Engineering plastics (POM, PBT)

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Production and trade of both polyacetal (POM) and polybutylene terephthalate (PBT) is active across Asia and Europe. These are engineered thermoplastics used in high volumes in the automotive sector as well as for a range of manufactured household products such as showerheads and irons. As a result, POM and PBT prices and market activity is sensitive to fluctuations in consumer demand from downstream markets.

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Engineering plastics (POM, PBT) news

Brazil’s chemicals importers mobilize against tariffs hike proposed by producers

SAO PAULO (ICIS)–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. Brazil’s Chamber of Foreign Commerce (Camex), a body under the government’s umbrella, concluded on 30 April a public consultation about import tariffs on chemicals. In it, Abiquim presented more than 60 proposals to hike import tariffs, while individual companies presented dozens more. In total, the proposals contemplate hikes in import tariffs in more than 100 products, most of them to be raised from 12.6% to 20%. Some proposals, however, aim to raise some import tariffs from 9% to 35%. A decision by Camex is expected in coming weeks. IMPORTERS MOBILIZEA key actor lobbying against the tariff hikes is Brazil’s plastics transformers trade group Abiplast, who benefit from imports into the country. Abiquim often describes those imports as coming into Brazil at “depredatory prices” which are putting some national production chains at risk due to unfair competition. China’s overcapacities continue casting a shadow in the global chemical industry, and Latin America’s historical trade deficit in the sector makes the region the perfect ground for Chinese producers to send their product, at times below costs of production. On the other hand, Abiplast and consumer groups have said a hike in import tariffs would only increase prices for consumers and industrial players alike and would only benefit Brazil’s chemicals producers. “There should be no increase in import tariffs as this is not a viable solution at this moment, nor at any time in the future. An increase would result in direct increases in prices in the Brazilian market,” said to ICIS a spokesperson for the trade group. Earlier in May, sources in Brazil’s chemicals sector said to ICIS it would be unwise to hike import tariffs right now, as the country reels from severe flooding in Rio Grande do Sul, which has a strong plastics sector, and when more imports may be needed. The floods have brought the state’s industrial fabric to a standstill, although the petrochemicals hub of Triunfo, near Porto Alegre, restarted in mid-May albeit at a slow pace as infrastructure in the state is still heavily disrupted. Abiquim, however, remains unrelentless in its request for fast action, arguing that the restart at Triunfo, with Brazil’s polymers major Braskem leading the way, will be enough to guarantee supply, without the need for more imports. Braskem has a commanding voice in Abiquim. “We don’t agree [with any pause in the hike, if finally approved, because of the floods’ effect]. Braskem resumed operations last week and, furthermore, the high level of predatory imports [in past months] mean that resin producing companies had sufficient stocks to supply the market,” said to ICIS a spokesperson at the trade group. Abiquim is hopeful it will gain the day. His lobbying to the government has gone as high as President Luiz Inacio Lula da Silva, with whom the trade group and a few chemicals producers met last week in Brasilia to make their case for the import tariffs hike. Lula’s center-left cabinet has been since the start more friendly towards chemicals producers than his predecessor Jair Bolsonaro, who favored a more free-market line. In 2023, the cabinet hiked import tariffs for several polymers twice, and reintroduced a tax break for chemicals called REIQ. Lula’s Workers’ Party (PT) main constituency is industrial workers, to whom the President promised during the electoral campaign to create more and better paid industrial jobs. Propping up domestic chemicals production would fall within that line of action. However, after Lula’s meeting with Abiquim, the backlash followed. According to a report by Brazilian daily Valor, Abiplast and 15 other trade groups have requested their own meeting with the President, hoping to stop the proposed increases in import tariffs. Among others, the groups opposing the hike include those representing sectors such as personal care, cleaning products, rubber articles, non-woven fabrics, paints, mattresses, toys, electronics, pharmaceutical products, food, polyolefin fibers, fabrics and clothing, footwear and civil construction. The groups said they were aiming to show to the President the “importance of tariff balance in maintaining industrial activities” in Brazil. BIG (AND CLOSED) CHEMICALS SECTORBrazil’s chemicals demand has always surpassed domestic supply, and around half of the country’s needs are covered by imports. That has been the case in the past few years. What has made the past year extraordinary is China dumping its product in Latin America, depressing prices – and margins for local producers. The fact that a 215-million market such as Brazil has not developed a bigger chemicals industry is surprising. Moreover, the country produces mostly commodity chemicals, which are to suffer from global downturns more than the higher-margin specialized grades. A source at Brazil’s chemicals industry, who deals with Braskem on a regular basis, was not impressed with Abiquim or Braskem’s strong stance in favor of higher tariffs. The source said it preferred to remain anonymous because “creating animosity by going against” the company’s position could put its business relationship at risk. “This [request for higher tariffs] is the cry of business mediocrity, which sees import restrictions as the solution to its productivity and technology problems. A country must not be built on protectionism but on investment in technology, productive capacity, creativity and scale,” said the source. “Brazil's political class has never prioritized competition as a source of development. Businessmen want to be alone in their businesses and the Federal Government wants to keep only Petrobras [in the crude oil sector] as a form of political financing.” Petrobras is the state-owned energy major, which holds a commanding position in the market despite other foreign players having some licenses to explore for and produce crude oil. The source added that when import tariffs are hiked generally, for all foreign potential exporters to Brazil, that is very different to potential anti-dumping duties (ADDs) imposed against a certain country – in this case, potentially China. “If the request was about ADDs on China’s product, this would be reasonable. But Abiquim and Braskem's request for hikes in import tariffs will affect all imports and this is not correct … We need more competition, not less. With more competition, some companies would have to close their doors indeed," it said. “Other companies, however, those which are more efficient, intelligent and audacious, would grow. Competition is always good and bringing foreign companies to compete in the local market would be interesting. Whenever and invariably private companies need the government to survive, there is a decrease in productivity and investments in new technologies.” However, the government’s ears are so open to chemicals producers’ demands that, on top of two import tariffs hikes in 2023 and the reintroduction of REIQ, earlier this year the cabinet announced the imposition of ADDs on US’ polypropylene (PP). The measure was taking even though PP imports into Brazil only represented 5% of the total in 2023 – 26,000 tonnes out of nearly 510,000 tonnes. Braskem is Brazil’s sole producer of PP as well as polyethylene (PE), the two mostly widely used polymers. A second source in the Brazilian chemicals distribution sector, said that the import tariff could benefits all parts of the chain – as well as producers, distributors and transformers, for instance – but only if all players rise prices in line with the increase in the import tariffs. “If the tariffs are finally hiked, it could represent a problem for us at first if Braskem lowers its prices, for instance – my product acquired pre-import tariff hike would be more expensive and I would have difficulty placing it in the market,” said the distribution source. “If Braskem does not lower its prices immediately, I would be able to maintain my prices. But if prices drop, I would be facing higher costs and lower selling prices: my margins would be greatly squeezed.” Focus article by Jonathan Lopez Additional reporting by Bruno Menini

28-May-2024

APIC ‘24: PODCAST: Asia recycled plastics sees sustainable finance focus

SINGAPORE (ICIS)–Sustainable finance is a key interest for companies seeking to enter the recycled plastics market in Asia or to expand their current capacities. Despite the various financial instruments available, the absence of a clear entry point often results in uncertainty for firms. In this podcast, ICIS analysts Chua Xin Nee and Joshua Tan explore the different types of sustainability-related loans available and their successful use cases. (This podcast first ran on 10 May.) Tan will be speaking at the Sustainability and Circular Economy breakout session of the Asia Petrochemical Industry Conference (APIC) 2024 in Seoul, South Korea, on 31 May. His presentation is entitled “Asian recycled polymers – short-term hiccups to long-term optimism”. Visit ICIS during APIC ’24 on 30-31 May at Booth 13, Grand Ballroom Foyer of the Grand InterContinental Seoul Parnas in South Korea. Book a meeting with ICIS here.

28-May-2024

Latin America stories: weekly summary

SAO PAULO (ICIS)–Here are some of the stories from ICIS Latin America for the week ended on 24 May. NEWS Brazil’s Triunfo petchems restart odd one out as wider industry still disrupted – consultant Most of Rio Grande do Sul’s industrial plants remain shut or operating at very low rates as the Brazilian state reels from the floods, with the restart at the Triunfo petrochemicals hub an exception rather than the norm, a chemicals consultant at MaxiQuim said to ICIS. Mexico’s Orbia/Vestolit's Altamira plant ceases operations due to water scarcity Orbia/Vestolit ceased operations at its Altamira, Tampico facilities in Mexico on 21 May due to water scarcity. The company operates there a polyvinyl chloride (PVC) facility with a production capacity of 690,000 tonnes/year. The company estimates it could resume activity on 19 June. SABIC declares force majeure at Tampico Mexico ABS plant SABIC Innovative Plastics Mexico (SABIC) declared force majeure at its Tampico, Mexico acrylonitrile butadiene styrene (ABS) plant on 23 May. The products affected include CYCOLAC ABS.  This facility has a capacity of 30,000 tonnes. Mexico’s Q1 GDP grows 0.3%, economic activity remains healthy in MarchMexico’s GDP rose by 0.3% in Q1, an acceleration from Q4’s 0.1% quarterly growth, the country’s statistic office Inegi said on Thursday. Brazil’s antitrust authority paves way for Petrobras to shed refinery sales Brazilian state-owned energy major Petrobras has been allowed by the country’s antitrust authority CADE to backtrack on planned refinery sales. Argentina’s manufacturing down nearly 20% in March Argentina’s petrochemicals-intensive manufacturing output fell in March by 19.6% year on year, the country’s statistics office, Indec, said this week. Brazil’s Unigel creditors mull fertilizers divestment The debt restructuring agreement at Unigel, under which the Brazilian chemicals producer’s creditors are to take a 50% equity stake, could result in a divestment of the company's beleaguered fertilizers division. Brazil’s Unigel to give creditors 50% equity stake in debt restructuring Unigel has obtained the support of enough creditors for a debt restructuring plan although it comes at a price as they will be getting a 50% equity stake in the Brazilian chemical and fertilizer producer. Brazil's Braskem restart at Triunfo to kick off petchem hub normalization Braskem has restarted operations at its Triunfo facility in the flood-hit state of Rio Grande do Sul, which will allow other players in the petrochemicals hub to start up their plants as many depend on input from the Brazilian polymers major to operate. INEOS Styrolution declares force majeure at Altamira Mexico facility INEOS Styrolution declared force majeure at its facility in Altamira, Mexico, on 20 May. The products affected include Teluran ABS, Novodur High Heat ABS and Luran ASA. This facility has a capacity of 113,000 tonnes. Chile’s Q1 GDP up 2.3% on strong consumption, manufacturing up 1.1% The Chilean economy started 2024 on a strong footing with GDP growth in the first quarter at 2.3%, year on year, the country’s central bank said on Monday. Volkswagen, Stellantis idle car plants in Brazil, Argentina after floods Volkswagen (VW) idled its three plants in the Brazilian state of Sao Paulo on Monday, as suppliers in the floods-hit state of Rio Grande do Sul are unable to produce any automotive parts, a spokesperson for the German automotive major told ICIS. PRICING LatAm PP international prices stable to up on higher Asian freights International polypropylene (PP) prices were assessed as steady to higher across Latin American countries due to the surge in freight rates from Asia to the region. LatAm PE domestic, international prices steady on sufficient supply, stable demand Domestic and international polyethylene (PE) prices were assessed unchanged this week across Latin American countries on the back of sufficient supply and stable demand.

27-May-2024

LOGISTICS: Container rates surge, chem tanker rates ease; Canada rail strike unlikely before July

HOUSTON (ICIS)–Rates for shipping containers continued to surge, liquid chemical tanker rates were flat to softer, and a possible freight rail strike in Canada is unlikely before mid-July, highlighting this week’s logistics roundup. CONTAINER RATES The global average for shipping containers has surged past the level seen in late January because of unseasonal increases in demand for ocean freight ex-Asia, as shown in the following chart. Rates are being pressured higher because of possible start of a restocking cycle in Europe and as US importers pull forward some peak-season demand on concerns of pending labor issues or additional Red Sea disruptions later in the year, according to Judah Levine, head of research at online freight shipping marketplace and platform provider Freightos. Rates for containers ex-Asia to both US coasts and to Europe are also nearing multimonth highs, as shown in the following chart. Drewry expects the spike in spot freight rates to lessen in the next few months. But Levine pointed to general rate increase (GRI) announcements for June, which he said indicate that carriers are not expecting demand to ease or conditions to improve in the short term. CMA CGM is setting Asia – north Europe rates at $6,000/FEU (40-foot equivalent unit) starting 1 June, and Hapag-Lloyd has announced an Asia – North America Peak Season Surcharge of $600/FEU to start June that will climb to $2,000/FEU mid-month. 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 CHEM TANKER RATES Rates for liquid chemical tankers ex-US Gulf were flat to lower this week. US chemical tanker freight rates assessed by ICIS were mostly steady to lower as rates fell from the US Gulf (USG) to both Asia and India while also edging lower from the USG to Rotterdam. However, were unchanged from the USG to Caribbean and South America. Overall, the market was subdued entering the long holiday weekend. From the USG to Asia, this market has remained overall soft despite a few larger monoethylene glycol (MEG) parcels being seen in the market. From the USG to Rotterdam, it has remained quiet again this week, with available space for part cargo still open amid a lack of inquiries or interest from charterers. CANADA FREIGHT RAIL LABOR ISSUES A possible freight rail strike in Canada is not likely to begin before mid-July, according to rail carrier Canadian Pacific Kansas City (CPKC). The ongoing uncertainties over the looming strike make it hard for Canadian chemical, fertilizer and other industrial producers, in particular exporters, to prepare for a work stoppage. After about 9,300 unionized conductors, train operators and engineers at freight rail carriers CPKC and Canadian National (CN) earlier this month voted for a strike as early as 22 May. Canada’s federal labor minister referred the matter to the Canada Industrial Relations Board (CIRB), a quasi-judicial tribunal charged with keeping industrial peace in Canada. PORT OF BALTIMORE The full reopening of the Port of Baltimore is closer after the Key Bridge Response Unified Command (UC) refloated the container ship Dali on Monday morning and moved it away from the scene of the collision. The Dali struck the Francis Scott Key bridge on 26 March, causing its collapse, and essentially closing the port. The closing of the port did not have a significant impact on the chemicals industry as chemicals make up only about 4% of total tonnage that moves through the port, according to data from the American Chemistry Council (ACC). PANAMA CANAL Wait times for non-booked southbound vessels ready for transit fell this week for traffic in both directions, according to the Panama Canal Authority (PCA) vessel tracker and as shown in the following image. Wait times a week ago were 3.6 days for northbound vessels and 13.9 days for southbound vessels. With additional reporting by Kevin Callahan and Stefan Baumgarten

24-May-2024

Canada freight rail strike unlikely to begin before mid-July, rail carrier says

TORONTO (ICIS)–A possible freight rail strike in Canada is not likely to begin before mid-July, according to rail carrier Canadian Pacific Kansas City (CPKC). The ongoing uncertainties over the looming strike make it hard for Canadian chemical, fertilizer and other industrial producers, in particular exporters, to prepare for a work stoppage. After about 9,300 unionized conductors, train operators and engineers at freight rail carriers CPKC and Canadian National (CN) earlier this month voted for a strike as early as 22 May, Canada’s federal labor minister referred the matter to the Canada Industrial Relations Board (CIRB), a quasi-judicial tribunal charged with keeping industrial peace in Canada. The minister wants the CIRB to investigate if disruptions to the supply of certain products (heavy fuel, propane, food, chlorine and other water treatment chemicals) could pose safety and health issues. A legal strike or lockout cannot occur until the CIRB makes a decision. In a statement, CPKC said that while it remains unclear how long it will take for the CIRB to issue a decision, “based on precedent, it is unlikely the parties will be in a position to initiate a legal strike or lockout before mid-July or later”. Labor union Teamsters Canada Rail Conference (TCRC) said that it would have to give 72-hour notice before starting a strike, meaning that the earliest date for a strike to begin is at least 72 hours after the CIRB makes its decision. After TCRC and the rail carriers made no progress in the latest collective bargaining talks ended 21 May, the parties are scheduled to meet again next week to continue negotiations with the assistance of federal mediators. IMPACTS ON CHEMICALS AND FERTILIZERS Freight rail work stoppages can quickly affect logistics in the chemical, fertilizer and other industries, and a simultaneous stoppage at CPKC and CN, which are Canada’s biggest rail carriers by far, would magnify impacts. The uncertainties about the exact timing of strike actions has already created difficulties in planning for sulfur importers and exporters in North America. “We are just waiting to see what will happen. We did quite a bit of sulfur business before the situation about the strike happened, but it is very difficult to know what to do next”, a source at a major exporter of sulfur told ICIS earlier this week. In the fertilizer industry, about 75% of all fertilizer produced and used in Canada is moved by rail and the industry depends on rail to move product across the country and into international markets. In the chemical industry, chemical producers rely on rail to ship more than 70% of their products, with some exclusively using rail. In the run-up to potential strikes, producers need to prepare, longer strikes can force them to curtail production or shut down plants, and after a strike ends it can take weeks for normal operations to resume. Canada freight rail traffic, ended 18 May: Source: Association of American Railroads With additional reporting by Julia MeehanPlease also visit Logistics: Impact on chemicals and energy Thumbnail photo source: Canadian Pacific Kansas City

24-May-2024

VIDEO: Europe R-PET looking at a more stable market for June

LONDON (ICIS)–Senior editor for recycling Matt Tudball discusses the latest developments in the European recycled polyethylene terephthalate (R-PET) market, including: More stable outlook for June looking likely Lower-priced PET could limit June offers Italian bale prices, PET imports could impact R-PET in coming weeks

24-May-2024

Germany's chemical industry faces weak domestic demand and persistent structural issues – VCI

LONDON (ICIS)–Although Germany’s chemical-pharmaceutical sales and production are forecast to increase this year, after sharp declines in 2023, domestic demand remains weak and the industry’s structural problems persist, according to Henrik Meincke, chief economist of chemical producers’ trade group VCI. Weak domestic industrial demand Pre-crisis chemical production levels not in sight Low capacity utilization reflects structural problems VCI’s 2024 forecast: Sales: +1.5% Export sales: +3.5% Domestic sales: -1.5% Chemical producer prices: -2.0% Production: +3.5% Production, excluding pharmaceuticals: +5.0% Employment: flat DOMESTIC DEMAND In the 2024 first quarter, domestic chemical-pharmaceutical sales fell 9.3% year on year, Meincke told participants in a webinar presentation that accompanied VCI’s recent Q1 report. Excluding pharmaceuticals, the decline was even worse, at 11.3%, as most domestic customer industries curtailed production: Building and construction: -1.4% Plastics products sector: -3.6% Metal production: -2.3% Metal products sector: -6.4% Autos: -8.2% Food: +1.3% Glass and ceramics: -11.3% Paper: -0.8% Printing products: -7.2% Furniture: -10.9% Machinery: -7.1% Electrical equipment: -14.6% CHEMICAL PRODUCTION Despite a 5.4% year-on-year increase in 2024 first-quarter chemicals production (excluding pharma), production in the chemicals industry’s major segments remains below its levels from 2018, Meincke noted. Production declines, from H2 2018 to H2 2023, by segment: Total chemicals: -19.8% Inorganic chemicals: -21.9% Petrochemicals: -24.1% Polymers: – 22.5% Fine and specialty chemicals: -16.8% Soap and detergents: -17.9% In fact, Germany’s chemical production has fallen back to its level from 1995 and the gap between the country's overall production and chemical production has widened, Meincke said. Production trends (red line: overall goods producing sector; blue line: chemicals; five-month moving average; 2021 = 100): (source: VCI) STRUCTURAL PROBLEMS The main reasons for the decline in Germany’s chemicals production include high costs for labor, raw materials and energy, bureaucracy, a weak economy and a loss in international price competitiveness, Meincke said. Although electricity and natural gas prices have somewhat normalized, they were still much higher than in 2019 and much higher than in countries such as China, the US or France – making it hard for Germany’s energy-intensive industry to compete internationally, he said. The low capacity rates in the chemical industry reflect its “extremely difficult” situation, Meincke said. Chemical-pharmaceutical capacity utilization in the 2024 first quarter was at 78.1% – a 10th consecutive quarter in which the industry is running “significantly” below normal rates of 82-85%, he said, adding that there were no signs of a significant improvement. As the under-utilization continues quarter after quarter, companies will react by not restarting idled capacities but rather shift investments abroad, the economist said. The crisis was so severe that it has triggered “structural effects”, he said. Eric Heymann, senior economist at Deutsche Bank Research, who also presented at the webinar, spoke of an “investment leakage”, meaning that German companies will avoid making big energy-intensive investments in the country but rather invest abroad. Heymann said one needed to distinguish between Germany’s problems as a location for industrial production and German industrial companies, which may invest in Germany or elsewhere. Although domestic sales are forecast to fall this year, increased export sales should more than offset this and VCI therefore forecasts a 1.5% increase in total 2024 sales. Production is expected to rise 3.5% in 2024. Production excluding pharmaceuticals should rise 5.0%, which would follow a 10.4% decline in 2023. However, despite the expected year-on-year increase, production will remain far from pre-crisis levels, the industry’s structural problems will persist, and companies are not expecting a recovery any time soon, Meincke said. Focus article by Stefan Baumgarten Thumbnail photo of Steam cracker II at BASF's Ludwigshafen site; source: BASF

22-May-2024

INSIGHT: China's industrial activity gathers pace but lopsided April data clouds outlook

SINGAPORE (ICIS)–China's industrial output grew by 6.7% year on year in April, signalling a further strengthening of its manufacturing sector, but weaker retail sales and bleak property data suggest that its overall growth momentum remains weak. The April industrial output reading accelerated from the 4.5% expansion in the previous month, data from the National Bureau of Statistics (NBS) showed. The strong April data brought year-to-date growth to 6.3% year on year, and industrial activity looks like it will be one of the main growth drivers in the second quarter of the year. The transition toward high-tech manufacturing continues to be one of the major driving forces for China's industrial output. High-tech manufacturing grew 11.3% year on year in April, and 8.4% over the first four months of the year, while auto production also rebounded strongly, up to 16.3% in April up from 9.4% in March. The upbeat manufacturing outlook follows earlier April data which showed the country's exports and imports both returning to growth in April after contracting in the previous month, while the official April manufacturing purchasing manager's index (PMI) remained in expansionary territory at 50.4 in April from 50.8 in March. Despite a partial retreat after peaking during the pandemic, China's share of global goods exports has recently rebounded, reaching 14.7% in the second half of 2023, up from 14% in the first half and exceeding pre-pandemic levels of 13.3% in 2019, according to Christine Peltier, an economist at French bank BNP Paribas. In addition, China’s recent market share gains have been recorded across a wide range of products, including low value-added consumer goods such as furniture and toys, organic chemicals and plastics, vehicles, electrical and electronic machinery and equipment and parts thereof, she noted. They have been particularly impressive for electric vehicles, with export volumes multiplied by 7 between 2019 and 2023, solar panels, exports multiplied by 5 between 2018 and 2023, and lithium batteries. These three products accounted for around 4% of China's total exports in 2023, about three times their 2019 share. The flood of Chinese products has given rise to growing concerns among industrial entrepreneurs and governments in the US, the EU and now emerging countries, and is likely to lead to new trade confrontations in the coming months, Peltier added. RISKS STILL OUTWEIGHING POSITIVES"While we acknowledge the resilience in some parts of the [China] economy amid this economic rebalancing, we believe these are insufficient to outweigh the drags from the property woes and geopolitical headwinds," Nomura Global Markets Research said in its Global Economic Outlook Monthly report. "Export growth is holding up steadily for now, thanks to cheap prices and resilient external demand, but could face further headwinds as countries launch anti-dumping investigations," it said. Although China's export growth has been strong this year due to the global tech upswing, resilient external demand, and competitive prices, rising trade tensions may hinder the export sector and prompt more supply chain relocations away from China in the long term. US President Joe Biden is increasing tariffs on $18 billion worth of imports from China, including electric vehicles (EVs), semiconductors, batteries, and other goods. The White House stated that this decision is a response to unfair trade practices and aims to protect US jobs. In response, China's Ministry of Commerce announced that it "will take resolute measures to safeguard its own rights and interests." PRIVATE CONSUMPTION REMAINS WEAK April's data revealed that retail sales growth fell to a new post-pandemic low, further indicating a shift away from consumption as a primary growth driver for 2024. Retail sales growth fell to 2.3% year on year in April, slowing from the 3.1% expansion in March, bringing the year-to-date growth rate to 4.1%. The largest drag to retail sales in April was tied to automotive sales, which declined by 5.6% year on year, and the data may add fuel to the fire for the critics of China's overcapacity in this sector. Another major category, household appliances, also slowed to 4.5% year on year. As trade-in policies take effect later in the year, these categories could see some recovery, Dutch banking and financial information services firm ING said in a note. "Consumption growth is likely to remain moderate through most of 2024, as consumer confidence remains downbeat amid tepid wage growth and the lingering negative wealth effects from the past several years of declining asset prices," it said. "A possible bottoming out of prices would also take some time before translating to stronger consumer activity." HOUSING SECTOR CONTINUES TO SLUMPThe persistent weakness in China's property sector, accounting for roughly a quarter of its economy, continues to weigh on overall economic growth. April data showed that in the 70-city sample from the NBS, property prices continued to slide. New home prices fell by 0.58% month on month in April, and secondary market prices fell by 0.94%, which were the steepest sequential declines since the start of the housing slump in 2021. At the city level, 69 out of 70 cities continued to see declining prices in the secondary home market in April, unchanged from March. Although new home prices rose in 6 out of 70 cities, including Shanghai and Tianjin, the new home market's performance was weaker in April compared to March when 11 out of 70 cities saw price increases. Separately, property investment fell by 9.8% year on year in January-April, extending the 9.5% contraction in January-March, NBS data showed on Friday. China is now exploring a bold plan to revive its struggling property market by having local governments purchase millions of unsold homes. Chinese authorities on 17 May pledged new support to enable state-owned enterprises to purchase unsold apartments, aiming to provide developers with more funding to complete pre-sold properties. The People's Bank of China also on 17 May eliminated the minimum mortgage interest rate and reduced the minimum down payment ratio for both first-time and second-time home buyers. "A recent flurry of supportive policy announcements including removing purchase restrictions, housing "trade-in" policies, and plans to directly purchase housing units for social housing programmes, has boosted market optimism that we will see a bottoming out of housing prices sometime this year," ING said. As these policies roll out in the coming months and help alleviate downward pressure on property prices, data indicates that homebuyers may still remain cautious and on the sidelines until a trough is established, it said. "While it is arguably one of the most important signs of a stabilization of sentiment in China, it is worth noting that a potential bottoming out of housing prices would only be the first step; elevated housing inventories will likely keep real estate investment suppressed for some time yet, and the property sector will remain a major drag on the economy this year," ING added. Recent announcements from local governments, including the Dali government of Yunnan Province, have expressed intentions to facilitate the acquisition of existing homes for conversion into public housing, Singapore's OCBC Bank said in a note. This move is seen as a way to not only address the housing surplus but also potentially stimulate economic growth by increasing public spending and boosting the construction sector. Moreover, China's Finance Ministry announced on 13 May a plan to issue 1 trillion yuan of ultra-long special bonds over a period of six months, ending in November. This moderate issuance pace marks only the fourth time in 26 years that China has employed this type of debt for fiscal stimulus, allowing for targeted spending. China has set an ambitious economic growth target of around 5% this year, a level which analysts are cautiously optimistic about. The world's second-largest economy expanded by 5.3% in the first quarter of this year. Thumbnail photo: A man rides a scooter next to a construction site of residential buildings in China (Source: ANDRES MARTINEZ CASARES/EPA-EFE/Shutterstock) Insight by Nurluqman Suratman

21-May-2024

Americas top stories: weekly summary

HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 17 May. IPEX: Global spot IPEX slips as decline in Asia offsets gains in other regions, crude The global spot ICIS Petrochemical Index (IPEX) slipped 0.1%, as a fall in the northeast Asia index failed to offset gains in other regions and a rise in crude oil prices. Univar sees scope for both industrial and specialty chemicals M&A – CEO Chemicals distributor Univar Solutions will target both industrial and specialty chemicals and ingredients acquisitions as it seeks to be a consolidator in a still-fragmented market, its CEO said. Brazil’s floods-hit state plastics sector under ‘hypothesis’ operations could normalize end May – trade group Plastics producers in Rio Grande do Sul remain shut following the floods but are working under the “hypothesis” operations could normalize by the end of May, a full month after the floods hit the Brazilian state, trade group Abiplast said. US home builder confidence dives as mortgage rates exceed 7% US builder confidence in the market for newly built single-family homes fell sharply in May as higher mortgage rates “hammer” confidence, the National Association of Home Builders said on Wednesday. Chemical cycle has bottomed and now ‘beginning to turn’ – Dow CEO The global chemical cycle has bottomed out and is starting to turn higher, with a higher degree of confidence in a sustainable recovery ahead, said the CEO of Dow. Houston storm disrupts chems, knocks power out for thousands Powerful thunderstorms in Houston and the Gulf Coast disrupted operations at chemical plants while leaving more than 700,000 without power as of Friday.

20-May-2024

Europe top stories: weekly summary

LONDON (ICIS)–Here are some of the top stories from ICIS Europe for the week ended 17 May. Europe PET/PTA industry on high alert as freight costs soar Another shock to the logistics system is rippling through the European polyethylene terephthalate (PET) value chain but the impact is only so far just touching the surface. Europe oxo-alcohol spot prices face pressure from growing supply Prices in the European oxo-alcohols spot market were stable to lower this week as there is now plenty supply of all grades. IEA cuts 2024 crude forecast as OECD Q1 demand slips into contraction The International Energy Agency (IEA) on Wednesday cut its expectations for global crude oil demand growth as demand from the OECD shifted into contraction territory in Q1 and as refinery margins continued to slump into the spring period. Non-OPEC+ crude supply growth to slip in 2025, Latin America to drive non-OECD output – OPEC Increases in crude oil supplies from outside the OPEC+ bloc of countries is expected to decline slightly year on year in 2025, with the US and Canada expected to remain the backbone of OECD production increases and Latin America driving the rest of the world, according to OPEC. IPEX: Global spot IPEX slips as decline in Asia offsets gains in other regions, crude The global spot ICIS Petrochemical Index (IPEX) slipped 0.1%, as a fall in the northeast Asia index failed to offset gains in other regions and a rise in crude oil prices.

20-May-2024

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