Moody's: Upgrading the credit outlook of the chemical industry

Recently, the credit rating agency Moody's Investor Services has raised the credit outlook of the chemical industry in North America and Europe, the Middle East and Africa from negative to stable. Moody's pointed out that the continuous improvement in chemical trading volume and profits in the second quarter is the key to making this change.

Moody's believes that improvements in many downstream industries should provide a better basic market environment for the chemical industry for the rest of 2020. Companies in the industry may have more profitable prospects, and some specialty chemical companies will also perform well. In the second quarter, many general chemical companies, including Dow Chemical, Lyondell Basel and West Lake Chemical, experienced a sharp decline in demand profits, and these companies’ earnings growth will perform strongly, which is beneficial to investors. Specialty chemical companies with high exposure in the consumer and medical terminal markets (including personal protective equipment) will experience a relatively mild rebound, and their performance will perform well even in the trough periods of April and May.

Other industries, including agrochemicals, industrial gases, and coatings, have mixed prospects. Moody's stated that the automotive, aerospace and construction end markets may be lower than before the new crown pneumonia epidemic for some time. Although overall economic activities have improved significantly, they are not expected to return to their pre-epidemic levels in the short term.

As a result, Moody's believes that the overall situation of chemical manufacturers is unlikely to deteriorate further, nor is it likely to improve much. Therefore, it is not appropriate to maintain a negative outlook, nor to further upgrade to a positive outlook. "Although we expect the financial situation of the chemical industry to improve significantly in the third quarter, due to uncertainties about the sustainability of the recovery and the path to return to the level before the covid-19 epidemic, we cannot adjust the credit outlook to a positive one." Said Martin Kohase, vice president and senior credit officer of Moody's.