Polyethylene (PE)

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Polyethylene (PE) news

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

INSIGHT: Europe’s PET industry in legislative ‘grey zone’ as the clock ticks on

LONDON (ICIS)–Over 300 members of the polyethylene terephthalate (PET) industry gathered in Brussels at the annual Petcore Europe conference in February, looking for clarity on the wide-ranging, market-changing packaging and waste legislation currently under discussion in the EU, but many left only slightly more informed than when they arrived. EU legislators unable to give clarity on key topics Questions remain around imports Exciting opportunities for growing sectors The industry is currently in a “grey zone’ that relates to the outcome of voting on the EU’s draft Packaging and Packaging Waste Regulation (PPWR) according to Leonor Garcia of consultants E&Act. It would be fair to say, however, that this is the case for most pieces of legislation aimed at the PET and wider plastics industry in Europe. The European Parliament and European Council reached provisional agreement on the regulation earlier this month although the text of that agreement has not been published. The EU Commission, acting as mediator in the trilogue between the two co-legislators, has stalled its approval. The three regulatory bodies involved in the trialogue for the regulation – the European Parliament, the European Commission, and the Council of the European Union – had different views and opinions when it came to topics such as recyclability of plastics, recycled content, restrictions on packaging formats and, particularly, on reuse targets for 2030 and 2040, Garcia noted. This point around reuse targets was emphasized by Delphine Close of soft drinks industry group UNESDA, and the chair of Petcore’s Reuse working group, presenting the different views of the three bodies around reuse targets. PETcore is the trade body representing PET value chains in Europe. When looking at exemptions to the PPWR reuse targets, for example, the Commission has no real exemptions, the Council one exemption and the Parliament several. But it is the timeframe that is of major concern for Close who pointed out that the three parties had little time to reach a decision on a regulation that will change the face of the European plastic packaging industry and its obligations to the circular economy. "There were high expectations for clarity around the regulations by delegates of the conference but at a time when the legislators were still deep in discussions. Clearly industry needs to prepare for the regulations and how it will impact their business but are unable to do so while answers on so many points are still outstanding.” said Helen McGeough, Senior Analyst, Plastics Recycling at ICIS. “To mirror comments made by participants in the event, regulation around recycled plastics is building at a rate which challenges the value chain to keep pace with. Clarity can only support the value chain in delivering on those requirements. That said, the atmosphere was positively charged during the networking breaks, with this sector demonstrating high levels of collaboration to the common goal of improving the circularity of PET.” The audience did not hide its dissatisfaction with some comments from the Commission speakers on the status of non-plastic packaging potential exemptions from the recycled content quotas. Shortly after the Petcore conference a legal assessment was profiled by the European Plastic Converters trade association (EuPC) to highlight that the bans on plastic film for a six-pack of bottles, for example, or exemption of coated paper packaging from recycled content quotas are likely not to be compatible with EU law. TIME RUNNING OUTThe European Parliament will end its mandate in April, and a new parliament will take its place, so the race is on to get the final vote on the PPWR though before then. Nicholas Hodac, Director General of UNESDA said there is still a lot of uncertainty regarding the Commission's and the Parliament’s priorities ahead of the new EU policy cycle in 2024 but stressed that a major focus for UNESDA “has to be the proper implementation of EU legislation that was adopted”. Hodac pointed out that while climate change is likely to remain a top priority during the next parliamentary cycle, focus could shift towards more nature-based policies such as nature restoration, restoration of biodiversity and protection of water resources. QUESTIONS AROUND IMPORTSOne of the main topics brought up during the course of the event was the stance on the flow of waste and products containing recycled material both into and out of the EU. There was a lot of uncertainty around this particular topic, even from Wolfgang Trunk, team leader of the Commission’s DG Environment working group who stated this was the “most delicate” and “most uncomfortable” point for him during his presentation. Trunk pointed to the fact that the Commission’s current proposal relating to the volume of recycled content in products is for products ‘placed on the market’, which, Trunk said, implies these products would be placed on the EU market. Trunk said this failed to take into account imports of products such as PET bottles, for example, that are manufactured in the US but exported to the EU. The current wording would imply this imported product would also be required to meet the same recycled content targets as bottles manufactured in the EU and contain recycled content from EU-produced waste. This contradiction illustrates both the complexity and ambiguity of the wording in the current legislation and raises the question of how the industry should interpret it. On top of this, the ban on exporting waste from the EU to non-OECD countries will take effect from 2026, but, Trunk said, these same non-OECD countries can still be allowed to produce products with recycled content if they fulfill certain conditions. GROWTH AREASOutside of the complexity of legislation, there were updates on the textiles and depolymerisation markets as well as the ever-popular tray to tray sector where design for recycling will play a key role in bringing recycling to an industrial scale. These demonstrated the ability of the PET industry to innovate to achieve recycling solutions. LONG PATH AHEADThe industry faces many challenges, however, when it comes to legislation, particularly due to the current lack of clarity coming from Brussels around specific targets, timelines and what might or might not be counted towards recycled content. The trade group’s conference showed the willingness to work together to address these. All it needs now is for Europe’s legislative bodies to keep pace and clarify targets and requirements. Insight by Matt Tudball and Helen McGeough

12-Mar-2024

Latin America stories: weekly summary

SAO PAULO (ICIS)–Here are some of the stories from ICIS Latin America for the week ended on 8 March. NEWS Brazil’s chemicals output up nearly 8% in January Brazil’s chemicals output rose by 7.9% in January from December, despite the 1.6% fall in overall industrial output, according to the country’s statistics office, IBGE. Brazil’s automotive output up strongly in February as investments soar Brazil’s petrochemicals-intensive automotive industry’s output rose in February by nearly 25%, month on month, in a sign of a strong recovery in the sector, automotive trade group Anfavea said on Thursday. Mexico’s inflation falls to 4.4% in February Mexico’s annual rate of inflation fell in February to 4.40%, down from 4.88% in January, the country’s statistics office, INEGI said on Thursday. Mexico’s automotive output up nearly 8% in February Mexico’s automotive sector posted an increase in output of 7.76% in February, year on year, to nearly 320,000 units, slowing down slightly from January, the country’s statistical office Inegi said on Wednesday. Brazil’s Unigel halts fertilizers production on high natural gas prices Unigel is to “temporarily stop” nitrogen fertilizers production because of high costs and low prices, effective on Wednesday, the Brazilian chemicals and fertilizers producer said. Auto major Stellantis to invest €5.6 billion in South America to 2030 Stellantis is to invest €5.6 billion in its South American operations in 2025-2030, with Brazil’s Betim facilities set to greatly expand to produce hybrid vehicles, the global automotive major said on Wednesday. Petrobras finds no irregularities on Unigel tolling contract after internal investigation Brazil’s state-owned energy major Petrobras has announced the conclusion of its internal investigation into the tolling contract with Unigel, finding no irregularities, the company said on 4 March. PRICING Mexico's PET prices continue to be threatened by import in 2024 Despite the continuous application of import tariffs on polyethylene terephthalate (PET) from Asia, the influx of imports into Mexico, offering enticing deals, is effectively keeping PET prices away from notable price increases.

11-Mar-2024

Americas top stories: weekly summary

HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 8 March. Evonik sells superabsorbents business to ICIG to focus on specialties Germany’s Evonik has signed a deal to sell its superabsorbents business to International Chemical Investors Group (ICIG), a privately-held industrial group headquartered in Germany. ICIG will acquire the entire division with around 1,000 employees and superabsorbent production facilities in Krefeld and Rheinmuenster, Germany, as well as two locations in the US, in Greensboro, North Carolina, and Garyville, Louisiana. Indorama Ventures will divest, right-size assets and cut costs under revised strategy Fundamental long-term changes in global chemicals markets have prompted a significant review of strategy, Indorama Ventures said on Monday. Indorama eyes upstream plant shutdowns with 6 assets under review – Group CEO Indorama Ventures is reviewing six operating assets in the ‘West’ for potential shutdown as it seeks to boost competitiveness and exit the merchant market for polyethylene terephthalate (PET) feedstocks amid intensifying competition from China, its group CEO and Founder said. Brazil’s Unigel halts fertilizers production on high natural gas prices Unigel is to “temporarily stop” nitrogen fertilizers production because of high costs and low prices, effective on Wednesday, the Brazilian chemicals and fertilizers producer said. Chemours says suspended execs tried to influence cash flows An internal review showed that top executives at Chemours tried to influence the reporting of the company’s cash flows, the US-based titanium dioxide (TiO2) and fluoromaterials producer said in an update late on Wednesday. LOGISTICS: Panama Canal to add additional slots in Panamax Locks beginning 25 March The Panama Canal Authority (PCA) announced on Friday that it will open additional slots in the Panamax Locks beginning 25 March based on the present and projected water levels in Gatun Lake.

11-Mar-2024

Europe top stories: weekly summary

LONDON (ICIS)–Here are some of the top stories from ICIS Europe for the week ended 8 March. BP Gelsenkirchen refinery scale-back underscores Germany's competitive hurdles BP is set to become the latest European oil and gas player to cut crude oil refining capacity in Germany, with the UK-headquartered firm citing structurally high costs and declining demand for conventional fuels. Poland’s Azoty rejects calls for Pulawy subsidiary to go it alone Second largest European fertilizer producer Grupa Azoty “faces an urgent challenge to return to a stable development path”, but any attempt to split off subsidiary Grupa Azoty Pulawy “would have a number of negative consequences”, the Polish group on Wednesday said in a statement. Celanese to close engineered materials site in Belgium Celanese plans to close an Engineered Materials compounding site at Mechelen, Belgium that was part of its $11 billion acquisition of DuPont’s Mobility & Materials business in 2022. Indorama eyes upstream plant shutdowns with 6 assets under review – Group CEO Indorama Ventures is reviewing six operating assets in the ‘West’ for potential shutdown as it seeks to boost competitiveness and exit the merchant market for polyethylene terephthalate (PET) feedstocks amid intensifying competition from China, its group CEO and Founder said. Evonik sells superabsorbents business to ICIG to focus on specialties Germany’s Evonik has signed a deal to sell its superabsorbents business to International Chemical Investors Group (ICIG), a privately-held industrial group headquartered in Germany.

11-Mar-2024

VIDEO: Europe R-PET C flake prices hit parity with PET

LONDON (ICIS)–Senior Editor for Recycling, Matt Tudball, discusses the latest developments in the European recycled polyethylene terephthalate (R-PET) market, including, Colourless flake prices hit same levels as virgin PET Closing of delta with virgin raises questions on flake demand Eastern Europe bale prices maintain strong uptrend

08-Mar-2024

Asia, Mideast petrochemical trades to slow down during Ramadan

SINGAPORE (ICIS)–Trades for several petrochemicals in Asia and the Middle East will slow down as markets observe Ramadan starting 10 March, with demand going into a lull amid shorter working hours during the Muslim fasting month. Converters hold ample inventory GCC demand for PP to rebound after Eid ul-Fitr Gaza conflict dampens EastMed market, outlook uncertain Most markets continue to struggle with poor demand as well as high cost amid geopolitical uncertainties in the Middle East and Europe. From 10 March, businesses in many Muslim-majority countries will operate on reduced hours, potentially affecting production and logistics, with significant business decisions likely to be postponed. INDONESIA IMPORT QUOTA FURTHER DAMPENS SENTIMENT In Indonesia – the world’s most populous Muslim nation and the second largest polyethylene (PE) consumer in southeast Asia after Vietnam – the seasonal slowdown in demand is exacerbated by uncertainties over the government’s import quota regulations. Industry players were recently informed by Indonesia’s trade ministry that most PE and PP grades would be exempted, but some worry that this could still change before the import quotas take effect on 10 March. Many converters are currently sitting on high stocks of PE, having boosted imports in the weeks after the government announced the new rules in December, before details were fleshed out. A few of them are now willing to re-enter the import market to order new supplies. “My customers have stopped talking to me for now. It’s both Ramadan and the import quota issue," said a PE supplier. "I feel that while prices have not really dropped … the demand has clearly slowed. Most buyers have already bought enough, and they are not willing to risk buying more,” the supplier said. “Ramadan and Lebaran (Eid ul-Fitr) are slow periods of demand,” he added. Eid ul-Fitr is a Muslim festival marking the end of Ramadan. In the upstream ethylene market in southeast Asia, inquiries from Indonesia have picked up since late February as buyers stock up for April and wanted to wrap up negotiations before Ramadan. Ethylene prices have increased because of tight supply amid operating issues at Chandra Asri’s cracker as well as limited supply coming from the Middle East. MIDEAST TENSIONS WEIGH ON TRADES Demand for both PE and PP in the Gulf Cooperation Council (GCC) is expected to improve after Eid ul-Fitr, as buyers restock after Ramadan's lull. In the East Mediterranean market, sentiment is likely to remain weak amid the Israel-Hamas war in Gaza. The war, now on its eighth month, and the weak economies of Lebanon and Jordan have dampened activity in both the PE and PP markets. Market conditions may not improve if a resolution to the war cannot be found soon. Since the start of the Israel-Hamas war on 7 October, sentiment was dampened throughout the region, with buyers in Jordan and Lebanon adopting a wait-and-see approach on markets. Hopes of an Israel-Hamas ceasefire ahead of Ramadan are fading following reports of more than 100 deaths of people waiting in a food aid line in Gaza. More than 100 people were killed on 29 February after Israeli troops fired on a large crowd of Palestinians racing to pull food off an aid convoy late last month, bringing the death toll since the start of the Israel-Hamas war to over 30,000, according to the Gaza Health Ministry. A continuation of hostilities beyond the start of Ramadan is now highly likely as several key issues remain unresolved. This could inflame tensions in the region significantly, with attacks by Yemen’s Houthi militants on shipping in the Red Sea likely to escalate. In toluene diisocyanate (TDI) and polymeric methylene diphenyl diisocyanate (PMDI) markets, GCC trades recently accelerated as some customers looked to stock up on volumes following recent spikes in costs of feedstock benzene and toluene in Asia. Some northeast Asian isocyanates producers announced sharp price increases in southeast Asia, which also impacted their volume allocations to other regions like the Middle East. In March and April, when supply for both TDI and PMDI is expected to be tight to normal due to some turnarounds in Asia, demand from GCC countries will likely slow down. Most businesses in the Middle East work fewer hours during Ramadan, which will impact overall activity. Focus article by Nurluqman Suratman Additional reporting by Josh Quah, Izham Ahmad and Damini Dabholkar Thumbnail image: Welcoming Ramadhan 2024, Medan, Indonesia – 27 February 2024 (Sutanta Aditya/NurPhoto/Shutterstock)

08-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

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In today’s dynamic and interconnected chemicals markets, partnering with ICIS unlocks a vision of a future you can trust and achieve. We leverage our unrivalled network of chemicals industry experts to support our partners as they transact today and plan for tomorrow. Capitalise on opportunity, with a comprehensive market view based on trusted data, insight and analytics.

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