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Polypropylene (PP) news
BLOG: Record levels of oversupply and the “Doublespeak” of the old market language
SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. Global polyolefins markets are such that the old phrases we use have become "Doublespeak", hiding real meanings. For example, recent mentions of "tight markets" on the Red Sea crisis and a wave of shutdowns should be read as "slightly less long markets". Stick with the data which always gives you the true perspective: Global polyethylene (PE) capacity exceeding demand is forecast to average 26m tonnes a year in 2024-2030, according to the ICIS Supply & Demand Database. This compares with just 7m tonnes a year in 1993-2023 (1993 marked the start of “China’s economic miracle”). Global polypropylene (PP) capacity exceeding demand is forecast to average 24m tonnes a year in 2024-2030 versus 6m tonnes a year in 1993-2023. So far in 2024, average NEA PE integrated variable cost margins have fallen to minus 27 under the blog's new margins index, a record low. NEA integrated naphtha-based variable cost PP margins have so far this year been at minus 28 in another new index, equalling the previous record low in 2022. The average China CFR PE price spread – weighted for the different grades – over CFR Japan naphtha costs has fallen to just $73/tonne so far this year, the lowest since our price assessments began in 1993. And while you stick with the data, remember this essential context: China's economy is undergoing a long-term structural slowdown. Get used to it and come to us for advice about what you should do next. 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.
INSIGHT: Low virgin chemicals pricing intensifies sustainable transition challenge – Borealis CEO
LONDON (ICIS)–Lower pricing for virgin petrochemicals in Europe on the back of a prolonged demand trough is exacerbating the challenge of building out sustainable products portfolios into a core spine of a chemicals business, according to the CEO of Borealis. The Austria-based petrochemicals producer is in the process of substantially increasing its sustainable and circular products offerings, completing its acquisition of Italy-based recycled polypropylene specialist Rialti in November. The company also agreed to acquire Integra Plastics, a Bulgaria-based producer of recycled polyethylene and polypropylene, that month. VIRGIN VS RECYCLED The push to develop circular products as a core plank of Borealis’ operations have become more difficult amid strained profitability and low pricing for conventional plastics, according to CEO Thomas Gangl. “What we want to do is focus on establishing circularity as a viable business,” he said. “This is tricky in general, and even more tricky in times of low prices for virgin material. On the other hand, I truly believe that this is not an optional topic, and is the way forward and we see for Borealis.” “The current environment, with lower demand for products, lower prices and margins, has of course been a difficult situation for us as well. Even more difficult in this environment, is making the mid- and long-term structural changes that we need,” he added. Lower pricing for virgin material has been a challenge for the mechanical recycling sector, with production units tending to be smaller-scale than gigantic fossil-based petrochemicals production plant, and utilising newer technology. Those market characteristics can make for higher costs, and periods of cheap and plentiful fossil-based materials regularly challenge the pace of recycled product market adoption. “We need to go to a more circular product portfolio. During times when the material is so cheap, it is very difficult to afford for customers to buy something with a premium. That is a challenging situation for the transformation,” he said. PERFORMANCE The company reported 2023 operating profit of €18m for its European asset base, excluding its nitrogen fertilizers business, which it sold to AGROFERT in July last year. The long-anticipated divestment has also allowed the company to simplify its approach to moving into a more circular business model, according to Gangl. "The proceeds that we have received from the sale were very good, and it is also about focus in difficult times. With the transformation towards circularity, we need to focus on the polyolefin business, and the nitrogen business was a big distraction from a management point of view," he said. The 2023 figure is a huge decline from the €703m generated -also excluding fertilizers – the previous year, amid high inflation and weaker margins and negative inventory effects. “The European asset base that Borealis is operating, excluding the big joint ventures such a Borouge, recorded €18m operating profit in 2023, a small profit compared to the record year 2022, but 2023 was a tough year for our industry, especially so for European based part of our industry, with high energy prices, inflation, a lot of imports," said CFO Daniel Turnheim. "Don't get me wrong, we are anything but happy with that sum, but it's still in a solid positive territory," he added. Slow ramp-ups and production issues for some new assets at Baystar, the company’s Texas joint venture with Total, also limited profitability last year. This is due in part to the 625,000 tonne/year scale of the polyethylene unit, which can present unique challenges when ramping up output “With this as the biggest machine ever built, you would expect to see some ramp-up curve… but we are convinced that this year this ramp-up curve will be continued and hopefully at the end of the year we will see a very stable operation,” Turnheim said. NO BIG SHIFTS IN 2024 No strong improvements are expected this year compared to last, with OMV projecting that operating margins for its European olefins and polyolefins assets will slip further in 2024, despite polymer sales and cracker operating rates projected to increase. OMV holds a 75% stake in the business, with Borealis standing as the Austria-based oil and gas major’s key foothold in downstream petrochemicals. OMV is in talks with Abu Dhabi sovereign oil major ADNOC on potential closer cooperation on petrochemicals, including the combination of subsidiaries of Borealis and Borouge as equal partners. Gangl declined to comment on the talks. Europe indicator operating margins (/tonne) 2024 (projected) 2023 Ethylene 490 507 Propylene 370 389 Polyethylene 320 322 Polypropylene 320 355 “I think what we really will see in 2024 is that the situation is not substantially different to 2023,” said Gangl. “It will be another challenging year. And so everyone has, therefore, focus on topics where there is the highest value to be delivered." Like most European players, an ever-intensifying focus on costs and efficiencies is the order of the day, Gangl said, with further consolidation in producers’ European asset base a strong possibility. !We've done a lot in working on margins, pricing, variable costs, fixed costs. This is the name of the game for European players, and therefore we need to continue this journey,” he said. “We have seen some first closures of assets last year and also here I expect that the one or the other will be added in the next years,” he added. LEGISLATIVE REFORM With the institution of a new European Parliament later this year as part of a wave of general elections that will see changes in national leadership for nearly half the population of the globe, sustainability legislation is likely to see some shake-ups. Marco Mensink, director general of European chemicals trade body Cefic, has predicted that Commission support on sustainability investment will be focused on the first movers and the highest spenders as industrial strategy rises up the agenda. With the sustainability transition comprised of the reinvention of numerous value chains and those shifts needing to happen in parallel to create a circular economy, what is lacking beyond investment is clarity, according to Gangl. “We are not happy with the timing of what is required from legislation and what we need to do now. We are taking steps without knowing exactly what the legislation will look like, and this is of course creating some issues,” he said. The US Inflation Reduction Act includes scope to cover operational expenses for new production units in value chains that may not yet be profitable, and an issue in Europe remains an obstacle to maturity of cleaner feedstock product markets, Gangl added. “We can for example, produce more products derived from bio-based feedstocks but as long as this is not supported by legislation, customers will not pay the extra costs for that. And this is where we then need a lot of smaller investments as well,” he said. “So it's not only one big investment, it's many smaller investments, and these will be delayed if there is no change in the approach by regulators,” he added. Insight by Tom Brown Thumbnail photo: Borealis' office in Taylorsville, US. Source: Borealis Clarification: recasts seventh paragraph
VIDEO: Red Sea tensions will ripple through Europe chems markets in 2024
LONDON (ICIS)–The Red Sea crisis has shaken the European petrochemicals industry. Products like PTA and polypropylene, ethylene glycols and HDPE have been highly impacted by reduced imports from Asia. In the long term, there is a shift in buyer behaviour caused by geopolitical uncertainties. European buyers moving away from just-in-time delivery Fear of trade disruption pushes domestic chemical prices Reduced sentiment on just-in-time deliveries leads to inventory building Input from Chris Barker, Meeta Ramani, Heidi Finch, Nigel Davis, Tom Brown and Will Beacham.
India’s HPCL eyes Jan 2025 start-up for 9m tonne/year Rajasthan refinery
MUMBAI (ICIS)–India’s Hindustan Petroleum Corp Ltd (HPCL) expects to begin commercial operations at its greenfield 9m tonnes/year refinery at Barmer in the western Rajasthan state by January 2025, a senior company official said on Wednesday. “Once the refinery comes on stream, the petrochemical plants at the complex will be commissioned in a phased manner in around three months,” the official said. The refinery and petrochemical complex which is being built at a cost of nearly Indian rupee (Rs) 730bn ($8.8bn), has achieved nearly 80% mechanical completion and is expected to cater to increasing demand in north India, he added. The refinery will initially operate at around 80% of capacity, with full capacity utilisation expected by 2027, he said. Once operational, the petrochemical complex will have a polypropylene (PP) unit with two 490,000 tonne/year lines; and a linear low density polyethylene/high density polyethylene (LLDPE/HDPE) swing plant with two 416,000 tonnes/year lines. The complex will also produce 240,000 tonnes/year of butadiene (BD). The project has faced delays and cost escalation since work on the project started in 2018. It is being developed by HPCL Rajasthan Refinery Limited (HRRL), a 74:26 joint venture between Hindustan Petroleum Corp Ltd (HPCL) and the Rajasthan state government. ($1= Rs83.1)
Americas top stories: weekly summary
HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 9 February. Brazil's chemicals output down 6% in 2023, producer prices fall by 17% Brazil’s chemicals output fell by 5.9% year on year in 2023, while plastics and rubber production rose by 1.2%, according to the country’s statistical office, IBGE. INSIGHT: Rough start to 2024 for chemicals, even as economic outlook brightens The US economy is proving most resilient but it is a different case for chemicals. And while the IMF raised its global GDP growth forecast for 2024 to 3.1% from a prior 2.9%, largely on an improving US outlook, chemical company guidance for Q1 following Q4 earnings calls all points to a rough start for the year. US natgas prices close below $2, benefiting chem margins US natural gas prices fell below $2 on Wednesday, which, barring the pandemic, represent the lowest winter-time level since 1997. INEOS Aromatics closes one of two PX units at Texas City, Texas site INEOS Aromatics has closed one of its two paraxylene (PX) units at its Texas City, Texas site, according to a company spokesperson. Brazil to reinstate antidumping duty on US PP Brazil is to reinstate antidumping duties (ADDs) on US polypropylene (PP), effective immediately after publication in the country's official gazette.
Europe top stories: weekly summary
LONDON (ICIS)–Here are some of the top stories from ICIS Europe for the week ended 9 February. INSIGHT: Europe gets gas cost relief but poor demand, overcapacity weigh heavy With natural gas prices potentially falling towards pre-Russia-Ukraine war levels and possibly below, European chemical manufacturers may soon be rid of the competitive cost disadvantage which has dogged them for several years. Europe TiO2 market relaxed about Venator Duisburg closure, longer term impact to be assessed Reaction to Venator’s imminent closure of its standard TiO2 Duisburg, Germany plant is muted so far, as it had been widely expected for some time and underlying demand remains fragile. Europe toluene demand forecasts better than those for downstream markets and TDI After a slow start for toluene bulk demand and that of toluene diisocyanate (TDI) along with major end user sectors in Europe downstream in 2024, sentiment is more bullish for the former market versus the latter two. Germany chemical production falls to lowest level since 1995 Germany’s chemical production fell 10.6% in 2023, dropping to its lowest level since 1995, the country’s federal statistics agency said. Eurozone construction sees sharpest decline since mid-2020 in January The eurozone construction sector remained in contraction territory in January, with conditions chilling further during the month on the back of weak demand and declines across key markets, with little sign of recovery this year. European PE/PP spot prices continue to rise as contract offers in triple digits European spot polyethylene (PE) and polypropylene (PP) prices are still on an uptrend this week, while February contract offers have been made in the triple digits.
Brazil to reinstate antidumping duty on US PP
SAO PAULO (ICIS)–Brazil is to reinstate antidumping duties (ADDs) on US polypropylene (PP), effective immediately after publication in the country's official gazette. The decision was taken on 8 February by the Executive Management Committee (Gecex) of Brazil's Foreign Trade Chamber (Camex). PP imports from the US into Brazil only represented 5% of the total PP imports in 2023. However, strong lobbying from besieged Brazilian domestic producers, who face stiff competition from lower-priced overseas material, prompted Camex to reinstate the ADD. In 2023, Brazil imported almost 510,000 tonnes of PP; less than 26,000 tonnes came from the US. Brazil's government extended the 10.6% ADD on imports of US PP in October 2023 for five more years. However, the government immediately suspended it. The measure must now be published in the Official Gazette (DOU) to take effect. PP is used for packaging, ropes, carpets, plastic parts, loudspeakers and automotive parts. Thumbnail shows rope made out of polypropylene. Image by Shutterstock.
Latin America stories: weekly summary
SAO PAULO (ICIS)–Here are some of the stories from ICIS Latin America for the week ended on 2 February. NEWSChile’s manufacturing output down 2.3% in December, central bank cuts rates 100 basis points Chile’s central bank interest rate cut this week by one percentage point to 7.25% may have been a welcome move by manufacturing companies, whose output fell 2.3% in December on the back of poor demand. Colombia manufacturing output booms in January on improved demand Manufacturing output in Colombia posted a strong recovery in January on the back of healthy new orders that prompted firms to expand production and employee count, S&P Global said this week. Mexico’s manufacturing output flirts with contraction in January Mexico’s manufacturing PMI index slipped back into contraction in January as overall output fell on downward pressure on new orders, business closures, unfavorable weather, and demand weakness, analysts at S&P Global said on Thursday. Brazil’s manufacturing output jumps in January to year-and-a-half high Brazilian manufacturing output jumped in January on the back of new orders which fuelled the largest expansion in production volumes since mid-2022, analysts at S&P Global said on Thursday. Colombia central bank cuts interest rates by quarter-point to 12.75% Colombia’s Banco de la Republica cut its benchmark interest rate by 25 basis points to 12.75% late on Wednesday. It was the second cut in interest rates since the central bank started to ease monetary policy in December. Brazil’s central bank cuts rates by 50 basis points to 11.25% The Banco Central do Brasil (BCB) on 31 January cut the main interest rate benchmark, the Selic, by half a percentage point to 11.25%. Mexico’s GDP up 3.1% in 2023, nearshoring fuels growth Mexico’s GDP grew 3.1% in 2023, year on year, confirming a resounding year for manufacturing on the back of nearshoring and services, which has fully recovered from the pandemic, the country’s statistical office Inegi said on Tuesday. Argentina’s peso devaluation too deep, too early while economy enters ‘profound recession’ – economist The new Argentinian government’s peso devaluation in December came too early and was too deep, not helping reduce the gap between the official peso rate the unofficial ‘blue dollar’ and probably fueling inflation further, according to the director at Buenos Aires-headquartered Fundacion Capital. PRICINGLatAm PE domestic prices rise in Brazil, Mexico on higher international prices, margin pressure Domestic polyethylene (PE) prices rose in Brazil and Mexico due to margin pressure and higher international prices. In other Latin American (LatAm) countries, prices were unchanged. LatAm PP prices higher in Brazil, Chile and Mexico on higher feedstock costs, margin pressure Domestic polypropylene (PP) prices increased in Brazil due to margin pressure. Prices in Chile and Mexico rose, pushed mainly by feedstock costs. In other Latin American (LatAm) countries, prices remained flat. Unigel to raise PS February prices in Brazil Unigel is seeking a 17% price increase on all grades of polystyrene (PS) sold in Brazil starting on 1 February, according to a customer letter. Sustained ethanol demand continues due to favorable fuel parity in Brazil The current fuel parity in Brazil continues to favor ethanol over gasoline, standing at a rate of 67%, as reported by market sources. Higher PET prices in Colombia and Chile at the end of January Polyethylene terephthalate (PET) prices in Colombia and Chile are firm based on market input, and demand is relatively stable with good spot availability in both countries. The recent fluctuation in prices is in line with international benchmark market trends this month.
BLOG: China PP trade flow scenarios underline end of Supercycle and other new complexities
SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. Today's uses China’s polypropylene (PP) trade flows as an example, but what applies here will of course apply to global trade in all the petrochemicals. Because of geopolitics, trade tensions, sustainability and the impact on demand of ageing populations, you need a wide range of scenarios for China’s PP trade in 2024-2030. For example: Under the ICIS base case, China’s PP operating rates are forecast to fall from a 2010-2023 average of 86% to just 73% on overcapacity. But good demand growth of 4% per annum results in net imports averaging 5m tonnes a year. Under my Alternative Scenario 1, China runs its plants at an average 86% operating rate in order to boost exports, as the factors detailed above don’t significantly reshape global trade. This places China in an average annual net export position of 2m tonnes. Demand growth is again a healthy 4%. Alternative Scenario 2, which is my preferred scenario, again involves China running its plants at 73%. Geopolitics and increased trade tensions etc mean it cannot increase its exports. This leaves it in an almost balanced position. It is in a balanced position because an operating rate of 73% is enough to meet local demand, as domestic demand growth falls to 1.5% on long-term structural economic challenges centred on an ageing population. This underlines how we are no longer in the comfortable petrochemical environment of 1993-2021 during the Supercycle. During this period, success was all but guaranteed through building more and more capacity to meet booming demand while ideally ensuring that new plants had strong feedstock cost positions. But now markets are becoming more nuanced, more complex, and potentially much more local. Localisation is again my preferred scenario. Does your company accept that these changes are a scenario worth planning for? And if so, do you have the resources to plan accordingly? How do you start by persuading enough people to listen? 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.
BLOG: China PP-naphtha spreads hit new low as long-term markets shift continues
SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson: The average China polypropylene ((PP) price spread over naphtha feedstock costs has so far this year been just $191/tonne, the lowest since ICIS price assessments began in 2003. China block copolymer and raffia-grade price spreads between 2022 and 26 January this year were 144% lower than their long-term average with injection grade spreads 145% lower. When you therefore hear people say, “The market is recovering,” point them in the direction of this data. There will have been no full recovery in the Asian PP market until spreads have rebounded by these amounts. Growth in global PP capacity between 2024 and 2030 would have to be 45% lower than the ICIS base case in order for global operating rates to hit their long-term healthy average of 87%. Based on what we see as a further big surge in capacity in a weak global growth environment, we are forecasting global PP operating rates of just 76% in 2024-2030. A spate of confirmed and reported PP shutdowns in the Middle East and Asia – some of which are said to be in the Middle East because of the Red Sea crisis – are apparent in the ICIS Live Disruption Tracker. The tracker calculates available capacity versus nameplate capacity. Some 64,000 tonnes less PP capacity is available in the Middle East and Asia in January 2024 compared with January 2023, according to the tracker. But the ICIS Supply & Demand Database tells us that global PP capacity is this year scheduled to increase by 7% over 2023, with no less than 74% of the increase due to take place in China. This year's global new capacity is forecast to total more than 7m tonnes/year. We should avoid thinking that a little bit of supply tightening or an unexpected surge in demand will quickly return petrochemical markets to their Old Normal. As the ICIS data on PP confirms, this is not a realistic prospect in 2024 and very probably in 2025 as well. As the second chart in today’s post summarises, major secular shifts are taking place in global petrochemical markets. New ways of navigating short-term markets are needed. New long-term plans are also required. 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.
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