The chemical industry's margins are starting to widen from cheaper shale gas produced by hydraulic fracturing, or Fracking. Fracking brought natural gas prices down in the U.S. and also fueled an ethane glut. Ethane can be heated under pressure to synthesize ethylene, a fundamental and widely-used chemical feedstock.
With this in mind, we can check to see if there are any attractively priced chemical companies which would benefit from this secular change.
Fracking Gains
Westlake Chemical (WLK) and LyondellBasell (LYB), the largest producers of ethylene in the United States, are reporting the highest profits ever, with shares going up 66 percent for Westlake and 91 percent for LyondellBasell. These are set to go up as lower production capacity might force prices to go up.
Industrial uses of ethylene include helping flowers to open, manufacturing plastic bags, producing paint removers, and even ripening fruit. Profit margins for the colorless gas
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