Mixed plastic waste and pyrolysis oil

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Gain a transparent view of the opaque mixed plastic waste and pyrolysis oil markets in Europe. With the growth of chemical recycling in Europe, competition for mixed plastic waste feedstock is intensifying. Pyrolysis-based plants targeting mixed plastic waste (with a focus on polyolefins) as feedstock account for ~60% (2023) of all operating chemical recycling capacity in Europe.

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Mixed plastic waste and pyrolysis oil news

US Cargill surpasses 50% completion at new canola facility in Saskatchewan

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

INSIGHT: Colombia’s wide single-use plastics ban kicks off amid industry reluctance

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

Europe top stories: weekly summary

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

Asia top stories – weekly summary

SINGAPORE (ICIS)–Here are the top stories from ICIS News Asia and the Middle East for the week ended 12 July 2024. OUTLOOK: Asia naphtha market braces for supply uncertainties By Li Peng Seng 12-Jul-24 12:00 SINGAPORE (ICIS)–Asia’s naphtha market sentiment is expected to be choppy in the short term due to a lack of clarity on arbitrage supplies against volatile demand. OUTLOOK: Asia EVA market loses shine as demand from PV sector lags By Helen Lee 11-Jul-24 11:25 SINGAPORE (ICIS)–Demand for ethylene vinyl acetate (EVA) from China’s photovoltaic (PV) industry is likely to remain lackluster amid an oversupply in the entire industry chain. PODCAST: China to accelerate hydrogen development via energy law By Patricia Tao 10-Jul-24 11:25 SINGAPORE (ICIS)–China's recent decision to include hydrogen in its draft national energy law signals a transformative shift in the country's energy landscape. China EV giant BYD to invest $1 billion in Turkey production plant By Nurluqman Suratman 09-Jul-24 15:24 SINGAPORE (ICIS)–Chinese electric vehicle (EV) giant BYD has agreed to invest $1 billion to set up a manufacturing plant in Turkey which will produce up to 150,000 vehicles per year. PODCAST: Asia recycling market sees increased interest in pyrolysis By Damini Dabholkar 09-Jul-24 11:17 SINGAPORE (ICIS)–Market players in Asia are increasingly becoming more interested in the use of pyrolysis oil as fuel. OUTLOOK: SE Asia PE to see some demand recovery in H2, challenges persist By Izham Ahmad 09-Jul-24 15:07 SINGAPORE (ICIS)–The southeast Asian polyethylene (PE) market is expected to face modest demand recovery in the second half (H2) of the year, but this is likely to be negated by increased supply and the threat of high freight costs affecting import shipments.

15-Jul-2024

INSIGHT: Brazil’s new gas deals with Bolivia ‘historic step’ for chemicals – Abiquim

SAO PAULO (ICIS)–Earlier this week, the head of Brazil’s chemical producers’ trade group Abiquim accompanied President Luiz Inacio Lula da Silva during his official visit to Bolivia and returned with deals which could potentially increase and liberalize natural gas supplies to Brazil. The chemicals industry in Brazil consumes around a third of all-natural gas available, according to Abiquim. Prices in the largest Latin American economy, however, are considerably higher than in the US, the other large economy in the Americas. Therefore, natural gas supplies – how to increase them and how to make them more affordable – has been on Abiquim lobbying agenda for some time now. Nearly a year ago, Brazil’s minister for energy and mines, Alexandre Silveira, was the star guest at an Abiquim event presenting a study on how to increase supplies. At the time, Silveira thanked them for the kind invitation but he came to basically say the government had little to do and it should be the private sector leading the effort. Truth be told, Brazil’s cabinet has much to say and much it could do about energy. The rather overwhelming and dominant position of Petrobras – a ministry in all effects, with its CEO always handpicked by whoever is the president – gives the energy major a key role in what Brazil's energy landscape looks like. Its interest in natural gas has always been very limited, injecting the supplies it gets from crude oil production back into the system. However, Abiquim and Petrobras earlier this year signed an agreement to explore joint projects on natural gas supplies. In June, Abiquim said in an interview with ICIS there would be news on that front within weeks, but nothing has been announced yet. One year on since Silveira attend that event in Sao Paulo, it seems industrial trade groups come and go in Brasilia’s corridors of power as they please. The current left-leaning administration and manufacturing companies have a common goal, expressed in different wishes: the former, more and better paid manufacturing jobs to please Lula's Workers Party (PT) core constituency; the latter, higher sales and profits, and improving their competitiveness can be an important part of that. Thus, this week Lula invited to go to Bolivia with him trade groups or associations representing sectors directly affected by Brazil’s high natural gas prices. Among them, Abiquim’s head, Andre Passos, with whom ICIS will publish an interview next week. Never shy in using strong words, Abiquim said the week’s agreements in Bolivia represented a “historic step” for Brazilian chemicals which could come to partly fix its competitiveness problem. “The visit to Bolivia is in line with the objectives of the Gas Para Empregar [Gas for Jobs] program and could represent an immense short-, medium- and long-term opportunity for the natural gas market, with the possibility of even using gas from Argentina through Gasbol [pipeline connecting Bolivia’s fields with Brazil’s south and most industrialized states],” said Abiquim. “Based on the conversations held, it will now be possible to start rounds of negotiations for the contracting of Bolivian and Argentine gas without the participation of Petrobras, which will be essential to increase competition in the gas market, enabling greater liquidity, and even helping to make natural gas from the pre-salt viable.” Abiquim added that Brazil’s Ministry of Mines and Energy was “essential in making this moment a reality” and in helping private players to make progress on being able to directly contract gas in Bolivia. In Brazil, the Ministry for Energy and Petrobras are the two decisive voices in energy policy. Abiquim’s diplomatic words thanking the ministry is just another way of saying they are pleased to see Petrobras losing the nearly full control it has had in issues related to the natural gas supply from Bolivia. This, of course, occurs as Abiquim's largest member and commanding voice is Brazilian polymers major Braskem, of which Petrobras owns 36.1%. A GIANT SEEKING GASBrazil has for several years been importing natural gas from Bolivia, via the pipeline Gasbol, which links the producer’s fields with Brazil’s southern and more industrialized states. Gasbol is the longest natural gas pipeline in South America with 3,150 kilometers (1,960 miles). According to Brazil’s Ministry of Energy and Mines, Bolivia is Brazil's main supplier of natural gas supplying two thirds of its imports. Meanwhile, natural gas represents 86% of Bolivia's exports to Brazil. Regarding natural gas, the trip this week aimed at easing access to that gas for Brazilian private sector players, until now quite constrained in what they could purchase given that natural gas bilateral trade has practically been a state-controlled affair via Petrobras. That was one of Brazil’s delegation legs, led by trade groups such Abiquim, Abrace Energia representing energy consumers, trade group for industrialists in Sao Paulo state FIESP, Abvidro representing the glass sector, and Aspacer and Anfacer, both representing the ceramics industry. Brazil’s minister for energy and mines, Alexandre Silveira, and Petrobras’ new CEO, Magda Chambriad, were also part of the delegation. While the company she now presides over may lose the upper hand in natural gas trade with Bolivia, Chambriad said – according to the Ministry of Energy and Mines’ press office – that the new natural gas production areas in Bolivia are going through the environmental licensing phase and could start up as soon as 2025. “The increase in gas supply to Brazil translates into lower prices in the country,” concluded the ministry. As it normally happens, many of the deals signed this week will be worth only the paper they are written in in some years’ time. However, they could be meaningful if just a few of them were to be implemented: the Bolivian Ministry for Hydrocarbons and Energy, in charge of all areas mentioned so far, published this week as many as 12 press releases on as many agreements. For example, and again related to Brazil’s thirst for natural gas, private companies had conversations about potential imports from Argentina but via the Bolivian Gasbol. MERCOSUR – AND MILEILula went to Bolivia after having visited Paraguay for a summit of Mercosur, the trade bloc formed by Argentina, Brazil, Paraguay, and Uruguay and which this year welcomed Bolivia as a member. However, Argentina’s Javier Milei refused to participate in the summit, perhaps for the best. He has insulted Lula so many times and in so colorful manners that it may be hard to try and establish any personal relationship – the two have never met face to face. To make his preferences clear, instead of attending the Mercosur summit, Milei went to Brazil’s state of Santa Catarina for an international event of right-wing and far-right figures. “No political rift will prevent dialogue with our Argentine brothers and sisters,” said Silveira before travelling to the summit, quoted by the public news agency Agencia Brasil. But increasingly more people are wondering what Mercosur’s future will look like. Despite Lula and his Spanish counterpart Pedro Sanchez good intentions when Spain was the holder of the EU’s rotatory presidency in 2023, both leaders were unable to push their sides to conclude the free trade deal between the two blocs, which has been in the making more than 20 years. The financial weekly The Economist also wondered this week about the bloc’s importance, highlighting Milei’s absence. In an opinion-ed article – those without byline which would represent the publication’s view – it said that the host’s rebuffs to Mile for not attending may well fall in deaf ears. “It was an especially pointed snub. Skipping the twice-yearly get-together of the presidents of Mercosur, Milei chose instead to speak to the hard right at a Conservative Political Action Conference in Brazil … The reality is that Mercosur is no longer so important. Even the host, Santiago Peña of Paraguay, admitted that ‘Mercosur is clearly not going through its best moment’,” said the article. “Milei has never formally met Luiz Inácio Lula da Silva, Brazil’s president, whom he slags off as ‘corrupt’ and a ‘communist’ (Brazil’s supreme court quashed Lula’s conviction – and he is a socialist). But political incompatibilities go back further: Jair Bolsonaro, Brazil’s former leader, and Alberto Fernández, Milei’s Peronist predecessor, similarly shunned each other.” THE FIGURES In 2023, trade flows between Brazil and Bolivia totaled $3.31 billion, with a surplus of $278 million for Brazil, according to official figures. Bolivia was the 35th main destination for exports and the 30th country of origin for Brazilian imports. Brazil was the main destination for Bolivian exports and the second country of origin for its imports. The main products exported by Brazil to Bolivia were those from the steel sector (iron and steel, bars, angles, and profiles, 6.1% of the total), and passenger cars (3.8%). The main products imported by Brazil from Bolivia were natural gas (86%) and chemical fertilizers (4.8%). Insight by Jonathan Lopez

11-Jul-2024

INSIGHT: After Beryl, US chems may see 11 more hurricanes

HOUSTON (ICIS)–The conditions that helped make Beryl become a hurricane before hitting Texas chemical plants will persist through the rest of the season, with meteorologists forecasting 11 more forming in the Atlantic basin. Conditions are already conducive for hurricanes even though the peak of the season does not happen until the late summer. Beryl still disrupted chemical operations even though it was a relatively weak hurricane when it made landfall in Texas. The next hurricane could disrupt global chemical markets if it damages terminals and ports on the Gulf Coast. BERYL'S KNOCKS OUT POWEREven though Beryl was a Category 1 hurricane – the weakest class – it still caused more than 2 million outages in Texas. Many of the disruptions that Beryl caused to the chemical industry were because of power outages. A roughly equal number of disruptions was caused by companies shutting down operations as a precaution. Other disruptions were attributed to bad weather. PORT DISRUPTIONSBeryl's other major effect was on ports. The ports of Corpus Christi, Freeport, Texas City and Houston had shut down. Beryl caused Freeport LNG Development to shut down its operations. CONDITIONS THAT MADE BERYL SO POWERFUL WILL PERSISTBeryl illustrates the destructive potential of a weak Category 1 hurricane that travels through parts of Texas that host critical powerlines and ports. The meteorology firm AccuWeather estimates that total damage and economic loss caused by Beryl was $28-32 billion. Beryl was remarkable because, prior to making landfall in Texas, it had become a Category 5 hurricane, the most powerful class under the Saffir-Simpson scale. It was the first time that such a powerful hurricane had formed so early in the year, something that US meteorologist attributed to exceptionally warm ocean temperatures. The surface temperatures at sea are already close to what is typical during the mid-September, the peak hurricane season, according to the National Oceanic and Atmospheric Administration (NOAA). After Beryl made landfall in Mexico's Yucatan peninsula, it weakened into a tropical storm before passing over more warm water in the Gulf of Mexico. There it strengthened rapidly and became a hurricane once more before hitting Texas. The warm waters that contributed to Beryl's strength will persist and should soon be joined by La Nina, a weather phenomenon that also makes hurricanes more likely. METEOROLOGISTS RAISE HURRICANE FORECASTEarlier this week, the hurricane forecast for this year was raised by meteorologists at Colorado State University's Tropical Weather & Climate Research. The following compares the center's latest hurricane forecast to its update in June and to the average for the years 1991-2020. July June Average Named Storms 25 23 14.4 Named Storm Days 120 115 69.4 Hurricanes 12 11 7.2 Hurricane Days 50 45 27.0 Major Hurricanes 6 5 3.2 Major Hurricane Days 16 13 7.4 Source: Colorado State University Like NOAA, Colorado State University (CSU) noted that extremely warm sea surface temperatures and a possible La Nina are making it more likely for hurricanes to form and strengthen. THE NEXT HURRICANE COULD CAUSE MORE DAMAGEThe next hurricane can prove to be a bigger logistical headache for railroad companies. Beryl had caused only brief disruptions at BNSF and Union Pacific (UP). Beryl's path did not threaten US oil and gas production in the Gulf of Mexico. The next storm could threaten those wells, causing several energy producers to shut in production. Damage to Gulf Coast oil, ethane, LPG and LNG terminals could disrupt energy markets if the outages last long enough. Texas and the neighboring state of Louisiana are home to most of the nation's LNG export capacity. Prolonged outages at LNG terminals could lead to an oversupply of natural gas in the US because producers could lose an outlet to ship out excess capacity. Prices for natural gas could consequently fall. Prices for ethane tend to follow those for natural gas, so they would also fall in the event of a supply glut. Texas ships ethane and liquefied petroleum gas (LPG) to crackers all over the world. If the next hurricane damages those terminals and leads to a prolonged shutdown, it could have global repercussions by interrupting shipments of feedstock to crackers. In the US, it could cause prices for those products to plummet, especially for propane. US midstream companies are already trying to ship out as much LPG as possible because production has been so prolific. Over the years, US producers have exported increasing amounts of polyethylene (PE) and polyvinyl chloride (PVC). If the next hurricane damages those plants, then it would have a direct effect on global petrochemical markets. Insight by Al Greenwood Thumbnail shows a distribution transformer of a power line knocked down by Beryl. Image by Reginald Mathalone/NurPhoto/Shutterstock

11-Jul-2024

Global crude demand slows in Q2, China consumption contracts – IEA

LONDON (ICIS)–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. Representing the slowest quarterly increase since the closing months of 2022, the period saw Chinese demand decline in April and May, the agency said in its July monthly oil market report. Global oil demand gains are expected to hover below one million barrels/day in 2024 and 2025 as tepid consumption growth, vehicle electrification and energy efficiency measures weigh on purchasing. Total supply increased by 150,000 barrels/day to 102.9 million barrels in June as easing maintenance levels and increasing biofuels output offset a fall in Saudi production, the IEA added. Saudi Arabia output fell to 8.85 million barrels in June from 9.03 million barrels the previous month, according to IEA data, leaving the Kingdom’s total excess capacity at 3.26 million barrels/day. Despite weak demand growth, pricing firmed slightly in June, with Brent crude futures priced around $86/barrel at the end of the month, and remaining around the $85/barrel mark in trading this week. This increase was driven in part by OPEC+ coalition signals that the schedule for unwinding production cuts would depend on market conditions, easing fears of a sudden surge in supply. Petrochemical sector demand for oil was sluggish during the quarter, the IEA added, but other signs point to potential early improvements for manufacturing in Europe. “Demand for industrial fuels and petrochemical feedstocks was particularly weak. By contrast, Q2 delivery data of gasoil and naphtha for OECD economies came in higher than expected, potentially signalling a budding recovery in Europe’s ailing manufacturing sector,” the IEA said. Despite the industrial input uptick, overall demand continues to trend slower, the agency added. “For next year, the call on OPEC+ crude tumbles… as demand growth continues to slow and non-OPEC+ output continues to expand. After the hot summer, cooler trends are set to prevail.” Thumbnail photo: An oil rig off the coast of China's Hebei province. Source: Xinhua/Shutterstock

11-Jul-2024

Brazil’s inflation third monthly rise in June pours more cold water on interest rates cuts resumption

SAO PAULO (ICIS)–Brazil’s annual rate of inflation rose over the 4% mark in June as the Brazilian real depreciated and prices for food and health services rose strongly, the country’s statistics office IBGE said on Wednesday. Brazil’s annual National Consumer Price Index (IPCA in its Portuguese acronym) rose in June to 4.23%, up from May’s 3.93%. In May, inflation had already risen partly after severe flooding in Rio Grande do Sul caused generalized food price rises in the southernmost state. Financial analysts had already warned in May than higher-than-expected price rises could prompt the central bank to halt interest rates cuts for the rest of 2024, hoping to contain the latest upticks in inflation. On Wednesday, June further uptick prompted some of them to suggest there were growing chances there would not be any cuts to interest rates until 2026. THREE MONTHS ON THE MARCHAs well as the increase in the annual rate of inflation to 4.23%, the IPCA also rose month on month, with monthly inflation at 0.21%, down from May’s 0.46%. Prices for food consumed at home rose by 0.47% in June, compared with May, and prices for health service rose by 0.54%. Transportation prices fell 0.19% in June, month on month, airfares posting the sharpest drop, down 9.88%. Fuel prices had mixed changes, with gasoline and ethanol prices rising, while diesel and vehicle gas prices fell. Gray columns: forecast Source: IBGE via Trading Economics At the beginning of 2024, there were expectations that inflation would seasonally rise in the second half of the year, but the increases have materialized sooner and stronger than expected. Petrochemicals-intensive manufacturing companies insist high interest rates continue to be a drag in their sales, as consumers shy away from big ticket purchases of durable goods, posting them until borrowing costs come down. RATES AT 10.5% UNTIL 2026?On Wednesday, financial analysts, most of whom were assuming the central bank would resume its monetary policy easing in early 2025 once the latest upticks in inflation had been contained, have now turned more pessimist. UK-headquartered Capital Economics said it was “hard to see any scope” for cuts to the Selic, the main benchmark, in 2024 but added there was even a “growing risk” there will not be cuts in 2025 either. In June, the central bank’s monetary policy committee (Copom) decided to keep the Selic unchanged at 10.5% after several cuts in a few months since August 2023, when it peaked at 13.75%. SELIC Source: Banco Central do Brazil via Trading Economics In June, investors’ weariness about President Luiz Inacio Lula da Silva intentions to increase public spending, potentially widening the fiscal deficit, spooked currency traders and the real (R) depreciating over the month. It reached a low on 2 July at $1/R5.70, although it has recovered since to around $1/R5.41 on Wednesday afternoon. The current fiscal deficit – and the prospect of it widening – was not helped by public spats, first, between members of Lula’s coalition cabinet nor by the President’s remarks criticizing the central bank and its president, quite outside the norm not to interfere with the institution’s independence. In the end, Lula’s comments and his ministers’ public disagreements on fiscal targets may have caused the cabinet’s main wish – lowering rates to increase consumption and jobs in manufacturing – caused the exact opposite effect. “The recent weakness in the real and mounting fiscal concerns means that there is no chance that Copom will restart its easing cycle at its meeting later this month. Rates are likely to be left unchanged throughout this year and there is a growing risk of no cuts next year either,” said analysts at Capital Economics. “Of some comfort to Copom will be that the strength in core services inflation in May unwound … And more to the point, higher headline inflation will compound concerns at the central bank, particularly given the worsening fiscal position and recent fall in the real.” REAL VERSUS DOLLAR Source: Trading Economics  Earlier in the week, before June inflation figures came out, economists surveyed by the central bank every week had already turned pessimistic as well about inflation falls slowing down and cuts being cut less than previously expected. However, they do still expect cuts in 2025 – on average, they expect the Selic to close 2025 at 9.50%, although that was an increase from their expectations a month ago. They now also expect inflation to end up higher both years – at 4.02% in 2024 and 3.88% in 2025. Expectations for GDP growth remain practically unchanged at 2.10% for 2024 and 1.97% for 2025. Expectations for the dollar/real exchange rate also remain practically unchanged, with the economists surveyed by the central bank expecting the real to close 2024 and 2025 at $1/R5.20. BRAZIL GDP Quarter on quarter Source: IBGE via Trading Economic  Focus article by Jonathan Lopez

10-Jul-2024

Houston, Freeport ports remain closed as millions lack power after Beryl

HOUSTON (ICIS)–The ports of Houston and Freeport in Texas remain mostly closed on Tuesday while millions remain without power following Hurricane Beryl's landfall at the start of the week. Port Houston said all of its terminals will remain closed on Tuesday. Port Freeport said the Freeport Harbor Channel is closed. Gates 4 and 14 are closed, while Gate 8 is opened. Freeport LNG Development had shut down its LNG operations at Freeport on July 7. It can export 15 million tonnes/year. Loadings for LNG tankers slowed considerably on 8 July due to rough seas and suspension of pilot services at Calcasieu Pass and Sabine Pass. Both are in Louisiana. The port of Corpus Christi is scheduled to reopen on Tuesday. It is the third largest oil-exporting port in the world, and it is home to Corpus Christi Liquefaction, a terminal that can export 15 million tonnes/year of liquefied natural gas (LNG). MILLIONS REMAIN WITHOUT POWERBeryl made landfall on Sunday in Matagorda, Texas, as a Category 1 hurricane, with maximum sustained windspeeds of 80 miles/hour (130 km/hour). So far, much of its effect on chemical operations has been by interrupting power. On late Tuesday morning, Texas reported more than 2.82 million outages, according to the website poweroutage.us, which keeps track of power outages in the US. CenterPoint Energy, the main electrical transmission and distribution company in Houston, said more than 1.76 million customers remain affected by outages. Entergy, the main one for eastern Texas, said on Monday evening that 247,000 customers remained without power. Texas-New Mexico Power, which handles the areas around Freeport and Galveston said it 73,220 customers are affected by outages. BERYL CAUSED SOME CHEM SHUTDOWNSElectrical outages and precautions had caused some chemical companies and refiners to shut down units. Enterprise Products said bad weather caused a trip to a propane dehydrogenation (PDH) unit in Mont Belvieu, Texas. Marathon Petroleum reported power loss and multiple unit shutdowns at its Galveston Bay refinery. Dow shut down its operations in Seadrift, Texas, as a precaution. In Baytown, ExxonMobil said it is continuing to assess the site for possible damage as it resumes normal operations. The company anticipated minimal impact to production. Formosa Plastics shut down its Olefins 1 unit at Port Comfort, Texas. Interoceanic Corporation (IOC) said its affiliate, PCI Nitrogen, has halted ammonium sulphate (AS) and sulphuric acid production at its facility in Pasadena, Texas. Phillips 66 reported an upset at its refinery in Sweeney, Texas. The refiner did not say if it shut down any unit. Personnel had returned it to normal operations. CITGO reduced operating rates at its refinery in Corpus Christi, Texas. BASF Total Petrochemical's cracker in Port Arthur, Texas, produced off-spec material because of a suspected lightning strike. LIMITED RAIL DISRUPTIONSOn Monday, BNSF said its Pearland intermodal facility in Houston remained closed.  WEATHER FORECASTIn the late morning, Beryl had degraded into a post tropical cyclone with maximum sustained winds of 30 miles/hour, according to the National Hurricane Center. It was in the northeastern part of the US state of Arkansas, and meteorologists expected it would continue traveling in that direction towards Canada. Thumbnail shows flooding caused by Beryl. Image by Reginald Mathalone/NurPhoto/Shutterstock

09-Jul-2024

Colombia inflation remains at just over 7% in June, central bank expects economy to pick up

SAO PAULO (ICIS)–Colombia’s annual rate of inflation stood in June at 7.18%, up very slightly from 7.16% in May, and the first increase in 15 months, according to the country’s statistical office DANE. Monthly inflation stood in June at 0.32%, also a slight increase from May’s 0.30%. Prices for the subgroup for utilities water, electricity, and gas as well as accommodation rose over the average (up 0.58%) as did health services (up 0.49%), in a country where private healthcare is the norm. Restaurant and hotel prices also rose over the average, up 0.39% in June compared with May. Prices for transport rose well below the monthly average with an increase of 0.19% compared with May, as some sub-components of that index such as gas fuel prices posted falls in prices. Earlier in July, the central bank lowered rates for the fifth time since it started easing monetary policy in December, leaving the main rate at 11.25%, and said indicators were pointing to a stronger performance in coming month. The petrochemicals-intensive manufacturing sectors, however, were in contraction in the second quarter and companies continue pointing to still-high interest rates as a drag for their growth as consumers stay away from big-ticket durable goods. UPTICK, BUT FALLS TO CONTINUEDespite June's small uptick, analysts and Colombia’s central bank still expect inflation to continue falling towards the 3% target by 2025. Gray columns: forecast according to analysts' consensus Source: DANE via Trading Economics.  Colombia’s annual rate of inflation stayed stubbornly high for much of 2023, despite mediocre economic performance, and only started coming down in earnest this year; the country was well behind other Latin American economies in bringing down its rate of inflation. In June 2023, the annual rate of inflation stood at 12.13%. Due to the slower progress fighting off the inflation crisis caused by the post-pandemic logistical woes and the global energy crisis caused by Russia’s invasion of Ukraine, the country’s Banco de la Republica started easing monetary policy later than most peers in Latin America. Since December, it has lowered interest rates five times; the current 11.25% rate compared to the peak at 13.25% for much of 2023. Gray line: forecast Source: Banco de la Republica de Colombia via Trading Economics Industrialists and manufacturing companies point to high interest rates to the sector’s poor performance. Apart from a bright spell in the first quarter of this year, manufacturing has been in contraction for much of 2023 and the second quarter, as confirmed by the PMI index earlier in July. Corporate Colombia also blames the left-leaning government of Gustavo Petro for some of the troubles, which include higher taxation to expand public spending in areas such public healthcare. The cabinet has also tried to increase tax receipts from the polymers sector, implementing a Europe-type plastic tax which companies and trade groups representing them have vehemently opposed. Financial analysts also think the government is too optimistic in its growth assumptions – and therefore those for tax receipts. Last week, US credit rating agency and analysts at Capital Economics both doubted the plans presented by the cabinet on fiscal consolidation were reachable. In its last statement following its monetary policy committee meeting on 4 July, the central bank said second quarter’s indicators pointed to a potential stronger performance in coming months. “The 0.9% annual GDP growth experienced in the first quarter exceeded the technical staff’s more conservative 0.3% forecast. During this period, net external demand was the primary driver of annual GDP growth due to the annual fall in imports and growth in exports. Second quarter results appear to point towards a recovery path for the economy,” said the bank. “The country’s risk premium and the peso to US dollar exchange rate remained high over the past weeks mainly as a result of uncertainty regarding the inflation behavior in the US and [its central bank] the Federal Reserve’s management of the interest rate, placing pressure on international financial markets and contributing to the strengthening of the US dollar worldwide.” On Petro’s cabinet fiscal consolidation plans, the central bank said it was pleased to see a “welcome public spending adjustment and commitment” to comply with the fiscal rules. Focus article by Jonathan Lopez

09-Jul-2024

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