Mono propylene glycol (MPG)

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Discover the factors influencing mono propylene glycol (MPG) markets

Commonly used in unsaturated polyester resins (UPR) and coatings, antifreeze and de-icing applications on an industrial scale, mono propylene glycol (MPG) demand responds to activity levels in the construction, aviation and automotive sectors. The MPG USP grade is used in pharmaceutical, cosmetics and other consumer related applications. Seasonal factors and consumer trends can also cause noticeable market movements – as can upstream fluctuations in feedstocks and crude oil. This level of volatility highlights the importance of accurate and timely information. The most success comes from informed decision-making.

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Saudi Aramco eyes further chemical investments in China with local partners

SINGAPORE (ICIS)–China has a "vitally important" place in Saudi Aramco's global investment strategy, with the energy giant actively developing additional investment opportunities with its Chinese partners in the chemicals sector, Aramco president and CEO Amin Nasser said. The global oil major’s strategic goals in chemicals are “well-aligned” with China’s, he said in a keynote speech at the China Development Forum in Beijing on 25 March, noting that the country “is already a powerhouse representing 40% of global [chemical] sales”. Aramco, through its chemicals arm SABIC, is planning to increase its liquids-to-chemicals throughput to 4m barrels per day by 2030, Nasser said. Saudi Aramco accelerated its push into China’s refining and petrochemical sector last year with strategic investments that are aligned with Saudi Arabia's Vision 2030 diversification goals. This includes the 10% stake acquisition in Rongsheng Petrochemical Co for $3.4bn last year. Saudi Aramco, together with Chinese partners Norinco Group and Panjin Xincheng Industrial Group (PXIG), is also building a 300,000 bbl/day refining and ethylene-based steam cracking complex in Panjin City, in northeast China's Liaoning province at a cost of around $12bn. The Liaoning project is expected to come online in 2026. “We are also pleased that SABIC’s partnership in Fujian is on-track to commence construction of a major chemicals facility at an estimated cost of $6.4 billion,” Nasser said. The Fujian complex will include a mixed-feed steam cracker with up to 1.8m tonne/year ethylene (C2) capacity and various downstream units producing ethylene glycols (EG), polyethylene (PE), polypropylene (PP) and polycarbonate (PC), among other products. SABIC’s other major investments in China include three compounding plants in Shanghai, Guangzhou and Chongqing; a joint venture with Sinopec in Tianjin; a technology centre in Shanghai and a customer centre office in Guangzhou. SUSTAINABLE DEVELOPMENT Demand for lower greenhouse gas emissions (GHG) materials – especially advanced composites and non-metallics in general – is growing rapidly, Nasser noted. Aramco’s research efforts in developing GHG materials are consistent with Chinese President Xi Jinping’s stance that sustainable development is the “golden key” for future success, he said. “We agree with China’s pragmatic and prudent approach to energy transition…I believe there are wide-ranging opportunities to jointly develop advanced GHG emission reduction technologies.” China has distinct strengths in renewables and critical materials, while Aramco and Saudi Arabia have a clear interest in solar, wind, hydrogen, and electro fuels, Nasser said. “These areas have great long-term potential, and combining our strengths could match our ambitions,” he added. Focus article by Nurluqman Suratman

26-Mar-2024

Dow, ExxonMobil among chems picked in US $6 billion CO2 cutting program

HOUSTON (ICIS)–A $6 billion industrial decarbonization program by the US will fund many chemical projects being developed by Dow, ExxonMobil and other companies, featuring projects as diverse as using carbon dioxide (CO2) as a feedstock, recycling plastic and burning hydrogen as a fuel, the Department of Energy (DOE) said on Monday. The following describes the seven chemical projects chosen by the US. ExxonMobil is developing the Baytown Olefins Plant Carbon Reduction Project in Texas. The project will use new burner technologies to combust hydrogen instead of natural gas for ethylene production. The project should cut more 2.5 million tonnes/year of carbon emissions, or more than 50% of the cracker's total emissions. The project will receive up to $331.9 million from the government. A subsidiary of Orsted plans to build a 300,000 tonne/year e-methanol plant on the Gulf Coast in Texas. The subsidiary, Orsted P2X US Holding, expects the e-methanol will be used as fuel for marine shipping and transportation. E-methanol is made with CO2 with green hydrogen. Orsted is already developing such a project in Sweden. The Texas project will receive up to $100 million from the government. BASF plans to develop a project in Freeport, Texas, that will convert liquid byproducts into synthesis gas (syngas) using plasma gasification and renewable power. Syngas is a mixture of hydrogen and carbon monoxide (CO). BASF will use the syngas as feedstock for its operations in Freeport. The project will receive up to $75 million from the government. LanzaTech and T.EN Stone & Webster Process Technology plan to develop a project on the US Gulf Coast that will capture CO2 emissions from crackers. It will then use green hydrogen and a biotech-based process to convert the captured CO2 into ethanol and ethylene. LanzaTech has developed strains of bacteria that ferment CO2 using hydrogen as an energy source. The name of the project is Sustainable Ethylene from CO2 Utilization with Renewable Energy (SECURE), and it will receive up to $200 million from the government. Ashland's subsidiary, ISP Chemicals, plans to replace natural gas boilers with electric heat delivered by a thermal battery at its plant in Calvert City, Kentucky. Other partners in the project include the Tennessee Valley Authority (TVA) and Electrified Thermal Solutions (ETS), which is supplying its Joule Hive system. The project will receive up to $35.2 million from the government. Dow's project will be developed on the US Gulf Coast and it will capture up to 100,000 tonnes/year of CO2 from ethylene oxide (EO) production. The project will then use the CO2 to produce chemicals used in electrolyte solutions to make domestic lithium-ion batteries. The project will receive up to $95 million from the government. Eastman is building a chemical recycling plant in Longview, Texas, that will use its methanolysis technology to break down waste polyethylene terephthalate (PET) into dimethyl terephthalate (DMT) and monoethylene glycol (MEG). The plant plans to use thermal energy storage combined with on-site solar power to reduce the carbon intensity of its process heating operations. It will receive up to $375 million from the government. DETAILS ABOUT THE US PROGRAMThe US expects the program will cut more than 14 million tonnes/year of emissions of CO2 from 33 projects. On average, each of the projects will cut carbon emissions by 77%. Out of the $6 billion, $489 million will come from the Bipartisan Infrastructure Law, and $5.47 billion will come from the Inflation Reduction Act (IRA). The fund will target the following: Seven chemical and refining projects. Six cement and concrete projects. Six iron and steel projects. Five aluminium and metals projects. Three food and beverage projects. Three glass projects. Two process heat-focused projects. One pulp and paper project.

25-Mar-2024

AFPM '24: INSIGHT: New US auto emission rule to boost plastic demand, squeeze refiners

HOUSTON (ICIS)–The new greenhouse gas restrictions that the US imposed on automobiles will speed up the adoption of electric vehicles (EVs), which will have several knock-on effects on plastics, lubricants and chemicals produced by refineries. Under the new greenhouse gas standards, EVs and plug-in electric vehicles (PHEVs) will make up a growing share of the nation's light automobile fleet at the expense of internal combustion engines (ICEs). EVs and PHEVs consume larger amounts of plastics on a per-capita basis than autos powered by ICEs. If the prevalence of ICE-powered vehicles declines as forecast by the US, then that would lower demand for fuel, discouraging refiners from expanding or making expensive investments on their units. That could lower production of aromatics and other refined products. DETAILS OF NEW EPA TAILPIPE RULEThe new rule requires the US light vehicle fleet to emit progressively smaller amounts of carbon dioxide (CO2), as shown in the following table. Figures are listed in grams of CO2 emitted per mile driven. 2026 2027 2028 2029 2030 2031 2032 Cars 131 139 125 112 99 86 73 Trucks 184 184 165 146 128 109 90 Total Fleet 168 170 153 136 119 102 85 Source: EPA The US will have to greatly increase its reliance on EVs to meet such standards, according to the EPA. The regulator forecasts what its new rule will entail for the makeup of the US light vehicle fleet. It presented three scenarios that make different assumptions about the share of EVs, PHEVs, hybrids and autos powered by ICEs. Hybrid vehicles rely predominantly on ICEs, while PHEVs rely predominantly on batteries, which is why they need to be plugged in to recharge. The following charts show the three scenarios. Scenario A 2027 2028 2029 2030 2031 2032 ICE 64% 58% 49% 43% 35% 29% Hybrid 4% 5% 5% 4% 3% 3% PHEV 6% 6% 8% 9% 11% 13% EV 26% 31% 39% 44% 51% 56% Source: EPA Scenario B 2027 2028 2029 2030 2031 2032 ICE 62% 56% 49% 39% 28% 21% Hybrid 4% 4% 3% 6% 7% 6% PHEV 10% 12% 15% 18% 24% 29% EV 24% 29% 33% 37% 41% 43% Source: EPA Scenario C 2027 2028 2029 2030 2031 2032 ICE 61% 41% 35% 27% 19% 17% Hybrid 4% 15% 13% 16% 15% 13% PHEV 10% 17% 22% 27% 32% 36% EV 24% 26% 30% 31% 34% 35% Source: EPA IMPACT ON PLASTICSEVs and hybrids typically consume more plastics than ICEs, according to Kevin Swift, ICIS senior economist for global chemicals. Swift compared two automobile models that their manufacturers offered in ICE, hybrid and EV versions. The following chart shows how plastics consumption fared across the three versions. Not only do EVs tend to consume more plastics, they impose different challenges on the materials. Because EVs need to be recharged, their systems are running even when the vehicles are stationary. Materials must have the durability to maintain their properties after several thousands of additional hours of use. The wires and cables within EVs generate heat through electrical resistance, so materials need to manage heat. Materials used in battery packs and the charging equipment need to have flame retardancy to prevent thermal runaway. Some materials must withstand high voltages from fast charging times, while others need to shield sensors and other electrical components from electro-magnetic interference (EMI) and radio frequency interference (RFI). As EV production grows, demand for these materials will increase. IMPACT ON BASE OILSIf the EPA's forecasts come true, then demand for base oils used in engine lubricants will decline. EVs lack ICEs so they do not use motor oil. However, EVs still have moving parts so they will require greases and lubricants. A more lucrative opportunity may lie in thermal management fluids. Petroleum-based thermal management fluids avoid the problems that come with using water-based cooling fluids like glycols in electric vehicles. In time, EVs could manage heat by relying on direct immersion cooling. Here the battery, the inverter and the motor are submerged in a bath of thermal management fluids. The base stocks that would be used in thermal management fluids will be a combination of polyalphaolefins (PAOs), esters and polyaklylene glycols (PAGS). IMPACT ON AROMATICSA faster adoption of EVs could speed up the arrival of peak oil demand. Figures from the US Energy Information Administration (EIA) show that gasoline demand in the country peaked in 2018. That peak was barely higher than the previous record set in 2007. Refiners are not going to add new capacity or make expensive investments if demand for their primary products have stagnated. As their units age or suffer damage from fires and other accidents, refiners could choose to shut operations or convert their complexes to produce renewable fuels or other sustainable products. The consequences would cause production to stagnate or even decline for benzene, toluene and xylenes (BTX), chemical building blocks that are primarily produced in refineries in the US. Downstream consumers of these chemicals will have to consider imports if they wish to maintain their operations. US COULD LAVISH MORE POLICIES ON EVSUS EVs could get more supportive policies in the months ahead. The EPA is expected to decide if California can adopt its Advanced Clean Car II (ACC II), which would phase out the sale of ICE-based vehicles to 2035. If the EPA grants California's request, that would trigger similar programs in several other states. The US Department of Transportation (DOT) is proposing stricter efficiency standards under its Corporate Average Fuel Economy (CAFE) program. The American Fuel & Petrochemical Manufacturers (AFPM) has raised concerns about the new EPA rule as well as the two pending policies that would provide further support for EVs at the expense of vehicles powered by ICEs. It raised more concerns on Thursday right before the group's International Petrochemical Conference (IPC), which begins on Sunday. “At a time when millions of Americans are struggling with high costs and inflation, the Biden administration has finalized a regulation that will unequivocally eliminate most new gas cars and traditional hybrids from the US market in less than a decade,” said Chet Thompson, AFPM CEO, said. “Whether you are a Republican or Democrat, Congress has to make a decision whether to protect consumer choice, US manufacturing workers and our hard-won energy security by overturning this deeply flawed regulation,” Thompson said. “Short of that, our organizations are certainly prepared to challenge it in court.” Insight article by Al Greenwood Thumbnail image shows an electric vehicle (EV) charging station in Takoma Park, Maryland. Photo by MICHAEL REYNOLDS/EPA-EFE/Shutterstock

21-Mar-2024

Europe top stories: weekly summary

LONDON (ICIS)–Here are some of the top stories from ICIS Europe for the week ended 15 March. Europe ethylene and propylene sentiment cautiously optimistic for remainder of H1 Given the better-than-expected demand conditions, with improved sales volumes and higher prices lifting many out of the mire that was 2023, the question on everyone’s lips is how long can we expect this state of affairs to last. Potential for oil market deficit in 2024 as demand expectations grow – IEA Higher oil demand expectations and fresh production cuts from the OPEC+ alliance could push the 2024 crude market balance from a surplus to a slight deficit if the voluntary reductions remain in place for the rest of the year, according to the International Energy Agency. Surging PET bottle bale prices threaten to ‘destroy’ Europe’s R-PET market Feedstock bale prices hit €930/tonne ex-works in Poland on Monday, prompting recycled PET participants to suggest such price levels threaten to destroy the R-PET market as they fear a repeat of 2022’s disastrous price volatility. Europe acetic acid, VAM contract talks for March focus on supply disruption March negotiations are underway for European acetic acid and vinyl acetate monomer (VAM) contract pricing with security of supply a key influence on negotiations amid LyondellBasell’s force majeure in the US and other disruptions to global trade flows. Caution caps optimism as peak season arrives for Europe styrene market Spot activity in the Europe styrene market was moderate in the week ended 8 March, as players attended a key industry event, while cautious and conservative sentiment persisted alongside crosswinds from ongoing demand weakness and thin liquidity, high feedstock costs and reduced availability. Participants pointed to only slight improvements in demand and market optimism from levels seen in 2023. Europe cracker margins up on firmer ethylene, co-products pricing Cracker margins in Europe rose in the week on the back of firmer ethylene and co-product pricing, ICIS Margin Analysis showed on Monday.

18-Mar-2024

INSIGHT: Indorama exit from PET feedstock markets to spur China PTA exports

SINGAPORE (ICIS)–Demand for China’s purified terephthalic acid (PTA) will get a boost as Indorama Ventures Ltd (IVL), a global producer of downstream polyethylene terephthalate (PET), shifts away from expensive integrated operations. IVL plant closures likely to focus on PTA – sources Tariff barriers dampen growth prospects for China PTA, PET exports China pins hopes on Belt and Road Initiative for new markets IVL cited overcapacity in China as one of the principal reasons for its new strategy – to procure cheaper feedstock from Asia, instead of running integrated facilities in the US. “A large portion of the refineries in the West are aged and losing their competitiveness. These facilities are expected to gradually close in the future,” ICIS senior analyst Jimmy Zhang said. The Thai company is the largest global PET resin producer with a 20% global market share and operates 147 production facilities in 35 countries, with its sales footprint covering over 100 countries in six regions – North America, Asia, Europe, the Middle East and Africa (EMEA), and South America. IVL 2.0 CALLS FOR SHUTDOWN OF SOME PTA UNITS Globally, IVL has a total production capacity of around 19m tonnes/year, the bulk of which or 67% are in combined PET business, which covers integrated PET, specialty chemicals and packaging, according to Thai investment research firm Innovest Securities. Integrated olefins derivatives account for 21% of the total capacity, while fibres have a share of 12%, it added. Market players said that in the US, IVL may prioritize shutting down PTA units over monoethylene glycol (MEG) units, whose production costs are still competitive compared with other global producers, thanks to their use of shale gas. “Given the current economic and market conditions, it is a wise decision to sell the assets which could not make money to ‘save its life’,” a trader in Asia said. In Asia, IVL currently operates three PTA assets – two in Thailand and one in Indonesia. According to market sources, the company could potentially mothball one of its less cost-effective PTA units in Thailand due to old age and technical issuSes. Its operations in Indonesia can better serve India, benefitting from competitive freight rates to IVL’s key market in Asia, they said. For now, IVL’s PTA plants in Asia still hold a unique export advantage in the south Asian country, as they are certified by the Bureau of Indian Standards (BIS). This certification was mandated by India late last year. Currently, no Chinese PTA producers have obtained BIS certification, reducing competition for IVL from Chinese imports. Origin swaps for PTA have taken place, with lower priced China cargoes being exported into southeast Asia as well as their downstream PET asset in Egypt. This enables Indorama to push for more exports to India at a much better price netback. This will unlikely change unless China PTA producers are able to obtain the BIS certification from India. Under its new masterplan dubbed “IVL 2.0”, IVL said that it will be reviewing six operating assets in the ‘West’ for potential shutdown, as it seeks to boost competitiveness. Including the Corpus Christi Polymers (CCP) joint venture project with Alpek and Far Eastern New Century (FENC) whose construction was halted, the number of projects under review total seven. IVL chief Aloke Lohia said that feedstock prices in Western markets are expected to increase over time as peak oil demand draws closer and refineries shut down, while the reverse will occur in emerging Asian markets as capacity rises, driving feedstock costs lower. The rise in refining capacity in China and India allows IVL to buy petrochemical feedstocks cheaper than they could produce them domestically,  Lohia had told ICIS. CHINA CAN FILL IN IVL PTA NEEDS China has the ability to export PTA at much lower cost amid a domestic oversupply, with the country’s annual production capacity now at more than 70m tonnes, only a small fraction of which – around 3m tonnes – are shipped abroad, according to the ICIS Supply & Demand Database. Over the years, China has continually increased its capacity across the entire polyester chain, granting Chinese producers a significant advantage in integration and scale for paraxylene (PX), PTA and PET, Zhang said. The country is now a major PTA exporter and has swung from being the world’s biggest net importer of polyester fibres and PET resins (bottle and film grade) to being the biggest net exporter, ICIS senior Asia consultant John Richardson said. But trade barriers in several countries hamper imports from China, raising the likelihood of “more barter trading activities” in the future, Zhang said. He is referring to a process in which Chinese cargoes will move to a duty-free country, which, in turn, will re-sell the volumes. With the change of origin, the cargoes can then be sold to markets with existing trade barriers to China duty free. “For example, it is likely that China will export more PTA to South Korea, while South Korea will export more PTA to other countries who set trading barriers for China,” Zhang said. CHINA CHANGES APPROACH TO TRADEWith anti-dumping investigations curtailing direct exports of PET to certain markets, China is moving away from western markets, shifting its focus on those covered by free-trade agreements within its Belt & Road Initiative (BRI). The country’s PET export market has shrunk since mid-2023 after the EU started anti-dumping investigations, with provisional duties on Chinese material activated in November of the same year. Anti-dumping investigations against Chinese PET, meanwhile, are ongoing in Mexico in North America and South Korea in Asia. China is expanding free-trade agreements (FTAs) with Belt & Road Initiative (BRI) and non-BRI member countries to counter growing geopolitical differences with the west, potentially leading to a shift in trading patterns as Chinese apparel and non-apparel production moves offshore to these nations, ICIS’ Richardson said. Overseas plants could be supplied by China-made polyester fibres, allowing the country to retain dominance in the global polyester value chain and offset rising labour costs, Richardson said. “Offshoring to the developing world may also enable China to make up for any lost exports of finished polyester-products to the West due to increased trade tensions,” Richardson added. China had signed 21 free trade agreements with 28 countries and regions as of August 2023, according to the Chinese state-owned Xinhua news agency. More than 80 countries and international organizations had subscribed to the “initiative on promoting unimpeded trade cooperation along the Belt and Road”, which is part of the BRI, it said. Source: Mercator Institute for China Studies (MERICS) Insight article by Nurluqman Suratman With contributions from Judith Wang and Samuel Wong Thumbnail image: Canal Container Transport, Huai'an, China – 12 March 2024 (Costfoto/NurPhoto/Shutterstock)

15-Mar-2024

BLOG: China PX net annual average imports may fall to 700,000 tonnes in 2024-2030

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson: Only a few people thought that China would reach self-sufficiency in purified terephthalic acid (PTA). I was among the few. Now China is a major PTA exporter. This followed China swinging from being the world’s biggest net importer of polyester fibres and polyethylene terephthalate (PET) resins (bottle and film grade) to being the biggest net exporter. Paraxylene (PX) could be the next shoe to drop as today’s post discusses. Given China’s total domination of global PX net imports – and the concentration of major PX exports in just a small number of countries and companies – the potential disruption to the global business is huge. The ICIS Base Case assumes China’s PX demand growth will average 1% per annum in 2024-2030 with the local operating rate at 82%. Such an outcome would lead to China’s net PX imports at annual average of 7.4m tonnes in 2024-2030. This would compare with 2023 net imports of 9.1m tonnes. Downside Scenario 1 sees demand growth the same as in the base case. But under Downside Scenario 1, I raise the local operating rate to 88%, the same as the 1993-2023 average. I also add 6.2m tonnes/year to China’s capacity, which comprises unconfirmed plants in our database. Downside 1 would result in net imports dropping to a 2024-2030 annual average of just 1.5m tonnes/year. Downside Scenario 2 again sees demand growth the same as in the base case, an operating rate of 90% and 6.2m tonnes/year of unconfirmed capacity Net imports would fall to an annual average of just 700,000 tonnes a year. As an important 26 February 2024 Financial Times article explores, China continues to build free-trade agreements with Belt & Road Initiative (BRI) and non-BRI member countries as a hedge against growing geopolitical differences with the West. We could thus see a significant shift in trading patterns as more Chinese apparel and non-apparel production moves offshore to these countries, with the overseas plants fed by China-made polyester fibres. China could thus maintain its dominance of the global polyester value chain via this offshoring process, thereby compensating for its rising labour costs. Offshoring to the developing world may also enable China to make up for any lost exports of finished polyester-products to the West due to increased trade tensions. This shift in downstream investments and trade flows could provide economic justification for just about complete PX and mono-ethylene glycols (MEG) self-sufficiency, which will be the subject of a future post. These are the only two missing pieces in China’s polyester jigsaw puzzle. Editor’s note: This blog post is an opinion piece. The views expressed are those of the author, and do not necessarily represent those of ICIS.

13-Mar-2024

BLOG: Why China’s HDPE net imports could average just 700,000 tonnes per year in 2024-2030

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. The global petrochemicals industry must prepare for the possibility that China is close to self-sufficiency in high-density polyethylene (HDPE), low-density PE (LDPE), linear-low density PE (LLDPE), polypropylene (PP), paraxylene (PX) and mono-ethylene glycols (MEG) by 2030. As I work through the products, see today’s post on HDPE where I present the following three scenarios: The ICIS Base Case: An average China HDPE operating rate of 72% in 2024-2030 and average demand growth of 3%. This would lead to net imports averaging 7.6m tonnes a year. Downside Scenario 1: An average 82% operating rate, an additional 5.2m tonnes/year of unconfirmed capacity comes on-stream, and 3% average demand growth. Annual average net imports total 3.8m tonnes. Downside Scenario 2: An average 88% operating rate, an additional 5.2m tonnes/year of unconfirmed capacity comes on-stream, and 1.5% average demand growth. Annual average net imports total just 700,000 tonnes. Why do I see these alternative outcomes as possible? As regards operating rates you can argue that China’s new HDPE capacity will be super-efficient in terms of scale and upstream integration, including perhaps advantaged supplies of crude into refineries. There is a potential “win-win” here. The oil-to-petrochemicals majors, especially Saudi Aramco, are keen to underpin crude production levels given the threats to long-term global crude demand from sustainability. China is the world’s biggest crude importer. Petrochemical operating rates in China have historically been a political as well as an economic decision. China made the decision in 2014 to push towards complete petrochemicals self-sufficiency. Our base case demand growth estimate of 3% per annum between 2024 and 2030 is perfectly reasonable and well thought-out, as it reflects the big turn of events since the “Evergrande moment” in late 2021. Growth of 3% would be hugely down from the 12% average annual growth between 1992 and 2023 during the Petrochemicals Supercycle, which was mainly driven by China. I have therefore stuck with 3% demand growth in Downside Scenario 1 while raising the operating rate to 82% for the reasons described above. But I believe we need to go further to achieve proper scenario planning. Downside Scenario 2 takes demand growth down to 1.5% and raises the operating rate to 88% – the same as the actual operating rate in 1992-2023. If Downside 2 were to happen, HDPE pricing markets would be upended. No longer would landed-China prices be as relevant as China’s import volumes would be much lower than they are today. Demand patterns in and trade flows to the world’s remaining net import regions and countries – Europe, Turkey, Africa, South & Central America, Asia and Pacific and the Former Soviet Union – would become much more important. In short, the petrochemicals world would be turned on its head. Are you prepared for all the eventualities? Editor’s note: This blog post is an opinion piece. The views expressed are those of the author, and do not necessarily represent those of ICIS.

08-Mar-2024

Lotte Chemical mulls 'strategic measures' for Malaysian-listed LC Titan

SINGAPORE (ICIS)–South Korean producer Lotte Chemical said on Thursday that it is exploring options for its Malaysian subsidiary, in response to local media reports that the unit is up for sale. "We are considering various strategic measures related to LC Titan [Lotte Chemical Titan] which is our subsidiary, but nothing has been decided so far," Lotte Chemical chief financial officer Seong Nak-sun said in a stock exchange filing. "We will re-announce the details within a month or when they are decided in the future," Seong added. Lotte Chemical and LC Titan could not be immediately reached for further comments on the potential sale. At 05:30 GMT, shares of the two listed companies were trading lower, with Lotte Chemical down 1.63% in Seoul, and LC Titan down 1.72% in Kuala Lumpur. According to media reports on Thursday, Lotte Chemical has already initiated the process of selling LC Titan, citing unnamed sources. "We're actively reviewing ways to optimize our portfolio, which includes considering the potential sale of LC Titan. However, a definitive decision has not yet been reached," an unnamed Lotte Chemical official was quoted by The Korea Economic Daily (KED) as saying. Lotte Chemical is approaching both domestic and international companies, along with private equity firms through investment banks, to be potential buyers for its Malaysian arm, KED reported. The Korean producer is planning to sell all outstanding shares of LC Titan traded on the Malaysian stock market, which is equivalent to 74.7% of the company, valuing the firm at around $550m based on current market capitalization, it added. LC Titan has incurred a second year of net loss, which widened to Malaysian ringgit (M$) 780.3m in 2023 as sales declined by 24% to M$7.65bn. Malaysia's LC Titan full-year financial results in thousand ringgit (M$) FY2023 FY2022 % change Sales           7,646,170         10,019,083 -23.7 Loss from operations           (868,001)         (1,041,451) -16.7 Net profit            (780,286)            (731,061) 6.7 Meanwhile, parent firm Lotte Chemical swung into a net loss last year. S Korea's Lotte Chemical full-year financial results in billion S Korean won (W) 2023 2022 % Change Sales 19,949 22,276 -10.4 EBITDA 839 185 353.5 Operating profit -333 -763 Net income -301 28 In the notes accompanying its financial results released on 7 February, Lotte Chemical had stated that that it “will pursue advancement and improvements to the business portfolio in order to actively respond to changes in the business environment of the petrochemical industry and improve profitability through efficient management of existing petrochemical businesses”. “The weak market conditions of the petrochemical industry are ongoing due to reduced demand and dropping product prices resulting from global uncertainties, as well as increased supply burdens caused by large-scale ethylene plant expansions in China,” it said. The acquisition of Malaysian company Titan Chemicals in 2010 was the Korean firm’s first foray into southeast Asia. The acquired company was rebranded Lotte Chemical Titan, and in 2017, was listed on the Malaysian bourse. LC Titan operates 12 plants at two sites in Johor, Malaysia; and holds a 40% stake in LOTTE Chemical USA based in Houston, Texas. In Indonesia, the company operates polyethylene plants, and in Q1 2022,  started construction of LOTTE Chemical Indonesia New Ethylene (LINE) Project, which will increase production capacity in Cilegon by 65% to 5.88m tonnes/year. The project is expected to produce 1m tonnes/year of ethylene; 520,000 tonnes/year of propylene; 250,000 tonnes/year of polypropylene (PP); and 140,000 tonnes/year of butadiene (BD). It is scheduled to be completed in 2025. Focus article by Nurluqman Suratman ($1 = M$4.71; $1 = W1,330) Thumbnail image: A Lotte Chemical Titan plant in Pasir Gudang, Malaysia (Source: Lotte Chemical Titan)

07-Mar-2024

INSIGHT: Indorama flags peak oil demand in possible plant closures

HOUSTON (ICIS)–While Indorama Ventures reviews six sites for possible closure, it will consider signs that oil demand will continue growing in emerging Asia while peaking in Europe and North America – a trend that would alter the regional costs of a principal polyester feedstock, making it more attractive to import it from Asia than make it in the West. Benzene, toluene and mixed xylenes (MX) are produced in refineries, and they are among the fundamental building blocks for the chemical industry. If oil demand peaks in the West, that would discourage refiners from expanding capacity or making the expensive investments needed to maintain existing production levels. That would tighten supplies for these building blocks, affecting costs for chemicals as varies as phenol, styrene and paraxylene (PX). By contrast, oil demand has yet to peak among emerging economies in Asia. There, refiners will continue to increase capacity to meet growing demand for diesel and gasoline. Supplies of aromatics should continue growing in those regions. Indorama is taking the prospect of peak oil seriously because a key polyester feedstock, purified terephthalic acid (PTA), is made from PX, and PX is extracted from MX. If Western PTA prices become too expensive, then it would make more sense for Indorama to shut down its high-cost plants in the West and purchase the feedstock from producers in Asia that can sell material at a lower price. Indorama did not specify which plants it could close. PEAK OIL IN WEST SPELLS END OF NEW REFINERIESIndorama expects oil demand in the West will soon peak, perhaps in 2025 or 2026, said Aloke Lohia, Group CEO of Indorama. He made his comments in an interview with ICIS. His comments are backed by statistics from the Energy Information (EIA). Outside of the post-COVID rebound in 2021, gasoline demand in the US has been running below pre-pandemic levels. In 2023, it reached a summertime peak of nearly 9.60 million bbl/day. That is more in line with summer levels in 2015. Given the outlook for oil demand in the West, Indorama is betting that refiners will unlikely make the pricey investments necessary to increase capacity. "No one is looking to build a new refinery," Lohia said. Refiners could even shirk from making the investments needed to maintain existing capacity. "We believe there will be de-growth in refineries in the West and hence high cost for crude oil derivatives that has hurt our competitiveness, especially in Europe," Lohia said in prepared remarks. Actions by refiners are bearing this out. LyondellBasell plans to shut down its Houston refinery because it cannot justify the capital expenditures needed to keep the 100+ year old complex running. Although ExxonMobil recently expanded its refinery in Beaumont, Texas, the last time a refiner made a comparable investment was in 2012, when Motiva expanded its refinery in Port Arthur, Texas. Several refiners have converted existing units to process vegetable oils and similar feedstock to produce renewable diesel and sustainable aviation fuel (SAF). LyondellBasell could convert its Houston refinery into a sustainability hub. OIL DEMAND TO CONTINUE GROWING IN EMERGING ASIAUnlike the West, Indorama expects oil demand to continue growing in emerging Asia. Governments in this part of the world have less aggressive schedules for reducing carbon emissions, with net-zero goals further out in the future, Lohia said. Reducing carbon emissions boils down to renewable electricity. Instead of producing power by burning coal and natural gas, countries would do so with renewable sources such as solar panels, wind turbines and hydropower. Renewable electricity could also be used to generate heat. Emerging economies have limited power production, and they want to use that electricity to rapidly industrialize, according to Indorama. De-carbonization and industrialization will compete for limited power generation. That will place a limit on the expansion of charging stations needed for electric vehicles (EVs). Until emerging markets build out electrical infrastructure, they will still need petroleum-based fuels. Consequently, emerging markets are giving themselves more time to reduce carbon emissions. In China in particular, some companies could rush to complete new expansion projects before decarbonization deadlines take effect, Lohia said. China already has too much capacity, so this building spree will worsen the supply glut. As it stands, crude oil processing in China reached 14.8 million bbl/day in 2023, an all-time high, according to the EIA. Growing refining capacity should increase supplies of aromatics such as PX, the feedstock used to make purified terephthalic acid (PTA). That should depress PTA production costs. INDORAMA'S PLANGiven the global outlook for chemical feedstock produced at refineries, Indorama is considering a plan that would reduce consumption of these feedstocks at its Western operations. Instead of producing feedstock at high-cost plants, Indorama would import the material from Asia. Production lost from any closures would be offset by increasing utilization rates at Indorama's low-cost plants. The move would significantly increase Indorama's overall operating rates and lead to double-digit returns on capital employed (ROCE) for the two businesses most exposed to MX, Combined PET (CPET) and Fibers. US SHALE MAY SPARE DOMESTIC PLANTSThe calculus is less straightforward for Indorama's US operations. Critically, these operations include methyl tertiary butyl ether (MTBE), an octane-boosting gasoline blendstock that is made with methanol and isobutylene. In the US, both of these chemicals are made from shale-based feedstock, giving Indorama a substantial cost advantage. When gasoline prices rise, Indorama's MTBE operations can earn the company very attractive margins. Those fat MTBE margins would offset the higher costs involved with producing PTA from PX extracted from MX. MX is another octane-boosting blendstock, so its price tends to rise and fall with that for gasoline. In effect, MTBE provides Indorama with a hedge against higher MX costs for its US PET operations. MX is not the only feedstock used to make PET. The other is monoethylene glycol (MEG), a chemical made from ethylene. US ethylene producers predominantly on ethane as a feedstock, giving them a cost advantage. For Indorama's PET operations in the US, shale gas gives the company a cost advantage on the MEG side and a hedge on the PTA side. Thumbnail shows bottle made of PET. Image by monticello/imageBROKER/Shutterstock Insight article by Al Greenwood

05-Mar-2024

Indorama Ventures will divest, right-size assets and cut costs under revised strategy

LONDON (ICIS)–Fundamental long-term changes in global chemicals markets have prompted a significant review of strategy, Indorama Ventures said on Monday. The company suffered a heavy loss in 2023 against the backdrop of oversupplied markets and weak demand. Supply side pressure and weaker demand in China are among the factors that have created unprecedented industry conditions it said. It is shifting strategy to right-size operations, deleverage its business and cut costs. The company reported a 53% drop in earnings for 2023 as revenues fell by 17%, with fourth quarter EBIDTA down 46% on 8% lower sales. A net loss for the year of $310 million (from a profit of $884 million in 2022) included an asset impairment on an incomplete plant in Texas. The company said that it plans to reduce net debt by $2.5 billion to around $4.3 billion in 2026. This includes generating $800 million in cashflow from “operational improvements” and a further $1.7 billion from actions including divestments, “asset actions” and “select business listing”. The aim is to reduce its debt to EBITDA (earnings before, interest, tax, deprecation and amortisation) ratio to less than 3X. An asset optimization program is targeted at lifting the company’s operating rate from 74% to 89%, it said. This will include “moving to lower-cost facilities and right sizing manufacturing capacity”, it added. A further $450 million run rate of efficiency gains is planned to be in action by 2026. The sale of non-core assets and other “value unlocking strategies” aims to generate about $1.3 billion in cash proceeds. Indorama Ventures said that by leveraging sustainability innovation it can create an additional $350 million/year of value. Under the revised strategy the company’s Integrated Oxides and Derivative (IOD) business segment will be renamed Indovinya. Intermediate chemicals assets, including integrated purified ethylene oxide (PEO), ethylene glycol (EG) and methyl tertiary butyl ether (MTBE) assets will move to Indorama Ventures’ Combined PET (CPET) segment. Indovinya will focus on downstream products and for Indorama Ventures markets will include home & personal care, crop solutions, coatings & solutions and energy & resources, it said. A run rate of $527 million in efficiency gains was achieved in 2023 and the roll out of a new enterprise management system in 2024 will unlock further value, it added. A $308 million non-cash impairment was taken in Q4 2023 it said on the suspension of activity on the partially completed purified terephthalic acid (PTA)-polyethylene terephthalate (PET) joint venture with Alpek in Corpus Christi, Texas.

04-Mar-2024

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