Chemicals

HOUSTON (ICIS)–Rates for shipping containers from Asia to the US fell again this week, but carriers are warning customers that they will stop accepting export bookings from unionized US Gulf and East Coast ports ahead of a looming 1 October strike deadline. Earlier this week the International Longshoremen’s Association (ILA), which represents about 25,000 port workers employed in container and roll-on/roll-off operations at ports on the US East and Gulf coasts, reiterated that it will strike without a new collective master contract agreement. At the same time, unions in the Netherlands and Bermuda – as well as other worldwide unions – have pledged solidarity with the ILA. The United States Maritime Alliance (USMX) is representing the ports and is urging the ILA to resume negotiations. A market participant told ICIS this week that it anticipates a work stoppage. Robert Khachatryan, founder and CEO of Freight Right Logistics said the strike looks like a certainty. “Even if the president gets involved, the ILA president said they will do slowdowns (an action where employees intentionally reduce their productivity to show dissatisfaction with their employer and gain leverage),” Khachatryan said. Khachatryan said cargoes are already being diverted to the US West Coast, which is likely to contribute to longer delivery times and could create congestion and backlogs at the West Coast ports. “If a strike was to stretch into weeks, that would certainly be enough time to overwhelm other ports,” Khachatryan said. Khachatryan said the fact that much of the typical peak season cargo has been pulled forward amid efforts to beat the work stoppage may ease some of the strain on supply chains. “Product for Black Friday and Cyber Monday (two of the busiest shopping days ahead of the Christmas holidays) should already be in the country now,” he said, adding that volumes have been tame this year compared with busier years. “The big retailers are not expecting a massive season, and the orders reflect that,” he said. CONTAINER RATES Global average rates for shipping containers fell by 5% this week, according to supply chain advisors Drewry and as shown in the following chart. Rates from Asia to both US coasts fell at a slower rate, with Shanghai to New York down by 4.5% and rates from Shanghai to Los Angeles down by less than 1%, as shown in the following chart. Drewry said that while the looming port strike casts a shadow, weak demand is expected to drive further decreases in east-west spot rates in the coming weeks. Judah Levine, head of research at online freight shipping marketplace and platform provider Freightos, thinks the federal government will act before a strike stretched into a second week. “Especially in an election year, the vocally pro-labor administration may be hesitant to end a strike via the Taft-Hartley Act,” Levine said. “But the economic impact of a prolonged shutdown is something the White House likely also wants to avoid, leading many to imagine that an ILA strike would, one way or another, not be allowed to last more than a week.” 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), are shipped in pellets. They also transport liquid chemicals in isotanks. LIQUID TANKER RATES STEADY US chemical tanker rates held steady this week. Most trade lanes had limited activity due to lack of interest for spot tonnage. On the transatlantic route things were steady this week. An outsider is going on berth for end of September dates. However, contract volumes have been steady with regular owners. Space for this trade lane does seem to remain available among the regulars. Otherwise, this route has been mostly quiet, and most owners still have pockets of space left on their vessels for October. While rates for chemical tankers ex-USG remain firm this week, as the USG to Mediterranean, and EC Mexico are steady. The firming is due to a lack of available tonnage amid more inquiries and fixtures in this trade lanes. However, rates to both Asia and India have been soft, especially for stainless steel vessels. It is very possible there is another rate decrease next week should this trend continue. Overall, throughout the month the spot market should remain soft as there is open partial space in the US Gulf and as most owners continue to depend on contract tonnage. Focus article by Adam Yanelli Additional reporting by Stefan Baumgarten, Kevin Callahan Thumbnail image shows a container ship carrying cargo on its way to Antwerp Harbour. (OLIVIER HOSLET/EPA-EFE/Shutterstock).

20-Sep-2024

SINGAPORE (ICIS)–Thai conglomerate Siam Cement Group (SCG) plans to use ethane imported from the US as feedstock for its Long Son Petrochemical (LSP) complex in Vietnam to boost the project’s long-term competitiveness. Storage, supporting facilities for ethane to be built on site Ethane targeted as major feedstock for LSP cracker; C2 market “turbulence” expected LSP commercial operations start October SCG is in talks with a contractor for the new ethane storage project, with construction of the facilities expected to take about three years to complete, the company said in roadshow presentation on 16 September. “The site is equipped with a central utility system, ready for the installation of ethane gas storage tanks and pipelines,” the company said in a separate statement on 16 September. SCG has yet to finalize the capital expenditure for the project, and the prospective US ethane supplier for LSP was not disclosed. The $5.4bn LSP project in Ba Ria-Vung Tao province is Vietnam’s first integrated petrochemical complex and is 100%-owned by Thai conglomerate SCG. The mixed-feed cracker at the site currently uses propane and naphtha feedstocks imported from Qatar under a long-term supply deal. The cracker can produce 950,000 tonnes/year of ethylene; 400,000 tonnes/year of propylene; and 100,000 tonnes/year of butadiene (BD). SCG said that LSP is already operating flexible gas cracker which can use a variety of feedstocks, including ethane, propane, and naphtha. Ethane imported from the US is currently cheaper by $200-400/tonne than existing feedstock, SCG said, noting that the average price of ethane has been around 40% lower than that of naphtha and propane over the past three years. The feedstock derived from shale gas also provides greater price stability as it is linked to US natural gas prices, unlike naphtha, which is influenced by oil price fluctuations. FEEDSTOCK DIVERSIFICATION The enhancement to LSP's feedstock flexibility is part of SCG's efforts to bolster its chemicals business in the face of global oversupply, low demand and oil price volatility, SCG said. For ethylene (C2), the company expects "future turbulence" in the market, especially in 2027-2028 amid a wave of new global cracker additions, especially in China. Global ethylene supply is projected by SCG to grow at a slower average rate of around 3-4% in 2025-2030, compared with 5% in 2019-2024. China will comprise around 53% of new ethylene supply additions in 2025-2030, it noted. SCG expects an "extended chemicals trough with low margin" in 2025-2030 amid continued naphtha price volatility. “The current global situation and the future outlook over the next 2-5 years will be marked by increased volatility,” SCG CEO and president Thammasak Sethaudom said on 16 September. “All SCG businesses are moving forward with strategies that align with these dynamics while also reducing carbon dioxide emissions…to ensure long-term competitiveness.” LSP COMMERCIAL OPERATIONS START OCTOBER The LSP complex has completed performance test runs in September and is on track to start commercial operations next month, according to SCG. Its utilization rate following start-up will be "determined by global demand dynamics", it said. LSP’s downstream plants include a 500,000 tonne/year high density polyethylene (HDPE) unit; a linear low density PE (LLDPE) unit of the same capacity; and a 400,000 tonne/year polypropylene (PP) unit. The cracker had an outage in February due to a technical issue and resumed normal operations in August. It had declared a force majeure in February due to issues at the cracker that also shut its downstream PE and PP units. Credit ratings agency Fitch Ratings in a note on 17 September said that it expects LSP to ramp up its utilization rate to 70-80% in 2025, “supported by its cost competitiveness versus imports and the flexibility to use both propane and naphtha as feedstock”. Imports currently fulfil nearly all of Vietnam's petrochemical requirements. Focus article by Nurluqman Suratman Thumbnail photo: Aerial view of SCG's Long Son Petrochemical Complex in Vietnam (Source: SCG)

19-Sep-2024

HOUSTON (ICIS)–The Federal Reserve lowered its benchmark interest rate by a half point to 4.75-5.00% on Wednesday, and the central bank could lower it by an additional half point by the end of the year. The following table summarizes the current and past forecasts for rates, inflation and GDP by members of the Federal Reserve. 2024 2025 2026 Fed funds 4.4% 3.4% 2.9% June forecast 5.1% 4.1% 3.1% GDP 2.0% 2.0% 2.0% June forecast 2.1% 2.0% 2.0% Core PCE Inflation 2.6% 2.2% 2.0% June forecast 2.8% 2.3% 2.0% Source: Fed If the forecasts hold true, the US economy will achieve a soft landing, with inflation falling to the Fed's long-term goal of 2% without triggering a recession. FED NOTES WEAKER JOB MARKET, INFLATIONThe Fed said that the job market had slowed since the last time it voted on rates at the end of July. Inflation has moved closer to the Fed's goal but remains somewhat elevated. Unlike its previous statement in July, the Fed said it "has gained greater confidence that inflation is moving sustainably toward 2%". In addition, the Fed stressed its commitment to support maximum employment. Its last statement in July lacked such a statement. CHEMS WILL WAIT BEFORE RATES TRIGGER RECOVERY IN DURABLESChemical producers will have to wait before lower rates cause a recovery for demand in durable goods and housing. Both are key end markets for polymers such as polypropylene (PP), nylon, acrylonitrile butadiene styrene (ABS) as well as chemicals used to make polyurethanes, such as isocyanates, polyols and propylene oxide (PO). Huntsman said the lag is typically about two quarters. Ultimately, mortgage rates will need to approach 5% before markets for homes and durable goods can recover, according to Dow. Higher rates had made housing and durable goods like furniture and appliances less affordable. Because fewer consumers are buying homes and moving, they are purchasing fewer durable goods. LOWER RATES TEND TO BOOST OIL, CHEM PRICESTypically, prices for oil and other dollar-denominated commodities tend to rise as US interest rates fall. A rise in oil prices typically causes those for petrochemicals to increase. Margins for US-based producers benefit from higher oil prices because their plants predominantly rely on gas-based feedstock. By contrast, much of the world relies on oil-based naphtha, giving US producers a cost advantage. FIRST CUT IN MORE THAN FOUR YEARSThe last time the Federal Reserve lowered interest rates was in March 2020, during the COVID-19 pandemic. Lockdowns, government stimulus and recovery caused a surge in inflation, which led the Federal Reserve to begin raising the benchmark rate two years later in what became the most aggressive tightening campaign in more than 40 years. The Fed stopped raising the rate in July 2023. A year later, inflation started showing signs of approaching the Fed's target of 2%. At the same time, the labor market began cooling off and returning to more normal levels. Focus article by Al Greenwood Thumbnail shows money. Image by ICIS.

18-Sep-2024

SAO PAULO (ICIS)–The likely increase in Brazil’s import tariffs for dozens of chemicals will start improving beleaguered domestic producers’ poor margins even though petrochemicals prices remain low, according to an analyst at US credit rating Fitch. Marcelo Pappiani, credit analyst for Brazilian chemicals producers, added that imports into Brazil and the wider Latin America remain high and are likely to continue that way as China and the US work through their overcapacities. Despite that, prices have stabilized, albeit at low levels, and “the worst of this downturn” seems to have subsided, said Pappiani. The two largest chemicals producers in Brazil, polymers major Braskem and chlor-alkali and polyvinyl chloride (PVC) producer Unipar, are covered by Fitch. The two companies have posted several quarters of poor financial results on the back of low prices and competition from overseas producers. TARIFFS UPBrazil’s chemicals producers – represented by trade group Abiquim, in which Braskem has a commanding voice – were hoping the Brazilian cabinet would increase import tariffs on dozens of chemicals in September. However, there have been contradictory reports on this, with some expecting the hike to be approved as soon as Wednesday (18 September), while other reports citing government sources have said the decision would be pushed back to December. The increases would follow a public consultation earlier this year in which Abiquim as well as individual companies proposed increasing tariffs in more than 100 products, most of them from 12.6% to 20%. Braskem is, at the same time, partly owned by the country’s state-owned energy major Petrobras, so the Abiquim/Braskem lobbying tandem tends to find open ears in the corridors of power in Brasilia under the current government, which has committed to expand the industrial sector. Pressure not to increase import tariffs has also been strong from other sectors, not least plastic transformers represented by Abiplast, but the producers’ proposals are expected to have won the day. “Petrochemicals prices in Brazil and the wider Latin America seem to have reached the bottom and we are seeing slightly less pressure on companies, despite of course still imports coming into the region in big numbers, from China, the wider Asia and the US,” said Pappiani. “Companies have lobbied the government strongly for an increase in import tariffs as well as other measures to prop up the chemicals industry. Import tariffs seem set to increase and that should soon make Brazilian producers more competitive.” Pappiani is in no doubt higher import tariffs in several chemicals – when around half of the Brazilian industry’s demand is covered imports – are likely to translate into higher prices for consumers, precisely the reasoning used by those who oppose the hike. “President Lula has said he wants to foster the chemicals sector and has met on several occasions with CEOs from the industry as well Abiquim,” said Pappiani. “But, of course, consumers will end up paying for higher import tariffs – this happens in all economic sectors, not just petrochemicals, of course.” COMPETITIVENESS THROUGH TARIFFSAs well as higher prices for consumers, those opposing the hike in import tariffs argue that Brazilian petrochemicals producers should speed up their modernization and diversification, so they are not as dependent on government policy for their profitability. Pappiani said Braskem is a well-managed company with international assets which would make it a profitable enterprise even without government measures which prop up its competitiveness in its domestic market. However, critics of protectionist measures continue their campaign against the increase in import tariffs, although according to most analysts the dice has been cast. On Tuesday, the president of Abiplast published a charged article in Brazil’s daily Estadao in which he wondered if Braskem would always need state indirect help to keep afloat, even if its second largest shareholder is Petrobras, which in theory should make accessing cheaper raw materials easier. “Why are foreign suppliers of petrochemical products able to be more competitive in their exports to Brazil, even bearing the costs of transportation, logistics and exposure to exchange rate variations? Over the past 40 years, we have exported many of these products to China; if the Chinese (and other countries) become competitive by importing Brazilian oil, why can't Brazilian [petrochemicals] producers become competitive?” said Jose Ricardo Roriz Coelho. “The exaggerated protection of the few petrochemical companies in Brazil results in them directing investments to countries where they face greater competition in order not to lose market share. Europe, which is not competitive due to its lack of raw materials for petrochemicals, has chosen to add value further down the production chain by importing resins from countries that are more efficient in production. “Structural problems, such as insufficient supply of inputs, cannot be solved with short-term remedies. The debate on new tariffs and the production chain is crucial,” concluded Roriz. Indeed, the prospect of high import tariffs being approved as soon as this week has already propped up Braskem’s market capitalization in the past few weeks. On 13 September, for instance, the company’s stock rose by nearly 8% as investors expect an imminent decision on the increase in import tariffs, according to a report by InfoMoney. The increase in import tariffs could automatically translate into higher earnings before interest, taxes, depreciation, and amortization (EBITDA) for Braskem, to the tune of $300 million/year, according to some analysts. Under current business conditions, that would be roughly the same EBITDA amount the producer posted in the second quarter of this year. “In our view, this additional tariff would help contain Braskem’s cash burn in recent quarters. The company would then be better positioned to capture a future cycle of increases in petrochemical spreads,” said analysts at XP cited by InfoMoney. Front page picture: Facilities operated by Brazilian polymers major Braskem in the state of Sao Paulo Source: Braskem Interview article by Jonathan Lopez 

17-Sep-2024

BARCELONA (ICIS)–Petrochemical markets are likely to remain depressed while China and other countries continue to add significant capacity, unless big wave of closures and demand improvement help to achieve balance. Global capacity additions far outstrip demand growth China, Middle East, US likely to continue expansions China drove the petrochemical supercycle, but no longer China chemicals demand growth likely only 2-4%/year Prospect of global deflation Europe can focus on specialty chemicals, other niches In this Think Tank podcast, Will Beacham interviews ICIS Insight editor Nigel Davis, ICIS senior consultant Asia John Richardson and Paul Hodges, chairman of New Normal Consulting. Editor’s note: This podcast is an opinion piece. The views expressed are those of the presenter and interviewees, and do not necessarily represent those of ICIS. ICIS is organising regular updates to help the industry understand current market trends. Register here . Read the latest issue of ICIS Chemical Business. Read Paul Hodges and John Richardson's ICIS blogs.

17-Sep-2024

SAO PAULO (ICIS)–Brazil and other Latin American countries have been grappling with severe wildfires in recent weeks, affecting even typically moist areas as they struggle with an intense drought. Millions are seeing their livelihoods disrupted across the Americas in an early showing of the worse effects of global warming, a signal of what the new normal will mean for the economy with recurrent disruption to logistics potentially the new normal. While Brazil is now battling wildfires, just three months ago the country suffered its worst floods ever, hitting the southernmost state of Rio Grande do Sul, a key petrochemicals and industrial hub where the economy came to a standstill for more than a month. Meanwhile, a severe drought is for the second consecutive year hitting the northern state of Amazonia, where the mightily Amazon River is already recording lower water levels than normal. In 2023, a similar situation brought havoc to petrochemicals logistics as the area is home to the Manaus Free Trade Zone (Zona Franca de Manaus, or ZFM in Portuguese) via which large amounts of imported chemicals make their way onto the rest of the country. Experts have warned Brazil is ill-prepared for the consequences of global warming, despite its huge progress on renewable energy’s implementation, and have asked policymakers to make climate change preparedness a cornerstone of all regulations approved. In another example of extreme weather affecting the Latin American chemicals industry, the Mexican petrochemicals hub in Altamira, in the east of the country, was brought to its knees earlier this year by a months-long drought. The authorities in Altamira prioritized water supplies to households and imposed restrictions to industrial players, making many companies' operations untenable and leading to several force majeure declarations. BRAZIL: FIRE EVERYWHEREThe current wildfires crisis in Brazil began in August and worsened due to widespread drought – numerous fires still burning. Blazes are also raging near the capital, Brasilia, and in the northern coastal state of Bahia, state which is being hit by the same drought than Amazonia. Active wildfires on the outskirts of Sao Paulo, the Americas' most populous metropolitan area with 20 million inhabitants, have significantly polluted the air over the past week, casting a grey pall over the city and exacerbating the city's already congested traffic. The state's Civil Defense reported ongoing fires in eight municipalities on 15 September. The state government has mobilized all available aerial resources to combat the blazes, deploying five fixed-wing and eight rotary-wing aircraft. And, just over the weekend, the waters of Sao Paulo's major Pinheiros River turned emerald green due to an algae bloom caused by the drought. The state's environmental agency attributed the river's color change to low water levels and the smoky air to a hot, dry mass trapping pollutants from ongoing wildfires in nearby forested areas. Over the weekend, President Luiz Inacio Lula da Silva surveyed the Brasilia National Park by air after a fire erupted there, having already consumed 1,200 hectares. In Serra do Cipo, in the municipality of Muquem de São Francisco in western Bahia, firefighters have been battling a blaze for 30 days. Persistent challenging weather conditions, including high temperatures, strong winds, and low humidity, are hampering efforts to contain the fire. The situation is further complicated by a prolonged drought, with no rainfall in the region since May. Brazil’s rich greenery, meanwhile, continues to be threatened by deforestation. The Amazon is the largest rainforest in the world and it acts as a key absorber of emissions, reason why the world’s eyes are on Brazil and its efforts – or lack of on occasion – to preserve the area. Last week, analysis by green group Amazon Conservation showed that significant portions of the Amazon rainforest remain unprotected. The study, based on satellite imaging and machine-learning models, identified key unprotected areas in Peru, Brazil, French Guiana, and Suriname. These regions contain large, dense trees and continuous canopy cover, making them vital carbon stores. The analysts reiterated Brazil’s urgent need to expand its conservation efforts to safeguard the Amazon's critical role in global climate regulation. While Lula’s first and second terms (2003-2011) registered lower deforestation rates, successive administrations overlooked the issue and partly reversed prior progress. Lula’s environment minister Marina Silva, widely praised for the initial success in the early 2000s, is back in the cabinet to achieve the same feat in what perhaps is the world's last chance to save the vital rainforest. However, as the Amazon quickly deteriorates, experts are embroiled in a scary debate: some studies are already suggesting the area may turn from a net absorber of carbon into a net emitter. Without its key lung taking in emissions, the effects of climate change on Earth could become considerably worse. OVERWHELMEDCritics have accused the Brazilian government of responding too slowly when the wildfires crisis began in August, potentially exacerbating the situation. However, the reality is that no Brazilian administration has ever faced such widespread wildfires over such an extended period – the country has traditionally been seen as the archetypal tropical country, where rainfall is common and often torrential. After thousands of hectares have been lost to the flames, Lula's administration appeared to fully acknowledge the reality last week, announcing measures to assist residents and municipalities in the areas most affected by the drought. This week, following Lula's aerial survey of the devastation in Brasilia National Park, the government announced the creation of a National Climate Agency, tasked with addressing extreme natural phenomena, as the country's vast geography makes it susceptible to opposing weather events within just a few months. The agency was one of Lula's plans after he took office for the third time in January 2023, but it was repeatedly delayed. The multiple climate crises Brazil has endured since May have now made its establishment essential. LATIN AMERICA IS GETTING DRIERElsewhere in Latin America, other countries are also battling record-high numbers of wildfires. Satellite data from Brazil's National Institute for Space Research (INPE) recorded 346,112 fire outbreaks across all 13 South American countries as of 11 September. This figure surpasses the previous record of 345,322 cases set in 2007, in a history dating back to 1998. Recent satellite imagery has revealed a smoke corridor stretching diagonally across the continent from Colombia to Uruguay. Despite efforts by Brazilian and Bolivian authorities, the blazes continue unabated, fueled by extreme temperatures and challenging weather conditions. Within petrochemicals, it is not only players in Brazil’s Manaus area who are having to learn how to do logistics under a new reality. In a recent trip to Buenos Aires, a source at a chemicals trader also operating in neighboring Paraguay and Uruguay described how low water levels in the equally mighty Parana River are putting a strain on the company’s logistics. The Parana River runs through Brazil, Paraguay, and Argentina for some 4,880 kilometers and it is the second largest river in South America, only behind the Amazon River. As water levels in the Parana have been unstable and reached record lows in the past two years, the Argentinian trading source said the company is slowly shifting the way it moves its cargo. “With low water levels, barges cannot fully load, so more barges are needed to transport the same amount of material. This obviously increases logistics costs quite a bit,” said the source. “We have always used the Parana River to bring product from Uruguay’s capital Montevideo, where it is shipped to from across the world, to landlock Asuncion, the capital of Paraguay. This has become a nuisance in recent months, and we are increasingly turning to trucks to transport the materials which can be transported by road.” Insight by Jonathan Lopez

17-Sep-2024

LONDON (ICIS)–Click here to see the latest blog post on Chemicals & The Economy by Paul Hodges, which suggests OPEC+ risks losing control of oil markets. 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. Paul Hodges is the chairman of consultants New Normal Consulting.

17-Sep-2024

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. I did the same exercise on global ethylene markets almost exactly a year ago as I do in today's post. This makes me wonder why there is talk of early signs of a global recovery in olefins and derivative markets. Based on the new calculations, what would it take to return global operating rates to their very healthy 1992-2023 average of 88%? Assuming global production, which is about the same as demand, stays unchanged from our base case, global capacity would have to grow by an average of around 2m tonnes a year versus our base case of 6.2m tonnes a year. This implies capacity closures elsewhere to get to the 2m tonnes a year of 2024-2030 capacity growth. Global capacity would need to grow at an average 1% per year to achieve a 2024-2030 operating rate of 88%. This would compare with the 1992-2023 average of 4%. One might argue that we have underestimated global demand given the likelihood of a loosening cycle by the Fed, perhaps a big dose of Chinese economic stimulus, and booming economies in the developing world such as India’s. But what happens in the rest of the world is less consequence compared with events in China. Today’s second chart – showing China’s percentage shares of global demand for the major ethylene derivatives in 1992 (at the start of the Chemicals Supercycle) and by the end of this year – underlines the disproportionate role that China has come to play in driving global consumption: In 1992, from a 22% of the global population, China’s average share of global demand across these ethylene derivatives was 6%. China’s share of global demand is forecast to reach 40% from only an 18% share of the global population by the end of 2024. The Economist wrote in its 7 September issue that the real Chinese economic picture may be bleaker than is commonly painted. “The official [Chinese government] numbers show that the GDP growth rate has reverted to pre-pandemic level, despite the moribund housing industry and low investment in infrastructure,” wrote the magazine “This is a risible claim, says Logan Wright of Rhodium Group, a consulting firm. ‘The broader problem is simply that the GDP data have stopped bearing any resemblance to economic reality,’ he explains. My ICIS colleague, Kevin Swift, has looked at disagreements over China’s population level. In the blog’s 30 August post, he wrote: “Demographer Yi Fuxian at the University of Wisconsin has questioned assumptions about current Chinese population and the likely path forward. He examined China’s demographic data and found clear and frequent discrepancies. These should parallel each other, and they do not. “Yi posits that China population in 2020 was 1.29bn, not 1.42bn, an undercount of over 130m.” If China’s population was smaller than commonly assumed in 2020, so perhaps was its chemicals demand, making today’s global oversupply worse. 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.

17-Sep-2024

HOUSTON (ICIS)–Gevo has received a patent for its process that converts ethanol into olefins in a single step, providing another way to make propylene from renewable feedstock, the US-based renewable chemicals producer said on Monday. The patent, No 12,043,587 B2, addresses the company's process that relies on catalyst combinations for the process, which can make propylene and butylenes, which are also known as butenes. Gevo had licensed the technology to LG Chem. Chemical companies have had limited ways to produce propylene or butylenes from renewable feedstock. Technology already exists to dehydrate ethanol to produce ethylene. Companies could then convert the ethylene to propylene through a metathesis unit, but that would require an additional step and another plant, which would increase costs. Another route is to hydrotreat natural oils and used cooking grease to produce renewable naphtha. That naphtha could then be cracked in traditional ethylene plants to produce olefins and aromatics. This process faces possible feedstock constraints if companies wish to use nonfood feedstocks. Already, oleochemical producers that rely on tall oil have had to compete with renewable diesel producers for feedstock. Gevo did not compare the costs of its process to these existing ways to make propylene and butylenes from renewable sources.

16-Sep-2024

NEW YORK (ICIS)–It has been a long time coming and there is plenty more time before the chemical industry finally sees a meaningful upturn in the durable goods cycle, in turn giving a much-needed boost to commodity chemicals, according to Jefferies. “We expect demand stabilization in 2025, with a restock cycle and a rate-driven durables goods cycle in 2026-2027 to set the stage for the next period of tight commodity chemical supply/demand balances – MDI (methylene diphenyl diisocyanate) and methanol first, in our view, then acetyls, then olefins,” said Laurence Alexander, analyst at Jefferies, in a research note. In his base case scenario, the analyst sees US durable goods demand flat to down 3% in 2025 and up around 10% in 2026. The anticipated turn in the cycle for housing and durable goods would be a strong catalyst for shares of Eastman, Huntsman, Avient and DuPont, he pointed out. For chemicals in the near term, Alexander expects Q3 2024 to show a return to “normal seasonality” and Q4 volume outlooks to be trimmed 1-2% on more caution on the Christmas spending season – especially in Europe – as well as automotive production this winter. TRIMMING OUTLOOK FOR CELANESEGiven the softer near-term outlook, the Jefferies analyst also trimmed his earnings per share (EPS) estimates on Celanese for Q3 (by $0.06 to $2.84), Q4 (by $0.05 to $3.09) and for 2025 (by $0.10 to $10.40). “Credit easing is likely needed to trigger a demand rebound, and any tailwind from an improved credit environment will likely not be evident until mid-2025 at the earliest,” said Alexander. “Although destocking has faded, demand trends remain broadly sluggish with few signs of a recovery. European demand has yet to trough, North America is flattish and the recovery in Asia has been muted,” he added. By end-market, he sees electronics likely rebounding but at a slower pace until consumer confidence improves and automotive production accelerates. Consumer durables and construction demand is likely to remain soft into next summer. And automotive demand is muted overall, with headwinds to production schedules likely in the near term. Longer term, he expects better momentum in electric vehicle (EV) sales in China. Focus article by Joseph Chang

16-Sep-2024