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US manufacturing shrinks for 16th month, but downturn may be stabilizing – ICIS economist
HOUSTON (ICIS)–US manufacturing activity shrank for a 16th consecutive month in February, with the purchasing managers’ index (PMI), compiled by the Institute for Supply Management (ISM), falling to 47.8 points, from 49.1 in January. PMIs below 50.0 indicate a contraction in manufacturing and PMIs above 50.0 indicate an expansion. Although the pace of the contraction was faster than in January, it slowed compared with 2023, said Kevin Swift, ICIS senior economist for Global Chemicals. Also, despite the latest decline, eight industries out of 18 expanded in February, up from four in January, Swift said, adding, “the manufacturing downturn may be stabilizing”. In the chemical industry, activity expanded for a second month, following 16 months of decline. Manufacturing production retreated into contraction last month, as did new orders. Order backlogs contracted, but at a slower pace than in January. Inventories contracted for a 13th month, with the pace accelerating. The low inventory could provide a floor for output, Swift said, adding, “The long and deep de-stocking cycle could be ending, with the possibility for re-stocking later this year.” Although demand remains slow, manufacturing may be at the early stages of a recovery, he said. Prices edged up for a second month in February, but the pace of the increase slowed from January. Prices are sensitive to changes in supply and demand and tend to provide a leading signal, the economist said. MANUFACTURING AT A GLANCE February 2024 (Source: Institute for Supply Management) Thumbnail shows an automobile being manufactured. Image by Ng Han Guan/AP/Shutterstock.
INTERVIEW: Arkema shifts gear to more incremental M&A – CEO
PARIS (ICIS)–Arkema’s mergers and acquisitions (M&A) strategy will focus on smaller deals after a period of intense transformation into a specialty chemicals company, according to its CEO. Since its creation from Total’s chemicals operation in 2004, the France-headquartered group has reduced its exposure to commodities, while boosting specialty materials operations through organic investment and M&A. In 2006, its intermediates division accounted for 50% of group sales. Some of its big specialty acquisitions include the Sartomer business in 2011, Bostik in 2015 and Ashland’s adhesives business in 2022. Big disposals include the vinyl products business in 2012 and polymethyl methacrylate (PMMA) in 2021. A total of 26 acquisitions have added around €5bn in sales, while 20 divestments were worth around €3bn in revenues. The remaining intermediates comprise a fluorogas business and acrylic monomers. Speaking on the sidelines of the company’s 2023 financial results conference, CEO Thierry Le Henaff said: “We are very happy with our portfolio: it will continue to change a little bit, incrementally – we have done so much in terms of portfolio management…. Our M&A will now become more incremental.” However, capital expenditure will be increased as the company builds new plants for materials that take advantage of some of the key growth areas Arkema has identified. Le Henaff pointed out the projects and key product groups he identified during the company’s capital market day in October 2023. The CEO said: “The world is changing with the drive towards sustainability which offers opportunities. To take advantage of these we need to invest more than in the past. We will try to have a few significant projects in order to seize the opportunities from megatrends.” He said capex for 2024 is forecast to be €750m, €100m more than in 2023 and is expected to stay at these levels. Interview by Will Beacham Thumbnail photo: Arkema's Colombes, France, headquarters (Source: Arkema)
PODCAST: Asia, Europe oxo-alcohols Mar market sees sustained tight supply
SINGAPORE (ICIS)–On 27 February, OQ Chemicals' oxo-alcohols unit in Oberhausen, Germany, went offline amid technical issues, further tightening supply in Europe. Asia is also likely to see tight supply as the market moves into the second quarter, as Japan embarks on its turnaround season. Asia, Europe to see tight oxo-alcohols supply into Q2 Asia demand likely stable quarter on quarter; demand from downstream plasticizers weak Asia-Europe arbitrage window could open on tighter Europe supply In this podcast, ICIS markets editor Julia Tan and markets reporter Nicole Simpson discuss the outlook for oxo-alcohols in Asia and Europe.
Japan's MGC to close OX, PA plants in Jan '25; exits plasticizers business
SINGAPORE (ICIS)–Japan's Mitsubishi Gas Chemical (MGC) will suspend its production of orthoxylene (OX) and phthalic anhydride (PA) at its Mizushima site from mid-January 2025, and is selling off its 50% stake in CG Ester Corp, effectively exiting the plasticizers business. Continued unprofitability, aging equipment, and forecasts of shrinking demand prompted MGC's decision to halt OX and PA production next year, the company said in a statement on 26 February. MGC produces 30,000 tonnes/year of OX and 40,000 tonnes/year of PA at its Mizushima site. OX is mainly used as a raw material for PA, as well as for solvents and pharmaceutical and agrochemical intermediates. PA is used as a raw material for plasticizers. In a separate statement, MGC said that it has sold off its 50% stake in plasticizers maker CG Ester Corp to its partner JNC Corp in a deal worth yen (Y) 734m ($4.9m). The share transfer was scheduled for 29 March this year, after which, CG Ester will be fully owned by JNC. CG Ester can produce 70,000 tonnes/year of plasticizers via two production sites in Mizushima and Ichihara, according to its website. CGE will cease manufacturing at its Mizushima plant by March 2025 and will take over operations of JNC Petrochemical Corp's manufacturing facility in Ichihara and will also continue to operate its own facility at the site, JNC Corp said in a statement. ($1 = Y150.5) Additional reporting by Michelle Liew
LOGISTICS: Carrier CMA CGM to resume Red Sea transits on a case-by-case basis
HOUSTON (ICIS)–Global container shipping major CMA CGM Group will begin transiting the Red Sea on a case-by-case basis as it continues to closely monitor the situation, the company said in an advisory to customers. The company said it will make assessments for each vessel prior to transits, so routing choices cannot be anticipated or communicated. All other vessels will continue to be rerouted around the Cape of Good Hope. Houthi attacks on commercial vessels in the Red Sea began in November 2023, forcing carriers to begin diverting away from the Suez Canal in December. Maersk and CMA CGM Group were the last two major carriers to completely cease transits through the Suez. The longer routes put upward pressure on freight rates because of increased fuel costs and tightened capacity with fewer available ships. Rates surged but have begun to ease, although they remain elevated. 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. Visit the ICIS Logistics: impact on chemical and energy markets Topic Page.
US Chemours shares crash after CEO, CFO placed on leave
HOUSTON (ICIS)–Shares of pigment and fluoromaterials producer Chemours fell by more than 35% on Thursday after the company placed its two top executives and its principal accounting officer on administrative leave. Chemours also delayed the release of its full-year earnings for the second time. It did not say when it could release its results. Right now, the company's audit committee is conducting an internal review that will cover the following: The processes for reviewing reports made to the Chemours ethics hotline. The company’s practices for managing working capital, including the related impact on metrics within incentive plans, certain financial metrics made in government filings and in public announcements. Chemours did not say when it would release its full-year earnings. Meanwhile, the Rosen Law Firm is investigating whether a class action lawsuit could be filed on behalf of Chemours's shareholders. ADMINISTRATIVE LEAVE FOLLOWS BOUT OF EXECUTIVE TURNOVERThe executives placed on administrative leave are CEO Mark Newman, Chief Financial Officer Jonathan Lock and Principal Accounting Officer Camela Wisel. Denise Dignam will serve as interim CEO. Matt Abbott will serve as as interim CFO and principal financial and accounting officer. Newman has been CEO since mid-2021. Before that he was the company's chief operating officer. Lock became CFO in mid-2023. He succeeded Sameer Ralhan, who was one of several high-profile departures that took place that year. The following lists the other departures: At the end of March 2023, Ed Sparks resigned as the president of Titanium Technologies and Chemical Solutions. Also at the end of March, Sheryl Telford resigned as the company's chief sustainability officer. At the end of May 2023, Alisha Bellezza resigned as president, Thermal & Specialized Solutions (TSS), the business segment that makes fluorochemicals. Susan Kelliher, senior vice president, people, resigned at the end of September 2023. FIRST DELAY ANNOUNCED IN MID-FEBRUARYChemours disclosed that its audit committee was conducting the review in mid-February, when it announced the first delay of its earnings release. Chemours makes titanium dioxide, fluorochemicals and fluoropolymers like Teflon. Thumbnail shows Chemours CEO Mark Newman. Image by Chemours.
Korea’s S-Oil targets $2bn capex for Ulsan oil-to-chems project in '24
SINGAPORE (ICIS)–South Korean refiner S-Oil has earmarked won (W) 2.72tr ($2bn) this year for its thermal crude-to-chemical (TC2C) project called Shaheen, representing 87% of the total capital expenditure (capex) set for 2024. The full-year capex at W3.14tr was up 54% from 2023, the company said in its Q4 results presentation released in early February. Construction of Shaheen at the Onsan Industrial Complex of Ulsan City started in March 2023 and will be in full swing this year, with mechanical completion targeted by the first half of 2026. The funds that will go to the project – whose name was derived from the Arabic word for falcon – were up 86% from 2023 levels. As of end-December 2023, site preparation was 48% complete, with engineering, procurement and construction at 18.7%, according to S-Oil. “Site preparation and EPC [engineering, procurement and construction] work is under full-fledged execution with the actual progress going smoothly according to the plan,” the company said. The project will leverage on the T2C2 technology of its parent company Saudi Aramco, the world’s biggest crude exporter. Aramco owns more than 63% of S-Oil. The project is expected to yield 70% more chemicals, with a capex/operating expenditure savings pegged at 30-40% versus conventional process. Meanwhile, for upgrade and maintenance of plants in 2024, total expenses will fall by about 32% to W298bn, with just two plants due for turnaround in the year – its No 1 crude distillation unit (CDU) and its No 1 lube HDT (hydrotreatment) unit, the company said in the presentation, noting that the plan is preliminary. ICIS had reported that S-Oil will conduct maintenance at its Group I and Group II base oils units in Onsan, Ulsan for more than a month from mid-September this year. On 23 February 2024, a fire broke out at the company’s Onsan production site in Ulsan, shutting one of the three crude distillation units (CDUs) of its 669,000 bbl/day refinery, with some reduction in propylene output of the residue fluid catalytic cracker (RFCC) at the site, industry sources said. Other downstream operations at the site were not affected, but this could not be immediately confirmed with the company. Its Onsan complex can produce 910,000 tonnes/year of propylene; 187,000 tonnes/year of ethylene; 600,000 tonnes/year of benzene; and 1m tonnes/year of paraxylene (PX), according to the ICIS Supply & Demand Database. The company was planning to restart the No 3 CDU by 27 February, news agency Reuters reported, quoting unnamed sources. 2023 NET PROFIT SLUMPSS-Oil posted a 54.9% slump in net profit, with sales sliding by about 16% to as operating rates across its plants declined. in billion won (W) FY2023* FY2022 Yr-on-yr % change Revenue 35,726.7 42,446.0 -15.8 Operating income 1,354.6 3,405.2 -60.2 Net income 948.8 2,104.4 -54.9 *Revised figures from S-Oil on 26 February 2024 in billion won (W) FY2023 FY2022 Yr-on-yr % change Refining operating profit 399.1 2,344.3 -83.0 Petrochemical operating profit 203.7 -49.8 -509.0 Lube operating profit 815.7 1,110.7 -26.6 Source: S-Oil presentation, 2 February 2024 Average operating rates across the company’s plants declined and were in the range of 75.1% to 90.4% in 2023 due to weakening global demand, with paraxylene (PX) plants registering the lowest run rate. Source: S-Oil, February 2024 2024 OUTLOOK “Regional refining markets are forecast to maintain an above average level by steady demand growth coupled with low inventory levels,” S-Oil said. Refining margins in the first quarter will likely be supported by “heating demand in winter and spring maintenance season", it said. “With uncertainties on start-up timing and pace of major new refineries, market impact is estimated to be restricted in 2H [second half] or beyond,” the company said. Paraxylene (PX) and benzene markets “are projected to be supported by firm demand growth” on the back of new downstream expansions as well as demand for gasoline blending, “amid drastically reduced capacity addition”. Polypropylene (PP) and propylene oxide (PO) markets “are likely to gradually improve in tandem with pace of China’s economic recovery, while pressures from capacity addition continues”, while for lube base oils (LBO), the product spread is projected to be solid “on limited capacity additions and sustained demand growth”, according to S-Oil. Thumbnail image: S-Oil's Residue Upgrading Complex (RUC) and the Olefin Downstream Complex (ODC) in Ulsan, South Korea (Source: S-Oil) Focus article by Pearl Bantillo ($1 = W1,334)
US ONEOK to start chem feedstock projects in '25; mulls NGL terminal
HOUSTON (ICIS)–ONEOK plans to start up three major natural gas liquids (NGLs) projects in the US that will provide more feedstock to chemical companies – while its possible NGL export terminal remains in preliminary stages. NGLs such as ethane are the predominant feedstocks used by US crackers to produce ethylene. Crackers outside of the US have also been importing ethane and other NGLs to produce ethylene. ONEOK'S UPCOMING NGL PROJECTS The company plans to complete the remaining loop of the West Texas NGL pipeline to connect with its Arbuckle II pipeline. The project will allow ONEOK to ship 740,000 bbl/day of NGLs out of the Permian basin. The project should cost $520 million, and service should start in the first quarter of 2025. The following map shows the scope of the project. Source: ONEOK ONEOK plans to expand the Elk Creek Pipeline to 435,000 bbl/day of NGLs. It will allow the company to ship a total of 575,000 bbl/day of NGLs out of the Rocky Mountain region. The project should cost $355 million, and ONEOK should complete it in the first quarter of 2025. Elk Creek stretches for 900 miles (1,450 km). One end is near ONEOK's Riverview terminal in eastern Montana state, and the other end is at the company's existing Mid-Continent NGL operations in Bushton, Kansas, state. ONEOK plans to complete the MB-6 fractionator in Mont Belvieu, Texas, in the first quarter of 2025. The fractionator will have a capacity of 125,000 bbl/day. POTENTIAL NGL TERMINAL IN PRELIMINARY STAGESONEOK acknowledged on Wednesday that it filed an application with the US Army Corps of Engineers for a potential pipeline and terminal project. The project is in the preliminary stages of development, and ONEOK has yet to make a final investment decision (FID). The proposed terminal will be in Sabine Pass, Jefferson County, Texas state, according to the application. It will include four dock structures that could load very large gas carriers (VLGCs), very large ethane carriers (VLECs) and smaller vessels. The possible project will include 68 miles of two 20-inch diameter pipelines that will ship NGLs from ONEOK's NGL fractionators in Mont Belvieu to the terminal. ONEOK expects that the NGLs will be shipped to China, India and Europe, according to the application. The following map shows the site of the proposed export terminal. Source: US Army Corps of Engineers. The name of the project is the TXGC Terminal, and the applicants are TXGC Properties and TXGC Pipelines, subsidiaries of ONEOK. ONEOK did not provide more details about the proposed project. However, the terminal is a sign that companies are interested in developing more capacity to crack ethane outside of the US.
GLM FOCUS: What Qatar's latest LNG expansion plan means for market
LONDON (ICIS)–Qatar’s decision to add a further 16mtpa of LNG production by 2030 has a broad impact across the market, affecting prices, US LNG, buying activity, and shipping. Two more trains will take Qatari LNG production up to 142mtpa, representing over a quarter of global demand by late in the decade. As with past projects, Qatar appears less reliant on achieving contractual offtake, equity investments or a resulting final investment decision (FID) to move forward. The LNG giant’s ability to push ahead with an early announcement strengthens its hand securing offtake at the expense of future competitors, particularly as the market turns in buyers’ favour. Sources said that Qatar has already been negotiating with buyers in India to secure long-term offtake. Buyers in China are also aware of a strong marketing drive in Asia. However, offtakers are also showing signs of delaying any agreements where possible, as competition for offtake into the 2030s heats up, said sources. Current equity-holders did not respond to requests for comment over rights to bid for further investment. US PROJECTS Some US sources expected European buyers to continue to prefer US LNG over Qatari supply, avoiding the Suez Canal. Asian buyers, though, see less risk in Qatari supply, sources said. But the regulatory pause on new US LNG project approvals means little new contracting activity is likely. Last month, the Biden administration announced it would halt approvals for new US LNG projects until it updates how their economic and environmental impact is evaluated. That might change either after the US presidential election or when updated guidance from the US Department of Energy (DOE) is released. How LNG demand will develop is also important to understanding the impact of Qatar’s additional 16mtpa. “LNG demand is forecast to grow beyond production, capacity in operation or under construction, so new supply sources are required,” said a Shell spokesperson, calling continued investment in LNG “critical”. Before the latest Qatari expansion was announced, Shell forecast global LNG demand to overtake supply around 2027. But ICIS Analytics shows demand is unlikely to outstrip supply before 2030, given a less optimistic view on demand growth. “If we only include projects [with FIDs], there is a chance that in 2030 global oversupply might turn into undersupply,” said ICIS lead Asia gas analyst Alex Siow. “As such, Qatar’s increased capacity is only exacerbating the current oversupply from 2026 to 2030,” he said, adding there will be “many options for buyers by 2026-2030”. “Even without the additional 16mtpa from Qatar, many US projects [that have completed FIDs] are already impacted by the global oversupply from 2026.” The result could be US projects lowering output, increasing maintenance periods, or offering increasingly competitive prices by using mechanisms like financing or declaring sunk costs. ACTIVE QATARI MARKETING IN ASIA Many Chinese buyers would like to wait to see if pricing offer levels fall, sources in China said. And Chinese buyers may not be the only ones not willing to sign new deals just yet. “Those who can wait at least until after US elections will,” said one source close to South East Asia buyers. Significantly lower spot prices mean long-term contracts are less attractive for now, strengthening buyer positions. EUROPEAN GAS PRICES fall Several trading sources said they were clear that Qatar’s announcement was the key factor in pushing annual 2027 and 2028 TTF contracts down on 26 February. The TTF 2028 contract price dropped 1.4% to $8.74/MMBtu, with the 2027 contract falling 0.4%. Prices up to 2026 increased the same day. One trader in northwest Europe noted that increased supply later this decade could help Europe shift from its current role as the premium global market. “Who [in Europe] wants a 20-year contract?” said the trader. “Qatari …volumes make sense for Asian buyers …that could free up LNG for Europe from the US and [flexible] volumes.” Yet Qatar could still turn to Europe for some offtake to add to its terminal capacity rights. Negotiations for Qatari offtake with buyers in Germany, Austria, Slovakia and the Czech Republic were ongoing in 2023, sources said. No agreement to deliver LNG into Germany for onward delivery to its neighbours was reached because of perceived high exit fees. A Germany-based source said the government is also still keen to encourage a shorter long-term contract. Exit fees could also change. Routes to Austria and the region may include Italy and Greece in future, given that interconnectors from Italy to Greece are being expanded. SHIPPING Even as Qatari offtake falls from 2029 into the 2030s, spurring Qatar to secure further volumes, it appears well-supplied with shipping options. Newbuild prices remain high but have been falling since 2023, dropping from $265m to $262m by early February, according to shipowner Flex LNG. And with over 100 newbuild vessel slots between Korean and Chinese shipyards, they can afford to wait, according to ICIS analyst Robert Songer. But there are questions over whether it now needs to expand the fleet further (see box-out). Additional reporting by Yueyi Yang and Fauzeya Rahman
MOVES: Brazil’s Unipar CFO resigns
SAO PAULO (ICIS)–Unipar’s CFO Antonio Campos Rabello has handed in his resignation, effective 29 February, the Brazilian chemicals producer said late on Tuesday. Campos Rabello was also Unipar’s investor relations officer. The company’s executive industrial officer, Rodrigo Cannaval, will temporarily assume the position of Investor Relations Officer, said Unipar. “The company would like to thank Rabello for his management work, especially as to the preparation of a capital structure adequate for the company’s expansion plans, enabling access to several financing sources in terms of currency, financial institutions and markets, as well as the analysis and structuring of growth opportunities,” said Unipar. Earlier this week, Unipar said it was mulling a joint acquisition with Brazilian chemicals producer Innova, without disclosing more details. According to a report by Brazilian daily O Globo, the two companies would be looking at an acquisition in the US of around $700 million.
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