Butadiene and c4s

LONDON (ICIS)–Venezuelans go to the polls on Sunday with the hope of a free and fair election, in which case President Nicolas Maduro is widely expected to lose office in a country where the economy has been battered by years of mismanagement, corruption, and US sanctions. In the crude oil-rich country – Venezuela holds the world’s largest reserves – petrochemicals could naturally develop given the raw materials advantage. Back in the 1990s, with crude oil output at its peak, petrochemicals were tilted as a growing and booming sector in the country. The industry never took off. Since 2001, Venezuela has been run by the socialist PSUV party, first under the late President Hugo Chavez, who died in 2013, and later under his appointee successor, Nicolas Maduro, who won an election in 2018 widely seen as not free: the PSUV-led coalition won 256 out of 277 seats in the National Assembly. Venezuela’s demise has been rapid and deep: practically no institution in the country has been spared from the PSUV taking over it, and the election on Sunday has several times been postponed as Maduro tries to cling onto power for as long as he can. The powerful military are still for the most part rallying behind him. A state of terror has been the norm in the past few years, and the economy took a turn for the worse in the late 2010s and pushed around seven million Venezuelans to flee, mostly to neighboring countries or, those with the means, to countries such as the US or Spain. Sunday’s election is momentous because it has been tilted as one in which Maduro could allow a free vote – but many still fear that is not his nature. But independent opinion polls have consistently showed him trailing behind the unity opposition candidate, Edmundo Gonzalez, a 74-year-old diplomat who managed to avoid, like other opposition candidates before him, being banned from running. PETROCHEMICALSBefore North America renewed its status as a global energy power with the advent of the shale gas boom, crude oil derivatives were – and continue to be in most Latin American countries – the only game in town when it comes to petrochemicals raw materials. In the past 30 years, crude oil output peaked in 2000 at slightly more than 3 million barrels/day, stayed mostly stable under Chavez’s rule at around 2.5 million barrels/day, but has been on a downward trend since, according to data from the US Energy Information Administration (EIA). VENEZUELA CRUDE OIL PRODUCTIONJanuary 2000-July 2023 Million barrels/day Source: US’ Energy Information Administration Currently, Venezuela produces around 700,000 barrels/day. The reserves continue to be there, underground, but the facilities to extract that wealth have also been victims mismanagement and have had little maintenance. In 2023, as the world’s energy sector reeled from Russia’s attack against Ukraine, the US softened some of its sanctions on Venezuela – its crude oil was now more needed than ever – and signed the so-called Barbados Accords, which would imply lifting sanctions in exchange for a free and fair electoral process. Maduro backtracked from his word earlier in 2024 – as he kept banning candidates from the opposition to run in the process – and the US reimposed the sanctions which, in the abyss the country is, are used by the government as the excuse for the country’s malaise. Amid this backdrop over the past decades, the 1990s talk about petrochemicals being a sector which could potentially be a powerful exporter of downstream materials to the rest of the world has all but died. In June, the Venezuelan government said it was mulling building production facilities for petrochemicals and fertilizers together with Turkey’s industrial conglomerate Yildirim, but without giving much detail about timelines or budgets. However, such deals have been signed before and nothing came to fruition out of them. Yildrim had not responded to a request for comment at the time of writing. Meanwhile, in an interview with ICIS in May, an executive at chemicals distributor Manuchar – Belgium-headquartered but focused on emerging markets, with strong presence in Latin America – told the sad fate the company was victim of in the late 2010s. By then, the economy worsened sharply and, with it, security – or the lack of it, rather – created a dangerous country to live in, from Caracas to the provinces. The government’s terror state has included paramilitary groups which have had little regard for their own people. Most of Manuchar’s employees fled the country while they still had the means, and the human resources problem forced the company to basically idle all its facilities there, which remain dormant to this day, said Manuchar’s head for South America, Stefan Van Loock “We still have a legal entity in Venezuela, although it is dormant, and we do not have any sales there since the end of the 2010s. During our last months there, the situation had become untenable: we could not import materials, there were hardly any dollars available, so even if you got the imports, you could not pay for them most times…,” he said. “It was also becoming a human resources problem. I saw many Manuchar colleagues resign: ‘I cannot stay in Venezuela any longer, it has become too dangerous, and I am leaving’. It was a combination of all those factors that made us decide to wind down our operations there. We can only hope things improve.” It is interesting to read this piece published on ICIS in 2013 when Chavez died. At the time, there were still hopes petrochemicals could be developed as the country’s crude oil sector was still worth the name. Little we knew how much the country would quickly deteriorate in the next five years, although the article already hinted at constrains which would only become much bigger later. “Venezuela potentially could attract significant petrochemical industry investment although major industry players have tried and failed in the past to establish footholds in the country,” the article’s author, ICIS expert Nigel Davis, wrote at the time. “State-controlled producer Pequiven has plans to nearly triple its plastics production capacity to 1.86 million tonnes/year in 2016 from 694,000 tonnes/year, although its ability to do so is questioned against the backdrop of feedstock, power, and financing constraints.” And looking further into the archives, even with Chavez in power, companies across the world such as major ExxonMobil wanted to tap into Venezuela’s petrochemicals. In this agreement from 2004, the US energy major and domestic producer Pequiven was mulling a 50:50 joint venture to build a $2.5-3 billion petrochemicals complex – once again, it never got to break ground. HOPE LAST THING TO LOSEMillions of Venezuelans abroad are following the electoral campaign and, for the most part, are hoping their compatriots at home go and vote em masse on Sunday: the polls have consistently and overwhelmingly showed Maduro behind, so if a free election is held, the Chavismo may be coming to and in a few months. The structures it leaves behind will take years to dismantle, anyway, and success in building a fairer and freer Venezuela is not guaranteed. Even this week, as he sees his position threatened, Maduro rallied supporters with a violent rhetoric which raised alarms across Latin America: he said that if his party does not win the election, there could be a bloodbath. Even Brazil’s President Luiz Inacio Lula da Silva, normally shy in openly criticizing Maduro as he has a worrying tendency to flirt with far left and authoritarian leaders in the region, was blunt about his feelings. "I was shocked by Maduro's statement that if he loses the election, there will be a bloodbath … Maduro has to learn that when you win, you stay; when you lose, you leave and prepare to run again in the next election," said Lula, quoted by Brazil’s public news agency Agencia Brasil. Lula has sent to Venezuela his personal adviser on foreign policy, Celso Amorim, as part of international delegations who are to be observers in the election. Jose Marquez, a Venezuelan journalist exiled in Buenos Aires, said Sunday’s election could be the last chance to put Maduro out of office, calling on his compatriots to vote em masse against Maduro. “There are people who emigrated who are right now traveling to Venezuela just to vote on Sunday. The fact that there are people in the country who decide not to vote, perhaps in the last opportunity to remove Maduro from power, is disappointing but, above all, very sad,” said Marquez. Front page picture: Facilities operated by PDVSA Source: PDVSA Insight by Jonathan Lopez

26-Jul-2024

SINGAPORE (ICIS)–South Korea's economy posted a slower second-quarter annualized growth of 2.3% compared with the 3.3% pace set in the preceding quarter amid sluggish domestic consumption, preliminary central bank data showed on Thursday. Q2 private consumption rose by 0.9% year on year, slowing from the 1.0% expansion in the first three months of 2024, the Bank of Korea (BoK) said in a statement. Manufacturing for the period rose by 4.5%, slowing from the 6.5% growth registered in January-March; while exports grew at a slower pace of 8.7% compared with the 9.1% expansion in the first three months of the year. On a quarter-on-quarter seasonally adjusted basis, the South Korean economy unexpectedly shrank by 0.2% in April-June, reversing the 1.3% growth posted in the first three months of this year. "We had expected South Korea’s GDP to slow sharply, but not to the point of falling into contraction territory," Dutch banking and financial information services provider ING said in a note. Q2 domestic growth components were weak except for government spending, which rose by 0.7% quarter on quarter, it said. Private consumption, construction, and facility investment dropped by 0.2%, 1.1% and 2.1%, respectively, The downside surprise came mainly from trade, as imports grew faster than exports, ING said. Q2 export growth moderated to 0.9% quarter on quarter, just half the 1.8% increase posted in Q1. Exports in Q2 were supported by higher shipments of chemicals and motor vehicles. Meanwhile, import growth rebounded to 1.2%, compared with a contraction of 0.4% in Q1, mainly buoyed by higher imports of crude oil and petroleum products. "Given the weaker-than-expected second quarter 2024 GDP, we have revised the annual GDP outlook downwards from 2.6% year-on-year to 2.3%," ING said. "We recently warned that the BOK would face challenges in its monetary policy decision as inflation cools towards 2% and sluggish domestic growth supports a rate cut, but at the same time, concerns about rising household debt are growing." In its latest forecast in May, the BoK raised its 2024 GDP growth forecast to 2.5% from 2.1% previously amid strong exports driven by robust chip demand. For inflation, the forecast average was unchanged at 2.6% for this year.

25-Jul-2024

LONDON (ICIS)–Mexican petrochemicals have much to gain under President-Elect Claudia Sheinbaum as the country taps into the nearshoring trend, which will require large public and private investments, according to an executive at polymers producer Braskem Idesa. Sergio Plata, head of institutional relations and communications at the mostly polyethylene (PE) producer, added that nearshoring – North American companies bringing back to the region production facilities – will require a large country effort, which the public sector alone now dominates the energy sector, will not be able to provide. Plata added that the first signs from Sheinbaum towards chemicals were encouraging: even as President-Elect, she has already visited the petrochemicals production hub in the state of Veracruz – the largest in the country. In it, she mentioned specific industry issues such as supply of certain raw materials which were very much welcomed by executives. Last week, ICIS published the first part of this interview, in which Plata said supply of ethane from Mexico’s state-owned crude oil major Pemex had stabilized after a renegotiation of the contract’s terms, although he added global PE market remained in the doldrums and a recovery may not arrive until the second half of 2025. Braskem Idesa operates the Ethylene XXI complex in Coatzacoalcos, south of the industrial state of Veracruz, which has capacity to produce 1.05 million tonnes/year of ethylene and downstream capacities of 750,000 tonnes/year for high-density polyethylene (HDPE) and 300,000 tonnes/year for low-density polyethylene (LDPE). Braskem Idesa is a joint venture made up of Brazil’s polymers major Braskem (75%) and Mexican chemical producer Grupo Idesa (25%). WHAT SORT OF PRESIDENT SHE WILL BESheinbaum won an overwhelming majority in the Presidential election in June, with 60% of the vote, and her party Morena achieved a ‘supermajority’ in parliament of two-thirds which initially spooked financial markets and brought the Mexican peso down. Financial analysts have warned that, for Mexico to tap into the nearshoring trend, its infrastructure – transport but also aged electricity transmission lines – will need to be upgraded during the remaining of this decade. That effort, most analysts agree, will only be possible with large sums of private investment, so the state-owned electricity utility CFE may need to give some way to private players. Equally, during Andres Manuel Lopez Obrador’s term, Mexico’s emissions rose, in opposition to the country’s commitments agreed in the 2015 Paris Accord and later enshrined into its domestic law. Lopez Obrador handpicked Sheinbaum to succeed him. Despite not being that apart generationally – he is 70, she is 62 – the President-Elect is a climate scientist who started her career in environmental roles, and most analysts think she may run free from her successor – by personal choice or forced by the circumstances – in issues like climate, if she wants to keep Mexico as a respected economy which fulfils its commitments. “I think she has a very clear vision in this regard – she knows the commitments [Mexico adhered to]. Something we are liking a lot is the appointments she is making – people with experience to work in the departments they are being appointed to: they have the necessary technical knowledge,” said Plata. “We have also seen her approaching the private sector and that, without a doubt, for us as an industry that is a very good start. In those meetings, our concerns about compliance with regulations have been raised. Something is very clear: to grasp the opportunities in nearshoring, collaboration with private sector is essential to bring real benefits to all Mexicans.” Plata said that, while Sheinbaum has not met Braskem Idesa yet, she has had a busy schedule meeting with industrialists, including with the country’s chemicals trade group Aniq as well as the Veracruz industrial trade group, which Plata presides. “When she visited the south of Veracruz, she talked about reactivating the petrochemical industry, and talked about very specific issues that the industry is worried about, such production of ethane, of ethylene, of ammonia: things that sounded very good to us,” said Plata. MEXICO, VENEZUELA COMPARISONSHe was asked if, given Morena’s ‘supermajority’ in parliament, Mexico could become a new Venezuela – when the governing party takes over all resorts of power and the country stops being a democracy worth the name. “I really believe that her vision is constructive, and she intends to work with the private sector so her Administration can work for everyone. We will have to see what decisions she takes along the way. For instance, she has spoken many times about the interoceanic corridor [a project to link Mexico’s east and west coasts by water],” said Plata. “Precisely, the promotion of the corridor has at its base the chemicals and the petrochemicals industries, because one of the objectives of the corridor is to take advantage of the raw materials in the area, which would benefit petrochemicals but also agriculture, for instance, and give added value. We see plenty of opportunities there.” Front page picture: Braskem Idesa’s facilities in Coatzacoalcos Source: Braskem Idesa Interview article by Jonathan Lopez

22-Jul-2024

SINGAPORE (ICIS)–Reliance Industries Ltd’s (RIL) oil-to-chemicals (O2C) business posted a 14.3% year-on-year drop in earnings in its fiscal first quarter ending June 2024 on poor chemicals margins, the Indian conglomerate said. O2C results in 10 million rupees (Rs) Apr-June 2024 Apr-June 2023 % Change Revenue 157,133 133,031 18.1 EBITDA 13,093 15,286 -14.3 Exports 71,463 69,006 3.6 – Revenue for the period rose primarily on the back of higher product prices in line with Brent crude price gains, and increased volumes due to strong domestic demand, the company said on 19 July. – Fiscal Q1 overall earnings before interest, tax, depreciation and amortisation (EBITDA) margin dropped to 8.3% from 11.5% in the same period of last year. – On a year-on-year basis, April-June domestic polymer and polyester demand increased by 8% and 5%, respectively. – RIL's consolidated group profit after tax fell by 4% year on year to Rp175 billion ($2.09 billion) in April-June 2024. Polymers- Fiscal Q1 polymer margins were down by 0.5% to 16.9% year on year due to firm naphtha prices. Product margin over naphtha April-June 2024 ($/tonne) April-June 2023 ($/tonne) % Change Polyethylene (PE) 330 397 -16.9% Polypropylene (PP) 318 381 -16.5% Polyvinyl chloride (PVC) 371 373 -0.5% Polyester – Paraxylene (PX) and monoethylene glycol (MEG) margins over naphtha decreased year on year due to higher naphtha prices. – "PTA [purified terephthalic acid] margins were impacted adversely due to high inventory with Chinese producers and increased competition," the company said. – On a year-on-year basis, domestic polyester demand in fiscal Q1 increased by 5%, driven by strong growth in PET, which was up 27% due to "higher demand from the beverage segment on account of summer season and elections". ($1 = Rs83.7)

22-Jul-2024

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. The slide in today’s post is an updated version of the slide I first published late last year. Note that there is a new scenario added to the original two, A Bi-polar World. I could be wrong, of course. I might have given the wrong weightings to each of the scenarios, or more simply have chosen the wrong scenarios entirely. But today’s events point to very different outcomes than we saw during the 1992-2021 Petrochemicals Supercycle. Supermajors – 25% probabilityA small number of oil-and-gas-to-petrochemicals players dominate the business as they have increasingly turned oil and natural-gas liquids into petrochemicals at competitive costs. This is in response to the decline in crude-oil demand into transportation fuels because of the electrification of vehicles. Non-integrated petrochemical producers in Europe, South Korea, Singapore, Taiwan and Southeast Asia consolidate. Large swathes of capacity closes-down in these countries and regions to balance markets. A Bi-Polar World – 50% probabilityThe split between China and the US, and possibly the EU as well, widens. The rest of the developed world, including major petrochemical players in countries such as South Korea, Singapore and Japan, will need to decide where they stand: With the US and its partners or with China and its partners. They are at risk of losing access to the China market. Petrochemicals trade is largely confined to between China and its partners and between the US and its partners. No one scenario will be completely right. We could end up at any of many points between each of these three extreme outcomes. This is the case with Supermajors and A Bi-polar World. It could be that the closer relationship between Saudi Arabia and China allows Saudi Arabia to supply more of China’s petrochemicals deficits, allowing the Kingdom to perhaps realise some of its crude-oil-to-chemicals ambitions. A De-globalised World – 25% probabilityMarkets are in general much more regional. Instead of just a bi-polar world, we end up with beggar-thy-neighbour trade barriers similar in scale to the ones which led to the Great Depression. Petrochemical companies become much more “local for local”. Governments put up barriers to protect jobs and to ensure refineries don’t shut down along with uncompetitive petrochemical plants, thereby by protecting local supplies of transportation fuels. While extreme outcomes help push people out their comfort zones, supporting local petrochemical companies might instead fit at some mid-way point between all the scenarios. And “local for local” shouldn’t be viewed as automatically a bad thing. One can argue that because of today’s highly uncertain geopolitical world, local supplies of at least some petrochemicals are essential. Calling all senior management teams out there: You need to prepare your teams for the world after the Petrochemicals Supercycle. 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.

19-Jul-2024

MADRID (ICIS)–Supply of ethane from Pemex to polyethylene (PE) producer Braskem Idesa is now more stable after a renegotiation of the contract – but the global PE market remains in the doldrums, according to an executive at the Mexican firm. Sergio Plata, head of institutional relations and communications at Braskem Idesa, said a recovery in global PE prices could start in the second half of 2025 as the market is expected to remain oversupplied in the coming quarters. Plata explained how Braskem Idesa had to renegotiate the terms of an agreement with Pemex, Mexico’s state-owned crude oil major, for the supply of natural gas-based ethane, one of the routes to produce PE, to its facilities in Coatzacoalcos. Supply is now more stable and in the quantities agreed, he said. Braskem Idesa operates the Ethylene XXI complex in Coatzacoalcos, south of the industrial state of Veracruz, which has capacity to produce 1.05 million tonnes/year of ethylene and downstream capacities of 750,000 tonnes/year for high-density polyethylene (HDPE) and 300,000 tonnes/year for low-density polyethylene (LDPE). Braskem Idesa is a joint venture made up of Brazil’s polymers major Braskem (75%) and Mexican chemical producer Grupo Idesa (25%). ETHANE FLOWING, TERMINAL IN Q1 2025 Pemex agreed with Braskem Idesa to supply the PE producer with a minimum volume of 30,000 barrels/day of ethane until the beginning of 2025, when Braskem Idesa plans to start up an import terminal in Coatzacoalcos to allow it to tap into exports out of the US Gulf Coast. However, both parties sat to renegotiate that agreement after Pemex’s supply proved to be unstable, with credit rating agencies such as Fitch warning in 2023 of the “operational risk” such a deal with the state-owned major represented for Braskem Idesa. The outcome of the renegotiation is starting to bear fruit, explained Plata diplomatically, without providing any details. He conceded, however, that to outsiders, Pemex’s businesses could look rather odd. “We understand the positions of a public entity such as Pemex, and we understand its methods could look questionable to eyes outside our relationship,” said Plata. “However, at Braskem Idesa we were confident that if we sat down with them to renegotiate, clearly stating what we require from each other, we could reach a point in the renegotiation which worked for us as a company and for the Mexican petrochemicals sector as a whole.” Together with more stable supply from Pemex, Braskem Idesa also adopted the so-called Fast Track to import ethane while its own import terminal starts up. The terminal, known as Terminal Quimica Puerto Mexico (TQPM), closed the last financing details at the end of 2023. Plata said the terminal would start up “without a doubt” by the beginning of 2025, adding that construction was 70% complete by the beginning of July. According to Plata, with Pemex’s more stable ethane supply and the Fast Track system, Braskem Idesa is operating at 70-75% capacity utilization. PE MARKET WOES As a PE producer, Braskem Idesa remains exposed to the global downturn in polymers prices due to oversupplies. Plata said the downturn has been a “very hard” period for polymers producers, who may still face 12 more months of downturn. In its latest financial statement for the first quarter, Braskem Idesa’s sales fell by 2%, year on year, and the company posted a net loss. Earnings before interest, taxes, depreciation, and amortization (EBITDA) rose. Braskem Idesa (in $ million) Q1 2024 Q1 2023 Change Q4 2023 Change Q1 2024 vs Q4 2024 Sales 229 234 -2% 199 15% Net profit/loss -85 1 N/A -101 -16% EBITDA 36 26 36% 26 39% PE sales volumes (in tonnes) 205,500 195,100 5.4% 174,500 17.8% “We have had a very complex environment, with increased capacities in the US or China and with the war in Ukraine raising our production costs. We are undoubtedly in a down cycle and as a company we have tried to take care of our margins by controlling our costs and look closely at our investments,” said Plata. He said he “would not have the answer” about what to do with China’s dumping of product around the world, a fact that in Brazil, the largest Latin American economy, has prompted chemicals trade group Abiquim to lobby hard for higher import tariffs in polymers, as well as dozens of other chemicals. “Market analysts predict the current cycle may come to an end in the second half of 2025. Let’s hope so… This has been such a long crisis, aggravated by external factors such as wars and global convulsions, which undoubtedly also affect the industry, and the environment remains very uncertain.” Front page picture: Braskem Idesa’s facilities in Coatzacoalcos Source: Braskem Idesa Interview article by Jonathan Lopez Next week, ICIS will publish the second part of the interview with Plata, with his views on the challenges and opportunities for the chemicals and manufacturing sectors under the upcoming Administration led by President-Elect Claudia Sheinbaum amid the nearshoring trend

18-Jul-2024

SINGAPORE (ICIS)–SK Innovation, the parent company of battery maker SK On and petrochemicals producer SK Geo Centric, has agreed to merge with its energy affiliate SK E&S in an overhaul to improve its profitability. The two companies are merging in a proactive effort to navigate the challenging external business landscape, characterized by a prolonged global economic downturn, increased volatility in the energy and chemical industries, and a slowdown in the electric vehicle (EV) market, SK Innovation said in a statement on 17 July. "By integrating assets and capabilities across both energy and electrification sectors, the merged company will bolster its core competitiveness and profitability," it said. Additionally, the merger aims to secure competitiveness in future energy business areas. Upon merging, the combined entity will transform into an energy firm with assets totaling Korean won (W) 100 trillion ($72.4 billion) and revenues of W88 trillion, "positioning itself as the largest private energy company in the Asia-Pacific region", SK Innovation said. The merged firm will also increase earnings before interest, taxes, depreciation and amortization (EBITDA) to W5.8 trillion, up from pre-merger levels of W1.9 trillion, it said. The two companies expect that by 2030, the synergies from the integration alone will add over W2.1 trillion to EBITDA, which is targeted to hit W20 trillion by the end of the decade. "Notably, the merged company will be able to mitigate the high profit volatility of the petrochemical business, which has served as a reliable cash cow, with the stable profit generation capabilities of the LNG [liquefied natural gas], power, and city gas businesses," SK Innovation said. The management boards of both SK Innovation and SK E&S approved the proposed merger on 17 July, subject to shareholders’ approval on 27 August. The merged corporation is expected to be officially launched on 1 November. "The merged company will develop a comprehensive portfolio that spans all areas, including energy sources (such as oil, chemicals, LNG, city gas, power, renewable energy, batteries, ESS [energy storage system] hydrogen, SMR, ammonia, and immersion cooling), energy carriers, and energy solutions," SK Innovation said. "Currently, global oil majors are also currently pursuing balanced portfolios across the energy sector through various mergers and acquisitions." SK Innovations' business portfolio includes petrochemicals, lubricants, and oil exploration. It is now diversifying into future energy sectors such as electric vehicle batteries, small modular reactors (SMR), ammonia, and immersion cooling. SK E&S was spun off from SK Innovation in 1999 as a city gas holding company and is transitioning into a green portfolio that organically integrates its four core businesses – city gas, low-carbon LNG value chain, renewable energy, and hydrogen and energy solutions, to create synergies. Separately, SK On's board has approved a merger with sister companies – crude oil and petroleum products trading firm SK Trading International and energy logistics firm SK Enterm to improve raw material purchasing efficiency and expand trading, helping improve SK On's profit structure. "Through the merger of these three companies, SK On will be able to further strengthen its competitiveness in securing raw materials ($1 = W1,380)

18-Jul-2024

HOUSTON (ICIS)–US agribusiness titan Cargill announced it has surpassed the 50% completion milestone in the construction of its new canola facility located in West Regina, Saskatchewan. Cargill broke ground on the facility in July 2022 and anticipates opening in 2025 with the new facility having the capacity to process 1 million tonnes of canola per year, producing crude canola oil for food and biofuel markets and canola meal for animal feed. “The addition of the Regina facility to the Cargill network will play a critical role connecting the Canadian canola industry to the expanding domestic and global market opportunities for vegetable oil, high quality meal and biofuels,” said Jeff Vassart, Cargill Canada president. “The current construction environment is full of unique challenges and this project has faced many headwinds since we broke ground, but we are committed to becoming a best-in-class option for canola growers in the region, along with helping decarbonize the global food and fuel supply chain.” To support rail and road infrastructure around the new plant, Cargill recently completed the purchase of just over 400 acres near the facility location which it said will allow for better connection to existing rail lines. This will provide the site with additional optionality to bring canola seed to Regina when needed, providing a new destination for farmers in western Canada.

16-Jul-2024

MADRID (ICIS)–Colombia’s single-use plastic ban, which affects a wide range of products, kicks off amid some industry reluctance after a hurried implementation, and with provisions to revise the legislation after a one year trial period. The law that came into force on 7 July implemented a ban on eight plastics: carrier bags for packing supermarket purchases; bags for fruits and vegetables; plastic packing for magazines and newspapers; bags for storing clothes coming out of the laundry; plastic holders for balloons; cotton swabs; straws; and stirrers. The regulation establishes that those plastic products must be replaced by sustainable alternatives, such as biodegradable and compostable materials or recycled materials, or reusable non-plastic materials. It is a wide-ranging ban approved in parliament in 2022, although the plastics industry has criticized that details about the implementation of the law were only published at the end of June, barely two weeks before the kick-off date. Environmental groups have welcomed the measure, hoping more countries in Latin America will implement similar legislation in a region where plastics are omnipresent. MORE TO COMEApart from the eight plastic products banned from 7 July, the ban has set a transition period ranging from two to eight years, depending on the type of plastic, to allow merchants time to adapt to the new regulations. By 2030, plastics to be eliminated or transformed into reusable materials include containers, packaging, and bags for non pre-packaged liquids; disposable plates, trays, and cutlery; confetti, tablecloths, and streamers; containers, packaging, and bags for deliveries; sheets for serving or packaging foods for immediate consumption; wrappers for fruits and vegetables; stickers for fruits; handles for dental floss; and straws for containers of up to three liters. The law establishes exceptions for single-use plastics in certain cases, including exceptions for plastics used for medical purposes; packaging of biological or chemical waste; food products of animal origin; and those made with 100% recycled plastic raw material sourced from national post-consumer material. The regulation also mandates that public entities cannot acquire prohibited single-use plastics if sustainable alternatives are available, and these entities must implement reduction campaigns. Colombia’s National Environmental Licensing Authority (ANLA in its Spanish acronym) will oversee and enforce these measures. Among the measures included in the law, there is a request from distributors of plastic bags to submit reports on the rational use and recycling of bags in their inventory and must submit an Environmental Management Plan for packaging waste by 31 December. The law clearly will put an administrative burden on companies, not least distributors and the role they have been assigned as guardians of the law. In an interview with ICIS, the CEO of QuimicoPlasticos, a chemicals distributor in Colombia, said he thinks many aspects of the law will have to be reversed, not least points such as the nationally sourced recycled plastics as substitutes, given that recycling is in its infancy in the country and there will not be enough supply for years. QuimicoPlastics is a family-run distributor founded in 1982 and employs 80 people. It imports raw materials which distributes to the plastic packaging sectors (rigid and flexible) with end markets such agriculture, construction, food, and hygiene. The company was founded by the father of the current CEO, Federico Londoño, who has been on the post for 12 years. He has got low opinions about the law. “The law goes much further than a country like Colombia can afford. Moreover, globally and here in Colombia there are investments companies have made which are researching alternatives to, say, trays made of EPS [expandable polystyrene], but with laws like this the burden on companies grows and incentives for investment diminish,” said Londoño. It is a criticism shared across Latin America. In an interview with ICIS in June, the head of Chile’s plastics trade group Asipla also said parliamentarians push for sustainability was at times detached from the country’s reality. Before QuimicoPlasticos’ Londoño, the head of Colombia’s plastics trade group Acoplasticos also showed skepticism in an interview with ICIS about the law banning such wide range of single-use plastics. Before the law on single-use plastics, Colombia had already approved a tax on plastics production, which was marred with confusion in its initial stages of implementation. The moves around plastics have been welcome by environmental groups, some of them with the support of major consumer goods producers such as Washington-based Ocean Conservancy; in its website, it says some of its partners include Coca-Cola, Ikea, or Garnier, among many others. “With over 11 million tonnes of plastics entering the ocean each year, this law [banning single-use plastics] is a huge win for Colombia and the ocean,” said in a statement Edith Cecchini, director of international plastics at Ocean Conservancy. “Single-use plastic bags, straws, and stirrers are among the top ten most commonly found items polluting beaches and waterways worldwide by Ocean Conservancy’s International Coastal Cleanup. Ocean Conservancy applauds Colombia for this important step to prevent plastic pollution and protect marine life, and we hope that other countries will follow suit.” EXPANDING PUBLIC SERVICESThe push for sustainability by the left-leaning cabinet presided over by Gustavo Petro goes hand in hand with plans to increase tax receipts to finance the expansion in the welfare state Petro campaigned for. The cabinet has been under pressure to put the public accounts in order after posting fiscal deficits for most of Petro’s term. In June, the government published its fiscal plan for the coming years, hoping to quell fears among investors. Most analysts argued that the cabinet’s plans are too optimistic. For instance, it forecasts crude oil prices at around $90/barrel on average for the coming years, as a big chunk of Colombia’s income comes from its state-owned oil major Ecopetrol. To reassure investors, Finance Minister Ricardo Bonilla announced spending cuts worth Colombian pesos (Ps) 20 trillion ($5.1 billion, equivalent to 1.2% of GDP) to meet the target set out by the new fiscal plan 2024. “Even so, there’s reason for concern. For one thing, the government made clear that there would be no cuts to social spending; instead, a lot of the adjustment (around one third) will come in the form of cuts to public investment,” said Capital Economics at the time. Manufacturing, meanwhile, has been in the doldrums for much of 2023 and 2024, except for a positive spell in the first quarter. According to QuimicoPlasticos’ CEO, the government’s economic policy is deterring investments and creating uncertainty. “The economy is not going well. Industrial companies are suffering a high degree of uncertainty, because the fiscal burden on them continues to increase. This is no surprise, of course, when some public official within the cabinet have publicly said companies ‘steal from the people’ and they should be taxed more,” said Londoño. “Treating industrial companies as cash cows is wrong: these are the companies which need large sums in capital investments, and increasing taxes on them only deters that. If we add to that, for example, that the cabinet wants to reduce the role of fossil fuels in the country’s exports due to environmental reasons, you get a worrying picture for the coming years.” ($1 = Ps3,946) Insight by Jonathan Lopez

16-Jul-2024

LONDON (ICIS)–Here are some of the top stories from ICIS Europe for the week ended 12 July. Europe ethylene spot prices turn firmer on demand, feedstock, looming cracker turnarounds European ethylene spot prices have firmed week on week on the back of better-than-expected demand amid higher feedstock values and an increasing focus on upcoming planned cracker maintenance outages. Global crude demand slows in Q2, China consumption contracts – IEA Global crude oil demand slumped to 710,000 bbl/day in Q2 2024 as China’s post-pandemic economic rebound ran its course, the International Energy Agency (IEA) said on Thursday. Storm Beryl damage, economic loss to US estimated at $28-32 billion Total damage and economic loss in the US from Storm Beryl amounted to $28-32 billion, according to meteorology firm AccuWeather. Europe chemicals players expect construction demand to remain sluggish until H1 2025 Chemicals players in Europe do not expect any substantial recovery from the building and construction industry until the first half of 2025 at least. Flooding to continue across central US as Beryl moves inland Flash flooding is expected as Storm Beryl continues to progress across the central US, with blackouts and logistic shutdowns seen in parts of Texas. ‘Life-threatening’ storm surge in Texas as Hurricane Beryl makes US landfall Hurricane Beryl has made landfall in eastern Texas and looks set to batter parts of the state’s key petrochemicals production hubs, with the US National Hurricane Center (NHC) warning of a life-threatening storm surge on Monday.

15-Jul-2024