3 Chemical Stocks Downgraded at KeyBanc Today

KeyBanc analyst Aleksey Yefremov downgraded three chemical stocks today as he expects commodity margins to start normalizing in 1H22.

Shares of Celanese (NYSE: CE), Olin (NYSE: OLN), and Westlake Chemical (NYSE: WLK) are downgraded to Sector Weight from Overweight.

The analyst doesn’t expect to witness a huge decline in margins, but they should normalize after a sharp move higher to hit record levels last month. Recent levels are seen as “unsustainable."

“We highlight risks in caustic soda, PVC, EDC, acetyls, epoxies, and from: a) improving production at existing capacity in the U.S., following an unprecedented string of unplanned outages; b) a return to a more normal commodity production level in China in 1H22, with evidence of the diminished impact of “dual control” policies in November; and c) increasing risks for demand in construction- driven commodities in China, given a decline in construction activity,” Yefremov said in a client note.

Elsewhere in the coverage, Huntsman (NYSE: HUN) is still seen as a top pick in the chemical coverage while Dupont (NYSE: DD) and Corteva (NYSE: CTVA) offer the most attractive risk-reward ratio.

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