美股制药行业：OLN ECN的复兴

www.ubs.com/investmentresearch This report has been prepared by UBS Securities LLC. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES, including information on the Quantitative Research Review published by UBS, begin on page 19. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.  Global Research 9 July 2021 North American Chemicals OLN ECU Renaissance – Alone in WLK CAV World Olin Electro-Chemical Unit strategy contrasts Westlake Chlor-Alkali-Vinyls OLN & WLK have been viewed as nearest peers, but they are pursuing very different strategies. We earlier highlighted a trend towards CAV over ECU (“The ECU is Dead, Long Live the ECU”). This report updates that debate in light of recent events, to show how an ECU strategy (e.g. OLN) may succeed alongside CAV leaders like WLK. Chlorine (CL2) is the key to an ECU strategy (which produces chlorine & caustic in roughly equal amounts). Vinyls (largest chlorine derivative) & ethylene (~2/3rds of vinyl economics) are key to a CAV strategy. OLN is only a few quarters into a new strategy, under a new CEO, to optimize its ECU flexibility. WLK just announced a major deal, under a long-term management team, to further optimize its Chlor-Vinyls vertical integration. WLK deals for Boral bldg. prod. & Lotte ethylene book-end CAV integration The $2.15B Boral deal will make WLK #1 in N. Am. Vinyl Building prod. (pipe, window frames, etc. – 37% of proforma sales). WLK is fully back-integrated into CL2 & ethylene to make vinyl. WLK is the only N. Am. Ethylene producer with a tax advantaged MLP, & all of WLK’s ethylene is low-cost ethane-based (incl. 50% interest in Lotte JV). WLK also produces ethylene derivs polyethylene & styrene (18% of PF sales combined). OLN ECU value from ~$200/ton to $1,000+/ton highlight mix upgrade potential While vinyl is the largest industry-wide use of Cl2 (~35%), it’s only ~22% of OLN use (& half as much of ECU incl. caustic). Olin has 50%+ share of N.Am. merchant chlorine mkt. (which is regional, as elemental Cl2 is hard to ship). OLN has legacy contracts with several customers at lower end of ECU realizations, & plans to reduce output if prices don’t rise. OLN has already reduced vol. with ~200 smaller customers to raise price, announced plant closures, & believes ~$1000/ton is ECU reinvestment value. Coproduct/Byproduct/Waste product caustic soda (alkali) links the strategies Coproduct economics are complex, & exist for refineries, naphtha crackers, etc. Values of CL2 & caustic have each gone negative in the past when producers attempt to maximize the other side of the ECU. OLN’s new strategy is to minimize the weaker side of the ECU, rather than max. the stronger side. Currently that means minimizing caustic (constraini