Energy

HOUSTON (ICIS)–Costs for shipping containers from Asia to South America are soaring while rates are plummeting along the other major trade lanes and Maersk will resume transits through the Panama Canal after administrators said they expect to be back to normal in 2025, highlighting this week’s logistics roundup. ASIA-SOUTH AMERICA CONTAINER RATES Rates for shipping containers from Asia to the US and Europe continue to fall, but rates from Asia to South America are spiking, according to data from ocean and freight rate analytics firm Xeneta and as shown below. Market participants said space along the Asia-South America route has tightened as China is exporting a lot of electric vehicles (EVs) to Brazil. A market participant told ICIS that Chinese automaker BYD has booked more than 10,000 containers to ship EVs to Brazil in April. Autos are typically transported using roll-on, roll-off (RoRo) ships that are designed to carry wheeled cargo. But the surge in EV imports from China has taken up most of the RoRo capacity, forcing China to send autos in containers, which is more expensive. A 20-foot shipping container can hold one or two vehicles, and a 40-foot container can hold up to four standard-sized cars, according to IncoDocs, a shipping solutions provider. ASIA-US CONTAINER RATES FALL Rates from east Asia and China to both US coasts continue to fall, along with rates from Asia to Europe, as shown in the following charts. Asia-US rates from online freight shipping marketplace and platform provider Freightos were largely steady this week, suggesting to the company's head of research that rates might be nearing a floor. Judah Levine, head of research at Freightos, said if diversions continue into the Q3 peak season months, shippers can expect rates to increase relative to this floor. STRAIT OF HORMUZ Global shippers are watching the situation in the Gulf of Hormuz after Iran’s Revolutionary Guard Corps (IRGC) seized a container ship operated by Mediterranean Shipping Co (MSC) near the Strait. "If attacks like this one continue, broaden, or Iran moves to completely close the strait, Middle East container flows would feel the strongest impact," Levine said. A closure would see ports in Kuwait, Iraq and most of the United Arab Emirates (UAE) become inaccessible. Saudi Arabia, with access to their Red Sea port access already challenged, would see their Gulf port access cut off as well. "These disruptions would also impact container hubs in India some of which are part of services that connect south Asia and the Middle East," Levine said. Container ships and costs for shipping containers are relevant to the chemical industry because while most chemicals are liquids and are shipped in tankers, container ships transport polymers, such as polyethylene (PE) and polypropylene (PP), which are shipped in pellets. They also transport liquid chemicals in isotanks. PORT OF BALTIMORE The Unified Command (UC) continues to remove containers from the Dali and clear wreckage from the collapsed bridge at the entrance to the Port of Baltimore. The US Army Corps of Engineers (USACE) expects to open a limited access channel 280 feet wide and 35 feet deep by the end of April, and are aiming to reopen the permanent, 700-foot-wide by 50-foot-deep federal navigation channel by the end of May, restoring port access to normal capacity. Source: Key Bridge Response 2024 LIQUID CHEM TANKERS US chemical tanker freight rates assessed by ICIS were stable to lower this week with rates for parcels from the US Gulf (USG) to Rotterdam and the USG to Brazil unchanged. However, rates from the USG to Asia ticked lower and all other trade lanes held steady. On this route, there is no shortage of glycol enquiries. From the USG to Rotterdam, there are bits of part cargo space still available for April. Most of the outsiders’ vessels that were on berth have already sailed, and only the regulars remain at this time as they push tonnage availability. Freight rates are now expected to remain steady for the time being. PANAMA CANAL Wait times for non-booked vessels ready for transit edged higher for northbound vessels and were unchanged for southbound vessels this week, according to the Panama Canal Authority (PCA) vessel tracker and as shown in the following image. Wait times last week were 0.9 days for northbound traffic. The Panama Canal Authority (PCA) said current forecasts indicate that steady rainfall will arrive later this month and continue during the rainy season, which would allow the PCA to gradually ease transit restrictions and traffic could return to normal by 2025. Global container shipping major Maersk said it will resume Panama Canal transits for its OC1 service beginning 10 May, ending its “two-loop” setup it established in January because of transit restrictions brought on by a persistent drought. Please see the Logistics: Impact on chemicals and energy topic page Additional reporting by Bruno Menini and Kevin Callahan

19-Apr-2024

CHARLOTTE, North Carolina (ICIS)–The US remains an outlier among advanced nations and continues to power forward. Inflation has moderated and central banks are eyeing rate cuts later this year. Global manufacturing has stabilized and is recovering in most major economies. Output is strongest in emerging economies. There are signs that China’s recovery has re-engaged and that Europe’s economy may be stabilizing, with recovery later this year. The US economy is outperforming most other developed countries, keeping the dollar strong. Based on a string of hotter-than-expected readings on inflation, it appears that interest rates will be higher for longer. The headline March Consumer Price Index (CPI) was up 3.5% year on year and core CPI (excluding food and energy) was up 3.8% year on year. Progress on disinflation appears to be stabilizing. Economists expect inflation to average 3.1% this year, down from 4.1% in 2023 and 8.0% in 2022. This is above the US Federal Reserve’s target of 2%. Inflation is forecast to soften to 2.3% in 2025. As a result, interest rate futures are now moving towards fewer cuts. The case is even being made for no cuts. US MANUFACTURING FINALLY IN EXPANSIONTurning to the production side of the economy, the March ISM US Manufacturing PMI came in at 50.3, up 2.5 points from February and above expectations. This expansionary reading ends 16 months of contraction in US manufacturing. Production moved back into expansion, as did new orders. Order backlogs contracted at the same pace. Inventories contracted at a slower pace, which could provide a floor for output. The long and deep destocking cycle could be ending, with the possibility for restocking later this year. Nine of the 18 industries expanded and demand remains in the initial stages of recovery, with obvious signs of improving conditions. The ISM US Services PMI fell 1.2 points to 51.4, a reading indicating slower expansion. The Manufacturing PMI for Canada remained in contraction during March while that for Mexico expanded for the sixth month. Brazil’s manufacturing PMI expanded for a third month. Eurozone manufacturing has been in contraction for 21 months. However, the region appears to be skirting recession. China’s manufacturing PMI was above breakeven levels for the fifth month. Other Asian PMIs were mixed. AUTOMOTIVE AND HOUSING HOLDING UPTurning to the demand side of the economy, light vehicle sales eased in March, and although inventories have moved up, they still remain low. Economists see light vehicle sales of 15.8 million this year, before improving to 16.3 million in 2025. The latest cyclical peak was 17.2 million in 2018. Pent-up demand continues to provide support for this market. Homebuilder confidence is guardedly optimistic. Housing activity peaked in spring 2022 before sharply falling by July 2022. From then and into mid-2023, housing reports were mixed. ICIS expects that housing starts will average 1.45 million in 2024 and 1.50 million in 2025. We are above the consensus among economists. Demographic factors are supporting housing activity during this cycle. There is significant pent-up demand for housing and a shortage of inventory. But mortgage interest rates have moved back up in recent weeks and will hinder affordability and, thus, demand. US RETAIL SALES, EMPLOYMENT STRONGNominal retail sales made another solid gain in March. Sales growth was marked across most segments. Sales at food services and drinking establishments also advanced. Spending for services is holding up, but the overall pace may be slowing. Job creation continues at a solid pace, and the unemployment rate is still at low levels. There are 1.4 vacancies per unemployed worker, off from a year ago but at a historically elevated level. This is still fostering wage pressures in services. Incomes are still holding up for consumers. Our ICIS leading barometer of the US business cycle has been providing signals that the “rolling recession” scenario in manufacturing and transportation may be ending. The services sector continues to expand, albeit at a slower pace. Real GDP rose 5.8% in 2021 and then slowed to a 2.5% gain in 2022. The much-anticipated recession failed to emerge and in 2023, the economy expanded by 2.5% again. US economic growth is slowing from the rapid pace in the third and fourth quarters, but those gains will aid 2024 performance of an expected  2.4% increase. The slowdown in quarterly economic activity suggests that in 2025, the economy should rise by 1.8% over average 2024 levels.

19-Apr-2024

LONDON (ICIS)–Europe stock markets shifted onto bearish footing in morning trading on Friday in the wake of explosions in Iran that escalated fears of ever-higher tensions in the Middle East. Oil prices settled after the initial shock. Explosions in Iran overnight sent crude pricing surging more than $3/barrel during the Asia trading window. Iran state media reported explosions near air bases close to the city of Isfahan, which also operates nuclear facilities. Watchdog the International Atomic Energy Agency (IAEA) stated that there has been no damage to any nuclear facility, but urged caution. “IAEA can confirm that there is no damage to Iran’s nuclear sites. Director General  Rafael Mariano Grossi continues to call for extreme restraint from everybody and reiterates that nuclear facilities should never be a target in military conflicts,” the agency said in a statement. Reports have also emerged in the media of explosions in Iraq and Syria. Speaking at a G7 briefing in Capri, Italy, this morning, US Secretary of State Anthony Blinken declined to comment on the developments beyond disavowing US involvement. “I’m not going to speak to that, except to say that the US has not been involved in any offensive operations,” he said. No parties have officially taken responsibility for the blasts, but the incident is the latest in a volatile week in the Middle East, which began in the wake of Iran’s drone strikes in Israel on 13 April, which the Israel Defence Force (IDF) confirmed had struck the Nevatim air base. Crude oil pricing has whipsawed in the face of the market unrest, breaching the psychological $90/barrel mark before receding, before surging close to that watermark again when news of the blasts in Iran broke. With no reprisals currently threatened, oil futures pricing quickly receded, dropping from $89.42/barrel for Brent at 3:17 BST to well under $87 in midday trading. A build in crude stocks also weighed on sentiment, while diminishing expectations for imminent central bank rate cuts in the face of stubborn inflation has also slowed the pulse of the global economy. Crude demand growth has been subdued this year but substantial downward shifts to supply could substantially tighten conditions, according to crude analysts at ING. "If these reports [of explosions] turn out to be true, fears over further escalation will only grow, as well as concerns that we are potentially moving closer towards a situation where oil supply risks lead to actual supply disruptions," the bank said in a note on Friday morning. European public markets were also subdued, with Germany’s CAC 40 and the UK’s FTSE 100 indices trading down 0.65% and 0.45% respectively as of 13:30 GMT. Europe chemicals stocks also weakened in early trading at a more modest level relative to general markets. The STOXX 600 chemicals index clumped 0.15% compared to Thursday’s close, with shares in seven of the 30 component companies down at least 1-2%. The weakest performer on Friday so far was Solvay, which saw shares shed 3.39% of their value as of 13:17 BST. Thumbnail photo: The city of Isfahan, Iran. Source: Morteza Nikoubazl/NurPhoto/Shutterstock

19-Apr-2024

DUBAI (ICIS)–Importers in the Middle East are being hit by surging costs of transporting goods by land through Saudi Arabia from the Jebel Ali port in the UAE a shipping crisis in the Red Sea to the west of the region. Increased demand meets truck shortage Polymer market activity slow to pick up after Eid holidays Logistics woes may spill into Strait of Hormuz as tensions escalate Buyers in Jordan, Syria and Israel have been relying more on this route to take cargoes coming in from elsewhere in the world. Most shipping companies avoid the Red Sea fearing attacks on commercial vessels by Yemen’s Houthi militants since late last year following the outbreak of the Israel-Hamas war. GCC suppliers are the main exporters of PP and PE to the East Mediterranean region and have been selling most of the material through truck via Saudi Arabia, with limited quantities sold via the CFR (cost & freight) Aqba route. The Red Sea, which has the Suez Canal in the north, offers the shortest route between Asia and Europe and shipping access to the East Mediterranean markets. From the Jebel Ali port in Dubai to Jordan, land freight has more than doubled in recent months, a Jordanian trader said. ”We’ve seen jumps from $60-70/tonne [trucking] cost from Jebel Ali, to Jordan, via Saudi Arabia, to … as high as $150/tonne when ordering non-prime material for both PP and PE  from a major UAE-based supplier,” the trader said. The Middle East observed the Muslim fasting month of Ramadan from 10 March, during which working hours were reduced, culminating with the Eid ul-Fitr holiday during the second week of April. “Now that we are back from Eid, the expectations are towards some decreases in the [land freight] costs,” the trader said. In March, the spike in freight cost was due shortage of trucks following a sharp spike in demand to transport essential goods by land for Israel from Jebel Ali via Saudi Arabia. This shortage was exacerbated by Saudi Arabia’s existing ban on trucks older than 20 years from transiting through its territories, which came into effect in 2023. Trucking demand for polymer cargoes from Oman and the UAE to Egypt via Saudi Arabia also increased, causing a sharp increase in freight cost. “The cost of [transporting] polymers by truck to Egypt was around $80-100/tonne before March, but it increased to $120-140/tonne ahead of Ramadan Season,” a regional trader said. Saudi Arabia’s own cost of transporting polymer cargoes, however, was not affected, market players said, despite a lot of trucks mobilized since the beginning of the year to transport material inland from plants located on the west coast to ports situated on the east coast, so be able to ship them to customers in Asia. Overall polymer market activity has yet to pick up as the Gulf Cooperation Council (GCC), East Mediterranean, and North African markets are just returning from the Eid holiday. Concerns are now shifting toward repercussions of a potential full-on war between Iran and Israel, which could further impact logistics in the region, specifically in the Strait of Hormuz, which could cause oil and feedstock prices to soar. Explosions in Iran, Syria and Iraq were reported early on Friday, causing oil prices to surge by more than $3/barrel in early trade, with Brent crude breaching $90/barrel before easing down. According to media reports, Israel was behind the explosions in Iran. The Strait of Hormuz, which connects the Gulf of Oman and the Persian Gulf, is bordered by Iran, Oman and the UAE. It is an important chokepoint for energy trades from the Middle East. On 13 April, Iran’s Revolutionary Guards seized Portuguese-flagged container ship MSC Aries in the key shipping lane which Tehran says is linked to Israel. On the same day, Iran had launched drones and missiles on Israel, which it blames for a fatal attack on an Iranian diplomatic facility in Damascus that killed a high-ranking member of Iran's Islamic Revolutionary Guards and eight other officers. Focus article by Nadim Salamoun and Pearl Bantillo Click here to read the ICIS LOGISTICS topic page, which examines the impact of shipping disruptions on oil, gas, fertilizer and chemical markets.

19-Apr-2024

SAO PAULO (ICIS)–Petrobras is to restart its large-scale ANSA fertilizers plant in Araucaria, state of Parana, which has been idle since 2020, the Brazilian state-owned energy major said late on Wednesday. The company did not disclose the date it intends to restart production but said as soon as “next week” technicians would work at the site to establish what repair or upgrading work is necessary to restart the facilities. The facilities are called Araucaria Nitrogenados SA (ANSA), a wholly owned Petorbras subsidiary. They are located next to Petrobras’ Presidente Getulio Vargas Refinery (REPAR). Production capacities stand at 720,000 tonnes/year of urea, 475,000 tonnes/year of ammonia, and 450,000 cubic meters/year of the so-called ARLA urea, an additive added to diesel engines to reduce the emission of polluting gases. “In view of the review of the company's strategic guidelines approved last year, investment in fertilizers production is once again part of Petrobras' portfolio,” said the company. Petrobras new CEO, Jean Paul Prates, was appointed by President Luiz Inacio Lula da Silva in January 2023, when he started his term. Unlike the prior Administration, Lula wants Petrobras to play a more active role in the economy. Lula has repeatedly said Brazil needs to increase fertilizers production to lessen its dependence on imports – the country’s trade deficit in fertilizers is large as its agricultural output has become on of the largest in the world. Agriculture is now a quarter of Brazil's economy. Moreover, the significant producer of fertilizers in the country, Unigel, has paused production on two large-scale fertilizers plant due to high natural costs while it negotiates with its creditors a debt restructuring. The two plants were a 10-year lease from Petrobras signed in 2019. Meanwhile, Unigel and Petrobras have been involved in negotiations to help the former restart its plants, but an agreement signed in December is now under scrutiny. All in all, the two plants remain idle. This week, Petrobras said its “re-entry” into the fertilizers sector would first focus on “assets that already belong” to it. Front page picture: Petrobras' facilities in Aracaura, state of Parana  Source: Petrobras

18-Apr-2024

LONDON (ICIS)–Eloise Radley, Energy Market Reporter, and Ignacio Sotolongo, Senior Editor at ICIS, sit down to discuss how geopolitics have impacted US oil production in recent years and how things could change if we see a new administration in November.

17-Apr-2024

SAO PAULO (ICIS)–Polymers major Braskem and US petrochemicals engineering services provider Lummus are to carry out a joint study to electrify one of its steam crackers in Brazil. Financial details were not disclosed. The two companies did not disclose which facility Lummus’ proprietary technology for e-cracking will be tested. Lummus commercializes its proprietary technology under the branded name SRT-e. “The SRT-e electric cracking heater leverages Lummus’ proven Short Residence Time (SRT) technology modified to operate using electricity and incorporates a modular unit-cell design that can be replicated for plants to accommodate any commercial capacity,” said the two companies. “The technology uses all commercially demonstrated components, plus an optimum heat flux profile leading to a longer radiant coil life and longer run length. In addition, decoking can be carried out on a unit-cell basis so maintaining a spare heater is not required.” Steam cracking is one of the most energy-intensive activities within a petrochemical plant. The sheer amount of energy required has so far made crackers’ electrification elusive. Some petrochemicals majors are developing experimental e-cracking units. In 2022, Dow and Shell announced one test unit in the Netherlands. Also in 2022, Germany’s BASF and Saudi Arabia’s SABIC, together with industrial gases major Linde, announced another test unit at BASF’s flagship Ludwigshafen site.

17-Apr-2024

SINGAPORE (ICIS)–Singapore's petrochemical shipments in March fell by 3.6% year on year to Singapore dollar (S$) 1.16 billion ($853 million), extending the 2% contraction in the previous month and weighing on overall non-oil domestic exports (NODX), official data showed on Wednesday. March non-electronic NODX down 23.2% year on year March manufacturing PMIs show continued expansion Singapore economy forecast to grow 1.0-3.0% in 2024 Overall exports of chemicals and chemical products in March fell by 37% year on year to S$3.54 billion, reversing the 5.8% expansion in February, Enterprise Singapore said in a statement. The country's NODX for the month fell by 20.7% – a much steeper decline from February’s 0.2% contraction – to S$14 billion because of a high base a year ago, with shipments to most major trading partners posting declines. March non-electronic NODX, which includes petrochemicals and pharmaceuticals, fell by 23.2% year on year to S$11.2 billion. Overall NODX to seven out of Singapore's top 10 markets fell in March, but shipments to Hong Kong, Taiwan and China rose. Singapore is a major manufacturer and exporter of petrochemicals in southeast Asia. Its petrochemicals hub Jurong Island houses more than 100 global chemical firms, including energy majors ExxonMobil and Shell. In the first quarter, the country’s economy grew by 2.7% year on year in the first quarter, accelerating slightly from the 2.2% expansion in the preceding quarter, according to official advance estimates. On a quarter-on-quarter seasonally adjusted basis, Singapore’s economy expanded by 0.1%, extending the 1.2% expansion in Q4. The manufacturing sector in Q1 grew by 0.8% year on year, moderating from the 1.4% expansion in the previous quarter. "Within the sector, output expansions in the chemicals, precision engineering and transport engineering clusters more than offset output contractions in the electronics, biomedical manufacturing and general manufacturing clusters," the Ministry of Trade and Industry (MTI) said. For the whole of 2024, Singapore's economy is expected to expand by 1.0-3.0%, compared with actual GDP growth of 1.1% growth in 2023, the ministry said. Manufacturing activity in Singapore improved in March, with the Singapore Institute of Purchasing and Materials Management (SIPMM) purchasing managers' index (PMI) inching up to 50.7, marking the seventh straight month of expansion. In contrast, a separate survey of private manufacturers by financial information and services provider S&P Global showed Singapore’s March PMI eased to 55.7 from 56.8 in February. Focus article by Nurluqman Suratman Thumbnail image: Singapore harbour and the Marina Bay Sands Hotel, 16 March 2023. (Franz Neumeier/imageBROKER/Shutterstock) ($1 = S$1.36)

17-Apr-2024

HOUSTON (ICIS)–Global container shipping major Maersk will resume Panama Canal transits for its OC1 service beginning 10 May, ending its “two-loop” setup it established in January because of transit restrictions brought on by a persistent drought. Maersk ceased transiting the canal in January for the service connecting Asia-Pacific and the US East Coast and instead transported containers across Panama using railroads. The company said it is taking the action because of the onset of the rainy season in the region and after the Panama Canal Authority (PCA) added three more daily slots based on the present and projected water levels in Gatun Lake. The PCA said it is optimistic that traffic through the canal could return to normal in 2025 as current forecasts indicate that steady rainfall will arrive later this month and continue during the rainy season. The PCA said all future plans remain contingent on how much rainfall comes and water levels in Gatun Lake. Peter Sand, chief analyst at ocean and freight rate analytics firm Xeneta, said he thinks there is still a long way to go before trade lanes via the Panama Canal become normal. “There may be projections for increased rainfall but at the moment they are just that – projections,” Sand said. “If water levels do not rise then it will be interesting to see how this plays out and whether Maersk can stick to this timeline.” Container ships and costs for shipping containers are relevant to the chemical industry because while most chemicals are liquids and are shipped in tankers, container ships transport polymers, such as polyethylene (PE) and polypropylene (PP), which are shipped in pellets. Some liquid chemicals are also shipped on container ships using isotanks. Please see the Logistics: Impact on chemicals and energy topic page

16-Apr-2024

LONDON (ICIS)–Gas in Focus deputy editor Marta Del Buono talks about key drivers for the current weeks affecting European gas market: Increasing geopolitical tensions support European gas prices ICIS technical analysis also indicates bullish sentiment across commodities Below average temperatures and below solar generation in Germany add support

16-Apr-2024