NEW YORK (TheStreet) -- Companies across sectors are feeling the effects of oil dropping to record lows -- with some stocks experiencing bounces while others are not faring as well. Chemicals companies are among those that stand to gain -- and lose -- the most.
Morgan Stanley (MS) research analysts took a deep dive across the firm's entire North America coverage universe to assess how "a sustained period of lower oil prices" would affect various sectors and stocks.
The Dec. 22 report "highlights stocks for which the effect would be most beneficial, or most challenging," it said. The analysts identified more than 30 industries in which "an extended period of low energy prices would have a material effect," and more than 120 stocks where the effects would be either "especially favorable or unfavorable."
Chemicals companies that are set to benefit include those that manufacture products such as industrial coatings, adhesives, alcohols, fibers, and solvents, the report said.
"Crude derivatives like propylene are a key raw material for paint and coatings companies," the report said. "Propylene derivatives are present in industrial products like adhesives, coatings, floor tiles, and polyurethanes. Depending on the specialty nature of the downstream product, consumers of propylene may be able to keep pricing elevated, while benefitting from reduced input costs. Propylene prices typically follow crude oil prices and we expect coatings companies in particular to maintain price despite lower COGS."
On the other hand, petrochemicals companies where "profitability is a function of the individual position on the global cost curve" could be challenged, the report said. "Crude oil derivative producers (Europe & Asia) have been on the high end of the cost curve for a number of years, whereas the shale gas expansion in the U.S. has moved U.S. producers to the low end of the curve (just above the Middle East). Therefore, as oil prices decline, the U.S.'s advantaged cost position deteriorates."
Click through to see which chemicals stocks made Morgan Stanley's list as either materially benefitting or being challenged.