Engineering plastics (POM, PBT)

SITGES, Spain (ICIS)–Chemical companies will find it easier to charge a green premium as the cost of carbon increases, fossil feedstock availability declines and customers realize the true value of the products they are buying. The cost of living crisis and poor profitability down industrial value chains mean that companies are resistant to paying more for low carbon and more sustainable products. But that will change as regulators push up the cost of carbon content in materials while the switch away from fossil fuels will make green alternatives more attractive, according to panel speakers at  the Fecc (European Association of Chemical Distributors) annual congress in Sitges, Spain. They argue that people will be willing to pay a green premium once there is regulatory support for carbon pricing, which will incentivize customers to take account of the savings low carbon products offer. Richard Jenkins, senior vice president for coatings solutions at France’s Arkema said: “The number of carbon credits will reduce, the number of companies seeking them will increase, and this will drive up the value of CO2 avoidance. So when I’m sitting in front of customers, I’m telling them they have to consider the whole cost of carbon – it might cost more per unit but overall you are saving on the costs of CO2.” The EU’s Emission Trading System (ETS) works under the principle of “cap and trade” where  companies are granted allowances for the maximum amount of CO2 they may emit from their facilities. They may buy and sell their allowances but the overall volume is steadily reduced each year in line with the EU’s climate targets. As they become more scarce, the price tends to increase. Georg Winkler, senior partner for consultants McKinsey & Company added: “If you decarbonize polyethylene (PE) packaging and then break down the actual costs, they are tiny – this should only change the price of the product by a cent or so. Also, if we have a single-use-plastics tax in Europe then we can point out the cost saving to our customers.” Ib Jensen, president and CEO of Swedish specialty chemicals group Perstorp said: “I don’t like the term green premium; I prefer the term fossil discount. Consumers are increasingly ready to pay a premium, especially in B2C (business-to-consumer), but also in B2B (business-to-business) they are appreciating [the need for a] green premium.” As the transition to low-carbon transportation accelerates, demand for diesel and petroleum will decrease, leading to the closure of more oil refineries. In turn this will reduce availability of petrochemical feedstocks for chemical production, potentially pushing up the cost of these materials. Arkema’s Jenkins said: “I don’t believe that today’s fossil-based chemistry will remain at the same scale and cost that it is today. We drive a lot less than we used to and some of my suppliers are telling me that some raw materials will be less available in the future. I think the old solutions may start to cost more, and as we get to scale the cost of new solutions will come down.” He added: “There is a lot of focus on energy efficiency so solutions which contribute to an overall cut in the cost of use are important. Now you’re talking about value rather than per unit cost – what it is doing and enabling and solving versus what it is, which is product push.” The Fecc annual congress takes place in Sitges, Spain from 11-13 September 2024. Focus article by Will Beacham Thumbnail photo source: Jeppe Gustafsson/Shutterstock

13-Sep-2024

SINGAPORE (ICIS)–Energy giant Saudi Aramco has signed new agreements to advance separate expansion plans with Chinese petrochemical producers Rongsheng and Hengli. Signing conducted during China Premier Li’s state visit to Saudi Arabia Deals with the Chinese firms part of Aramco's downstream expansion Aramco moves closer to acquire 10% of Hengli Petrochemical Chinese Premier Li Qiang and Saudi Crown Prince Mohammed Bin Salman on 11 September discussed cooperation in energy, investment, and trade, according to state news agency Saudi Press Agency (SPA). In a separate meeting with GCC secretary general Jasem Mohamed Albudaiwi in Riyadh, Li called on China and Gulf Cooperation Countries (GCC) countries to align their development strategies and “speed up free trade agreement negotiations”, according to Chinese state media Xinhua. Li is in the Middle East on 10-13 September for state visits to Saudi Arabia and the UAE, both members of GCC. The four other members of GCC are Bahrain, Kuwait, Oman and Qatar. PLANS WITH RONGSHENG The new agreements follow a previously signed framework agreement with Rongsheng Petrochemical for a potential joint-venture expansion of Saudi Aramco Jubail Refinery Company (SASREF) facilities. SASREF operates a 305,000 barrel/day refinery complex in Al-Jubail, Saudi Arabia with downstream aromatics units that can produce 260,000 tonnes/year of toluene and 275,000 tonnes/year of benzene, according to the ICIS Supply and Demand Database. Aramco now owns 10% of Rongsheng Petrochemical, bought for $3.4 billion, with further plans between the two companies to take stakes in each other’s subsidiaries. Rongsheng Petrochemical manufactures and distributes a range of petrochemical and chemical fiber products, including purified terephthalic acid (PTA), polyester yarns, polyester filaments, and polyethylene terephthalate (PET). The Saudi oil giant intends to acquire 50% of Ningbo Zhongjin Petrochemical (ZJPC), which is fully owned by Rongsheng, with plans to upgrade existing assets and jointly develop a new materials project in Zhoushan. The proposed Chinese yuan (CNY) 67.5 billion Zhoushan new materials project would produce polyethylene (PE), propylene oxide (PO), styrene, ethylene vinyl acetate (EVA), polyolefin elastomer and bisphenol A (BPA). Rongsheng, in turn, would acquire a 50% stake in Aramco’s SASREF, which operates a refinery in Jubail. POTENTIAL DEALS WITH HENGLI With Hengli, talks have advanced relating to Aramco’s potential acquisition of a 10% stake in the Chinese group’s petrochemical arm, subject to due diligence and required regulatory clearances.’ The two companies had signed a memorandum of understanding (MoU) on the proposed transaction in in April 2024. Hengli Group operates across the entire production chain of oil refining, petrochemicals, polyester film, and textiles. It is one of the biggest PTA producers in China. "China is an important country in our global downstream growth strategy," Aramco downstream president Mohammed Al Qahtani said. "These agreements reflect our collective intention to elevate our relationships in vital sectors to advance our downstream objectives." Aramco is targeting a fourfold increase in its crude oil-to-chemicals conversion capacity to four million barrels/day by 2030. Focus article by Nurluqman Suratman Thumbnail image: Chinese Premier Li Qiang meets with Saudi Crown Prince and Prime Minister Mohammed bin Salman Al Saud, and co-chairs the Fourth Meeting of the High-Level Chinese-Saudi Joint Committee with him at Riyadh's al-Yamamah Palace in Saudi Arabia on 11 September 2024.

12-Sep-2024

SINGAPORE (ICIS)–Indonesia has initiated an investigation as to whether “safeguard measures” would be needed in response to a sharp increase in imports of linear low density polyethylene (LLDPE), its trade ministry said. The Trade Security Committee (KPPI) under the Ministry of Trade started the probe on 9 September following a complaint from The Indonesia Olefin, Aromatics and Plastics Industry Association (INAPLAS), acting on behalf of Chandra Asri Pacific and Lotte Chemical Titan Nusantara Indonesia. The committee noted initial findings suggested there were possible losses to the domestic industry over the years 2021-2023 arising from the sharp increase in imports of LLDPE. It also noted that the biggest sources of these imports were Malaysia and Thailand, which accounted for over 70% of LLDPE imports into Indonesia. Government data showed that in 2023, Indonesia's LLDPE imports increased by 33.3% to 280,385 tonnes, compared with a 3.3% decline registered in 2022, the ministry said. Some market participants ICIS spoke with said they were not yet ready to respond to the announcement as await more details from the government. (adds paragraphs 5-6)

10-Sep-2024

SINGAPORE (ICIS)–Indonesia has initiated an investigation as to whether “safeguard measures” would be needed in response to a sharp increase in imports of linear low density polyethylene (LLDPE), its trade ministry said. The Trade Security Committee (KPPI) under the Ministry of Trade started the probe on 9 September following a complaint from The Indonesia Olefin, Aromatics and Plastics Industry Association (INAPLAS), acting on behalf of Chandra Asri Pacific and Lotte Chemical Titan Nusantara Indonesia. The committee noted initial findings suggested there were possible losses to the domestic industry over the years 2021-2023 arising from the sharp increase in imports of LLDPE. It also noted that the biggest sources of these imports were Malaysia and Thailand, which accounted for over 70% of LLDPE imports into Indonesia.

10-Sep-2024

SINGAPORE (ICIS)–Here are the top stories from ICIS News Asia and the Middle East for the week ended 6 September 2024. Strong regional currencies weigh on Asia recycling exports The weakening of the US dollar against major currencies in Asia since August will continue to strain exports of recycled polyethylene terephthalate (R-PET), recycled polyethylene (R-PE), and recycled polypropylene (R-PP). Asia refined glycerine market stagnates on stand-off between buyers and sellers Asia’s refined glycerine market may likely continue to remain tepid in the near term due to a persistent stand-off between buyers and sellers. UPDATE: Oil falls by $1/bbl, Asia petrochemical shares tumble on global growth worries Asian petrochemical shares slumped on Wednesday as regional bourses tracked Wall Street’s rout overnight on poor data from both the US and China, with crude prices shedding more than $1/bbl in late Asian trade. At the close of trade in Tokyo, Mitsui Chemicals fell 3.07% and Sumitomo Chemical tumbled by more than 4%, with the Nikkei 225 index down 4.24% at 37,047.61. Asian PX hits fresh year low, levels last seen in December 2022 Asian paraxylene (PX) prices hit a fresh year low, amid a lack of buyers' confidence and overnight losses seen in upstream crude markets. INSIGHT: China-Canada trade frictions may affect MEG trade flows Trade frictions between China and Canada have intensified recently following the Canadian government’s decision to impose tariffs on imports of electric vehicles (EVs) as well as steel and aluminum from China starting 1 October. INSIGHT: Qatar to emerge as PVC exporter next year when $279 million plant comes online Qatar will become an exporter of polyvinyl chloride (PVC) as early as next year when commercial operations start at its first plant, because its 350,000 tonne/year capacity will be more than 10 times the state's annual imports. Asia titanium dioxide Sept key drivers to be stock levels, exchange rates While the titanium dioxide (TiO2) spot price in Asia is likely to find support with the start of the traditional demand season in September, a large-scale revival now seems unlikely.

09-Sep-2024

HOUSTON (ICIS)–US recycled plastics Senior Editor, Emily Friedman and Americas recycled plastics Analyst, Josh Dill, dive deeper into the challenges chemical recyclers face, following Josh’s recent webinar, Chemical Recycling Growth: Accelerating Progress Towards Meeting Recycling Targets (view the recording here). While the webinar primarily highlighted legislative uncertainties, this discussion expands on the other hurdles including: Technological difficulties faced by chemical recyclers as a nascent industry Challenges in securing adequate feedstock which is financially sustainable Overall economic headwinds as many recyclers look to startup new plants

06-Sep-2024

LONDON (ICIS)–Senior editor for recycling Matt Tudball discusses the latest developments in the European recycled polyethylene terephthalate (R-PET) market, including: Further narrowing of the colorless flake range in eastern Europe Latest Italian bale auctions see colorless and blue bales drop More bullish sentiment displayed by some sellers in September

06-Sep-2024

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson: If this wasn’t so critically important, I’d be getting bored by now in telling the same old story. As today’s blog confirms it is the same story in the engineering or higher-value polymer polycarbonate (PC), as it is many other in chemicals and polymers. In 1992, China, with a 22% share of the global population accounted for 3% of global demand. By the end of this year, we expect China to be responsible for 47% of global demand from an 18% share of the global population. Here we go again: Events in China (demographics, debts, its geopolitical relationship with the West and the rise in China’s chemicals and polymers capacity) mean that today’s chemicals world is very different from the past. Are you still not convinced? Then consider these ICIS PC data points: During the1992-2021 Chemicals Supercycle, China’s demand growth averaged 17% per in year. In 2022-2030 we are forecasting this will drop to 3%. In 1992-2023, China accounted for 76% of global net imports of PC among the regions and countries that imported more than they exported. China's percentage shares of global net imports have been falling since 2021, the year of the Evergrande Moment. The ICIS base case predicts China’s net PC imports will average just 460,000 tonnes a year in 2024-2030 compared with 1.1 million tonnes during the peak years of 2010-2023. But 460,000 tonnes assume an operating rate of just 47% compared with the long-term average of 68%. Raise operating rates closer to 68% and you end up with China as a net exporter. There is, however, a scenario where China struggles to directly export chemicals and polymers where it is not already an established player. This could apply to PC. In 2023, 83% of Taiwan’s PC production, 41% of Thailand’s production, 34% of South Korea’s production and 26% of Japan’s production was dependent on exports to China. A valid question therefore seems to be: What should these countries do next? What would it take to return to the very healthy average global PC operating rate of 83% in1992-2023? Assuming no change to our base case assumption on production (the same as demand), global capacity would have to fall by an average 138,000 tonnes per year versus our forecast that capacity will instead grow by 153,000 tonnes each year. What might be the answer for producers in countries such as South Korea? Becoming more differentiated than their Chinese competitors as they emerge as winners in the fourth industrial revolution: Sustainability. 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.

06-Sep-2024

SINGAPORE (ICIS)–The weakening of the US dollar against major currencies in Asia since August will continue to strain exports of recycled polyethylene terephthalate (R-PET), recycled polyethylene (R-PE), and recycled polypropylene (R-PP). Fewer September deals expected as buyers resist changes in currency conversion Importers of recycling feedstock benefit from weakening of US dollar Asian recyclers wary of interest cuts by the US Fed Asian recyclers were largely relieved to see downward correction on container freight costs in August, but the ease in transportation costs were countered by foreign exchange fluctuations. Exporters of recycled polymers from key markets such as Japan, Thailand, Indonesia and Malaysia have struggled to close deals for September loading. Buyers were resisting the strengthening of major Asian currencies against the US dollar, resulting in an impasse in spot negotiations. A strong currency makes exports less competitive as buyers continue to use the US dollar for transactions in both term and spot commitments. As of 02:05 GMT, the Thai baht and the Indonesian rupiah registered the biggest month-on-month gains against the US dollar among four currencies of major Asian exporters. Exchange rates versus $1 Currencies 6 Sept (As of 02:05 GMT) % appreciation (month on month) Japanese yen (Y) 143.29 2.5 Thai baht (Bt) 33.56 5.8 Indonesian rupiah (Rp) 15,389.10 4.6 Malaysian ringgit (M$) 4.34 3.4 Source: www.xe.com Recyclers, on the other hand, have been unwilling to lower their prices amid high production costs and eroded margins. Due to this, majority of recyclers in the region expect September spot negotiations to be lower than that of August. “Our buyers [of R-PET flakes] within Asia were strongly resisting higher prices and they prefer to halt negotiations than to shoulder the foreign exchange fluctuations,” a Thailand-based R-PET producer said. A few buyers hedging their exposure to foreign exchange volatility were still able to secure spot quantities, but majority of buyers are not hedged. On the other hand, Asian recyclers which purchase US dollar-denominated feedstock benefited from the exchange rate fluctuations. Asian recyclers expect export volumes to remain dampened and are concerned about interest rate cuts by the US Federal Reserve. As regional recyclers continue to position themselves as net exporters of R-PET, R-PE and R-PP, currency fluctuations and decisions by the Federal Reserve retain great implications to overall trade from Asia. Focus article by Arianne Perez Thumbnail image: A 10,000-Japanese yen note and $1 US dollar notes, 3 July 2024. (Taidgh Barron/ZUMA Press Wire/Shutterstock)

06-Sep-2024

SAO PAULO (ICIS)–Brazil’s manufacturing PMI index for August sharply slowed down from July on the back of output falling for the first time in several months due to subdued sales, and elevated cost pressures, analysts at S&P Global said on Monday. At 50.4 points in August, the manufacturing PMI stood just above the 50.0 point mark which separates expansion from contraction. It also represented a sharp slowdown from July’s 54.0 points. Brazil manufacturing August July June May April March February January December 2023 November October September PMI index 50.4 54.0 52.5 52.1 55.9 53.6 54.1 52.8 48.4 49.4 48.6 49.0 Source: S&P Global While the fall in production was described as slight, it marks a reversal from the growth trend seen earlier in the year. New business growth slowed to a multi-month low, though some firms noted a shift from imported to domestic goods due to high shipping fees, suggesting a complex demand environment where domestic producers may be benefiting from import challenges, but overall demand remains subdued. Export sales growth also softened, with improved demand from Asia and the Middle East offset by lower orders from the US and Mercosur countries. Cost pressures intensified significantly, reaching a multi-year high. Companies reported increased prices for chemicals, fabrics, foodstuffs, packaging, plastics and transportation, often attributing these rises to currency depreciation. Despite these challenges, manufacturers showed increased optimism about the year-ahead outlook. This positive sentiment was attributed to plant expansion plans, product diversification efforts, investment intentions, and forecasts of a potential pick-up in demand. Employment continued to rise, albeit at a slower pace than earlier in the year. The moderation in job creation was linked to shortages of skilled job seekers and cost-cutting measures at some units. Nevertheless, the continued growth in employment allowed firms to reduce their backlogs of work. “The Brazilian manufacturing sector suffered a loss of momentum in August, with surging cost pressures hampering firms' ability to secure new business. Manufacturers even took the step of scaling back production and softened the pace of hiring in a bid to limit costs,” said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence. "Firms will be hoping for an improvement in the real exchange rate soon to help relieve some of the pressure on costs and lead to a revitalization of growth in the months ahead." Front page picture: Facilities operated by Brazilian polymers major Braskem in the state of Sao Paulo Source: Braskem

02-Sep-2024