Mixed plastic waste and pyrolysis oil

HOUSTON (ICIS)–The US Department of Agriculture (USDA) is expecting increases in corn utilized for ethanol, larger exports, and lower ending stocks, while soybean supply and use projections are unchanged, according to the December World Agricultural Supply and Demand Estimate (WASDE) report. In the monthly update, the USDA said corn used to produce ethanol is raised by 50 million bushels to 5.5 billion bushels. This lift is based on the most recent data from the Grain Crushings and Co-Products Production report and weekly ethanol production data for the month of November. The agency said this data implies that corn used for ethanol during the September to November quarter was the highest since 2017. The December WASDE shows corn exports raised by 150 million bushels to 2.5 billion bushels, which the USDA said reflects the pace of sales and shipments to date. With no other use changes, corn ending stocks are reduced 200 million bushels to 1.7 billion. The season-average corn price received by producers continues to be unchanged at $4.10 per bushel. For soybeans, the supply and use projections are unchanged but the monthly update has lifted soybean oil production to 131.2 million tons, with the USDA saying it is up slightly due to an increase for cottonseed. With higher soybean oil supplies and strong export commitments to date, exports are raised 500 million pounds to 1.1 billion pounds. The December WASDE said the season-average soybean price is being forecasted at $10.20 per bushel, down $0.60 from last month. The first WASDE report of 2025 will be released on 10 January.

11-Dec-2024

HOUSTON (ICIS)–A new gas pipeline set to be built by Energy Transfer should provide support for natural gas and ethane prices in the Permian producing basin, lowering the likelihood that US chemical producers see another period of ultra-low costs for the main feedstock used to make ethylene. Energy Transfer's new Hugh Brinson pipeline, previously known as Warrior, will ship natural gas from the Waha Hub in West Texas, to Maypearl, Texas, which is south of Dallas. The first phase of the project will ship 1.5 billion cubic feet/day of natural gas. Operations should start by the end of 2026. Depending on demand, Energy Transfer could concurrently start construction on a second phase that will increase the pipeline's capacity to 2.2 billion cubic feet/day. Energy Transfer's pipeline is the second major one announced in the past six months. Earlier, a new joint venture announced Blackcomb, a pipeline that can ship up 2.5 billion cubic feet/day of natural gas from the Permian basin to the Agua Dulce area in south Texas. Blackcomb will be developed by joint venture made up of Targa and WPC, itself a joint venture made up of WhiteWater, MPLX and Enbridge. NEW PIPELINES TO SUPPORT ETHANE BY REDUCING LIKELIHOOD OF NEGATIVE WAHA PRICESThe two new pipelines should provide West Texas with sufficient capacity to take away natural gas from the Waha Hub and prevent regional prices from falling below zero. The Waha Hub is the main pricing point for the natural gas produced by the oil wells in the Permian basin. Prices at the hub spent much of 2024 below zero because existing pipeline capacity was insufficient to take away excess supplies, which were growing because of rising oil production and gas-to-oil ratios across the basin. When gas prices at Waha fall below zero, it creates a powerful incentive for processing plants to recover as much ethane as possible from the gas stream. Any ethane that remains in the gas stream is sold for its fuel value. When gas prices are negative, producers are unable to capture any value for the ethane left behind. By maximizing ethane recovery, processing plants also free up existing pipeline space, allowing more natural gas to be taken out of West Texas. The surge in ethane recovery increased the amount of the feedstock available to the market. At one point in 2024, ethane prices fell below 12 cents/gal, a low not seen since the COVID pandemic. Since that low, the start up of the Matterhorn Express pipeline has increased takeaway capacity in the Permian, which caused Waha gas prices to rise above zero. Colder temperatures also supported prices for natural gas by increasing demand. Ethane prices are now trading above 20 cents/gal. LNG, ETHANE TERMINALS ALSO INFLUENCE COST FOR CHEM FEEDSPricing at the Waha Hub is one of the many factors that can influence the cost of ethane for chemical producers. Maintenance on one or more of the pipelines that takes away gas from the Permian basin can also depress Waha prices and, potentially, those for ethane. The proliferation of liquefied natural gas (LNG) terminals on the Gulf Coast is playing an increasing role in natural gas and ethane prices. These terminals are vulnerable to disruptions caused by hurricanes and tropical storms that pass through the Gulf of Mexico. These storms can disrupt LNG operations and temporarily shut down a large source of gas demand in the US. If the outage lasts long enough, it can cause a meaningful increase in US supplies of natural gas. That can lower prices for gas as well as the recovery cost for ethane. Midstream companies are increasing their capacity to export ethane overseas, which should support prices for the feedstock. Enterprise is adding 120,000 bbl/day of capacity via the first phase of the Neches River Terminal project, scheduled to come online in mid-2025. A second phase, due online in the first half of 2026, will add up to another 180,000 bbl/day of ethane export capacity. Enterprise and Navigator are adding ethane export capabilities as part of the expansion projects at their existing ethylene terminal in Morgan's Point. Energy Transfer is also adding 250,000 barrels/day of flexible export capacity, which is scheduled to start up during the second half of next year. Similarly, new crackers will increase demand for ethane. The only confirmed new US cracker is a joint-venture cracker that Chevron Phillips Chemical and QatarEnergy should start up in late 2026 in Texas. Shintech could build a cracker in Louisiana, but the company has yet to announce a final investment decision (FID). Insight article by Al Greenwood Thumbnail shows natural gas. Image by Hollandse Hoogte/Shutterstock

11-Dec-2024

SINGAPORE (ICIS)–China's exports in November grew at a slower year-on-year rate of 6.7% to $312.3 billion amid trading headwinds from a potential wave of tariffs to be levied by the incoming US administration. The growth was about half the 12.7% pace recorded in the previous month, official data showed on Tuesday. Exports to the US for the month grew by 8% year on year, while those to the EU increased to 7.2%. Meanwhile, China’s shipments to ASEAN countries posted a double-digit growth of 15% over the same period. Overall imports of the world’s second-biggest economy in November, on the other hand, fell by 3.9% year on year to $214.9 billion on weaker domestic demand, resulting in a trade surplus of $97.4 billion, China Customs data showed. For the first 11 months of 2024, China's total exports increased by 5.4% year on year to $3.2 trillion, while imports rose at a slower pace of 1.2% over the same period to $2.4 trillion, the data showed. The country's total crude import volume in January-November 2024 declined by 1.9% year on year to 50.6 million tonnes. China is the world's biggest oil importer and consumer. It is also a major importer of petrochemicals but its self-sufficiency has been growing over the years amid ongoing heavy capacity additions. Thumbnail image: At the Qinzhou Automated Container Terminal of Beiwan Port in China on 5 December 2024. (Costfoto/NurPhoto/Shutterstock)

10-Dec-2024

HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 6 December. US Manufacturing PMI for November improves but remains in contraction The ISM US Manufacturing Purchasing Managers’ Index (PMI) improved to 48.4 in November – up 1.9 points from 46.5 in October, but remains in contraction (below 50) for the eighth consecutive month, and 24 out of the last 25 months. INSIGHT: Brazil chems producers upbeat as cabinet on side, but serious competitive woes remain The mood this week at Brazil’s chemicals producers trade group Abiquim’s annual meeting was notably more upbeat than a year ago, when imports into Brazil were increasingly eating into their market share. US Nov auto sales rise but could face headwinds from tariffs US November sales of new light vehicles ticked higher from the previous month and rose compared with the same month a year ago, but proposed tariffs on Mexican and Canadian imports by President-elect Donald Trump could create further headwinds for the industry. INSIGHT: 2024’s relative stability in key commodity pricing a contrast to previous US election years Heading into 2025, there are a plethora of factors which chemical markets players are tracking to see what could impact pricing and fundamentals, but key among them is the arrival of a new US President. Braskem’s new CEO appoints a leaner board as Novonor’s stake could be closer to sale Braskem’s new CEO Roberto Prisco has reshuffled the company’s board, including the CFO position, and has made it leaner with nine members, down from 12, the Brazilian polymers major said late on Wednesday. INSIGHT: Global plastics plan pushed down the road, production remains in the spotlight With the idea of a global binding accord on how to handle plastics waste kicked back into the long grass for now, negotiations have progressed but the key points of disagreement still seem fairly intractable. SHIPPING: Asia-US container rates fall, but average global rates rise as possible port strike nears Rates for shipping containers from east Asia and China to the US were flat to softer this week while global average rates rose by 6%, but the looming strike at US Gulf and East Coast ports could put upward pressure on rates in the coming week.

09-Dec-2024

SAO PAULO (ICIS)–Brazil's petrochemical industry needs to implement a deep restructuring if it wants to regain global competitiveness, and it can do this by shifting to renewable raw materials and increased use of natural gas, according to the CEO of Bahia state public company Bahiainveste. Paulo Guimaraes was appointed CEO of Bahiainveste and is tasked with attracting investment to Bahia state – home to Camacari, one of the country's biggest chemical production hubs. Bahiainveste, which was founded in 2015, falls under the umbrella of Bahia’s Secretariat for Economic Development, and functions as a public company with its own assets and revenues, as well as budgetary and financial autonomy. Guimaraes spoke to ICIS on the sidelines of the annual summit of the chemicals trade group Abiquim earlier in December. Although the mood at the gathering was more positive than in 2023, Guimaraes said it was best not to be complacent despite recent successes for chemicals producers in Brazil. The most significant of these has been higher import tariffs. In effect since October, they will help domestic producers increase market share. However, Brazil’s lack of competitiveness in the sector run deeper, and it should address them immediately rather than rest on its laurels, Guimaraes added. Although it may sound like an impossible task, Guimaraes said Brazil can and should compete against the US, the Middle East and China, who have sharply  increased their exports to Brazil during the last two years, hitting domestic producers’ market share. RENEWABLE FEEDSTOCKSTo turn the situation around, Guimaraes said a chemical transformation is necessary for Bahia, where the sector has faced falling competitiveness and job losses over the past two decades due to outdated facilities and a lack of modernization. "We need to look at the possibility of renewable raw materials. Within the next three years, Bahia will become an exporter of ethanol, so we will have the capacity to supply the industry with this type of raw material, for example,” said Guimaraes. The executive highlighted how Brazil's chemical industry has historically underinvested in technological innovation, focusing instead on basic petrochemicals. This strategy has left the sector vulnerable to international competition, particularly from Asia, and in the case of ethanol this is telling, he noted. "Brazil was the one who created ethanol as an automotive fuel in the late 1970s and early 1980s, but today we are producing ethanol using a technology imported from the US, because we did not understand that we needed to continue to develop the technology," he said. “This is a recurrent Brazilian feature, and we need to change it.” DOMINANT PLAYERGuimaraes went on to reflect on the dominance of polymers major Braskem, which emerged from a consolidation of several companies in the early 2000s and is in part owned by Petrobras, the state-owned energy major. These factors have resulted in Braskem – Brazil and Latin America’s largest chemical company – to be key in shaping industry development. The company's virtual monopoly in basic petrochemicals has influenced investment patterns across the sector, said Guimaraes. The US and Brazil are the Americas’ two largest chemicals producers. In the former, a significant shift occurred in 2004 when chemicals producers began utilizing shale gas, making natural gas-based chemistry more competitive than traditional crude oil-derived, naphtha-based processes. Brazil failed to adapt its industrial strategy accordingly. Moreover, the Brazilian chemical sector's challenges are further complicated by the country's energy policies. Following an energy crisis in 2001, the government implemented an emergency thermoelectric program that prioritized gas use for electricity generation over industrial applications. "Natural gas began to rise in price because Petrobras began to see it as just another product that needed to be as profitable as oil. And it stopped being used as a lever for the country's growth," said Guimaraes. DUMPING CONCERNSGuimaraes said growing protectionist moves around the world will only increase further over the coming years as countries face significant concerns about dumping practices which have affected their manufacturing sectors, chemicals included. Guimaraes said the tire industry was a good example. "Today, the tires that are entering Brazil are entering at a price lower than the price of the raw material. And the raw material is a commodity," he said. He noted that domestic Brazilian tire production has fallen between 40-60%, and this occurred even though Brazilian manufacturers use 70% clean energy in their production processes, which in theory should have given them an edge in a world increasingly worried about climate change. The threat of climate change could also give way to opportunities of a new, green industry. Looking ahead, Guimaraes said he can envisage significant opportunities in green hydrogen and sustainable aviation fuel (SAF) production in Brazil. However, once again, he advocated for domestic value addition rather than raw material exports. "Producing hydrogen and exporting hydrogen is like exporting water, wind and sun. Brazil should instead focus on manufacturing finished products using those resources. For instance, rather than exporting hydrogen and iron ore separately, we could produce green steel domestically instead,” said Guimaraes. “We have the advantages of a country where renewable energy production is easy, and we have plenty of available land for non-food crops: we would be able to plant crops to produce chemical feedstocks without competing with food production. “For example: I plant corn, and from the corn I produce ethanol and animal feed. What is the energy I use for this? CO2 or the biomass that the cattle generate. So, the animal feed would feed the cattle that would feed this energy." Front page picture: Bahia’s Camacari petrochemicals hub Picture source: Camacari Town Hall (Camara Municipal de Camacari) Interview article by Jonathan Lopez

09-Dec-2024

LONDON (ICIS)–Here are some of the top stories from ICIS Europe for the week ended 6 December. INSIGHT: Global plastics plan pushed down the road, production remains in the spotlight With the idea of a global binding accord on how to handle plastics waste kicked back into the long grass for now, negotiations have progressed but the key points of disagreement still seem fairly intractable. 2024’s relative stability in key commodity pricing a contrast to previous US election years Heading into 2025, there are a plethora of factors which chemical markets players are tracking to see what could impact pricing and fundamentals, but key among them is the arrival of a new US President. Eurozone economy contracts as chemicals operating rates plunge; outlook grim The eurozone economy has started to contract again according to the latest composite purchasing manager index (PMI), while regional chemical industry operating rates continue to fall sharply. GPCA '24: Lack of recycling root cause of plastics pollution, Dow says Dow has attributed problems with plastics pollution to a lack of plastics recycling and not production, the US producer’s chair and CEO said at the 18th Annual Gulf Petrochemicals and Chemicals Association (GPCA). UPDATE: GPCA '24: Bahrain to host 2025 GPCA Forum Manama, the capital of Bahrain, will host the 19th Annual Gulf Petrochemicals and Chemicals Association (GPCA) Forum on 8-11 December 2025, according to GPCA promotional material seen by ICIS.

09-Dec-2024

SINGAPORE (ICIS)–South Korea’s benchmark stock market index continued to bleed on Monday amid political instability wrought by the shock martial law announcement on 3 December, with impeachment motions against President Yoon Suk Yeol dropped over the weekend due to lack of quorum. KOSPI composite index falls for fourth session Petrochemical shares tumble along; Nov exports fall 5.6% year on year Yoon may be stripped of presidential powers At the close of trade on Monday, the KOSPI composite index shed 67.58 points or 2.78% at 2,360.58, with shares of major petrochemical companies slumping. The Korean won also weakened sharply against the US dollar. The pair was trading W1,437.27 as of 07:04 GMT. When martial law was declared late on 3 December, the won tumbled to a near two-year low above W1,440 levels versus the greenback. PETROCHEMICAL EXPORTS FALLINGSouth Korea is a major exporter of ethylene, as well as aromatics, such as benzene, toluene and styrene monomer (SM). The overall industry is reeling from a combination of weak external demand and overcapacity in China. South Korean industries, including chemicals, rely heavily on exports to China, whose self-sufficiency has grown over the years. In November, South Korea’s petrochemical exports declined by 5.6% year on year to $3.6 billion. In the first 11 months of 2024, however, its petrochemical export volume increased by 7.5% year on year, the Ministry of Trade, Industry and Energy (MOTIE) said on 5 December. Market players said that port operations in Daesan have been unsteady because of strong winds, causing delays in cargo deliveries. “Petrochemical exports are facing difficulties due to unforeseen factors such as falling product prices linked to oil prices and bad weather,” the first vice minister of MOTIE Park Sung-taek said after a recent visit to the refinery of Hyundai OIlbank and the production/export site of Hyundai Chemical. For Hyundai Oilbank, the arrival of five carriers and three crude oil import vessels were delayed because of inclement weather in late November, while delays also hit shipment of five product carriers of Hyundai Chemical, MOTIE noted. “In order to prevent disruptions in exports, we will diversify the types of oil reserves from the existing heavy crude oil to light crude oil in consideration of the types of oil used by each refinery, and greatly simplify the oil reserve lending process so that companies can quickly provide oil reserves when necessary," Park said. EMERGENCY MEETINGS OF FINANCIAL REGULATORS CONTINUEThe economic managers of Asia’s fourth-largest economy – led by Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok – have been holding daily emergency meetings before markets open to ensure financial markets stability, keeping their promise to provide “unlimited liquidity”. “The participants agreed that, as domestic and international uncertainties still persist, relevant organizations should maintain a closer emergency cooperation and response system and mobilize all capabilities to respond in order to minimize the economic impact of the political situation. In a statement on Monday, the Ministry of Economy and Finance said that “as domestic and international uncertainties still persist, relevant organizations should maintain a closer emergency cooperation and response system and mobilize all capabilities to respond in order to minimize the economic impact of the political situation”. South Korea intends to activate a market stabilization fund worth won (W) 40 trillion ($28 billion) following the country’s brief dalliance with martial law, with its slowing economy facing the prospect of increased US tariffs in 2025. For the stock market, the MOEF said that W30 billion of the value-up fund “has already been invested”, with W70 billion to be injected this week, with another W30 billion scheduled to be implemented sequentially. YOON SURVIVES IMPEACHMENT BUT MAY BE STRIPPED OF POWERSBecause of lack of quorum, South Korean President Yoon managed to survive impeachment on 7 December, which was set into motion following his declaration of a six-hour long martial law that disrupted markets. “The impeachment vote failed to gain the 200-vote hurdle needed to suspend the president from duties,” Singapore-based UOB Global Economics & Markets Research said in a note on Monday. “The opposition bloc needed only eight votes from the ruling PPP [People Power Party] to impeach Yoon as votes by three PPP members had prompted protesters outside the National Assembly to chant “five more to go,” it said. On 8 December, PPP leader Han Dong-hoon said that Prime Minister Han Duck-soo will manage the nation’s affairs as an exit plan for Yoon is being prepared, the constitutionality of which is being questioned by the opposition Democratic Party of Korea (DPK). Focus article by Pearl Bantillo Additional reporting by Jonathan Yee Thumbnail image: Lawmakers in the voting chamber during the plenary session for the impeachment vote of President Yoon Suk Yeol at the National Assembly in Seoul, South Korea on 7 December 2024.(JEON HEON-KYUN/POOL/EPA-EFE/Shutterstock)

09-Dec-2024

LONDON (ICIS)–While countries around the world bet on battery technology, Germany has taken a step back with plans to cut funding for battery research – to the dismay of its chemicals and other industries. Battery research key to energy transformation Trying to catch up with China New government may reverse cuts after election With the cuts in the federal government’s 2025 draft budget, the German federal research and education ministry could stop funding new battery research projects as soon as next year. The cuts would also include a reduction in so-called “commitment appropriations” (Verpflichtungsermachtigungen) of more than €100 million for spending on battery research in future years, according to the opposition Christian Democrats. Chemical producers’ trade group VCI said that the cuts would lead to “a loss of added value” and raised the risk of Germany becoming more dependent for batteries on other countries or regions. Germany needed strong research funding in this field in order to catch up with other countries, said Ulrike Zimmer, head of science, technology and environment at VCI. “This is the only way Germany can maintain its chances in competition with the US and China, and also train the urgently needed skilled workers,” she said. The planned funding cuts have already created uncertainties at academic and research institutes, VCI warned in a joint statement this week with trade groups from the machinery, electronics and digital sectors. As it stands, employment contracts could currently not be extended and new contracts could not be signed, the groups said. Research institutions were losing scientists due to the lack of prospects in the battery field, and the technology transfer via collaborations and start-up companies was coming to a standstill, they said. They said the cuts would have far-reaching consequences as they affected all industries involved in the battery value chain: chemical companies, mechanical and plant engineering, cell manufacturers and all industries whose products are based on the performance, price and availability of batteries. Affected sectors included electric vehicles (EVs), stationary storage systems, drones, power tools and robots, among others, they said. TRYING TO CATCH UP WITH CHINA Peter Lamp, head of battery technology at automaker BMW, told a parliamentary committee on Wednesday, 4 December that without powerful batteries, the transformation to a carbon dioxide (CO2)-neutral energy and transport industry was not possible. The availability of modern battery technologies was crucial to successfully implementing the energy transition, he said. Lamp criticized Germany's current dependence on Asian battery cell suppliers. Germany and the EU needed “technological sovereignty” in this area, he said, adding that the planned reduction in funding was therefore “incomprehensible”. Auto industry trade group VDA said that funding for battery research was of “central significance” for the future of the German automotive industry. The country’s Fraunhofer research institute said in a submission to the committee that government support for battery research was “an essential prerequisite” for the success of Germany’s energy and mobility transition. Battery research played a key role in the development of electrochemical energy storage solutions, as well as battery and production development, it said. China and other Asian countries were far ahead in developing and producing batteries, the institute noted. “In order to counter the dominance of Asian players in battery technology and the associated supply chains, Germany and Europe must constantly build up skills and technologies for large-volume battery cell production for all applications, also as insurance against geopolitical dependency,” it said. NEW GOVERNMENT Government officials have said that the cuts were necessary because the country’s supreme court ruled last year that Berlin needed to trim spending in order to comply with the “debt-brake” (Schuldenbremse), which is a constitutionally enshrined provision to keep public deficits low and limit debt. However, there is a chance that the cuts may be reversed in the event of a change in government in Berlin. Following the collapse last month of Chancellor Olaf Scholz’s coalition government, early elections will likely be held in February. The Christian Democrats, which are ahead of Scholz’s Social Democrats in opinion polls on the election, have said that the cuts to battery research, as well as the abolition last year of an incentive for the purchase of EVs, were “short-sighted”. The party has introduced a motion in parliament calling for “strong battery research in Germany”, which prompted Wednesday’s parliamentary committee hearing. Countries such as China, the US, Japan, and South Korea had nearly tripled public spending on battery research over the past four years while Germany risked falling behind internationally in this important area, it said. The cuts would also jeopardize the support the government already committed for investments in construction for battery plants, the party said, and noted the support the government has granted to a project by Sweden’s Northvolt at the Heide chemicals and refining site northwest of Hamburg. Spending a lot of money on battery factories and significantly less on research and training was “highly risky”, it said. The Northvolt project may not be realized, however. The company last month filed for Chapter 11 protection and reorganization in the US, raising questions about its future and the prospects of the German project. BATTERIES, EVs AND CHEMICALS Batteries and the EVs they power are important market opportunities for the chemical industry. An EV contains more plastics and polymer composites and more synthetic rubber and elastomers than a conventional vehicle powered by the internal combustion engine. However, BASF said earlier this year that market dynamics in the EV sector were slowing, and the company would therefore pause or may not make certain investments connected to the industry. One project on which BASF paused work is a proposed commercial-scale EV battery recycling metal refinery at its chemicals production complex in Tarragona, Spain. GERMANY AUTO INDUSTRY SENTIMENT IN DECLINE Meanwhile, the sentiment in Germany’s automotive industry continued to deteriorate in November, according to the latest survey by Munich-based research group ifo this week. Demand was weak and the industry remained stuck in a “mix of far-reaching transformation, intense competition, and a weak economy”, ifo said. Also, thousands of Volkswagen workers went on a short strike on Monday, 2 December to protest against potential job cuts and plant closures in Germany, and their union, IG Metall, has announced another strike for Monday, 9 December. The automotive sector drives demand for chemicals such as polypropylene (PP), along with nylon, polystyrene (PS), styrene butadiene rubber (SBR), polyurethane (PU), methyl methacrylate (MMA) and polymethyl methacrylate (PMMA). Additional reporting by Tom Brown Please also visit the ICIS topic page Automotive: Impact on chemicals Thumbnail photo source: BASF Focus by Stefan Baumgarten

06-Dec-2024

Romanian MP calls on EU to work closely with member states to cut back on red tape Incoming Romanian government must address bureaucracy, high taxation, introduce market reform Romania can establish itself as viable regional alternative to Austrian gas hub LONDON (ICIS)–The incoming European Commission should simplify procedures to access funds for energy projects and strengthen the dialogue with member states particularly in Eastern Europe amid growing popular discontent, a Romanian parliamentarian told ICIS. Speaking to ICIS, Cristina Pruna, vice-president of the industries and services committee in the Romanian parliament said the Romanian energy sector played a major role not only in the EU but also in supporting neighbouring countries such as Moldova and Ukraine. She warned previous delays in allowing Romania to join key agreements such as the EU’s Schengen area, which abolishes border controls, or bureaucratic procedures complicating efforts to tap funds had created major frustrations, which may be partially responsible for gains made by far-right parties in recent polls. REFORM She conceded the incoming Romanian government, which will be formed following parliamentary elections on December 1, will also have to address multiple internal challenges. These include encouraging local and foreign investments in the gas and renewable sectors, cutting back on red tape, reducing taxes and preparing the market for deregulation. She said her party, Uniunea Salvati Romania (USR), which is currently in talks to form the incoming coalition government, had proposed to establish a one-stop-shop at the regulator ANRE to help investors navigate the bureaucratic process to access EU funds for renewable projects. Furthermore, she said Romania should establish power and gas markets where prices are set by demand and supply and insisted there should be a predictable legal framework in place to support vulnerable consumers as well as industrial consumers. One of her party’s proposals is to introduce an automatic mechanism to guarantee tax credits for industrial consumers, which would allow them to deduct from taxes part of rising energy costs. Market participants have complained caps on electricity and gas prices introduced following the 2022 energy crisis had led to burdensome taxation and market distortions. Pruna agreed caps should be lifted but insisted consumers should be prepared for market deregulation expected in 2025. TAXATION Although the ruling Partidul Social Democrat (PSD) won the latest polls with a narrow lead, their policies to date have led to a high taxation regime that has throttled investments and led to nosediving liquidity on Romania’s forward electricity and gas markets. As a result of policies spearheaded by PSD and the liberal party, PNL, in the outgoing coalition government, up to 87% of the money made from gas/oil sales is paid in royalties, windfall taxes and contributions to various funds. Their policies have also led to regulatory unpredictability, deterring large-scale investments. Meanwhile, there are fears that the three far-right populist parties which won seats in parliament –  Alliance for the Union of Romanians (AUR), Partidul Oamenilor Tineri (POT) and S.O.S. Romania – could push for policies that would exacerbate an already visible nationalist streak which has underpinned Romania’s energy regulations in recent years. AUR calls into question the privatisation and sale of Romania’s oil and gas assets to OMV Petrom in the early 2000s. Meanwhile, the front-running presidential candidate Calin Georgescu who will face the USR candidate Elena Lasconi in a run-off on December 8, claimed Romanians are ‘suffocated by taxes’ but neither he nor his newly established party POT has proposed concrete measures to scrap them. ENERGY MIX Although USR advocates scaled up nuclear and solar as well as onshore and offshore wind production, Pruna is keen to point out that Romania should capitalise on its gas reserves. “Offshore Black Sea gas production is due to come onstream in 2027 during the mandate of the incoming 2025-2028 government. We need to ensure that Romania establishes itself as a viable regional market and an alternative to the Austrian gas hub,” she said. She also noted the importance of working closely with Moldova and Ukraine to increase border capacity for electricity and gas flows.

06-Dec-2024

PARIS (ICIS)–Global specialty chemicals producer Arkema aims to supercharge growth in key targeted markets by leveraging proprietary chemistries to develop new products with clear sustainability and performance benefits. From France-based Arkema’s spinoff from energy giant Total (now TotalEnergies) in 2006, the company has undergone a major transformation from a diversified chemical company with a mixed bag of commodity, intermediates and specialty businesses, to nearly a pure play specialty and materials business today. “We had to revisit the strategy of the company in-depth, and we had a strong belief at that time that there was an exponential growth [opportunity] in innovative and high performance materials,” said Thierry Le Henaff, chairman and CEO of Arkema, in a video interview with ICIS. “So our strategy was to focus on specialty materials around three segments – adhesives, coatings solutions, and also high performance additives and polymers in order to make Arkema a pure specialty player,” he added. Le Henaff is the 2024 ICIS CEO of the Year, having been selected in a vote among his peers – the CEOs and senior executives in the ICIS Top 40 Power Players. M&A STRATEGY AND LATEST DEALSThe latest move in the company’s transformation is the acquisition of Dow’s flexible packaging laminating adhesives business for $150 million which just closed on 2 December. The deal adds about $250 million in sales to Arkema’s Bostik adhesives business, and Le Henaff calls it a “step change” for Bostik in the flexible packaging adhesives market, giving it a unique opportunity to be a key partner for customers across the packaging industry. Arkema will spend around $50 million in implementation costs or capex related to the acquisition and is targeting about $30 million in annual cost and development synergies after five years. “We are going to continue to invest in… cost optimization, but at the same time continue to change the portfolio, which means to invest in M&A,” said Le Henaff. The Dow deal comes on top of major acquisitions such as a 54% stake in South Korea-based PI Advanced Materials (polyimide films for mobile devices and electric vehicles) in December 2023 and US-based Ashland’s performance adhesives business (pressure-sensitive adhesives for auto and buildings) in February 2022. While the company will now focus more on organic growth, bolt-on acquisitions will be an important part of Arkema’s strategy in the coming years, he noted. One such smaller bolt-on deal was the April 2024 acquisition of a 78% stake in Austria-based Proionic, a start-up company for the development of ionic liquids, a key component for the next generation of EV batteries. HYPER GROWTH SUBMARKETSSpeaking of organic growth, the Arkema CEO has an ambitious goal of growing sales in certain parts of its specialty businesses at a rate triple that of its overall business through 2028. These high growth areas are green energy and electric mobility; advanced electronics; efficient buildings and homes; sustainable lifestyle; and water filtration, medical devices and crop nutrition. “It is really with this combination of our technologies [in] these submarkets… where we want to multiply by three, the average growth of Arkema. This means that in this market, we could deliver 12% organic growth while for the average of Arkema it would be 4%,” said Le Henaff. Arkema aims to grow these businesses from around 15% of sales in 2023, to 25% of total sales, which are projected to be around €12 billion, by 2028. These high growth areas with three times higher sales than the group average will account for 50% of the company’s R&D budget. “We have about 15 technologies, superior technologies, where we can really differentiate ourselves. Our strategy is really to take advantage of this sustainability trend,” said Le Henaff. “In fact, the answer to climate change is through the solutions we can develop for customers. This is really the core of our strategy,” he added. Within electric mobility, in addition to the acquisition of a majority stake in Proionic, Arkema in January 2024 took a stake in Tiamat, a pioneer in sodium-ion battery technology – a potential alternative to lithium-ion batteries. RENEWABLE RAW MATERIALS AND DECARBONIZATIONArkema is also undertaking organic growth projects in these hyper growth submarkets. One key project is in bio-based polyamide 11, used in bicycle helmets, consumer goods, wire and cable and medical equipment. “We are adding more and more renewable raw materials in the product range we are offering to our customers. One good example and very emblematic [of our strategy] is this polyamide 11 made from castor oil, which is a fully sustainable, renewable, bio-sourced, high performance polymer,” said Le Henaff. “We are very proud of it, and we have just invested in a plant in Singapore to accelerate the growth of this polymer,” he added. Its Rilsan bio-based PA 11 has an 80% lower carbon footprint versus traditional polyamide resins using fossil-based raw materials and conventional energy sources, according to the company. Arkema also recently launched more sustainable adhesive solutions, including its Kizen LIME range of packaging adhesives made with a minimum of 80% renewable ingredients, and Bostik Fast Glue Ultra+ for do-it-yourself (DIY) applications with 60% bio-based materials. Along with helping its customers decarbonize, the company is also decarbonizing its own operations, targeting a 48.5% reduction in Scope 1 and 2 emissions, and a 54% reduction in Scope 3 emissions by 2030 versus a 2019 base. One major project is to decarbonize its acrylics production in Carling, France by installing new purification technology. The €130 million project should result in a 20% reduction in CO2 emissions at the site by 2026. GLOBAL FOOTPRINTAlong with its transformation into pure play specialties, Arkema has also diversified its global footprint, with more exposure in North America than Europe. Today Arkema is a global player with close to 40% of sales in North America, 25% in Asia and around a third in Europe, versus Europe at about 60% of sales when it was spun off in 2006, the CEO pointed out. “I still believe in Europe, but it's clear that we have a gap in competitiveness and also in demand. The pace of demand is slower for Europe than it is for the rest of the world,” said Le Henaff. “It's very important that our governments and the European Commission understand that the cost of doing business in Europe is too high compared to what it is in the rest of the world because of legislation, because of the cost of energy, because of the cost of raw materials,” he added. There is much work to do on this front to get Europe back to competitiveness and growth, especially for chemicals, he said. DEMONSTRATING RESILIENCEArkema’s geographic diversification and specialties focus has made it more resilient to challenging macroeconomic markets. In Q3, sales rose 2.9% year on year to €2.39 billion and adjusted earnings before interest, tax, depreciation and amortization (EBITDA) increased 5.4% to €407 million, the latter driven by 9.0% growth in specialty materials, offsetting a 7.3% decline in intermediates segment. Its overall EBITDA margin expanded to 17.0% versus 16.6% a year ago. A strong focus on efficiency and a healthy balance sheet has served it well. “Arkema over 20 years has doubled in size and we have a set number of headcount. This means that competitiveness and productivity is very important for Arkema, even if we are less vocal than other companies on this topic,” said Le Henaff. On the balance sheet side, net debt of around €3.11 billion is “tightly controlled” at a conservative two times last 12 months EBITDA. TRANSFORMATION NEVER OVERKey to success for Arkema is to continuously evolve, be nimble and be open to growth opportunities. “It’s never over. The status quo in this world is not possible, because the world is changing all the time, because of demography, because of geopolitics, for plenty of reasons, so we have to move forward,” said Le Henaff. “There are plenty of opportunities, but the opportunities of today won't be the opportunities of tomorrow. So we really need to have a company which is structured to be able to catch these new opportunities which arise all the time,” he added. Meanwhile, on the macro-outlook for 2025, he is cautiously optimistic. “We are all cautious because we thought 2023 would be the year of the rebound and also 2024, so we have to be cautious for 2025. But I'm cautiously optimistic,” said Le Henaff. “I still think that we should have some kind of rebound for 2025. We'll see if I'm right or not, but in the meantime, I would say the most important thing is we need to continue [evolving]. We are very glad to be in a unique position because at the end of 2024, we will have nearly fully financed billions of euros of projects, including external growth and organic growth,” he added. PEOPLE AND CULTUREKey to any ongoing transformation is of course the people involved. Arkema deems it critical to keep its people engaged with the mission. “I think, in a world which is quite volatile, quite changing, it's very important to have fixed points,” said Le Henaff. First, the long-term strategy and vision has to be attractive. But equally as important is having a corporate culture with clear and simple values. These five values for Arkema are: Solidarity, Performance, Simplicity, Empowerment and Inclusion. It is the culture that amplifies the inherent strengths in an organization, including technology, and smooths the path for continued successful transformation in an uncertain world, he said. Interview article by Joseph Chang Watch the exclusive Q&A video interview with Arkema CEO Thierry Le Henaff on the 2024 ICIS CEO of the Year landing page.

05-Dec-2024