Oil Plunge Hits Chemicals

The new year hasn’t brought a halt to oil’s months-long price slide or to U.S. chemical makers’ concerns about profitability. Undermined by the expectation of falling chemical prices, stock prices at Westlake Chemical, LyondellBasell Industries, and Huntsman Corp. are down 43%, 35%, and 23%, respectively, from the highs they reached last September. Goldman Sachs analyst Robert Koort lowered his earnings estimates for Westlake, Lyondell, and Dow Chemical by about 20% last week. Huntsman CEO Peter R. Huntsman recently tried to assure shareholders they would benefit in the long term from lower oil prices. “We expect our margins to improve as the cost of our raw materials decreases,” he said, adding that Huntsman would profit from more spending by consumers benefiting from lower gasoline prices. Cowen & Co. stock analyst Charles Neivert said chemical shares probably have fallen more than they should. “We would remain cautious on our most oil-sensitive shares so long as oil prices are trending lower,” he wrote in a research note. “However, we believe the shares in our space have declined by more than their earnings will ultimately justify.”