Expandable polystyrene (EPS) and polystyrene (PS)

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A versatile plastic used to make a wide variety of consumer products, expandable polystyrene (EPS) and polystyrene (PS) are integral in industries such as food packaging, appliances, construction, and some niche automotive applications for polystyrene, and for expandable polystyrene construction, white goods packaging, and fish boxes packaging. These industries and more are impacted every day by the dynamics of global and regional PS and EPS markets, as well as developments in the upstream styrene market.

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Expandable polystyrene (EPS) & polystyrene (PS) news

Strong UK June manufacturing activity offset by weakening services sector

LONDON (ICIS)–Strong UK manufacturing activity growth in June was offset by slowing expansion in the services sector, according to the latest Purchasing Managers’ Index (PMI) data. Growth among goods producers, driven by improved order book intakes and strong business confidence, drove the manufacturing output and manufacturing indexes to 26- and 23-month highs respectively. Conversely, services activity grew at its softest pace for seven months, with survey feedback indicating the slowdown was partly driven by a pause in client spending decisions in the run up to the UK election on 4 July. UK PMI Indexes June May Composite output 51.7 53.0 Services Business Activity 51.2 52.9 Manufacturing Output 54.2 53.4 Manufacturing 51.4 51.2 A figure above 50 in the index indicates expansion, and below 50 contraction. UK firms also faced a quickening of input cost inflation in June as severe global shipping constraints led to higher transport costs, index compiler S&P Global said. This rise fed through to quicker increases in output charges for both manufacturing and services companies, with producers raising prices at the sharpest rate since May 2023. “The slowdown in part reflects uncertainty around the business environment in the lead up to the general election, with many firms seeing a hiatus in decision making pending clarity on various policies,” said S&P chief business economist Chris Williamson. The latest PMI data for the eurozone indicated a slowdown in economic recovery at the end of the second quarter. Both data sets were released on Friday 21 June.


Malaysia May chemical exports rise 0.8% as overall trade continues recovery

SINGAPORE (ICIS)–Malaysia's exports of chemicals and chemical products rose by 0.8% year on year to ringgit (M$) 6.31 billion in May amid signs that its overall trade weakness has bottomed out. Risks to trade outlook include geopolitical tensions and regional conflicts May export growth driven by manufactured and agriculture goods Demand for paper, petroleum, and palm oil drove exports to China Overall exports rose by 7.3% year on year to M$128.2 billion in May, while imports were up by 13.8% to $118.1 billion, data from the Department of Statistics Malaysia (DOSM) showed on 20 June. This resulted in a trade surplus of around M$10 billion, rebounding from the lowest level since May 2020 in the preceding month at M$7.7 billion, partly aided by a steeper slowdown in the growth of imports relative to exports. Economists at UOB Global Economics & Markets Research noted in a 20 June report that the two consecutive months of export growth indicate that Malaysia's trade performance may have reached its lowest point and is now on a path to recovery. The latest Malaysia S&P manufacturing Purchasing Mangers’ Index (PMI) also rose in May, suggesting improvement in manufacturing conditions on account of higher new orders, UOB said. "Exports of commodity products particularly mining goods remains subject to potential production shocks due to plant closures for maintenance while price effects are fading," it said. RISKS TO TRADE OUTLOOK "Malaysia’s external trade continues to recover at a gradual and bumpy pace in the near term," UOB said. However, given lingering logistical challenges, ongoing geopolitical tensions and regional conflicts that cast over the global trade outlook, Malaysia will not be spared should these downside risks escalate and trigger a wider adverse impact on the global economy, it said. The Red Sea crisis and ongoing conflict in the Middle East have already disrupted supply chains, causing delays and driving up shipping costs for certain sectors, UOB noted. Additionally, environmental concerns, such as the historically low water levels in the Panama Canal, a critical artery for global trade, pose further threats to the smooth flow of goods, it added. OPTIMISM FOR GROWTH DESPITE CHALLENGESUOB remains cautiously optimistic trade outlook for Malaysia with a projected export growth of 3.5% for this year. This forecast is slightly more conservative than Bank Negara Malaysia's estimate of 5.0% growth. In comparison, the country experienced a contraction of 8.0% in exports in 2023. "This is mainly supported by the ongoing improvement in E&E exports along with a global soft landing, a sustained recovery in China’s economy and expected global monetary policy loosening before year end," UOB said. "The Malaysian government’s bold and effective implementation of various national master plans including the Semiconductor Strategic Plan will be additional catalysts to the trade prospect in the short and medium term." While acknowledging potential slowdown risks in China due to "ongoing housing debacle and trade restrictions with the West," Malaysia's Hong Leong Bank in a note said that it anticipates sustained growth in the broader region to help mitigate these concerns. Barring unforeseen materialization of other downside risks, and supported by a "stable world economy," the bank remains optimistic about Malaysia's export outlook. Factors such as the uptick in the global tech cycle and still elevated commodity prices further bolster this positive outlook. Hong Leong Bank expects Malaysia's export growth to accelerate, potentially reaching double-digit figures in the second half of the year. However, the overall contribution to GDP growth may be moderated by a concurrent, or even stronger, recovery in imports, driven by the continued expansion of domestic demand. MAY EXPORTS GROWTH DRIVEN BY ELECTRONICS, PALM PRODUCTS May’s export growth was largely thanks to strong improvement in shipments of manufactured and agriculture goods. Exports of manufactured goods, which account for 86.2% of total exports, grew 8.3% year-on-year in May, following a 7.1% increase in April. This growth was fueled by robust demand for electrical and electronic (E&E) products, which saw a 7.6% increase in May compared to a 0.6% increase in April. Agriculture goods, comprising 7.1% of total exports, continued their upward trend with a 22.1% year on year increase in May, building on April's 13.8% growth. This was primarily driven by robust exports of palm oil and palm oil-based products, which rose 25.7% year on year in May thanks to increases in both volume and export prices. REGIONAL TRENDSExports to the US soared for the fifth consecutive month, recording a 17.4% year-on-year increase in May, closely following April's 17.3% growth. This surge was primarily attributed to higher shipments of E&E products. Exports to Singapore also experienced a significant boost, jumping 13.7% year on year in May after a 9.0% increase in April. This rise was also fueled by greater exports of E&E products. The robust growth in exports to Singapore, coupled with a fifth straight month of increased shipments to Vietnam, helped sustain a healthy 10.4% expansion in exports to the ASEAN region as a whole, slightly lower than April's 11.3%. While exports to the EU and China also grew, they recorded smaller gains of 7.2% and 1.6% respectively in May, compared to 11.3% and 2.1% in April. Resilient demand for palm oil & palm oil-based products, optical & scientific equipment, and chemicals & chemical products supported shipments to the EU. Meanwhile, exports to China were primarily driven by demand for paper & pulp products, refined petroleum products, and palm oil & palm oil-based agriculture goods. Thumbnail photo shows containers at a port in Butterworth, Malaysia. (Source: Vincent Thian/AP/Shutterstock) Focus article by Nurluqman Suratman


Colombia plastic industry still skeptical on single-use plastic tax – trade group

SAO PAULO (ICIS)–Despite Colombia’s Supreme Court ruling correcting some aspects of the tax on single-use plastics approved by Congress, the industry is still largely skeptical about the tax’s principle or about a smooth implementation, according to the president at plastics trade group Acoplasticos. Daniel Mitchell added that the regulations put a burden on companies’ finances and may, in the medium and long run, affect their ability to invest in new technologies and processes to make the circular economy a reality. Since President Gustavo Petro took office, Colombia has passed two significant regulations affecting the plastic chain: the tax on plastics, and the progressive elimination in the market of single-use plastics. The first law, the tax on plastics came into effect at the end of 2022 but legislators left some open questions as to who would pay the tax. So much so that Colombia’s Supreme Court ruled in November correcting some aspects of the law, although it did not question the principle of the tax. In August 2023, the head of chemicals at Colombia’s industrial trade group Andi, Daniela Sotello, had already said in an interview with ICIS that the tax’s implementation had proved troublesome and explained how, at the time, many players in the chain were still uncertain of who would pay the tax. SUPREME COURT RULINGIt is good there is more clarity now, not least because the first phase of the tax on single-use plastics is coming into force on 7 July, as planned in the original regulation’s text. A second phase in the mid-2022s will start implementing recycling targets and the regulation should be fully implemented by 2030. “Thankfully, there is more clarity now on who should pay the tax, with the Supreme Court ruling it must be absorbed by producers and not users of the plastics. However, this brings yet another confusion to the table: is it the producers of plastics, the polymers producers, or the producers of the products packed in those plastics?” said Mitchell. “We lived with the initial confusion [producers paying or users paying] for 11 months, until November 2023 ruling. The first payment of the tax was done at the end of the fiscal year in February 2024, as planned.” In the end, players managed to muddle through the confusion and managed to pay the tax, although Mitchell says it did cause a slight uptick in prices which, he concedes, is obviously the purpose of the tax so consumption is reduced. But then, some particularities in the Colombian law are striking. For instance, the prices of soft drinks in plastic bottles are not included in the tax: according to the law, Coca-Cola and others are included in the so-called "basic family basket". According to Acoplasticos, prices for the final products with plastics which were included in the regulation have increased between 0.5% and 4% due to the plastic tax. “In sophisticated packaging, cosmetics and the likes, prices of the final product have risen around 4%, although in that chain the impact can go up to 6% in some cases. In most cases, the increases in prices have been between 1% and 2%,” said Mitchell. “For the consumers, the price rises have not been as noticeable as some feared. To give you an idea, the tax collected in its first year Colombian pesos (Ps) 70 billion ($17m). I imagine that amount, when divided by the 45 million Colombian consumers, was not that noticeable in their pockets, but the tax has put a burden on plastics producers and its customers, not least for the chaotic implementation.” THE PLASTIC PROBLEMClarified the first hurdles, the more meaningful debate. A trade group representing plastics producers will invariably oppose a tax on their operations, but the plastics industry remains on the eye of the storm in the debate about sustainability. Plastics producers have for decades operated with healthy profits most years. Meanwhile, plastics pollution has grown in little more than half a century into a problem which is causing most humans, according to several studies, to carry plastics in them: homo plastic so to speak. While no producer will accept direct responsibility in the pollution problem, some sources within the chain in Latin America say the industry could have at least done one thing better. According to the CEO of Chile’s plastics trade group Asipla, Magdalena Balcells, producers knew a long time ago the plastic pollution problem was becoming serious, and either were late to talk about it and alert the authorities, or ignored it completely. “Obviously, a company producing plastics has no competencies about the plastic waste, which falls on the authorities. Plastics have a big demand and are indispensable in so many applications. The debate has really taken off, rightly so, in the past 15 years – before that, the talk was mostly about how plastics were so useful and almost a win-win for all elements in the chain,” said Mitchell. “Things have changed, and I really think the circular economy is taking off. This is due to a combination of regulation, private sector initiatives, and more engagement from consumers. We need to reach a system where there is not waste, full stop.” – But in such a scenario, plastic producers of today would effectively run out of a business? If everything is recycled, there would not be a need to produce virgin material? – You will always have a small number of applications in which, at least for now, you cannot use recycled materials. Also, I think that while we may aim to recycle all plastics, the demand for plastics will always be larger than that supply of recyclable material. ($1 = Ps4,172) Interview article by Jonathan Lopez Front page picture: Plastic bottles and plastic rubbish are shredded and pressed; archive image Source Jochen Tack/imageBROKER/Shutterstock


INSIGHT: China slams EU over EV tariffs; trade war brewing

SINGAPORE (ICIS)–China has slammed EU’s proposal to impose provisional tariffs on imports of Chinese electric vehicles (EVs), denouncing it as a "blatant act of protectionism”, raising concerns that a trade war between Asia’s biggest economy and a new western front is brewing. EU tariffs on Chinese EVs to rise to 27-48% Retaliatory measures from China likely EU imports of China cars surge sevenfold over three years "The European side has disregarded facts and WTO [World Trade Organization] rules, ignored China's repeated strong opposition, and ignored the appeals and dissuasion of multiple EU member state governments and industries," China’s Ministry of Commerce said in a statement issued late on 12 June. The European Commission on 12 June notified Chinese automakers, including EV giant BYD, Geely, and state-owned SAIC Motor Corp, that it will impose additional provisional tariffs of 17% to 38% on imported Chinese EVs from around 4 July. These will be applied to existing 10% tariffs imposed on all Chinese EVs, with the final rate determined by each carmaker's level of cooperation with EU's anti-subsidy investigation launched in September last year. NEW FRONT FOR TIT-FOR-TAT TRADE WAR China’s commerce ministry has urged the EU to "immediately correct its wrong practices" and "properly handle trade frictions through dialogue and consultation". The ministry said it will "resolutely take all necessary measures to firmly defend the legitimate rights and interests of Chinese companies". "This move by the European side not only harms the legitimate rights and interests of the Chinese electric vehicle industry but will also disrupt and distort the global automotive industry chain and supply chain, including the EU," it said. The EU's move follows the US' tariff hikes announced last month on Chinese imports of EVs, batteries and other materials, starting 1 August. In 2018, then US President Donald Trump initiated a trade war with China by imposing tariffs on Chinese imports to address alleged trade imbalances, intellectual property theft, and unfair trade practices. China retaliated with tariffs on US goods, escalating tensions between the two biggest economies in the world. While reviews by the US and EU on Chinese goods were under way, Beijing launched in May an anti-dumping investigation into imported polyoxymethylene (POM) copolymer, also known as polyformaldehyde copolymer – a key material in electronics and automotive manufacturing. China's commerce ministry alleged that the plastic is being sold below market value, harming domestic producers. The probe, targeting imports from the US, EU, Taiwan, and Japan, could last up to 18 months and is seen as a direct response to their recent trade barriers against Chinese goods. In the case of Taiwan, China has also suspended tariff concessions on 134 more products from the island, including base oil, chemicals, and chemical products, citing Taiwan’s supposed violations of the Cross-Strait Economic Cooperation Framework Agreement (ECFA) with the mainland. Meanwhile, Japan’s tightened export controls on 23 types of semiconductor manufacturing equipment that took effect on July 2023 was deemed in line with restrictions imposed by the US and the Netherlands, potentially hindering China's access to advanced chipmaking technology. China may issue further retaliatory measures, potentially impacting global supply chains and escalating trade tensions with major economies in the west. The automotive industry is a major global consumer of petrochemicals that contributes more than one-third of the raw material costs of an average vehicle. 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). CHINA 2023 CAR EXPORTS TO EU SURGE China’s exports of automobiles to the EU have surged over the past year, particularly in the battery electric vehicle (BEV) segment, according to Nomura Global Markets Research. Cars produced in China accounted for 20% of all BEV registrations in the EU during the first two months of 2024, it said, citing data from automotive business intelligence firm JATO Dynamics. An analysis of January-April 2024 sales figures from China’s top three EV manufacturers in the EU, however, suggests that their overall presence in the region is still nascent, Nomura noted. In 2023, EU’s imports of Chinese EVs surged to $11.5 billion, more than sevenfold increase from $1.6 billion in 2020, according to think thank Rhodium Group. China accounted for 37% of EU’s total EV imports last year, it said. In the first quarter of 2024, about 40% of China’s EV exports or 145,002 units went to Europe, according to official customs data. Focus article by Nurluqman Suratman Thumbnail image: An electric car at a charging station near the European Commission building in Brussels, Belgium. (Xinhua/Shutterstock)


German auto industry opposes EU tariffs on EVs from China

LONDON (ICIS)–Germany’s auto industry is opposed to tariffs on electric vehicles (EVs) from China, trade group German Association of the Automotive Industry said on Wednesday. The group, known as VDA in its German acronym, was reacting to a European Commission proposal of tariffs on battery electric vehicles (BEVs) from China after an investigation concluded they benefited from unfair subsidies. VDA said the proposed tariffs were not the right tool to strengthen the competitiveness of Europe’s auto industry. Instead, the tariffs would further escalate the risk of trade conflicts, to the detriment of Germany’s automakers, it said. “The fact is that we need China to solve global problems,” in particularly in dealing with the climate crisis, it said. China played a crucial role in a successful transformation towards electromobility and digitalization, and a trade conflict would jeopardize this transformation, the group said. However, VDA added that the extent of the subsidies China grants EV makers was “a challenge” for Europe and it called on China to make “constructive proposals” to settle the dispute. Germany ranks first in Europe and second after China globally in terms of EV production, and the bulk of German EV production goes into export, according to VDA data released this week. Industry observers have noted that Germany-based EV production relies on imports of materials and batteries from China. The US last month announced tariff hikes on Chinese imports of EVs, batteries and other materials, starting 1 August. In related news, the business climate in Germany’s automotive industry deteriorated in May amid fears about impacts on German automakers from the conflict with China, according to a recent survey by Munich-based ifo research. The automotive industry is a major global consumer of petrochemicals that contributes more than one-third of the raw material costs of an average vehicle. 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 Graeme Paterson Please also visit the ICIS topic page Automotive: Impact on chemicals Thumbnail photo shows a Volkswagen EV; photo source: Volkswagen


Styrolution to permanently shut Sarnia styrene plant in Canada

HOUSTON (ICIS)–INEOS Styrolution will close its 445,000 tonnes/year styrene production plant in Sarnia, Ontario, Canada, by June 2026, the company announced Tuesday. Styrolution has been involved in a dispute with Canadian government officials over the plant after a nearby indigenous group complained about benzene emission levels from the site. The company shut the plant for maintenance in April after the complaints surfaced. But Styrolution said that was not the reason for the plant closure. “Our decision to permanently close the Sarnia site by June 2026 is irrespective of the current situation,” the company said in a news release. Styrene producers in North America, as well as globally, have been battling poor economics due to over-capacity. North American styrene operating rates have been under 70% so far this year. China, once a key outlet for North American styrene, has added significant styrene capacity over the past three years. China commissioned 3.7 million tonnes of styrene capacity in 2023 alone. “This difficult business decision to permanently close our Sarnia site was made following a lengthy evaluation process and is based on the economics of the facility within a wider industry context,” Styrolution CEO Steve Harrington said. “The long-term prospects for the Sarnia site have worsened to the point that it is no longer an economically viable operating asset.” Even with the loss of styrene supply to the market, the Sarnia plant closure in April has had no impact on styrene spot prices. “Additional large investments that are unrelated to the potential costs of restarting operations would be necessary in the near future. Such investments would be economically impractical given today’s challenging industry environment,” Harrington said. In late May, Canada’s federal environment minister extended an order imposing stricter benzene emission controls on plants operating at the Sarnia petrochemicals production hub in southern Ontario, close to the US border and Detroit, Michigan, for two years. The order came after an Ontario provincial ministry suspended production operations at Styrolution's Sarnia styrene plant following the complaints from residents about potentially high benzene emissions. In addition to styrene, the Sarnia plant has ethylbenzene production capacity of 490,000 tonnes/year, according to the ICIS Supply and Demand Database. Styrolution operates two additional styrene plants in North America – the 770,000 tonnes/year facility in Bayport, Texas, and the 455,000 tonnes/year plant in Texas City, Texas. The Sarnia plant represents approximately 7% of North American nameplate styrene capacity. Styrene is a chemical used to make latex and polystyrene resins, which in turn are used to make plastic packaging, disposable cups and insulation. Major North American styrene producers include AmSty, INEOS Styrolution, LyondellBasell Chemical, Shell Chemicals Canada, Total Petrochemicals and Westlake Styrene. Thumbnail shows a cup made of polystyrene (PS), which is one of the main derivatives of styrene. Image by ICIS.


Mexico’s Altamira petchems force majeure declarations continue on severe drought

SAO PAULO (ICIS)–Petrochemicals producers in the production hub of Altamira, in the Mexican state of Tamaulipas, keep declaring force majeure as a severe drought halved water supplies to industrial players. On Thursday, a spokesperson for Cabot said to ICIS the company has also declared force majeure for carbon black from its Altamira facilities, which adds to several force majeure declarations in the past two weeks. The drought affecting Tamaulipas has its epicenter in the south of the state, where Altamira is located, and recent minimal rainfall has not helped much to fill up the state’s water reservoirs. The drought, which the state government says has lasted already eight years, has reached a critical point in 2024, prompting authorities to arrange water deliveries in tanker trucks from other state municipalities as well as other Mexican states. The crisis could end up hitting US petrochemicals, as the state is a key supplier to that market. Earlier this week, M&G Polimeros declared force majeure on one of its two polyethylene terephthalate (PET) lines from Altamira. The line has a production capacity of 420,000 tonnes/year, which has prompted fears the US’ PET supply could be hit. PETROCHEMICALS HIT HARDCabot’s force majeure from Altamira on carbon black – a material used as a colorant and reinforcing filler in tires and other rubber products, as well as a pigment and wear protection additive in plastics and paints – follows a string of declarations from other producers. “Over the past weeks, the water supply to our Altamira plant has deteriorated in both quantity and quality. Consequently, our plant is currently unable to operate all production units and is running limited production, along with warehouse, packing, and shipping operations,” Cabot’s spokesperson said. “Due to this situation beyond our control, Cabot has declared a force majeure for carbon black from this facility.” Apart from M&G Polimeros’ force majeure on PET, several other producers in Altamira have also issued force majeure declarations or have sharply reduced operating rates. Mexico’s chemicals producer Orbia/Vestolit, a large polyvinyl chloride (PVC) player, was one of the first companies to declare a force majeures out of its facilities in Altamira in mid-May. This week, a spokesperson for the company said to ICIS the force majeure remained in place, with no expected date for return to operations as the water situation has not improved, rather the opposite. Saudi petrochemicals major SABIC declared force majeure on acrylonitrile butadiene styrene (ABS). European major INEOS Styrolution also declared force majeure on ABS from Altamira, as well as on general purpose polystyrene (GPPS). US chemicals producer Chemours also said it has halted titanium dioxide (TiO2) operations in Altamira. Germany’s major BASF, also with facilities in Altamira, had not responded to a request for comment at the time of writing. Trade group the Association of Industrial Companies of Southern Tamaulipas (AISTAC), which represents many of the producers listed above, had not responded to a request for comment at the time of writing. WATER TANKERS, DRY LAGOONSThe governor of Tamaulipas, Americo Villarreal, ordered this week to send tanker trucks to the south of the state from other municipalities not affected as harshly by the drought, as well as from other Mexican states. The trucks will not sort out the dire situation at industrial parks, however, as the water will be deployed to households, which are also suffering water restrictions. “With the arrival of these units, support to the southern area of ​​Tamaulipas is reinforced, adding to those that the Secretariat [agency for hydraulic resources] had previously sent, as well as those that have arrived from other entities, with 50 units distributing water,” said the state’s government. “[This] coupled with the installation of 25 isotanks with a capacity of 24,000 liters in strategic points, sent previously by the agency.” As if it was not enough for tamaulipecos to suffer water restrictions in their own homes, natural spaces they hold dear are also showing the scars of more severe droughts as climate change advances unabated. This week, local media reported how Champayan lagoon, a large water natural reservoir west of Altamira, dried up practically from one day to the other. Front page picture: Tanker trucks heading to the Altamira area for emergency water supplies for households Source: Government of Tamaulipas Clarification: Re-casts paragraph 15


Eurozone private sector momentum hits one-year high in May

LONDON (ICIS)–Business momentum in the eurozone hit the highest level in 12 months in May, pushing further into growth territory as service sector orders surged and the manufacturing industry showed signs of recovery. The eurozone composite purchasing managers’ index (PMI) rose to 52.2 during the month compared to 51.7 in April as stronger demand buoyed output and hiring, according to data from S&P Global. Momentum improved for most of the eurozone’s largest economies with the exception of France, where a renewed contraction in private sector activity drove PMI growth back into negative territory at 48.9, a two-month low. A PMI score of above 50.0 signifies growth. Growth in Germany, which has suffered a deeper and more protracted downturn than most of the core economies, continued to rally on the back of improved output to  a 12-month high of 52.4. Italy’s recovery slowed during the month, dropping to a three-month low of 52.3, while Spain remained the strongest core performer with activity rallying to a 14-month high of 56.6. The sustained strong momentum points to an exit from contraction for the eurozone economy, despite eurozone manufacturing activity in the bloc remaining in recession footing. According to data released earlier this week, the manufacturing sector's PMI rose to a 14-month high of 47.3 in May, despite remaining some ways short of stabilising. “The spectre of recession is off the table,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, which helps to assemble the composite data. “In Germany, we can now talk of an upward trend, Italy's business activity remains solid, and Spain has improved from an already strong position. “ “Only France has experienced a setback, slipping into slightly negative territory. Overall, the service sector is likely to ensure that the Eurozone will show positive growth again in the second quarter,” he added. Inflationary pressure also eased during the month, despite an increase in overall levels for the eurozone according to flash estimates from statistics body Eurostat issued last week. Inflation is expected to be 2.6% in the eurozone for May compared to 2.4% in April on the back of higher service and food price inflation. Overall price gauges indicate cooling inflationary pressures during the month, according to the PMI data, but input cost increases remained sharp and well above pre-pandemic levels. The rate of inflation for output costs eased to the lowest level in six months, but was still substantially above pre-2020 averages. The European Central Bank is set to make a decision on whether to cut interest rates for the first time in eight years on Thursday. “The European Central Bank (ECB) is getting a tailwind from the PMI,” said de la Rubia. The PMI price components for the service sector indicate a slight easing of inflationary pressures, making an ECB rate cut on June 6 more likely. Reduced inflation pressures are evident in both costs and selling prices.” “However, the PMI price indices do not yet give the all-clear, as they are unusually high in the context of the rather weak economic situation,” he added. (Thumbnail photo: Cargo ships pulling into the port of Hamburg (Source: Fotowerkstatt-ks/imageBROKER/Shutterstock)


INSIGHT: Coalition government to rule India as Modi's BJP suffers major setback

MUMBAI (ICIS)–A Bharatiya Janata Party (BJP)-led coalition government is expected to assume office in India, with a third term for incumbent Prime Minister Narendra Modi which should ensure continuity of most economic policies. BJP secures 240 seats in Lok Sabha, down from 303 in 2019 India targets sizeable share in global manufacturing pie Legislative process for reforms faces possible delays The BJP-led National Democratic Alliance (NDA) has won the elections, with a tally of more than 290 out of a total of 543 seats in the Lok Sabha or lower house of parliament, ensuring a third consecutive five-year term for Modi’s political party. The numbers, however, were well below expectations of 400 seats. BJP alone secured less than half of the total seats available at 240, below the required 272 for an outright majority. In 2019, the party had secured 303 seats. India, a south Asian emerging market giant, held its national elections over the past six weeks until 1 June. It was the world’s biggest democratic elections, with nearly 970 million eligible voters. “The BJP-led NDA alliance is a pre-poll alliance, and hence, we see less friction in the government formation exercise. Prime Minister Modi in his victory speech re-affirmed his commitments to reforms and growth,” Indian financial services firm Motilal Oswal said in a report on 4 June. GDP GROWTH ROBUST The Indian economy has emerged as among the top-performing economies in the world, logging an 8.2% GDP growth for the fiscal year ending March 2024, with the fiscal Q4 growth at 7.8%. The Reserve Bank of India (RBI) forecasts a 7% GDP growth for the current fiscal year 2024-25, based on the central bank’s annual report released on 30 May. “The Q4 GDP growth data for 2023-24 shows robust momentum in our economy which is poised to further accelerate. As I’ve said, this is just a trailer of things to come,” Modi said on social media platform X on 31 May. “Fundamentally, India is witnessing its own mini-Goldilocks moment with excellent macros, solid corporate earnings,” Motilal Oswal said in a report dated 3 June. Confederation of All India Traders (CAIT) secretary general Praveen Khandelwal said: “We expect the government to formulate new initiatives, provide policy support and take necessary steps to boost domestic trade and exports,” As part of an election pledge to transform India into a global manufacturing hub, the BJP government wants to offer subsidies for domestic production modelled on recent packages for semiconductor firms and electric vehicle makers, newswire agency Reuters reported on 3 June. The government plans to increase India's share of global manufacturing to 5% by 2030 and to 10% by 2047. To increase the country’s manufacturing capacity, the government is expected to introduce new laws, tax reforms, trade pacts and duty reforms to promote ease of doing business. On its third term, Modi's government could bring about reforms in all factors of production including land, labour, and capital, Indian finance minister Nirmala Sitharaman had cited in February. There were also plans to lower trade barriers to help develop domestic industries. The new government is expected to reduce import duties on various components used in the textiles, engineering goods and other industries. India has already reduced tariffs on several mobile device components to boost production and make exports competitive. POSSIBLE DELAYS IN LEGISTATIVE REFORMS With the party’s weakened grip in the lower house, however, legislative reforms such as proposed changes to the goods and service tax (GST) may be delayed. The GST – a single tax that replaced multiple indirect taxes – was introduced in 2017. The government had proposed certain amendments to the GST in the national budget announced in February, which included penalties and changes in procedure of applying the tax. Any proposal to hike the tax rate as part of fiscal reforms is likely to be resisted. Plans to amend India’s Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act of 2013, which would make it easier for industries to acquire land may also be subjected to delays. The proposed changes are aimed at freeing acquisition of land from existing restrictions, for certain types of projects like those related to defence, infrastructure and industrial corridors. A third term for a BJP-led government is expected to ensure continuity in India’s economic landscape, with increased focus on clean energy, infrastructure, and manufacturing. “Regardless of the election outcome, policy focus will remain on sectors considered strategic by the major domestic political parties, including renewable energy, automotive, electronics, textiles, digital infrastructure, logistics, food production and services,” research agency S&P Global Market Intelligence had said in a report on 29 May. However, as no political party has been able to secure majority seats by itself, the BJP will be forced to rely on its coalition partners. “A substantial cabinet reshuffle is almost certain in this scenario, with portfolio allocation being distributed across coalition parties and with policymaking becoming decentralized,” S&P stated. The government’s policies will focus on encouraging macroeconomic growth to keep India on track to become the third-largest contributor to global GDP by 2030, it said. Also high on the government’s list of priorities are infrastructure, clean energy sector development, as well as promoting trades with bilateral partners. India is exploring free trade agreements with the UK and the EU, after signing a deal in March 2024 with the European Free Trade Association (EFTA) comprising Switzerland, Norway, Iceland and Liechtenstein. In the Middle East, the south Asian country had signed a trade agreement with the UAE in May 2022 and has recently concluded negotiations with Oman. Insight article by Priya Jestin


Latin America stories: weekly summary

SAO PAULO (ICIS)–Here are some of the stories from ICIS Latin America for the week ended on 31 May. NEWS Brazil’s Porto Alegre port still shut after flooding, industry demands more support The Port of Porto Alegre remains shut one month after severe flooding hit the Brazilian state of Rio Grande do Sul, while trade groups are asking the authorities to extend their financial support to speed up the recovery. Automotive major Stellantis plants in Argentina, Brazil still affected by floods aftermath Stellantis’ facilities in Argentina remain shut and its plant in Goiana, northeast Brazil, has also partially stopped, a spokesperson for the global automotive major said to ICIS on Friday. Canadian fertilizer producer Nutrien halts three Brazil fertilizer blending plants Canadian fertilizer major Nutrien has announced a decision to halt three fertilizer blending plants in Brazil as it undergoes a reorganization of their operations for improved efficiency within the country. Brazil’s Unigel on force majeure for HIPS due to lack of input from Triunfo Unigel has declared force majeure for high impact polystyrene (HIPS) because one supplier based in Brazil’s floods-hit state of Rio Grande do Sul cannot deliver the feedstock, according to a letter to customers seen by ICIS. Brazil’s chemicals importers mobilize against tariffs hike proposed by producers Brazil’s importers of chemicals are lobbying the cabinet not to implement the hikes to import tariffs proposed by the country’s producers, represented by trade group Abiquim. PRICING LatAm PP domestic, international prices unchanged as market awaits June prices Domestic and international polypropylene (PP) prices were assessed as unchanged this week across Latin American (LatAm) countries. LatAm PP domestic, international prices unchanged as market awaits June prices Domestic and international polypropylene (PP) prices were assessed as unchanged this week across Latin American (LatAm) countries.


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