaker profits after a tough second quarter marked by soft automotive and manufacturing demand.
The commodity chemical producers are facing a cyclical slump now stretching into its 38th month, analysts said.
"We'll continue to see pressures to their earnings in Q3. I don't think there's going to be any relief, any difference based on guidance issued during Q2," said Morningstar analyst Seth Goldstein.
China's swift ramp-up in ethylene production, a key ingredient for plastics, packaging and construction, has deepened a global supply glut, pressuring prices and U.S. and European margins.
In Europe, high energy costs, aging infrastructure and strict environmental rules have piled pressure on its petrochemicals sector, which depends on imported feedstocks, leading to several plant closures following years of losses.
RBC Capital Markets analyst Arun Viswanathan said demand in the commodity chemicals sector has remained "somewhat tepid" through the third quarter, with Dow and Eastman projecting earnings below previous guidance midpoints.
Muted building and construction activity, combined with ongoing tariff uncertainty, has kept near-term volumes under pressure, although some improvement could come near term, he added.
U.S. tariffs of at least 15% on European goods have further dampened demand from key consumers including automakers, machinery and consumer goods producers.
Carlyle's CG.O recent deal to buy BASF's BASFn.DE coatings business highlights continued portfolio reshuffling amid industry headwinds.
Investors will watch earnings calls for signals on cost control, recovery prospects and demand trends as trade and geopolitical pressures persist.
Dow reports on October 23, followed by LyondellBasell on October 31 and Eastman Chemical on November 3.
Chemical companies expected to report lower Q3 earnings https://reut.rs/4nUEPhy
Share movement for chemical companies https://tmsnrt.rs/42TUvt8
(Reporting by Katha Kalia in Bengaluru; Editing by Shailesh Kuber)
((Katha.Kalia@thomsonreuters.com;))