RE:RE:RE:Scotia commentKherson wrote: GregC24 wrote: incomedreamer11 wrote:
(Relatively) Recession Resilient - Upgrading to Outperform
OUR TAKE: Positive. We have upgraded CHE to Outperform, as we believe the business model can outperform its basic chemical peers through a recession, at least on a relative basis. Our revised PT moves to $10.25 from $9.50.
Inside Our Note
How is that possible? Kherson said that the Q1 guidance had already accounted for the current caustic soda price? Was he lying? Uninformed? Or both?
Greg, you really need to educate yourself on the difference between spot prices for Caustic and long term contracts for Caustic! The following is a good exercise for you and your minions, what percentage of Chemtrade's caustic sales are under long term contracts?
Just maybe Chemtrade is planning on yet another Equity or Debenture Issue (it's been over 6 months) and a little positive support from an Underwriter certainly would help?
Too funny!
Kherson
Let's examine this. One would assume that the CEO of Chemtrade knows if the spot price impacts what Chemtrade makes from quarter to quarter.
Q1 2020 Conference call: For the co-product caustic soda, we had assumed that the
NE Asia spot index for caustic soda, which is a key determinant of our pricing, would be flat for the first half of 2020 from where it ended in 2019 and increase by about 15% over the second half of 2020.
Q2 2020 Conference Call: The other change is our assumption regarding the price of our caustic soda. We now assume that
the NE Asia spot index for caustic that is instrumental in establishing our selling price for the second half of 2020, will be about US$40 lower than we assumed at the end of the last quarter. For the whole year, we expect that the NE Asia average spot price for caustic soda will be about US$60 lower than what we saw in 2019. As
many of you know, our pricing is affected by movements of the NE Asia index. This index can move quite quickly and is often quite volatile.
Q3 2020 Conference Call: The main exception is pricing for caustic soda.
The Northeast Asia spot index for caustic soda, which is very influential on our caustic soda selling price, settled at a very low level towards the end of the third quarter. It was approximately US$50.0 per tonne below the level relative to the same period in 2019.
Q1 2022 Conference Call: Now this is interesting as it is the forecast that Kherson referred to that started this conversation. "They already built the increased price into their forecast" or something along those lines.
Notably, we now forecast that
the average Northeast Asia spot price for caustic soda, that will be a key determinant for our realized selling price in 2022, will be US $575 per ton, which is US $285 per ton higher than in 2021. This is US $135 per ton
higher than our previous assumption.
If they have long term contracts, why would the spot price be a key determinant for their realized selling price in 2022? Wouldn't it be set? If they were long term contracts how could their prior assumption be wrong by $135? Wouldn't long term contracts mean price certainty? How can this be?
Q4 2021 Conference Call: The
Key assumptions driving that outlook are in our M, D&A and shown on the slide: I will not read these out for you but will
remind you that our caustic soda price, which is affected by but not equal to the NE Asia spot index, generally lags the Northeast Asia spot index by a quarter. Key assumptions are driven by the spot index? What? Kherson said that wasn't true? What is going on????????
Q4 2021 Q&A period: Scott Rook, President & Chief Executive Officer regarding caustic price guidance:
Well, so I would say the
caustic pricing over the past four to five years has been a very difficult product to forecast pricing for, and especially when you're looking at a spot price. We saw a rapid run up in the second half of last year in caustic prices. Quite a bit of that was possibly coming from restrictions that were in place in China.
Where we sit right now today, it's possible that the guidance looks a little conservative, but
where it's going to be 60 days or 90 days, that's really hard to say. Where it's going to be in 60 to 90 days is hard to say? Huh? Kherson said you have long term contracts? How could price changes in 60 to 90 days even be a part of the conversation?