Citi has removed its positive Catalyst Watch on BASF, pointing to a significant decline in Asian chemical spreads in May and to more modest market share progress for the German chemicals company in Europe than had been anticipated. The combination of those developments has reduced Citi's conviction in near-term upside for BASF.
Analyst Sebastian Satz highlighted that Asian spreads fell materially last month, reversing the gains recorded in March and April following the onset of the Middle East conflict. While chemical spreads in Europe and the U.S. posted modest increases over the same period, Citi noted that the Asian reversal "does not bode well for the coming months given Asia's leading role."
For BASF specifically, Citi's updated modelling now points to roughly c1 billion of net pricing across the company's two upstream segments for fiscal year 2026, down from an estimated c1.5 billion in the bank's April projection. The firm's revised base case for BASF stands at c7.2 billion, which incorporates about c400 million of positive net pricing and is broadly in line with consensus expectations.
At Citi's recent European Chemicals Conference, BASF's own comments suggested that market share gains in Europe "have thus far remained more modest than might have been expected," the bank said. That relative underperformance in Europe has led Citi to conclude that its earlier upside scenario - close to c9 billion for the year - is much less likely to materialize.
Despite removing the Catalyst Watch on BASF, Citi still ranks BASF favourably within the European diversified chemicals group alongside peers Arkema and Evonik. The bank also continued to hold a constructive view on U.S. polyethylene producers Dow and LyondellBasell.
Citi attributed part of the stronger positioning for U.S.-based ethylene producers to an elevated oil-to-gas ratio and an ethane feedstock cost advantage that U.S. producers benefit from but which European peers cannot match. That feedstock differential underpins Citi's positive stance on Dow and LyondellBasell in the polyethylene segment.
Takeaway - Citi's removal of the positive Catalyst Watch for BASF reflects recent deterioration in Asian spreads and more muted European market share gains. The bank trimmed BASF's net-pricing estimate for fiscal 2026 and lowered its upside expectations for the year, while remaining constructive on select European diversified chemicals and U.S. polyethylene producers.