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APIC '24: Thailand chemicals demand to recover after challenging 2023 – FTIPC

SEOUL (ICIS)–Thailand's petrochemical industry is expected to recover in 2024 as demand improves following a challenging 2023, which was marked by a global economic slowdown, inflation, and high energy costs that dampened consumption. The Federation of Thai Industries' Petrochemical Industry Club (FTIPC), in a report prepared for the Asia Petrochemical Industry Conference (APIC), noted that uncertainties in the global economy, including the recent Israel-Hamas conflict, China's economic stagnation, and instability in US and European financial markets, have impacted the Thai economy. KEY SEGMENTS IMPACTED This challenging environment has already impacted key petrochemical segments. Ethylene consumption, for example, declined in 2023 due to weaker economic conditions and subdued demand. in '000 tonnes/year 2020 2021 2022 2023 Total Capacity 4,609 5,409 5,409 5,360 Production 4,516 5,045 4,530 4,463 Consumption by derivative products* 4,719 5,040 4,478 4,463 Exports 44 99 63 41 Import 163 43 87 95 *Consumption netbacked from polyethylene (PE), ethylene dichloride/vinyl chloride monomer (EDC/VCM), ethylene glycol (EG), and styrene monomer (SM) production Demand for ethylene is expected to remain under pressure in 2024 due to feedstock volatility, weak derivative demand, and increased competition from new capacities in China, southeast Asia, and the US. Additionally, polymer converters are grappling with major concerns such as geopolitical uncertainties, global recession fears, and high inflation rates, as consumers limit spending and further weaken demand for end-use sectors. OUTLOOK AND CHALLENGES AHEAD Looking ahead, Thailand, southeast Asia's second-largest economy, is projected to grow by 2.2%-3.2% in 2024, fueled partly by a rebound in exports and increased private and public investment. However, the recovery in global demand for petrochemicals is not expected to fully materialize until the second half of 2024, according to the FTIPC. This is due in part to a supply glut in Asian markets caused by increased production capacity in China, Vietnam, Indonesia, and Thailand itself, as well as the Middle East, which has prompted producers to reduce output or maintain inventory levels to preserve profit margins. Volatile economic conditions, geopolitical conflicts, new rules of global trade, and the trend of reducing carbon emissions and greenhouse gases present both opportunities and challenges for the petrochemical sector, the FTIPC said. “Businesses must adapt to this changing landscape by enhancing competitiveness, flexibility, and continuous adaptation amidst external uncertainties,” it said. “Integrating business operations with sustainable development is crucial, with a focus on sustainable business growth that meets the demands of consumers in a low-carbon and net-zero emission society.” Focus article by Nurluqman Suratman

30-May-2024

German consumer confidence improves, but economic recovery ‘bumpy’

LONDON (ICIS)–Consumer confidence in Germany improved in May but the country’s economic recovery remains bumpy, with no significant GDP growth expected in Q2, according to the latest reports by research groups on Wednesday. Consumer confidence improves Industrial economy continues to struggle May core inflation flat at 3.0% year-on-year pace CONSUMER CONFIDENCE Although consumers remain pessimistic overall, confidence continued to pick up in May, Nuremberg-based market research firm GfK said. Income expectations rose in May, the inclination to save declined, and consumers' economic expectations improved compared with April, GfK said. Lower inflation rates combined with a noticeable increase in wages and salaries, were boosting consumers' purchasing power, the group said. Nevertheless, uncertainty among consumers remains “pronounced”, prompting them to delay larger purchases, the group said. The GfK consumer climate index for Germany rose from -27.3 points in April to -24.0 points in May, and GfK is currently forecasting that the index will improve further to -20.9 in June. A minus value indicates consumer pessimism. The GfK index is based on monthly interviews with about 2,000 consumers. The May interviews were conducted from 2-13 May. INFLATION Meanwhile, core inflation, as measured by the consumer price index (CPI), is expected at a 3.0% year-on-year pace in May, unchanged from April, according to an initial estimate by the country’s federal statistics agency on Wednesday. Core inflation excludes volatile energy and food prices. The headline CPI is estimated to gain 0.1% month on month in May and run at a 2.4% year-on-year pace (April: 2.2%). Analysts at German regional state bank NordLB said that inflation pressures remained "stubborn" in services. However, the latest inflation data out of Germany were no obstacle to an expected interest rate cut by the European Central Bank (ECB) next month, the analysts said. ECONOMY Economic research group DIW Berlin said on Wednesday that Germany’s economic recovery remained “bumpy”, with no significant acceleration of GDP growth expected in the second quarter. In the first quarter, GDP grew 0.2% from the 2023 fourth quarter. The main positive for Germany is that the global economy is “surprisingly robust”, despite high interest rates, continued high inflation, and geopolitical uncertainties, DIW said. A stronger global economy supports German exports. Domestically, higher wages and salaries, moderating inflation and expected interest rate cuts should translate into a slow increase of demand this year, DIW said. However, Germany’s industrial producers have yet to find a way out of the slump, although there were “signs” that a recovery in the industrial economy could get under way in the second half of the year, DIW said. The DIW economic barometer for Germany fell from 92.9 points in April to 86.1 in May – well below the neutral 100-point mark which indicates average economic growth. MANUFACTURING CLIMATE IMPROVES Meanwhile, another indicator, the ifo business climate index, remained unchanged at 89.3 points in May, Munich-based ifo reported. In manufacturing, the business climate improved for a third consecutive month as companies were considerably more satisfied with their current business and their outlook for the coming months was less pessimistic than in April, ifo said. The manufacturing order backlog, however, continued to decline, the group said. The ifo index is based on about 9,000 monthly survey responses from businesses in manufacturing, services, trade and construction. Germany chemical producers' trade group VCI expects the country's chemical production (excluding pharmaceuticals) to rise 5.0% in 2024, which would come after a 10.4% decline in 2023. Focus article by Stefan Baumgarten Please also visit Macroeconomics: Impact on Chemicals. Thumbnail photo of Germany's economic affairs minister and vice-chancellor Robert Habeck: source: German government

29-May-2024

Global chemical industry poised for M&A boost from Japan, India in 2024 – DC Advisory

NEW YORK (ICIS)–The global chemical sector should see increasing mergers and acquisitions (M&A) activity through the rest of 2024 following a depressed 2023, driven in part by portfolio restructuring among Japanese companies as well as increasing interest by Indian buyers, according to an investment bank. “In 2024, we are seeing increased levels of M&A activity as companies reevaluate their portfolios and seek strategic opportunities to drive growth, while navigating a constantly evolving landscape that is currently marked by technological advancements, shifting geopolitical alliances and an increasing emphasis on sustainability,” said investment bank DC Advisory in a report by managing director Federico Mennella and others. It expects the portfolio re-evaluation of Japanese chemical companies to accelerate and spur future M&A activity. China’s aggressive capacity expansion in commodity chemicals has greatly pressured Japanese companies exporting petrochemicals to China. Just under a third of Japan’s petrochemical output is exported, and China accounted for around half of exports in 2022, the investment bank pointed out. “Japanese production of ethylene has dropped to its lowest in 25 years due to China’s fast-growing capacity,” said DC Advisory. “As a result, Japanese diversified chemical companies such as Mitsubishi Chemical, Mitsui Chemicals and Resonac Holdings have recently announced strategies to restructure their petrochemical businesses, such as divesting, collaborating with other companies and to consider IPOs,” it added. Japanese chemical companies have also become more active on the buy side as they transition towards specialty, low-carbon and more sustainable business models. In April 2024, Japan-based Shin-Etsu Chemical announced its planned acquisition of Japan-based semiconductor materials company Mimasu Semiconductor Industry through a tender offer for shares. Shin-Etsu already had a 43.87% stake in Mimasu. In October 2023, Sumitomo Bakelite agreed to buy Asahi Kasei’s Pax packaging and films business serving the pharmaceutical, industrial and food sectors. DC Advisory advised Shin-Etsu and Sumitomo Bakelite on their respective transactions. Other recent deals involving Japan-based buyers include Sumitomo Corp/Saconix, DIC/PCAS Canada and Fujifilm/Entegris’ electronic chemicals business. INDIA AS A BUY-SIDE FORCEMeanwhile, India’s chemical industry has grown sales by over 6%/year on average since 2012 and is now further benefiting from global supply chain diversification, the investment bank pointed out. “We… believe the China Plus One Strategy, set up to minimize supply chain dependencies on China by diversifying the countries they source from, will drive growth in the Indian chemicals industry and prompt further M&A in the sector,” said DC Advisory. “With the Indian public markets recently valuing the specialty chemicals sector at a lifetime peak, we expect Indian companies in the sector will be eager to utilize available cash and if required raise further equity to do global acquisitions,” it added. The investment bank sees Indian buyers as consolidators for global assets in agrochemicals, active pharmaceutical ingredients (APIs), and specialty chemicals CDMO (contract development and manufacturing organization) segments. In November 2023, India-based carbon black producer PCBL Ltd announced the acquisition of India-based water treatment and oil and gas chemicals company Aquapharm Chemicals for $456 million. In June 2023, Bain Capital announced the acquisition of India-based Porus Labs, a producer of ag and specialty chemicals. “Large global funds such as CVC through its investment in Sajjan (2021) and Bain with its investment in Porus Labs, both leading Indian chemicals manufacturers, have created specialty chemicals platforms with an Indian company as the anchor asset from which they can acquire global businesses,” said DC Advisory. OTHER POSITIVE DRIVERSThe overall backdrop is also becoming more positive for chemical deal-making with increased earnings visibility in the sector for 2024; streamlining of portfolios toward growth subsectors; continued consolidation in sectors such as adhesives, coatings, pigments, ag chemicals and flavors and fragrances; and continued interest by private equity buyers, particularly in the sustainability aspect of chemicals, DC Advisory pointed out. The energy transition and the circular economy are also driving chemical sector growth and M&A activity. “We believe chemicals and materials companies that do not incorporate sustainability into their business models will not find buyers and may even struggle to survive, while those driving the change to a cleaner future will be in high demand from both private equity and strategic buyers,” said DC Advisory. Focus article by Joseph Chang

29-May-2024

APIC '24: Policy fragmentation stalls Asia's plastics circularity drive

SEOUL (ICIS)–Asia's journey towards a circular plastic economy is gaining momentum, but the region's diverse waste management practices and fragmented regulations present challenges to realizing this vision. Harmonizing policies crucial for circularity Demand for recyclates driven by regulations Regional disparities impact global sustainability With a steady rise of plastic consumption in Asia, countries in the region have taken steps to promote the circular economy, including implementation of the Extended Producer Responsibility (EPR) policy, waste separation requirements and bans of single-use plastics, said Bala Ramani, director of sustainability consulting and Asia strategy advisor at ICIS. EPR shifts the financial and/or operational burden of post-consumer product management from governments to producers. Japan, South Korea, Taiwan, India, the Philippines, and Singapore have adopted the policy. However, the scope and depth of circularity strategies, which require legislation, currently vary widely across Asian countries because the region does not have an overarching administrative body like the EU in Europe to unify countries around sustainability goals. “As the economic and supply chain integration amongst the countries in Asia deepens, there is also a need for regional integration of circular economy policies," Ramani said. Plastic circularity will be a core topic of the Asia Petrochemical Industry Conference (APIC) in Seoul, South Korea on 30-31 May, whose theme is "Trailblazing the path in a sustainable era." REGIONAL DISPARITY While Japan, Taiwan and South Korea have been at the forefront of efficient waste resource management, countries in south and southeast Asia are still working toward setting up a well-managed waste management and recycling infrastructure, Ramani noted. While the “informal sector” plays a significant role in solid waste management in southeast Asia and parts of the Indian subcontinent, northeast Asian countries have established robust systems, reducing their need for such informal contributions, according to ICIS Asia Pacific plastic recycling analyst Joshua Tan. Nine out of the top 20 countries globally with the highest percentages of mismanaged plastic waste are in Asia, Tan noted, and this is particularly evident in coastal populations residing within 50 kilometres of the coast. The same nine countries are identified as major contributors to marine plastics pollution through rivers. Tan said that these countries generate some 844,000 tonnes of plastic waste annually, which is more than 20 times the capacity of a typical recycled polyethylene terephthalate (R-PET) recycling plant. "For Asia to achieve plastic circularity as a region, it will be imperative for the countries to harmonize policies, develop regional standards (design for recycling, industrial standards for recyclates, mandatory recycled content, trade restrictions etc) and facilitate regional cooperation," Ramani said. CIRCULAR PLASTICS OFFER COMPETITIVE ADVANTAGE   Plastics are essential to sustainability across various sectors, from packaging and automotive to agriculture and construction, making effective plastic waste management and recycling crucial for their future viability, Ramani said. “As the chemical sector goes through this period of demand uncertainty and overcapacity especially for fossil-derived products such as virgin plastics, plastic recycling and circularity offers a means of competitive advantage and higher value-addition in the future to ultimately distinguish winners from losers." While mechanical recycling is expected to play a significant role in addressing plastic waste in the region, chemical recycling will be necessary to complement these efforts, particularly due to the diverse waste management systems across different countries in the region, Ramani said. Mechanical recycling dominates the Asia-Pacific market with more than 18 million tonnes/year of installed capacity, dwarfing chemical recycling's nascent 700,000 tonne/year capacity, according to Tan. And while plastic recyclates have become a global commodity, their trade is marked by a stark contrast with virgin plastic material, Ramani said, noting that while demand for recyclates is driven by regulations and brand commitments in certain regions, supply of consistent, high-quality material struggles to keep pace. Recyclates are secondary raw materials derived from either post-consumer household waste (PCR) or post-industrial waste (PIR), with PIR being easier to recycle due to less contamination. "This results in regional imbalances across the value chain from plastic waste collection and sorting to recovery/recycling and ultimately the end-use of recyclates, leading to supply-demand imbalances with prices ultimately driving movement of materials from one region to another.” These regional disparities in the plastics recycling value chain have not gone unnoticed, with significant implications for global sustainability efforts. In response to this challenge, Europe's Antwerp Declaration, launched in February this year, sets ambitious goals for the chemical industry to adapt to rapid expansion of renewable energy, strengthen local supply chains, and shift towards sustainable products. The declaration – now signed by close to 1,200 organizations across 25 sectors – calls for urgent action from European governments to boost industry competitiveness and sustainability, requiring a massive increase in electricity production and a sixfold increase in industrial investments to achieve climate neutrality by 2050. "The recent launch of the Antwerp Declaration by the European chemicals and other industries is a further sign of the more local-for-local world we are moving towards," said ICIS senior consultant John Richardson. “Local-for-local” supply chains involve chemicals as they are the building blocks for all the manufacturing and service supply chains, he noted. "Europe must prioritize new renewable energy projects and make it easy to install the necessary infrastructure… ‘Local-for-local’ domestic supply chains are critical for [supply] security," Richardson said. "Governments need to lead in boosting demand for low carbon and circular products as Europe needs a strong single market for bio feedstocks, plastic waste, recycled materials and electricity," he added. Focus article by Nurluqman Suratman Click here to view the ICIS Recycled Plastics Focus topic page. Thumbnail image: Plastic bottles made from polyethylene terephthalate (PET) are widely used for soft drinks and bottled water. PET can be fully recycled. (Source: Helmut Meyer Zur Capellen/imageBROKER/Shutterstock)

29-May-2024

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 taken even though US 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 the import tariff hikes could benefit all parts of the chain – apart from producers, distributors and transformers as well – 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

Midstream consolidation continues as US Energy Transfer makes $3.25 billion deal

HOUSTON (ICIS)–Energy Transfer plans to acquire WTG Midstream for $3.25 billion, the latest deal in an ongoing consolidation of the industry that provides feedstocks to chemical plants. Energy Transfer is acquiring WTG from affiliates of Stonepeak, the Davis Estate and Diamondback Energy, it said on Tuesday. The deal should close in Q3 2024. The deal includes eight natural gas processing plants that have a total capacity of 1.3 billion cubic feet/day. Two additional plants are under construction that will add another 400 million cubic feet/day of capacity, with the first starting up in Q3 2024 and the second in Q3 2025. Natural gas processing plants extract ethane and other natural gas liquids (NGLs) from raw gas produced from oil and gas wells. The NGLs are then shipped to fractionators which extract the individual products. Ethane and other NGLs are the main feedstock that US crackers use to make ethylene. The deal also includes a 20% stake in the Belvieu Alternative Natural Gas Liquid (BANGL) pipeline. The BANGL will stretch for 425 miles (683 km) and will have an initial capacity of 125,000 barrels/day, expandable to more than 300,000 barrels/day. It will connect the Permian basin to the fractionation hub in Sweeny, Texas, on the Gulf Coast. The pipeline could be completed in H1 2025. Other partners in the pipeline include MPLX and Rattler Midstream, a company formed by Diamondback Energy. SURGE IN MIDSTREAM M&AEnergy Transfer's acquisition is the latest in a surge of deals in the midstream industry. The following lists some of the more recent mergers and acquisitions (M&A). Phillips 66 agreed to buy Pinnacle Midland Parent from Energy Spectrum Capital for $550 million ONEOK is buying NGL pipelines from Easton Energy for $280 million EQT is acquiring Equitrans Midstream in a deal that the Wall Street Journal valued at $5.5 billion Energy Transfer completed its $7.1 billion merger with Crestwood Equity Partners in November 2023 ONEOK completed its $18.8 billion acquisition of Magellan Midstream Partners in September 2023 Phillips 66 completed a deal for additional units of DCP Midstream, raising its stake to 86.8% The deals come amid a flurry of new projects being built by midstream companies, which includes processing plants, pipelines, fractionators and terminals. When completed, the infrastructure will provide feedstock to petrochemical plants in the US and the world. Thumbnail shows pipeline. Image by Global Warming Images/REX Shutterstock

28-May-2024

PODCAST: Distributors see improving demand, but geopolitics threatens recovery

BARCELONA (ICIS)–Chemical distributors are seeing signs of a sequential improvement in demand, but increasing geopolitical volatility threatens any recovery, according to the head of trade group Fecc. Sequential improvement in demand, destocking winds down Red Sea disruption highlights continuing fragility of supply chains Geopolitics creates growing instability and volatility Europe chemicals need political support Permitting needs to speed up to enable low carbon energy transfer South Korea chemicals under intense pressure to consolidate Click here to download the 2024 ICIS Top 100 Chemical Distributors. In this Think Tank podcast, Will Beacham interviews Dorothee Arns, Director General of Fecc (European Association of Chemical Distributors), ICIS Senior Consultant Asia John Richardson and Paul Hodges, chairman of New Normal Consulting. Editor’s note: This podcast is an opinion piece. The views expressed are those of the presenter and interviewees, and do not necessarily represent those of ICIS. ICIS is organising regular updates to help the industry understand current market trends. Register here . Read the latest issue of ICIS Chemical Business. Read Paul Hodges and John Richardson's ICIS blogs.

28-May-2024

Moldovan gas market should couple with Romania – CEO

Moldovan gas market and incumbent Moldovagaz undergo major changes related to market and transit Coupling with Romanian market would help speed up implementing daily balancing Political developments may determine the direction taken by the market. LONDON (ICIS)–Moldova’s best chance to consolidate its gas sector is to couple up with the Romanian market, the CEO of the gas incumbent Moldovagaz told ICIS on 24 May 2024. Speaking on the 25th anniversary of the company, which is majority owned by Russia’s Gazprom, Vadim Ceban said the country and Moldovagaz were facing major changes including the establishment of a competitive market, an internal reshuffle and not least the future of the Russian gas transit from 2025. Ceban said the key step towards establishing a competitive gas market in line with EU rules would involve setting up a functional balancing market. Nevertheless, he warned Moldova would struggle to introduce balancing operations in the immediate future because this would entail scaling up the deployment of smart metering and ensuring there were enforceable penalties for imbalances. To fast-track the process, Moldova should consider coupling the market with Romania’s, which already has a daily balancing market and benefits from the experience of a variety of participants including domestic producers and suppliers, Ceban said. As an EU candidate member, Moldova is expected to implement rules related to establishing market competition, unbundle transmission operations and consolidate institutions. UNPRECEDENTED CHANGES The country is going through unprecedented changes, transitioning from being fully dependent on Russian supplies in 2021 to buying volumes from a range of sources on all regional markets. Last year, it also divested transmission operations, which had been historically held under the Moldovagaz umbrella. These were transferred to Vestmoldtransgaz, a company majority owned by the Romanian gas grid operator, Transgaz, and which is the main stakeholder in the Iasi-Ungheni pipeline connecting the two countries. Trading has already been picking up on an organised platform hosted by the Moldovan branch of the Romanian gas exchange, BRM, and more liquidity is expected to build up as various segments of consumers are deregulated and new companies enter the market, including from abroad. Earlier this month, the Romanian state producer Romgaz opened a new branch in Moldova, expecting to trade locally and support Moldova’s security of supply. Nevertheless, although Romanian traders welcome tighter relations with Moldova, they have also warned that Romania itself would need to improve its market conditions as the government continues to interfere by regulating wholesale and retail prices. TRADING Moldovagaz itself is considering the organisation of operations in a way that its current subsidiary Transautogaz could focus on trading on the free market, while another branch, Flacara Albastra, would be tasked to supply consumers on the regulated market, Ceban said. Moldovagaz is responsible for supplying gas to households, which cover the bulk of the market. This is part of the company’s public service obligation introduced by the government. Ceban insists Moldovagaz should not be seen as a market monopoly because its historical objectives since its foundation on 24 May 1999 were to guarantee security of supply for the country. In fact, the company has been changing so much that it secured natural gas on the BRM East Energy platform for delivery in May at a price that was slightly lower than the gas secured under the long-term Russian contract. He also insisted the state-wholesaler Energocom which has been taking an increasingly important role in the market over the last three years should overhaul its operations to ensure that trading on the free market is separated from its main responsibility to build up stocks for security of supply. RUSSIAN GAS TRANSIT Ceban agreed the company was also facing the challenge of securing gas for Transnistria, a Russian-controlled breakaway state internationally recognised as being part of Moldova from 2025. The region on the left bank of the River Dniester currently receives around 2 billion cubic meters annually via Ukraine. However, as Ukraine’s own transit agreement with Russia’s Gazprom expires on 1 January 2025, and Kyiv is adamant it will not renew the contract, Moldovagaz is already exploring alternative options to secure the gas coming in reverse from Turkey. Ceban said an abundance of supplies in the Balkan region and Romania is already helping Moldova to secure gas at heavily discounted prices. “Until a few years ago Moldova was buying at TTF plus, now it can secure the gas at TTF minus,” he said. Nevertheless, many of the objectives that need to be achieved will also depend on the political direction that the country takes following presidential and parliamentary elections this and next year, Ceban conceded.

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

Europe top stories: weekly summary

LONDON (ICIS)–Here are some of the top stories from ICIS Europe for the week ended 24 May. Brenntag CEO says Europe must play to its strengths Europe’s chemical sector is seeing a wave of commodity production closures, which is likely to accelerate as the region is suffering from structurally higher energy costs and depressed margins since it lost access to cheap Russian gas. Europe epoxy sentiment stable, Asia imports may face EU antidumping claim Europe epoxy resins prices have been mainly agreed with rollovers for May so far, in spite of a drop in feedstock costs this month. Speculation is also growing over EU anti-dumping claims against Asian imports. Europe naphtha and gasoline prices firm on improved liquidity, summer optimism Liquidity in Europe's naphtha and gasoline markets improved in the week to 17 May as stable-to-soft prices encouraged buying appetite, just as the market is gearing up for an uptick in demand ahead of the summer holidays. Europe PE, PP contract prices down beyond monomer for May Europe’s polyethylene (PE) and polypropylene (PP) freely negotiated prices for May are down, with variance by grade

27-May-2024

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Jamie Stewart, Managing Editor, Energy

Jamie manages ICIS’ 50-strong energy editorial team, covering European gas, power and hydrogen markets alongside global LNG and crude oil. Jamie is responsible for ICIS’ coverage of energy news, analysis, price assessments and indices.

Matteo Mazzoni, Director of Energy Analytics

Matteo has extensive analytics expertise in power, gas, carbon and energy planning. Matteo has responsibility for ICIS energy analytics strategy and operations including research and analysis, product ideation and development, and market engagement.​

Ed Cox, Global LNG Editor

Ed manages the ICIS global LNG editorial team, analysing LNG markets at a granular level, from individual cargoes to broader trade flows and global trends. Ed joined the ICIS LNG team in 2014, prior to which he led ICIS European gas coverage.

Jake Stones, Global Hydrogen Editor

Jake leads on price discovery for hydrogen as a tradeable commodity, engaging with European energy market participants to refine ICIS’ hydrogen pricing methodology. ​Jake joined ICIS in 2019 as a UK gas market reporter, moving to hydrogen in 2020.

Alice Casagni, European Spot Gas Editor

Alice’s specialist expertise lies in the gas pricing methodology that underpins ICIS gas assessments and indices, for which she is responsible. Alice joined ICIS in 2016 covering European gas markets including Italy and the Netherlands.

Alex Froley, Senior LNG Analyst

Alex is a specialist in European gas and LNG, publishing regular commentary on LNG market trends. His team maintains and develops market fundamentals data on the ICIS LNG Edge platform, including real-time ship-tracking and import/export trade flows.

Barney Gray, Global Crude Oil Editor

Barney specialises in upstream oil and gas Exploration & Production and valuation modelling, with an extensive industry network. His role encompasses price discovery and insight, including managing ICIS tri-daily World Crude Report.

Aura Sabadus, Energy and Cross-Commodity Specialist

Aura works to develop integrated ICIS coverage of energy, petrochemicals and fertilizer markets, explaining the impact of energy price movements on energy-dependent sectors. She also covers emerging gas markets including the Black Sea region. ​

Tom Marzec-Manser, Head of Gas Analytics

Tom leads ICIS qualitative analysis on European gas hubs and global LNG markets, promoting TTF as a global benchmark. Tom’s work supports the ICIS LNG Edge platform offering pre-trade analysis plus granular LNG supply-demand forecasts. 

Andreas Schroeder, Head of Energy Analytics

Andreas is responsible for quantitative modelling and data-based analysis products within ICIS’ energy offer, covering carbon, power, gas, LNG and hydrogen. His expertise lies in energy economics, focusing on traded energy commodities.

Matt Jones, Head of Power Analytics

Matt overseas the output of ICIS’ power team across 28 European markets, from short-term developments to long-term forecasting out to 2050. ​He provides quantitative and qualitative analysis, with particular focus on EU regulatory developments. ​

Lewis Unstead, Senior Analyst, EU Carbon

Lewis is an expert on EU and UK ETS legislation and market design, regularly advising ETS compliance players and market regulators. He manages ICIS‘ weekly and monthly carbon commentary, analysing carbon’s interplay with wider energy markets.

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