KeyBanc Capital Markets has revised its stance across the chemicals sector in response to disruptions linked to the Iran conflict, promoting Dow and LyondellBasell to Overweight and downgrading Avient to Sector Weight.
Analyst Aleksey Yefremov wrote that, although developments remain unsettled, the firm views the conflict as a net positive for U.S. petrochemicals. He noted that rising crude prices are elevating the global cost curve and contributing to tighter supply conditions.
KeyBanc estimates that roughly 11-15% of global ethylene and polyethylene capacity is directly affected by the conflict. Those disruptions, combined with already low inventories, are anticipated to push global utilisation into the mid-to-high 80% range.
The firm expects at least several quarters of global petrochemical tightness before incremental supply can meaningfully alleviate the shortage. KeyBanc highlighted Europe’s continued heavy reliance on imports as a factor that could prolong constrained market conditions.
Within the coverage universe, KeyBanc sees Dow and LyondellBasell as the primary beneficiaries of the current environment. Yefremov singled out LyondellBasell as relatively better positioned because it has fewer assets in the Persian Gulf and has MTBE exposure that may be advantageous amid the disruption.
As a result of the revised outlook, KeyBanc raised its estimates for both Dow and LyondellBasell, pointing to stronger prospects for key product streams including ethylene, propylene, polyethylene and MTBE.
On pricing, KeyBanc said U.S. polyethylene could gain about $0.10 per pound in the coming months, with optionality for larger increases at $0.15 per pound or more if supply chains continue to run thin. The firm noted that spot export prices have already climbed in the range of $0.12 to $0.15 per pound.
Conversely, Avient was downgraded because of mounting raw material cost pressure and demand risks related to inflation. KeyBanc left Westlake at Sector Weight, citing partial offsets from higher housing-related activity, and identified limited upside for Celanese tied to a tightening methanol market.
Clear summary: KeyBanc adjusted ratings in the chemicals sector after Iran-related disruptions tightened global petrochemical supply, upgrading Dow and LyondellBasell and downgrading Avient while forecasting several quarters of elevated utilisation and upward pressure on polyethylene prices.
Analyst commentary: Yefremov emphasized the positive catalytic effect for U.S. petrochemicals, the role of rising crude in lifting the global cost curve, and the potential for extended market tightness.