We recently compiled a list of the 8 Best Plastics Stocks To Invest In Now. In this article, we are going to take a look at where LyondellBasell Industries N.V. (NYSE:LYB) stands against the other plastics stocks.
Key Trends and Challenges Facing the Plastics Industry
The importance of plastics in modern society cannot be overstated. They play a vital role in various industries, including automotive, construction, food and beverage, and healthcare. Plastics are lightweight, durable, and versatile, making them essential for the production of a wide array of products that enhance our daily lives.
Additionally, the plastics industry plays a crucial role in the global economy, contributing significantly to job creation and innovation. According to the Plastics Industry Association’s 2024 Size and Impact Report, the US plastics sector alone accounted for over 1 million jobs and generated $519.1 billion in shipments in 2023. This sector has shown resilience, with plastics manufacturing employment growing at a rate of 1.1% annually from 2013 to 2023, outpacing the overall manufacturing growth of 0.7% during the same period.
Recent trends indicate a strong push towards sustainability within the plastics sector. Companies are increasingly investing in recycling technologies and circular economy initiatives to reduce waste and improve environmental outcomes. According to a report by The Business Research Company, the global plastic recycling market was valued at $41.71 billion in 2023. The market is expected to expand at a compound annual growth rate (CAGR) of 8.1% during 2024-2028 to reach a value of $61.56 billion by the end of the forecast period.
According to the United Nations Environment Programme (UNEP), the production of plastic has been increasing rapidly since the 1970s, outpacing the growth of any other material. Global plastic production could reach 1,100 million tonnes by 2050. A significant portion of this plastic, around 36%, is used for packaging, including single-use items like food and beverage containers. Unfortunately, about 85% of these single-use plastics end up in landfills or as unmanaged waste, contributing to a growing environmental crisis.
Demand for plastics is expected to remain high in the coming years. While limiting plastic production may seem beneficial for the environment, it could lead to unintended negative consequences for economies worldwide, particularly affecting those in developing regions that rely on affordable plastic products.
The plastics industry is not only vital for economic stability but also plays a crucial role in addressing modern sustainability challenges. With ongoing investments in recycling and innovation, the plastics industry is expected to continue to thrive while adapting to changing consumer preferences and regulatory landscapes.
Our Methodology
To compile our list of the 8 best plastics stocks to invest in now, we looked for the largest plastics companies. We also reviewed our own rankings and consulted various online resources to compile a list of the best plastics stocks.
From an initial pool of more than 20 plastics stocks, we focused on the top 8 stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s Q3 2024 database of 900 elite hedge funds. The 8 best plastics stocks to invest in now are ranked in ascending order based on the number of hedge funds holding stakes in them as of Q3 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Is LyondellBasell Industries N.V. (LYB) The Best Plastics Stock To Invest In Now?
A factory worker monitoring a conveyor belt of specialty chemicals being produced.
LyondellBasell Industries N.V. (NYSE:LYB) is an American multinational chemical company that produces and sells plastics, petrochemicals, and basic chemicals. The company’s products are used in many industries, including automotive, construction, and food packaging. LyondellBasell Industries N.V. (NYSE:LYB) is one of the world’s largest producers of polymers.
In September 2024, the company began constructing its MoReTec-1 facility in Wesseling, Germany. This plant will utilize the company’s proprietary advanced recycling technology to produce 50,000 metric tons of recycled feedstocks annually from hard-to-recycle plastic waste. The European Union has recognized this initiative with a €40 million grant, highlighting LyondellBasell’s (NYSE:LYB) commitment to sustainable practices. The facility, designed to achieve high plastic-to-plastic yields, is expected to start operations in 2026 and will significantly reduce the carbon footprint compared to traditional fossil-based feedstocks.
The company’s financial performance remains strong, with a reported EBITDA of $1.2 billion in the third quarter of 2024. In North America, integrated polyethylene margins have improved due to favorable raw material costs and increased polyethylene prices. Year-to-date demand for polyethylene and polypropylene has risen by over 7% and 4% year-over-year, respectively.
LyondellBasell Industries N.V. (NYSE:LYB) is exiting the refining business, with plans to shut down its Houston refinery by the end of the first quarter of 2025. This decision is part of a strategy to move away from a business that has been unstable and offers low-profit margins. The company aims to redirect its efforts towards creating sustainable value. As of the end of the third quarter in 2024, LyondellBasell (NYSE:LYB) reported having $2.6 billion in cash and short-term investments, along with $7.3 billion in available liquidity. This strong financial position supports their investment-grade balance sheet, allowing them to focus on future growth opportunities.
The combination of innovative recycling technology, strong financials, and a clear focus on sustainability positions LyondellBasell Industries N.V. (NYSE:LYB) as an attractive investment opportunity in the plastics sector.
Overall, LYB ranks 4th on our list of the best plastics stocks to invest in now. While we acknowledge the potential of LYB as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than LYB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
