U.S. Chemical Industry Exhibits Spike in CDS Spreads

CDS spreads of chemical corporations increased in June 2022. As per the annual meeting of the American Chemistry Council (ACC) last month, the industry continues to face challenges from inflation, supply chain issues and the Ukrainian crisis. The council also addressed the long-term concern of reducing carbon footprint in the energy-intensive chemical sector. Many companies feel the pressure of facing consumer backlash due to emission risks and growing focus on the urgent situation of climate change. In addition to this, ESG assessment is gaining popularity among investment funds. Officials are of the view that if governments offer the right kind of incentives, they can effectively decarbonize and grow their production. Most of the attending companies aim to reach a ‘net-zero’ carbon dioxide emission by 2050. According to Solve’s data, CDS spreads of securities in the IG sector increased between May 31st, 2022, and June 30th, 2022. Mid spreads for AKZANA 5Y (ICI Wilmington, Inc.) increased by 83% from 74 bps to 135 bps; DOW 5Y (Dow Chemical Co.) increased by 73% from 92 bps to 159 bps; EMN 5Y (Eastman Chemical Co.) increased by 66% from 89 bps to 148 bps; and DD 5Y (DuPont de Nemours, Inc.) increased by 60% from 52 bps to 83 bps. CDS spreads in IG sector surged by 71% from 89 bps to 152 bps. The summit concluded with most companies being cautiously optimistic, buoyed by inventory rebuilding, stable demand across end-user industries and a sustained competitive advantage in natural gas-based chemistries. Technological innovations in different sectors are also contributing to the current industrial demand. Data provided by Solve Advisors Inc