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Discover the factors influencing xylenes markets

Xylenes prices and demand can change in an instant. As a by-product of oil refining, petrochemical production and coke fuel manufacturing, these chemicals are highly dependent on upstream markets. Likewise, xylenes demand fluctuates rapidly in downstream markets as they are used in a variety of processes.

Xylenes are split into four main components, isomer grade mixed xylenes (MX), solvent grade xylenes, para-xylenes (PX) and orthoxylenes (OX). Solvent xylenes are used as solvents in the printing, rubber and leather industries as well as cleaning agents, thinners for paints and in agricultural sprays. The primary use of mixed xylenes is as an octane booster for transportation fuels. Xylenes are also one of the precursors of the production of polyethylene terephthalate (PET) and polyester fibre. OX is largely used for the production of phthalic anhydride (PA) markets.

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CDI Economic Summary: US Fed rate cuts delayed on sticky inflation, economic resilience

CHARLOTTE, North Carolina (ICIS)–With disinflation having stalled above the US Federal Reserve’s targeted rate, Wall Street expectations of six rate cuts this year have evaporated. Interest rate futures are now moving towards fewer cuts and along the lines the latest Fed “dot plots” of three cuts this year. Any cuts that were to emerge will not happen until May or June. Starting with the production side of the economy, the January ISM US Manufacturing PMI registered 49.1, up 2 points from December and the 15th month in contraction. Only four industries out of 18 expanded, and weakness remains broad-based. But production moved back into expansion, as did new orders. The latter featured a 5.5-point gain to a positive 52.5 reading. This is always a good sign. Order backlogs contracted, however, at a faster pace. Both new orders and order backlogs, when combined with the reading on inventories, are good indicators of future activity. Inventories contracted, which could provide a floor for output. The long and deep de-stocking cycle could be ending, with the possibility for restocking this year. Meanwhile, the ISM US Services PMI improved 2.9 points to 53.4, a reading indicating modest expansion. The Manufacturing PMI for Canada remained in contraction during January while Mexico expanded. Brazil’s manufacturing PMI improved into expansion. Euro Area manufacturing has been in contraction for 18 months, and the region continues to skirt recession. China’s manufacturing PMI was slightly above breakeven levels for the third month, as its recovery continues to face headwinds. Other Asian PMIs were mixed. AUTO AND HOUSING OUTLOOKTurning to the demand side of the economy, light vehicle sales slumped in January due to severe winter weather. This allowed inventories to move up, but they still remain low compared to historical norms. Economists see light vehicle sales of 15.9 million this year before improving to 16.3 million in 2025. The latest cyclical peak was 17.2 million in 2018. Pent-up demand continues to provide support for this market. Homebuilder confidence remains in negative territory but is improving. Housing activity peaked in Spring 2022 and into mid-2023, with the latest housing reports being mixed. We expect that housing starts will average 1.42 million in 2024 and 1.48 million in 2025. We are above the consensus among economists. Demographic factors are supporting housing activity during this cycle. There’s significant pent-up demand for housing and a shortage of inventory. Falling mortgage interest rates will also support affordability and thus demand. RETAIL SALES FALLWith severe winter weather in much of the nation, nominal retail sales fell back in January. Sales were weak across most segments, but sales at restaurants and bars advanced. Spending for services is holding up, but the overall pace is slowing. Job creation continues at a good pace, and the unemployment rate is still at low levels. There are 1.4 vacancies per unemployed worker. This is off from a year ago but at a historically elevated level, which is still fostering wage pressures in services. Incomes are still holding up for consumers. INFLATION STILL HIGH BUT WILL EASEThe headline January Consumer Price Index (CPI) was up 3.1% year on year and core CPI (excluding food and energy) was up 3.9%. Progress on disinflation has been made but appears to be stabilizing. Economists expect inflation to average 2.7% this year, down from 4.1% in 2023 and 8.0% in 2022. Inflation is expected to soften further to 2.3% in 2025. Our ICIS leading barometer of the US business cycle has provided a signal consistent with the “rolling recession” scenario in manufacturing and transportation. The services sectors, however, continue to expand but are slowing. Recent readings show stabilization in this leading index, which is encouraging. US GDP FORECAST POINTS TO SOFT LANDINGAfter real GDP rose 5.8% in 2021 and then slowed to a 2.5% gain in 2022, the much-anticipated recession failed to materialize. In 2023, the economy expanded by 2.5% again. US economic growth is slowing from the rapid pace of Q3 and Q4, but those gains will aid 2024 performance which is showing a 2.1% gain. A cyclical slowdown in economic activity is occurring in 2025, economic growth should average 1.7% for the year. WEAKER OUTLOOK FOR EUROPE, CHINALooking overseas, recent global indicators show slow economic growth and soft commodity prices. Europe is skirting a shallow recession. The conflict affecting Red Sea seaborne trade adds to supply chain disruptions, costs and uncertainty for the region. Within the context of demographic headwinds, continued property sector woes and soft export markets, China’s economy has lost momentum. The government and Bank of China are responding with stimulus measures. For more updates and interactive charts, visit our ICIS Topic Page – Macroeconomic Outlook: Impact on Chemicals


UK Q2 energy price cap falls quarterly, year on year

Additional reporting by Hector Falconer Q2 energy price cap falls to £1,690, in line with lower wholesale gas and power prices The Q2 cap is £238 lower than the Q1 cap and has also fallen year on year The Q3 price cap is likely to fall further if gas and power prices continue their bearish trajectory, however bullish drivers could limit losses LONDON (ICIS)–The UK energy price cap for April-June has decreased quarter on quarter and year on year in line with lower wholesale gas and power prices, energy regulator Ofgem said on 23 February. The cap was introduced in January 2019 and sets the maximum price that gas and electricity suppliers can charge end-users for each unit of energy consumed. Ofgem sets the cap through a methodology that considers a range of supplier operating costs, including ICIS wholesale energy price assessments, as well as network costs and VAT. The price cap is likely to fall further for the third quarter of 2024 if prices continue their bearish trajectory, however any bullish driver such as a hot summer could limit losses. FALLING PRICES ICIS assessed the NBP gas Q2 ’24 contract at an average 84.338p/th between 16 November and 15 February – the period used by Ofgem to calculate wholesale energy costs. This was much lower than the previous year when the equivalent contract averaged 228.967p/th between 16 November 2022 and 15 February 2023. Prices have declined steadily from their peak after Russia’s invasion of Ukraine, although NBP products are still well-above seasonal average levels seen before the energy supply crisis. As gas is a key price driver for the UK power market, UK power prices have tracked a similar bearish trend, with UK power Q2 ’24 prices significantly below Q2 ’23 prices. ICIS assessed the UK power Baseload Q2 ’24 contract at an average £76.02/MWh between 16 November and 15 February, 65% lower than the Q2 ’23 over equivalent dates. The Q2 ’24 contract has maintained a premium to its European counterparts, which indicates that the UK is likely to import power from neighbouring countries, including France, through the front-quarter. Data from French nuclear fleet operator EDF shows that nuclear output is set to remain strong through the second quarter of 2024, averaging 46.5GW in the period 1 April to 30 June, 9.5GW above the 2019-23 average. CAP OUTLOOK Both gas and power Q3 ’24 prices are currently at a premium to Q2 ’24 price however, both contracts have continued to shed ground through the first quarter of 2024. Barring any shift in the underlying fundamentals, Q3 ’24 gas and power prices are likely to continue to fall, which could results in the Q3 price cap being lower than the Q2 cap. According to ICIS price assessments on 22 February, the NBP Q3 ’24 contract was 2.225p/th above the Q2 ’24 contract and the UK power Baseload Q3 ’24 contract was £2.65/MWh above the Q2 equivalent. From January to March 2018-2023 the NBP Q2 contract averaged 89.971p/th and the 2018-2023 average of Q3 when it was the front quarter was 85.072p/th – indicating that Q3 ’24 may dip below the Q2 ’24 price level nearing delivery. European gas storage sites currently sit at 65%, which is 22% above the 2017-21 average, according to data from Gas Infrastructure Europe. This, mixed with low levels of historical gas demand could continue to pressure Q3 prices – especially if the UK has a windy summer period which would mute gas-fired power demand. On the power side, heatwaves remain a risk factor in the third quarter, as this would support air condition demand in the UK and on the continent, therefore supporting power prices. High river water temperatures can also lead to reduced output at French nuclear plants, as reactors cannot be cooled effectively. This could also be a potentially bullish driver for UK power prices. Furthermore, low wind generation would also be a risk factor supporting UK power prices and increase gas-for-power demand.


Europe top stories: weekly summary

LONDON (ICIS)–Here are some of the top stories from ICIS Europe for the week ended 16 February. EU road fuels demand to drop 70% by 2050 as electrification takes hold The European Union (EU) now has a decarbonization pathway for road transport firmly set out as the European Parliament and Council reached a provisional political agreement in mid-January on strengthening CO2 emissions performance standards for new heavy-duty vehicles (HDVs). Global oil demand growth losing momentum as post-pandemic rebound phase ends – IEA The momentum of crude oil demand growth is starting to slow as the post-pandemic rebound in consumption nears its conclusion, the International Energy Agency (IEA) said on Thursday, despite arctic conditions in January tightening market balances. Low virgin chemicals pricing intensifies sustainable transition challenge – Borealis CEO Lower pricing for virgin petrochemicals in Europe on the back of a prolonged demand trough is exacerbating the challenge of building out sustainable products portfolios into a core spine of a chemicals business, according to the CEO of Borealis. Transport to drive 2024 crude demand growth – OPEC Road and air transport demand are likely to be the key drivers of crude oil consumption growth this year, OPEC said on Tuesday, with petrochemicals sector consumption also likely to buoy volumes. Europe OX, PX spot prices firm on higher contract pricing, freight costs European orthoxylene (OX) and paraxylene (PX) spot prices rose last week amid firmer contract pricing and higher premiums over Asian values.


Asia petchem markets await China's demand signals after holiday

SINGAPORE (ICIS)–Asia's petrochemical markets will closely watch China's demand signals after the Lunar New Year holiday amid ongoing concerns about the country’s economic health. Asia markets eye China's post-holiday demand signals China's economic health remains central concern Prices likely to rise amid supply constraints Markets in Asia took a breather in the week of 12-16 February, with Lunar New Year holidays in China, Taiwan, Malaysia and Singapore, while countries such as South Korea, Japan and Indonesia observed public holidays as well. Market participants are cautious about the post-holiday market; while some downstream buyers will restock after the holidays, there is concern that existing inventory held by domestic China producers and distributors will largely satisfy demand until early March. PRICES LIKELY TO RISE AMID SUPPLY CONSTRAINTSPetrochemical prices in Asia are expected to continue to increase in February, supported by capacity losses from outages and run-rate reductions, according to ICIS analysts. Among the 31 major petrochemical commodities covered by the ICIS Asia Price Forecast, average February prices for at least 22 of these commodities are anticipated to increase. Ethylene (C2), butadiene (BD) and styrene butadiene rubber (SBR) are expected to lead in terms of gains. In Asia’s C2 market, end-users who have yet to settle March arrival cargo are expected to hit the ground running once most of players return to the market this week. In the southeast Asia C2 market, demand enquiries were largely heard from Thailand last week, while other end-users in Indonesia have begun to look towards the April window for spot cargo. "The Asia C2 industry is likely to be characterised by tight supply in the weeks to come," said Paolo Scafetta, ICIS senior olefins analyst. "February should see about 7% of total monthly nameplate capacity lost due to downtime unless unplanned events cause further technical hiccups." The upstream naphtha market in Asia should be influenced by a few bearish factors, Scafetta added. These include the shift from naphtha to liquefied petroleum gas (LPG) as an alternative cracking feedstock and an improvement in supply from March as naphtha cargoes are expected to increase as Middle East refineries return from their maintenance. Asia's naphtha market is likely to be plagued with volatility in the short term as tensions in the Red Sea will continue to disrupt supplies. In Asia’s propylene (C3) market, trade was largely subdued during the Lunar New Year break but picked up towards the close of the week with most market players, except China, returning from their holiday. Talks and discussions in Taiwan commenced at the end of the week after the holidays ended. However, the post-holiday buying sentiment weakened on the back of ample supply, leading sellers to progressively lower their offers and selling indications. With buyers in China largely away from the market, overall business activity during the week was muted. In southeast Asia, while demand was also heard in Malaysia and Indonesia, most buyers continued to hold back from purchases on the expectation that supply tightness might result in an easing in offers down the road. In Asia’s benzene market, post-holiday restocking is expected to pick up in the second half of February amid strong competition for April and May cargoes from global players. February and March benzene cargoes have been already sold out and April cargoes are in strong demand. Benzene buyers based in both Asia and the West had actively sought procurement since end-January, for pre-holiday and pre-summer stocking up respectively. Asia's acetone market looks poised to maintain its strength. This is due to the high prices of benzene, reduced production leading to tighter supply, and a resurgence in trading flows between Asia and the West. A significant increase in demand for Asia acetone from the US market is bolstering this trend. Limited supply in the US, a result of low phenol production and ongoing allocations, is driving this demand. Meanwhile, supply within Asia is also constrained as phenol/acetone producers scale back production in response to unprofitable margins and decreased demand for phenol in China. In the xylene markets, further support in the market will be dependent on downstream sectors after the Lunar New Year holidays, with eyes firmly on China. For paraxylene (PX), there remains optimism for gasoline-blending demand heading into the second quarter, with positive arbitrage window economics for exports to the West. Firm upstream naphtha prices have also provided some support for PX. Several market participants noted there had been pre-buying of mixed xylenes (MX) and toluene by gasoline blenders to the US. Demand and price developments in the downstream purified terephthalic acid (PTA) and polyester sectors will help provide clarity about whether high PX costs can be absorbed down the chain. Asia's butyl acetate (butac) and ethyl acetate (etac) markets are poised to stay afloat on anticipated post-holiday demand, albeit at a gradual pace. Sellers of butac in both China and the region largely maintained their spot offers for March loading prior to the Lunar New Year holiday. Spot butac prices were on a downtrend in the early part of the fourth quarter of 2023 and have climbed since December, in part driven by cost pressures upstream as suppliers worked towards mitigating compressed margins. Asia’s methylene chloride (MEC) market might be bullish after the Lunar New Year holiday, as rising demand is likely to shift the market to a more balanced state. Most buyers were in a wait-and-see mode, monitoring prices and observing what producers would offer after the Lunar New Year break, with market participants in southeast Asia eyeing a rebound in demand through Q2, around the Ramadan period. CHINA'S ECONOMIC HEALTH IN FOCUS ICIS analysts expect most of China's end-use consumption, including in industries such as agriculture and home appliances, to recover from March. The China government's Two Sessions policy meetings, widely seen as the most important political meeting of the year for the country, will be held on 4-11 March. ICIS analysts expect another series of policies to be introduced to stimulate economic growth. Further market and infrastructure investment can boost petrochemicals demand. Latest official data from China is pointing to some recovery from domestic tourism trips and revenues. Domestic tourism trips and revenues during the Lunar New Year holidays in China jumped by 34.3% and 47.3% year on year respectively, with their levels at 19.0% and 7.7% above pre-pandemic levels in 2019, data from the country’s Ministry of Culture and Tourism (MCT) shows. "Most official and private media channels have been reporting strong (or even exceptionally strong) Lunar New Year holiday consumption data, and markets risk getting caught up in the euphoria of the moment, under the supposition that China’s economy is suddenly bottoming out, driven by the Chinese people’s hidden passion for spending," research analysts from Japan's Nomura Global Markets Research said in a note. "Although we do see some strength in the data, we urge market participants to exercise caution," it said, adding that China's property sector continued its downward spiral, right before the Lunar New Year holiday, and there was no sign of a recovery during the holiday. "Despite the positive [Lunar New Year] data, we maintain our view that the ongoing economic dip is likely to worsen into the spring," Nomura said. With additional reporting by Josh Quah, Julia Tan, Seng Li Peng, Angeline Soh, Helen Lee, Keven Zhang, Melanie Wee and Samuel Wong Focus article by Nurluqman Suratman Thumbnail photo: Lunar New Year lanterns in Shenyang, northeast China's Liaoning Province, on 1 February 2021. Asia will closely watch China's demand signals after the Lunar New Year holiday amid concerns about the country’s economic health. (Source: Xinhua/Shutterstock)


Asia top stories – weekly summary

SINGAPORE (ICIS)–Here are the top stories from ICIS News Asia and the Middle East for the week ended 16 February 2024. Singapore Jan petrochemical exports rise 8.7%, NODX up 16.8% By Nurluqman Suratman 16-Feb-24 09:55 SINGAPORE (ICIS)–Singapore’s petrochemical exports in January rose by 8.7% year on year to Singapore dollar (S$) 1.11bn ($822m), with non-oil domestic exports (NODX) posting a 16.8% growth for the month, official data showed on Friday. Asia fatty acids market faces cost pressures on strong palm oil prices By Helen Yan 15-Feb-24 13:10 SINGAPORE (ICIS)–Asia’s fatty acids market is likely to face costs pressures from recent spikes in upstream crude palm oil (CPO) prices, while demand is expected to stay tepid. PODCAST: Asia R-PE, R-PET see slow 2023; legislations, waste management to shape future By Damini Dabholkar 15-Feb-24 14:07 SINGAPORE (ICIS)–Asia recycled polymers markets were sluggish for the most part in 2023. In early 2024 too, challenges that dim the short-term outlook persist. INSIGHT: Indonesia polls raise questions over Nusantara, import curbs By Pearl Bantillo 13-Feb-24 19:27 SINGAPORE (ICIS)–Indonesia, southeast Asia’s biggest economy, will go to the polls on 14 February to elect a new president, posing uncertainties on continuity of economic policies, from import restrictions coming into effect in March to incumbent President Joko Widodo’s flagship project of building a new capital called Nusantara in Kalimantan province. Asian EPDM market quiet amid holidays; demand outlook mixed By Ai Teng Lim 13-Feb-24 17:22 SINGAPORE (ICIS)–Discussions for Asian spot imports of ethylene propylene diene-monomer (EPDM) ground to a halt this week, with much of Asia out of action on extended Lunar New Year holidays.


INSIGHT: 2023 marks first year as US net plastic scrap importer, driven by PET imports increasing 33% year on year

HOUSTON (ICIS)–2023 was a year of record changes within US plastic scrap trade. While some relationships remain steadfast, such as the plastic scrap trade between North American partners Canada, Mexico and the US, other relationships are growing in strength, such as US importing activity from Asia, particularly for polyethylene terephthalate (PET) plastic scrap. US becomes net importer of plastic scrap for the first time US PET scrap imported increase 33% year on year Canada, Mexico comprise 55% of US scrap exports, 58% of US scrap imports Full year trade data from the US Census Bureau shows US imports of plastic scrap – noted by the HS code 3915- continue to increase, having jumped 5% year on year to a total of 446,778 tonnes in 2023. Plastic scrap imports include items such as used bottles, but also other forms of recycled feedstock such as purge, leftover pairings and now also flake material. This comes at a time when domestic market conditions for recycled plastics are mixed. Many grades of plastic which are used for cost-sensitive applications, such as those which go into construction materials or durable good and packaging, have seen a severe withdrawal of demand, as low cost virgin material continues to flood the market. Even grades of sustainability driven recycled plastics, such as those going into consumer goods applications like beverages and personal care, have seen weaker market conditions domestically, as customers switch to imported recycled resin. Supporting the increase in imported scrap plastic, US recyclers who continue to have strong order volumes were heard to be supplementing their operations with imported feedstock. Several recyclers now purchase cheap spot or imported R-PET flake to process into their food grade pellet product and redirect their internally produced flake from high cost domestic bale feedstock to sell directly to customers. In the long term, the US will seek imports of bale or flake feedstock not just due to the cost driver but to feed growing plastic recycling capacities amid stagnant plastic collection rates domestically. Intra-North American recycled plastic trade relationships continue to show strength, as Canada and Mexico not only dominate as the origin location of plastic scrap import but also as top export destinations for US plastic scrap exports. 58% of the plastic scrap imported by the US came from Canada and Mexico combined, though Mexico's volumes notably dropped year on year, down 35% compared to 2022. Picking up the slack, US plastic scrap imports from Thailand increased by 103% year on year. Thailand is now the third largest country of imported plastic scrap origin. PET imports show tremendous growth The majority of plastic scrap received from Thailand was of the PET subcategory, coming in at 23,346 tonnes, a 157% increase year on year from Thailand alone. PET imports from Thailand now make up 11% of the total US PET plastic scrap imports, trailing Canada at 29%. Thailand's PET scrap export activity to the US has grown significantly, increasing 415% by volume in comparison to 2019. Similarly, Ecuador has step-wise increased the volume of PET scrap being sold to the US market, jumping 63% year on year and 414% since 2019. Market participants confirm they have seen a notable rise in imported recycled polyethylene terephthalate (R-PET) activity from Asia and Latin America, particularly due to their cost-competitive position in light of cheaper ocean freight rates in 2023. Imported PET scrap from Canada also saw a large change, increasing 21% by volume year on year to 59,247 tonnes. When looking at the geographic regions of the top 10 origin countries of US PET scrap imports, Mexico and Canada make up 34% of volume, tied with Asian countries at 34%, then followed by Latin America at 15%, Africa 5% and non-top 10 countries at 12%. In general, PET scrap imports increased substantially in 2023, jumping 33% year on year to a record setting 204,278 tonnes in 2023. When looking at the data by comparing quarters year-on-year, it is clear the market continues to face increased volatility. This is showcased by the wide swings in import volumes since 2020, when prior, quarterly import volumes were much more stable. Polyethylene (PE) also continues to be a leading polymer type for US plastic scrap imports, coming in at 63,206 tonnes in 2023. Of that volume, Canada is by far the largest contributor at 72%. On the other hand, PE scrap exports have fallen 16% year on year, likely due to lessened manufacturing activity amid macroeconomic pressure in 2023. Plastic scrap imports continue historic downward trend Similarly , PET scrap exports fell 14% year on year to 65,556 tonnes, which was mainly driven by decreased export activity to Germany. Volumes of PET scrap sent to Germany dropped 40% year on year, down to 6,156 tonnes. This is likely attributed to the fact that both the US and European recycled plastics markets saw lackluster demand in 2023, paired with fierce competition from lower cost virgin cargoes. Contrary to that trend, exported of PET scrap to Mexico increased 15% year on year, making up 54% of all US PET scrap exports. At present, aggressive buying activity from Mexican recyclers continues to drive up US PET bale prices. Exports to Mexico have always made up a small portion of US PET bale sales from southern California or states like Texas, though the current activity has been notably strong. This is likely due to increased PET recycling capacity now in Mexico within the last year, as well as increased demand in Mexico from brand companies sourcing R-PET locally. Similar to the US, this time of year when the weather is cooler results in lower consumption of beverages and thus a tighter supply of bottles available for collection. In general, US plastic scrap exports continue to follow a downward trend since 2017, dropping another 4% year on year. This trend has resulted in the US becoming a net plastic scrap importer, as total scrap trade is import positive at 26,408 tonnes. To reinforce how significant this change is, as of 2014 the US was net exporting 1,765,917 tonnes. Among the top destination countries for US plastic scrap exports were Canada, Mexico and India, Malaysia and Vietnam, with Canada and Mexico accounting for 55% of the overall volume in 2023.


India’s Styrenix plans ABS, PS capacity expansions in Gujarat

MUMBAI (ICIS)–India’s Styrenix Performance Materials (SPM) expects to begin operations at its expanded acrylonitrile butadiene styrene (ABS) and polystyrene (PS) capacities at Dahej and Nandesari in the western Gujarat state before 2028, a company source said on Friday. SPM plans to invest Rs6.5bn ($78m) on the expansion projects. Its ABS capacity will grow to 210,000 tonnes/year over the next four years, from 85,000 tonnes/year currently; while its PS capacity will be raised to 150,000 tonnes/year over the next three years from the current 66,000 tonnes/year, based on the plan released in October 2023. Funding the brownfield expansions will be through a mix of internal accruals and debt, SPM said. “The expansion will be done in a phased manner and capacity will be increased gradually over the next few years,” the company source said. The expansion of production capacities will help SPM meet increasing domestic demand for ABS and PS, he sai. “We expect to see robust growth in in our existing markets like automobiles, household appliances, medical devices, electronics, [among others],” the source said. SPM is formerly known as INEOS Styrolution India. It was renamed in January 2023 after INEOS Styrolution sold its entire stake in the company to Shiva Performance Material in August 2022. ($1 = Rs83)


EU may have wide hydropower potential for power balancing

The article has been updated to clarify the impact of climate change and include more details about large-scale dams The EU has some untapped potential for hydropower growth – expert Growing intermittent renewables will need more balancing capacity like hydro storage Climate change could lift hydro costs and could challenge water resources LONDON (ICIS)–As intermittent supply from renewable penetration increases, hydropower could support balancing needs, mainly through pumped hydropower storage (PHS) plants. The European Commission Joint Research Centre’s (JRC) energy model suggests a 20% increase in annual hydropower output in the EU by 2050. The model considers the potential of sustainable hydropower in the EU, which will support the balancing of the power system in many countries, hydropower expert Emanuele Quaranta at the European Commission told ICIS. Key features of future hydropower will be “the provided flexibility and the water and energy storage of the associated reservoirs”, he added. Quaranta’s study based on 2019 EU hydro generation conditions showed that modernising and improving the efficiency of existing plants would bring a 10% increase in power generation, which could reduce the need for additional capacity, with none or little impact on the environment. ICIS Analytics shows that in 2024, 254GW of installed hydropower capacity in Europe (including other non-EU countries) should produce 512TWh, making 16% of the total power generation stack. Hydropower capacity across Europe could grow from 254GW to 279GW, generating 543TWh or 10% of the total power mix by 2050 while surpassing the total nuclear power generation amid growing demand needs, according to the ICIS Analytics forecast. HYDROPOWER POTENTIAL River and water basins in the EU are home to more than 650,000 water barriers – including small-scale dams – with only 5% currently used for hydropower production, Quaranta told ICIS. The EU has almost 5,000 large-scale dams above 15 metres, or between 5 and 15 metres with storage volumes larger than 3 million cubic metres, half of them with installed hydropower generation capacity. However, only one-third of the total infrastructures are built exclusively for hydropower generation, with many sites including hydropower as a secondary scope alongside other types of use, like stocking water for agriculture or residential use. “The average age of hydropower plants currently in operation is 45 years, meaning a large part of the EU’s hydropower infrastructure will need interventions to increase its efficiency and flexibility, sustainability, improve the resilience to climate change and ensure safety,” the expert said. According to a European Commission JRC study by Quaranta, the hydropower energy return on investment (EROI) is the highest among renewable sources. BALANCING NEEDS Battery storage can be used for short-term balancing, typically up to 4 hours, but when insufficient renewable output is prolonged, PSH can guarantee flexibility of power systems. “PHS can store water energy (with daily, monthly and seasonal storage depending on the installed capacity and reservoir’s volume) more cost-effectively than any other option, and can put and absorb energy available in seconds,” the JRC study indicated. CLIMATE CHANGE RISKS Climate change is set to impact the use of hydropower, particularly in southern Europe where the risk of severe droughts is expected to increase over the coming years. However, Quaranta noted that climate change might impact regions differently, with northern and eastern European countries expected to have increased precipitation levels potentially supporting hydro stocks, while southern Europe could face drier weather hampering water reservoirs and, therefore, electricity production. “Climate change could shorten the lifespan of hydropower turbines as they would need to operate in a context of dry weather alternating with infrequently but stronger rainfall volumes. Also, the required flexibility needed to support the integration of the highly volatile wind and solar energy generation can increase the stress on hydropower equipment,” he added. Although climate change seems likely to lift overall maintenance costs for hydropower plants associated with sediment management (more frequent floods could increase solid transport and erosion), new technologies might mitigate sediment deposition issues, Quaranta confirmed


Americas top stories: weekly summary

HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 9 February. Brazil's chemicals output down 6% in 2023, producer prices fall by 17% Brazil’s chemicals output fell by 5.9% year on year in 2023, while plastics and rubber production rose by 1.2%, according to the country’s statistical office, IBGE. INSIGHT: Rough start to 2024 for chemicals, even as economic outlook brightens The US economy is proving most resilient but it is a different case for chemicals. And while the IMF raised its global GDP growth forecast for 2024 to 3.1% from a prior 2.9%, largely on an improving US outlook, chemical company guidance for Q1 following Q4 earnings calls all points to a rough start for the year. US natgas prices close below $2, benefiting chem margins US natural gas prices fell below $2 on Wednesday, which, barring the pandemic, represent the lowest winter-time level since 1997. INEOS Aromatics closes one of two PX units at Texas City, Texas site INEOS Aromatics has closed one of its two paraxylene (PX) units at its Texas City, Texas site, according to a company spokesperson. Brazil to reinstate antidumping duty on US PP Brazil is to reinstate antidumping duties (ADDs) on US polypropylene (PP), effective immediately after publication in the country's official gazette.


INSIGHT: Chemical recycling as a method to tackle the circularity of flexibles

HOUSTON (ICIS)–Film plastics, more commonly known as flexibles, are a recurring obstacle in the path of recycling as they are notoriously hard to deal with via traditional recycling methods. Several key aspects make flexibles challenging for recycling: They are soft and bendable, leading to easy clogging of recycling machines Their relatively lightweight nature makes them difficult to handle on sorting lines They are not typically accepted in curbside recycling programs Flexibles are commonly comprised of two main polymer types: low-density polyethylene (LDPE) and linear low-density polyethylene (LLDPE). They are heavily utilized in the packaging industry, for both food and non-food packaging—a trend that shows no sign of slowing down. The relatively low quantity of LDPE and LLDPE flexibles being mechanically recycled, especially when compared to their rigid high-density polyethylene (HDPE) counterpart, alludes to the challenges that many mechanical recyclers encounter in recycling these polymers. One useful metric to quantify this difference is to compare the mechanical recycling penetration percentages for LDPE+LLDPE and HDPE. The mechanical recycling penetration of LDPE+LLDPE for 2023 can be found by comparing the total mechanical recycling output of LDPE+LLDPE in 2023 to the amount of LDPE+LLDPE that was consumed in the same year.  The graph below, extracted from the ICIS Supply and Demand Database and Recycling Supply Tracker – Mechanical, shows the mechanical recycling penetration for both LDPE+LLDPE in North America, as well as HDPE for comparison. Sources: ICIS Supply and Demand Database and Mechanical Recycling Supply Tracker, January 2024 Mechanical Penetration of Polymer for 2023 = (Mechanical Recycling Output of Polymer in 2023)/(Consumption of Polymer in 2023) Despite similar consumption volumes for 2023, significantly more HDPE is making its way back into the market via mechanical recycling than LDPE+LLDPE. One primary reason for this difference is the inherent characteristics of flexibles. They are lightweight and pliable, making them excellent choices for packaging. However, these same qualities are obstacles to traditional recycling processes. The recycling journey begins with collection, a crucial stage where the disposability and public perceptions of plastic films play a pivotal role. Many consumers, influenced by the nature of these films, tend to discard them in the trash, viewing them as potentially contaminated or unaware of their recyclability. Consequently, these items seldom find their way to recycling facilities. A significant challenge emerges for those who make an effort to recycle these packaging materials: they are often not accepted for curbside recycling in numerous states in the US. Instead, recycling them frequently requires a separate collection process and participation via an in-store recycling program. All these additional steps for consumers—including separating materials, identifying drop-off locations, and investing time in transportation—add another layer of complexity to the recycling process for flexibles. Flexibles also pose a challenge at the material recovery facility (MRF) level, disrupting much of the sorting machinery. Consequently, flexibles that do make their way to MRFs are susceptible to improper sorting and potential diversion into waste streams. To achieve a high-quality pellet output, mechanical recyclers require a high quality of feedstock. This means sorting capacities to deliver bales with low contamination levels, which remains difficult to achieve consistently. The reality is that mechanical recyclers must further sort to extract the useable volumes required. This is more challenging to achieve at the required volume and quality for flexibles, particularly in a cost-effective way. In such situations, chemical recycling emerges as a viable complementary technology. Chemical recycling primarily involves breaking down polymers into their fundamental components. Polyethylene polymers, including HDPE, LDPE, and LLDPE, share the same base parts, enabling them to be processed together as mixed plastic bales for chemical recycling. This option, unavailable in mechanical recycling, alleviates the pressure of sorting waste into individual polymer types. Nevertheless, it is crucial to acknowledge that the degree of sorting still impacts chemical recycling outcomes. Even with chemical recycling, certain contaminants will negatively impact the process and should be removed. Generally, a better-sorted stream yields superior results, regardless of the recycling method. Techniques like pyrolysis and gasification further expand the possibilities for the recycling of polyethylene polymers, as they are better equipped to handle these particular feedstocks. According to ICIS Recycling Supply Tracker – Chemical, operating pyrolysis plants in the US account for nearly 28% of the total chemical recycling operating capacity available in 2023. However, that number is anticipated to increase to over 60% of the total chemical recycling operating capacity in 2028 based on announced projects. Sources: ICIS Chemical Recycling Supply Tracker, January 2024 Another inevitable challenge tied to mechanical recycling is the limited ability to recycle continuously. After a certain number of cycles, plastics undergo degradation in their physical qualities. Chemical recycling, by breaking down plastics to their base form, provides an alternative route for plastics that can no longer undergo mechanical recycling. Although chemical recycling offers relief in situations where mechanical recycling is limited, it is still a relatively new process, especially when compared to the more established mechanical recycling methods. As a result, it will take time to establish feedstock streams and achieve consistent and maintainable yields. The constant shifts in the legal landscape do not help to clarify the situation surrounding chemical recycling. In the US there is no consensus on whether chemical recycling should be classified as a form of recycling. Presently, 24 states have legislation acknowledging chemical recycling as an acceptable method. As another result of the novelty of chemical recycling, there are limited impartial studies that have been done surrounding its environmental impact. Even the name ‘chemical recycling’ signifies to some that the process is inherently bad for the environment, a claim that is not substantiated. There are many different processes that fit under the umbrella of chemical recycling, each requiring thorough and unbiased analyses to be conducted as the technologies mature. While mechanical and chemical recycling both undoubtedly have their drawbacks, one thing is certain: there is a problem of plastic waste that needs to be addressed. It will take the combined efforts of mechanical recycling, chemical recycling, and many other methods in unison to combat this crisis. Insight by Joshua Dill


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