Mono propylene glycol (MPG)

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Commonly used in unsaturated polyester resins (UPR) and coatings, antifreeze and de-icing applications on an industrial scale, mono propylene glycol (MPG) demand responds to activity levels in the construction, aviation and automotive sectors. The MPG USP grade is used in pharmaceutical, cosmetics and other consumer related applications. Seasonal factors and consumer trends can also cause noticeable market movements – as can upstream fluctuations in feedstocks and crude oil. This level of volatility highlights the importance of accurate and timely information. The most success comes from informed decision-making.

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Mono propylene glycol (MPG) news

BLOG: China’s ever-more sophisticated chemicals markets could entirely serve itself

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. China's chemicals producers are said to be focusing on being “nimble and agile” in response to weaker demand growth, ample local supply of intermediate chemicals and increasingly sophisticated end-use markets. This involves producing everything up and down the value chains only when it makes economic sense and increasing the differentiation of grades for a broader range of more sophisticated applications. Local producers are reported to be tripling their range of polyethylene (PE), polypropylene (PP) and polyurethane (PU) grades as they broaden their licensing of technologies. A lot of this differentiation is aimed at supplying chemicals and polymers for higher-value downstream industries such as electric vehicles and batteries. There are said to be plenty of intermediate chemicals available locally that can compete with opportunistic imports. Local producers of intermediates are also reported to be able to make better domestic netbacks than selling overseas. Customers of the local intermediate producers increasingly value reliable suppliers who can provide a wider range of grades, technical services and local currency deals, I’ve been told. The ability of chemicals importers to compete on price alone seems to be under challenge as a sustainable business model. Future winners in China could be the Tier 1 suppliers. These suppliers would make all the grades necessary to serve ever-more sophisticated local end-use markets, which would require constantly successful R&D and good technical services. This points towards China becoming a vast continent-sized market that largely serves itself in speciality chemicals and composites, as well as commodity chemicals. I earlier discussed how self-sufficiency is increasing in commodity chemicals resulting in a pivot by “overseas-based” producers to specialities and composites. China could become just about entirely self-sufficient in commodity grades of PP, polyethylene (PE) and in paraxylene (PX) and ethylene glycols (EG) by 2030. The latter two chemicals are of course pure commodities. Note the above phrase “overseas-based” rather than overseas, as the foreign investors in China are in strong positions to take advantage of this vas and rapidly maturing market. For reasons discussed today, I don’t believe that the pivot by overseas-based producers to specialities and composites will work if it is based on exporting to China. What should the overseas-based producers do? Pretty much forget China as an opportunity as they focus on the rest of the world. And here's the link: https://www.icis.com/asian-chemical-connections/2024/06/chinas-ever-more-sophisticated-chemicals-markets-could-entirely-serve-itself/ 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.

18-Jun-2024

India’s GAIL to build $7.2bn Madhya Pradesh petrochemical complex

MUMBAI (ICIS)–State-owned GAIL (India) Ltd plans to invest Indian rupee (Rs) 600 billion ($7.2 billion) to build an ethane cracker and its derivative plants in Madhya Pradesh. The cracker will have a 1.5 million tonne/year capacity and will be set up at Ashta in the Sehore district of the state in central India, GAIL said in a regulatory disclosure to the Bombay Stock Exchange (BSE) on 10 June. GAIL did not provide product or capacity details of the ethylene derivatives it plans to produce at the complex. “Around 800 hectares of land shall be provided by the MP [Madhya Pradesh] Industrial Development Corporation, for which the state government has already initiated the process,” GAIL said. Project construction is expected to begin by February 2025, with commercial production likely in the financial year ending March 2031, it added. Investment on the project is still pending approval from GAIL management board, and the mode of financing yet to be decided. The Madhya Pradesh state government has approved the project and land will be allotted soon, state chief minister Mohan Yadav had said in a statement on 7 June. He said that “petrochemicals like linear low density polyethylene (LLDPE), high density polyethylene (HDPE), mono ethylene glycol (MEG) and propylene will be produced” at the site. The new project is part of GAIL’s initiative to enhance its petrochemical portfolio, a company source said. “The demand for petrochemicals is increasing in the country, led by expanding industrial, construction and manufacturing,” he said, citing an 8-9% annual growth rate in India’s polymer demand. In March 2024, GAIL had signed a tripartite agreement with Oil and Natural Gas Corp (ONGC) and Shell Energy India to explore opportunities for the import of ethane and other hydrocarbons at Shell Energy Terminal in Hazira in the western Gujarat state. Separately, the company recently announced plans to set up liquid pipeline for ethylene (C2), propylene (C3) from Vijaipur to Aurai in the northern Uttar Pradesh state. At Pata in the same state, GAIL will begin operations at the 60,000 tonne/year PP plant by December 2024. At Usar in the western Maharashtra state, GAIL expects to begin operations at its 500,000 tonne/year propane dehydrogenation unit (PDH) and 500,000 tonnes/year polypropylene (PP) line by April 2025; and its 50,000 tonne/year isopropylene project by December 2025. In the southern Karnataka state, the company expects to bring on line its 1.25m tonne/year purified terephthalic acid (PTA) plant in Mangalore by March 2025. GAIL had acquired JBF Petrochemicals in June 2023 which allowed it to add PTA to its existing petrochemical portfolio. ($1 = Rs83.49) Focus article by Priya Jestin

11-Jun-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 7 June 2024. Vietnam’s increase in recycled PE imports boost market mood By Arianne Perez 07-Jun-24 14:37 Producers of recycled polyethylene (rPE) in northeast and southeast Asia have seen a recent uptrend in spot orders from Vietnam amid new requirements from brand owners. Asia MEG demand slows amid limited Mideast cargoes; China supply to grow By Judith Wang 06-Jun-24 13:57 SINGAPORE (ICIS)–A tug of war between snug import availability and slowing demand is likely to continue in Asia’s monoethylene glycol (MEG) market, while an expected increase in China’s domestic supply could shake things up in the near term. INSIGHT: New measures for China property market boon for chemicals By Lina Xu 05-Jun-24 10:00 SINGAPORE (ICIS)–The People's Bank of China (PBoC) released a series of new real estate-related policies on 17 May, including a nationwide removal of minimum interest rate on commercial personal housing loans; reduction in minimum down payment ratio for both first-time and second-time home buyers; and lower interest rate on housing provident fund. NE Asia C2 market sees pressure from long supply, downstream shutdowns By Josh Quah 03-Jun-24 10:49 SINGAPORE (ICIS)–Asia ethylene markets are likely to still face pressure from an overhang of regional supply from May despite some production corrections in June. Asia DEG shrugs off China’s suspended tariff concessions on Taiwan material By Judith Wang 03-Jun-24 15:20 SINGAPORE (ICIS)–Asia’s diethylene glycol (DEG) market is shrugging off China’s decision to suspend tariff concession on its imports of Taiwanese material. China PX buyers prefer domestic over imports on differing yuan exchange rates By Samuel Wong 06-Jun-24 12:36 SINGAPORE (ICIS)–The difference in exchange rates for the Chinese yuan (CNY) set by the People’s Bank of China (PBOC) and the prevailing spot market rate saw downstream purified terephthalic acid (PTA) users in China preferring domestic paraxylene (PX) cargoes over imported cargoes.

10-Jun-2024

LOGISTICS: Container rates surge, tanker rates flat to lower, Panama Canal raises maximum draft

HOUSTON (ICIS)–Global rates for shipping containers continue to surge, liquid chemical tanker rates were flat to lower, and the Panama Canal Authority (PCA) is increasing the maximum allowable draft to transit the Neopanamax locks, all highlighting this week’s logistics roundup. CONTAINER RATES Global rates for shipping containers continue to surge, although the rate may be slowing. Global average rates from supply chain advisors Drewry rose by 4% this week, a slower pace from the double-digit increases over the previous two weeks. The following chart shows that average rates are approaching $4,250/FEU (40-foot equivalent unit). Rates from Asia to the US are also at new highs for the year, as shown in the following chart. Rates continue to be pressured higher because of unrest in the Middle East, specifically attacks on commercial vessels by Yemen-backed Houthi rebels. Houthis even claimed responsibility for an attack on the USS Dwight D Eisenhower, an aircraft carrier stationed in the Red Sea. US and UK responded by sending fighter jets to strike Houthi targets in Yemen. Rates are likely to continue rising, according to ocean and freight rate analytics firm Xeneta. “The ocean freight container shipping market has seen rapid and dramatic increases during May and that is set to continue with further growth in spot rates,” Peter Sand, Xeneta chief analyst, said. “On 1 June, spot rates will reach a level we have not seen since 2022 when the COVID-19 pandemic was still wreaking chaos across ocean freight supply chains.” From the Asia-Pacific to US West Coast, market average spot rates are expected to reach $5,170/FEU on 1 June, which would surpass the Red Sea crisis peak of $4,820/FEU seen on 1 February, Xeneta said. This is an increase of 57% during May and the highest spot rates have been on this trade for 640 days. From the Asia-Pacific to US East Coast, spot rates are expected to reach $6,250/FEU on 1 June, only slightly shy of the Red Sea crisis peak of $6,260/FEU and an increase of 50% since 29 April. Container ships and costs for shipping containers are relevant to the chemical industry because while most chemicals are liquids and are shipped in tankers, container ships transport polymers, such as polyethylene (PE) and polypropylene (PP), are shipped in pellets. They also transport liquid chemicals in isotanks. LIQUID TANKER RATES US chemical tanker freight rates assessed by ICIS were mostly unchanged. However, rates increased from Brazil to the US Gulf (USG) and fell slightly from the USG to Asia and from the USG to Brazil. From the USG to Brazil, there continues to be plenty of contractual volumes for both caustic soda and monoethylene glycol (MEG). All the regulars are open and have a lot of tanks to fill. This route has experienced significant downward pressure due to market dynamics and because activity here has been limited. The USG to Brazil trade lane is expected to remain at a standstill which could add further pressure. From the USG to Asia, freight rates declined due to lack of interest. PORT OF BALTIMORE The Unified Command (UC) continues to clear wreckage from the bottom of the Patapsco river, projecting to fully restore the Fort McHenry Federal Channel to its original 700-foot width and 50-foot depth by 8-10 June. The UC cleared a 400-foot-wide swath of the federal channel on 20 May, permitting all pre-collapse, deep-draft commercial vessels to transit the port. Source: Maryland State Police Aviation Command PANAMA CANAL The Panama Canal Authority (PCA) is increasing the maximum allowable draft to transit the Neopanamax locks, effective immediately. The PCA said the arrival of the rainy season in the Canal watershed prompted the action. Wait times for non-booked southbound vessels ready for transit held steady this week for northbound traffic and fell for southbound vessels, according to the PCA vessel tracker and as shown in the following image. Wait times a week ago were 1.5 days for northbound vessels and 3.6 days for southbound vessels. Additional reporting by Kevin Callahan

31-May-2024

APIC '24: Global energy transition to impact chemical feedstocks availability – consultant

SEOUL (ICIS)–The effect of the global energy transition will extend beyond energy sources and become more pronounced after 2030 – impacting the availability of petrochemical feedstocks, a senior industry consultant said on Thursday. "The energy transition is a very wide terminology, which actually goes well beyond energy and materials that will be used in the future," Stefano Zehnder, vice president of consulting at ICIS, told delegates at the Asia Petrochemical Industry Conference (APIC) in Seoul, South Korea. This shift, he explained, will significantly affect the types of materials used in the future and this has important implications for the refining industry. "Oil demand alone does not describe the role of global refining," Zehnder said. Large-scale refining capacity rationalization is expected as refining operations become more exposed to fluctuations in fuel demand, he said. "As refining operation will become more and more exposed to the fuel side, they will be increasingly targeting the petrochemical feedstock area," Zehnder projects. Zehnder also presented a longer-term scenario projecting a substantial reduction in oil demand post-2030, driven by the increasing penetration of sustainable fuels. Despite the evolving energy landscape, "the refining industry remains the dominant provider of feedstock for the petrochemical industry", he said. "We don't think is going to change much into the future." "Post 2030, longer-term scenarios will envisage an important reduction of oil demand, accelerating the trends visible in the medium term," Zehnder added. Although the reduction size in demand will be function of specific assumptions on the key drivers of fuel demand, the impact on “conventional” refiners is likely to be even more pronounced. "This scenario implies a loss of 11 million barrels/day of crude processing. The main factor is [the] assumption related to sustainable fuels, with annual contributions from non-gas liquids (NGLs) gradually flattening." The shift away from fossil fuels to sustainable alternatives will also affect the production of petrochemical feedstocks that are traditionally derived from oil refining. Zehnder highlighted that this transition could lead to a shift in the availability of key feedstocks such as naphtha and propylene. Through to 2049, reducing refinery runs and gasoline yields will affect propylene availability from global refineries, Zehnder explained. "As FCC capacity will decline, higher propylene yields will be required." During the same period, Zehnder noted, "SAF technologies can contribute to renewable naphtha availability, with bio/renewable also potentially contributing to renewable naphtha availability, including bio/renewable diesel to bunkers." Focus article by Nurluqman Suratman

30-May-2024

APIC ’24: Overcapacity weighs on Japan petrochemical production – JPCA

SINGAPORE/SEOUL (ICIS)–Cracker operations in Japan will remain “challenging” this year amid soft demand while capacity expansion in China continues, according to the Japan Petrochemical Industry Association (JPCA). C2 output falls to record low in 2023 Production of five major plastics shrink by around 5% Capacity optimization among industry main tasks “With new cracker capacities being planned in China almost every year at a pace far exceeding demand, the operation rates of domestic crackers are expected to remain challenging,” said a JPCA report prepared for the Asia Petrochemical Industry Conference (APIC) being held in Seoul. The two-day conference ends on 31 May. In 2023, Japan’s ethylene (C2) production shrank 2.3% to a record low of 5.32 million tonnes, as domestic crackers ran below full capacity, JPCA data showed. “The operation rates of domestic crackers have remained below 90% (this rate is said to be the criterion for judging the economic situation) since August 2022 and the monthly operation rate dropped below 80% four times in 2023,” JPCA said. Japan, which was dislodged by Germany as the world’s third-biggest economy in 2023, is projected to post a 2024 GDP growth of around 1.3%, down from last year’s 1.9% pace. In Q1 2024, the economy shrank at an annualised rate of 2.0% as both consumption and capital spending weakened. For the whole of 2023, the country’s total production of five major plastics – namely, linear density polyethylene (PE), high density PE (HDPE), polypropylene (PP), polystyrene (PS) and polyvinyl chloride (PVC) – declined by an average of 4.7% to 6.02 million tonnes. Japan production of major petrochemicals (in thousand tonnes) Product 2023 2022 % change Ethylene 5,324 5,449 -2.3 LDPE 1,223 1,347 -9.2 HDPE 661 714 -7.4 PP 2,075 2,120 -2.1 PS 564 654 -13.8 PVC 1,496 1,483 0.9 Styrene monomer (SM) 1,428 1,542 -7.4 Ethylene glycol (EG) 264 351 -24.8 Acrylonitrile (ACN) 341 422 -19.2 Sources: JPCA, Japan's Ministry of Economy, Trade and Industry (METI), Japan Styrene Industry Association (PS, SM) and Vinyl Environmental Council (PVC) Domestic demand as ethylene equivalent for the year declined by 11.9% to 3.87 million tonnes, according to JPCA data. “In 2024, there is a risk of a decline in demand due to the deterioration of the global economy, such as price hikes of raw commodities due to supply disruptions caused by several problems,” JPCA said, citing Russia’s prolonged invasion of Ukraine, the Israel-Hamas war, and attacks on commercial ships in the Red Sea. “But a certain amount of demand growth is expected due to the resilience of the US and some developing countries’ economy, and the global economy would have a possibility to make a ‘soft landing’,” JPCA stated. Economists are growing more confident that the US – the world’s biggest economy – will be able to post a 2024 growth rate of 2.4%, easing from the actual GDP growth of 2.5% in 2023. China, although beset by a slumping property sector, should be able to post a 5.0% GDP growth, according to the revised forecast by the International Monetary Fund (IMF). In the report, JPCA also emphasized the petrochemical industry’s tasks to engage in “green” or environmental-friendly transformation toward carbon neutrality by 2050; to enhance and optimize excess production capacity amid a declining population; to push for digital transformation; and contribute to a recycling-oriented society. “In Japan, demonstration experiments using new process technologies and raw materials that contribute to green activities have begun, such as biomass-based fuel, bio-material-based olefins, ammonia synthesis, and hydrocarbon synthesis,” it said. Focus article by Pearl Bantillo

30-May-2024

APIC '24: Chemical plant closures to accelerate amid unprecedented oversupply

SEOUL (ICIS)–Announcements of chemical plant closures are expected to gain momentum throughout 2024 as the industry now realizes that demand will not improve measurably anytime soon to offset languishing margins, a senior industry analyst said on Thursday. Speaking at the Asia Petrochemical Industry Conference (APIC) in Seoul, South Korea, ICIS vice president of chemical analytics Alex Lidback said that "margins for most products are suffering”. Lidback that demand is still growing for base chemicals overall but noted that the growth is slowing. "It’s very difficult to grow your way out of this [excess capacity]," he said. Global base chemical demand growth Lidback attributed the current market woes to excess capacity additions in recent years, particularly in China, resulting in persistent excess capacity in base chemicals such as ethylene, propylene, ethylene glycol, paraxylene (PX), and styrene. "The over-capacity is unprecedented – unless there are extensive shutdowns, the market will not rebalance most products anytime soon," Lidback said. "Major capacity shutdowns will take place when companies decide not to maintain existing assets and delay FIDs [final investment decisions]." This glut of supply has severely eroded profit margins, pushing many producers into the red. “If you go back to previous down cycles, China helped grow out of this excess capacity,” Lidback noted. The situation is different this time around, as China is no longer able to absorb the excess capacity, adding that the imports of base chemicals have declined by 12 million tonnes from 2020 to 2023, he said. China's imports "Growing out of this excess capacity state will take too long, China will not be the savior," Lidback said. The industry will need to make some difficult decisions to rebalance the market, including permanent plant closures, project delays, and even cancellations. “So, what we think is gonna happen over the next few years is starting this year is we're gonna start to see the announcements of permanent closures." While low-cost assets in the Middle East and North America are secure, higher-cost producers in other regions are vulnerable, the ICIS analyst said. Several factors have delayed necessary decisions, including the financial stability of many companies entering the downturn, the integration of some chemical firms with refining operations that benefited from favorable crack spreads, and the lingering hope of a strong demand rebound. "A lot of companies entered this down cycle in a pretty good financial state, which allowed them to ride the wave a little bit further through these tough margins," Lidback said. However, the anticipated demand recovery has not materialized. Lidback recalled the optimism that followed a strong first half of 2022, but noted that the second half was "terrible," and that the hoped-for improvement in 2023 had not occurred. "The hope was that the first half of 2023 would be slow, but the second half of 2023 would be a very strong demand year. Obviously, that didn't just transpire, and we haven't seen really any major improvement in 2024." Lidback also pointed to the high cost of capital as a factor that is making it more difficult for companies to invest in new projects. “It’s a lot harder with these types of interest rates in reverse sitting around 7%. And I’ll tell you that for FIDs, you go to a [management] board right now and ask for a project – that’s going to be really difficult." Focus article by Nurluqman Suratman

30-May-2024

APIC '24: Thailand chemicals demand to recover after challenging 2023 – FTIPC

SEOUL (ICIS)–Thailand's petrochemical industry is expected to recover in 2024 as demand improves following a challenging 2023, which was marked by a global economic slowdown, inflation, and high energy costs that dampened consumption. The Federation of Thai Industries' Petrochemical Industry Club (FTIPC), in a report prepared for the Asia Petrochemical Industry Conference (APIC), noted that uncertainties in the global economy, including the recent Israel-Hamas conflict, China's economic stagnation, and instability in US and European financial markets, have impacted the Thai economy. KEY SEGMENTS IMPACTED This challenging environment has already impacted key petrochemical segments. Ethylene consumption, for example, declined in 2023 due to weaker economic conditions and subdued demand. in '000 tonnes/year 2020 2021 2022 2023 Total Capacity 4,609 5,409 5,409 5,360 Production 4,516 5,045 4,530 4,463 Consumption by derivative products* 4,719 5,040 4,478 4,463 Exports 44 99 63 41 Import 163 43 87 95 *Consumption netbacked from polyethylene (PE), ethylene dichloride/vinyl chloride monomer (EDC/VCM), ethylene glycol (EG), and styrene monomer (SM) production Demand for ethylene is expected to remain under pressure in 2024 due to feedstock volatility, weak derivative demand, and increased competition from new capacities in China, southeast Asia, and the US. Additionally, polymer converters are grappling with major concerns such as geopolitical uncertainties, global recession fears, and high inflation rates, as consumers limit spending and further weaken demand for end-use sectors. OUTLOOK AND CHALLENGES AHEAD Looking ahead, Thailand, southeast Asia's second-largest economy, is projected to grow by 2.2%-3.2% in 2024, fueled partly by a rebound in exports and increased private and public investment. However, the recovery in global demand for petrochemicals is not expected to fully materialize until the second half of 2024, according to the FTIPC. This is due in part to a supply glut in Asian markets caused by increased production capacity in China, Vietnam, Indonesia, and Thailand itself, as well as the Middle East, which has prompted producers to reduce output or maintain inventory levels to preserve profit margins. Volatile economic conditions, geopolitical conflicts, new rules of global trade, and the trend of reducing carbon emissions and greenhouse gases present both opportunities and challenges for the petrochemical sector, the FTIPC said. “Businesses must adapt to this changing landscape by enhancing competitiveness, flexibility, and continuous adaptation amidst external uncertainties,” it said. “Integrating business operations with sustainable development is crucial, with a focus on sustainable business growth that meets the demands of consumers in a low-carbon and net-zero emission society.” Focus article by Nurluqman Suratman

30-May-2024

INSIGHT: Surging freight rates hamper Asia petrochemical trades

SINGAPORE (ICIS)–A severe shortage of containers and vessel space as commercial ships take a much longer route to avoid the Red Sea has sent freight rates skyrocketing in recent weeks, artificially propping up petrochemical prices even as demand remained generally weak. Some sellers offer on free on board (FOB) basis but no takers Freight costs for Chinese exports more than double India may suffer near-term shortage of select petrochemicals Across markets in Asia in recent weeks, industry players’ lament boils down to this exasperated hyperbole: “The freight rates are killing us!” It takes the fun out of witnessing some initial signs of recovery in external demand for global manufacturing giant China. Whatever export competitiveness Asia gained from having weaker currencies against the US dollar is being undermined by the high cost of shipping out of the region. The Chinese yuan recently fell to a six-month low, while the Japanese yen continues to trade at multi-year lows against the US dollar, which is firmly supported by higher-for-longer interest rates. Overseas demand for Chinese products, including petrochemicals, seems to be improving, but actual trades are being hampered by logistics woes stemming from the Red Sea crisis in the Middle East. Attacks on commercial ships have continued in the key shipping lane that connects Asia to Europe, the latest being on an oil tanker bound for China. Rerouting of ships to the Cape of Good Hope meant longer voyage times and much slower turnover of vessels and containers, thereby, creating a strong pressure on freight rates, which may persist for most of the year. “The race for capacity appears to have started, with shippers showing strong demand due to shippers moving significant cargo in the first four months of 2024 to avoid potential Q3 constraints​​,” Richard Fattal, chief commercial officer of London-based freight forwarder Zencargo said in a note on 20 May. “Combined with an average of 5% ongoing blanked sailings, there is a looming future of tighter capacity, higher rates and sellers’ market swings ahead,” he said. “With capacity shrinking in the face of resurgent port congestion, driven by equipment shortages in China and longer routes around the Cape of Good Hope,” Fattal said. For Q2, Zencargo is projecting more than a 13% contraction shipping capacity on the Asia-Europe routes compared with Q3 2023, “with alliances cancelling 5% of sailings between weeks 20 and 24 [H2 May to H1 June]”. “The effective capacity to Northern Europe, based on actual vessel departures from Asia, has decreased by 5.1% compared to a year ago,” it said, citing “the longer route taken by the majority of vessels via the Cape of Good Hope, despite a 17.8% increase in vessel capacity on the Asia-North Europe route”. For the Asia-Mediterranean route, however, the overall capacity has “increased by 10.5%, even with the diversions via the Cape” due to a 49.1% increase in total deployed capacity on this route compared to a year ago”, Zencargo said. WEST BUILDING WALLS AGAINST CHINA TRADES The July-September period is the peak season for Chinese shipments to the west, ahead of the Christmas season in December, according to Wang Guowen, director at Shenzen Logistics and Supply Chain Management Research. Possibly driving up US’ overall demand for Chinese goods, which exerts upward pressure on shipping costs, is the impending tariff hike on imports of selected products from China, including electric vehicles (EVs) and battery materials. For Chinese EVs, the US import tariffs would quadruple to 100% from 1 August, which is tantamount to a ban. European countries appear to be considering similar protectionist measures against China, whose overcapacity is deemed to be killing domestic industries in the west. “Western countries' implementation of tariffs and tax structures on Chinese-manufactured automotive and EV exports is anticipated to significantly impact the shipping sector by potentially reducing vessel demand,” online container and leasing platform Container xChange said in a recent note. To bypass these trade barriers, Chinese automotive and EV makers “are accelerating efforts to internationalize their manufacturing, assembly, and distribution processes”, it said, adding that “immediate effects are already evident, as manufacturers are hastening to ship EVs to avoid impending tariffs and uncertainties”. In the global petrochemical scene, manufacturing facilities in the US and Europe, as well as in parts of northeast Asia are shutting down amid China’s overcapacity. Technically, reduced production elsewhere would open up new markets for China’s excess capacity, if not for the surging freight rates, which further deter trades while demand recovery remains fragile. China’s overall exports have remained soft, posting low single-digit annualised growths in three of the first four months of 2024, with one month in contraction. HEADACHE FOR INDIA PETROCHEMICAL IMPORTERS Petrochemical end-users in India are facing long waiting time to get their hands on imports from China. “Now, no shipping lines will confirm fresh Q2 shipment booking, even after dishing out quotes that are three to four times higher than Q1,” an India-based styrene butadiene rubber (SBR) importer said. A phenol trader said: “June vessel arrangements are more troublesome this year because of the Red Sea issues and also China's exports have been weak especially in the past two months, so fewer vessels are being arranged to China.” India is possibly facing a near-term shortage of purified terephthalic acid (PTA), since northeast/southeast Asian suppliers are struggling to export to the south Asian market. Freight rates from both Taiwan and Thailand to India nearly doubled from April, with voyage time for some shipments taking as long as 90 days, up from the usual 30-40 days. For polyethylene (PE) and polypropylene (PP), cargoes from the Middle East heading to the south Asian markets of India and Pakistan are also being delayed, amid congestion at the ports of Salalah in Oman, Dammam in Saudi Arabia and Jebel Ali in the UAE. For polymeric methylene diphenyl diisocyanate (PMDI) of northeast Asian origin, offers to India have spiked amid tightened regional supply, with delays in getting cargoes from South Korea. SURGING SHIPPING COSTS KILLING SPOT TRADESSpot petrochemical trades are being stalled by constantly changing freight rates on a weekly basis. In the polypropylene (PP) market, some Chinese suppliers have stopped offering on a cost, insurance and freight (CIF) basis, and will only offer on FOB basis because of the risks. For the China-to-Vietnam and the Vietnam-to-Indonesia routes, freight rates have nearly tripled, market players said. Buyers are less willing to discuss on an FOB basis, unwilling to shoulder an expected high cost since most of them do not have their own regular shipper. For soda ash, offers of Turkey-origin dense grade cargoes for 1,000-tonne lots to southeast Asia for Q3 shipments rose to around $300/tonne CFR, up by $20-30/tonne compared with May shipments. Importers of the material across Asia were largely staying on the side lines, with some of them experiencing delays in receiving Turkish cargoes. “Discussion levels are firming up due to freight costs,” said an end-user, adding that the “Red Sea issue is getting worse and lots of shipments from Europe and USA are stuck.” The same is true for the southeast Asian PE market given delays in arrivals of Middle East-origin cargoes and amid perceptions of shorter supply. In the oxo-alcohols markets, producers in Asia are under strong pressure to offload cargoes at lower prices given difficulty in moving volumes to their usual export outlets. Freight rates on chemical tankers are also on the rise amid the Red Sea crisis, sources from Asia’s monoethylene glycol market, resulting in postponing of cargo-loading by some producers. “The freight rates are quite high now, and we have to optimize our vessel availability,” a major MEG producer said. FURTHER FREIGHT SPIKES LIKELY IN JUNE H2 is typically “a busier, more competitive, and profitable season for the shipping industry”, with many container sellers are “currently holding onto their inventory” in anticipation of better demand, said Christian Roeloffs, co-founder and CEO of Container xChange, in a note in May. "In an environment of heightened market volatility and encouraging demand recovery for global trade, container traders are gearing up for the second half of 2024, where we expect a cyclical rise in demand,” he said. “This combination of heavier-than-expected demand for freight and anticipation of further demand surges in the second half of 2024 is driving up container trading prices in China,” Roeloffs added. In a recently conducted survey of container traders and leasing companies by Container xChange, it noted that a majority of the respondents reported “extremely high prices for 40 ft high cube containers in China”. On 21 May, the average one-way leasing rates quoted in the market rose to as high as $2,480 for 40 HC in China for US-bound shipments, more than double the rate at the start of the month at around $950, it said. With ceasefire between Israel and Palestinian militant Hamas in Gaza proving elusive and the threat of a wider Middle East conflict still hanging, it looks like high freight rates are here to stay for an extended period. Insight article by Pearl Bantillo With contributions from Nurluqman Suratman, Fanny Zhang, Nadim Salamoun, Judith Wang, Helen Lee, Ai Teng Lim, Samuel Wong, Julia Tan, Izham Ahmad, Jackie Wong, Shannen Ng, Helen Yan and Clive Ong

29-May-2024

APIC '24: PODCAST: China PP exports to weigh on SE Asia on ample C3 supply

SINGAPORE (ICIS)–Ample propylene (C3) supply in Asia and new downstream polypropylene (PP) capacities in China are expected to weigh on discussions in southeast Asia over the coming months. Asia C3 to lengthen after propane dehydrogenation (PDH) units restart in China; SE Asia volumes China PP exports to weigh on SE Asia discussions Asia PP prices to come under pressure in June-July In this podcast, ICIS editors Julia Tan, Jackie Wong and Lucy Shuai discuss current trends in Asia's propylene and PP markets, and what we can expect going forward. (This podcast first ran on 16 May.) Visit us at Booth 13, Grand Ballroom Foyer of the Grand InterContinental Seoul Parnas in South Korea. Book a meeting with ICIS here.

29-May-2024

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