Chemicals

SINGAPORE (ICIS)–Aramco and China’s Hengli Group have entered into discussions regarding the potential acquisition of a 10% stake in Hengli Petrochemical, the Chinese company said on Tuesday. Based on the memorandum of understanding (MoU) signed on 22 April, the partners will also cooperate on crude and raw material supply, product sales as well as technology licensing, it said. The deal "aligns with Aramco’s strategy to expand its downstream presence in key high-value markets, advance its liquids-to-chemicals program, and secure long-term crude oil supply agreements", Aramco said in a separate statement. Hengli Petrochemical owns and operates a refinery and petrochemical complex at Liaoning province with 400,000 bbl/day of refining and 1.5 million tonnes/year ethylene capacities. The company also owns several chemical plants in Jiangsu and Guangdong provinces.

23-Apr-2024

SAO PAULO (ICIS)–US paints and coatings producer Tronox’s shares were up strongly on Monday after the company said its earnings in the first quarter had come between 9-31% higher than the analysts’ consensus. Tronox earnings before interest, taxes, depreciation and amortization (EBITDA) stood at $131 million in Q1. Analyst consensus expected that figure to be between $100-120 million. Tronox’s shares were up 5.87% in Monday afternoon’s trading at the New York Stock Exchange (NYSE), compared with the last close on 19 April. EBITDA posted strong growth compared with the fourth quarter, although it fell year on year. EBITDA is the preferred metric to measure a company’s financial health as it strips out external factors out of the company’s control. Sales rose in all metrics for titanium dioxide (TiO2) and zircon, a mineral that increases resistance on glass and metal. In February, the company already gave a hint its performance was proving better than expected when it raised operating rates for TiO2, with the company confident at the time that pricing for that material had bottomed out and should start improving after Q1. These are Tronox’s key products – TiO2 sales rose in Q1 by 8% year on year, and by 17% quarter on quarter. Zircon posted even better metrics, although its weight within Tronox’s portfolio is much lower than TiO2’s. In Q1, zircon sales rose by 22% year on year, and by 54% quarter on quarter. Tronox (in $/million) Q1 2024 Q1 2023 Change Q4 2023 Change Q4 2023 vs Q1 2024 Revenue 774 708 9% 686 13% EBITDA 131 146 -10% 94 39% EBITDA margin 16.9% 20.6% -3.70% 13.7% 3.2% Net income/loss -9 25 N/A -56 N/A TIO2, ZIRCON AND OUTLOOK“Costs continued to trend favorably as a result of improved absorption from higher production volumes and the absence of non-repeating charges in prior quarters,” said Tronox’s CEO, John D Romano. The company added its priorities for the rest of 2024 would be prioritizing investments which “are critical to furthering our strategy” as well as bolstering its liquidity on the back of what it expects will be market recovery. The Stamford, state of Connecticut-headquartered producer added it will also aim to resume debt payments as well as “evaluate strategic high-growth” opportunities for potential acquisitions but fell short of disclosing more details. STOCK JUMP EXPECTED “Management attributed the guidance raise [to Q1 financials] to demand outpacing expectations for both TiO2 and zircon,” said analysts at Alembic Chemical Advisors. “Management also stated that in line with their year-end earnings call guidance, their costs continue to trend favorably as a result of improved absorption from higher production volume and the absence of non-repeating charges in prior quarters.” Analysts at Alembic Chemical did forecast Monday’s sharp price increase, adding it would return to more normal trading patterns after the excitement subsided. The chemical equity analysts at Alembic recommended selling Tronox’s stock to cash in gains while the rises on the positive Q1 preliminary results sentiment lasted.

22-Apr-2024

SAO PAULO (ICIS)–Here are some of the stories from ICIS Latin America for the week ended on 19 April. NEWS Brazil’s Petrobras, China’s CNCEC mull petchems, fertilizers joint projects Petrobras and China’s chemicals major CNCEC have signed a memorandum of understanding (MoU) to explore petrochemicals and fertilizers joint projects, the Brazilian state-owned energy major said on Thursday. INSIGHT: Argentina’s petchems hit hardest by recession as country holds breath under Milei Argentina’s petrochemicals are taking a severe hit amid the recession, with falls in demand for some materials of up to 50%, but companies and the country are holding firm under the new President’s economic shock therapy. Brazil's Petrobras re-enters fertilizers sector with restart at ANSA plant Petrobras is to restart its large-scale ANSA fertilizers plant in Araucaria, state of Parana, which has been idle since 2020, the Brazilian state-owned energy major said late on Wednesday. Pemex to remain ‘fiscal challenge’ for Mexico's new administration – S&P Beleaguered finances at Pemex, the Mexican state-owned energy major, will require support from the federal budget for years to come, the analysts at S&P said this week. Argentina’s lower rates helping central bank shore up balance sheet at savers’ expense – economist Argentina’s latest cut to interest rates had more to do with shoring up the central bank’s balance sheet, possible thanks to currency controls implemented by the prior Administration, than the actual control of price rises, according to the director at Buenos Aires-based Fundacion Capital. Latin America's fiscal consolidation at risk of slippages as plans postponed – IMF Latin America’s countries high debt levels require fiscal consolidation plans which in some cases are being postponed, increasing risks for the long-term financial stability of the region, the Director of the Western Hemisphere Department at the IMF said on Friday. Chile inflation falls to 3.7% in March Chile’s annual inflation rate fell in March to 3.7%, down from 4.5% in February, according to the country’s statistics office INE. Brazil’s automotive output barely up in Q1, sales rise 9% Brazil’s petrochemicals-intensive automotive output rose by 0.4% in the first quarter, year on year, to just below 550,000 units, the country’s trade group Anfavea said on Monday. LatAm PE domestic price lower in Chile on cheaper US export offers Domestic polyethylene (PE) prices were assessed lower in Chile because of cheaper US export offers. In other Latin American (LatAm) countries, prices remained steady. Latin America’s February lube demand holds steady Lube demand in Latin America was relatively steady in February at a time of year when consumption typically falls in other markets like the US and Europe. The steady consumption coincided with lower base oils output in the region in February. LatAm PP international prices stable to up on higher freights from Asia International polypropylene (PP) prices were assessed as stable to higher because of increased freight rates from Asia to the region. However, Asian offers remain competitive compared to other origins like the Middle East and the US. Plant status: Dow Argentina shuts HDPE and LDPE plants on technical issues – sources US chemicals major Dow’s subsidiary in Argentina shut on 16 April a high density polyethylene (HDPE) plant due to a mechanical pump failure and a low density polyethylene (LDPE) plant due to technical failure, several sources said. Weather conditions starts to slightly shift PET demand in Latin America Polyethylene terephthalate (PET) prices remained stable in Brazil, with a slight softening in consumption coinciding with stabilized temperatures. However, demand continues to exceed expectations when compared with the corresponding period last year. Weather conditions starts to slightly shift PET demand in Latin America Polyethylene terephthalate (PET) prices remained stable in Brazil, with a slight softening in consumption coinciding with stabilized temperatures. However, demand continues to exceed expectations when compared with the corresponding period last year.

22-Apr-2024

HOUSTON (ICIS)–INEOS Styrolution is temporarily shutting its styrene plant in Sarnia, Ontario, after nearby residents complained they became ill from the plant’s emissions. “At INEOS Styrolution, ensuring the health and safety of our employees and community is paramount,” the company said in a statement. “We are temporarily shutting down our facility located in Sarnia, Ontario, Canada, to perform maintenance and address a mechanical issue. We will resume operations once addressed.” The plant has capacity to produce 445,000 tonnes/year of styrene and 490,000 tonnes/year of ethylbenzene (EB), according to the ICIS Supply and Demand Database. The shutdown came after the Aamjiwnaang First Nation community asked the government to close the plant when members complained of becoming sick and said that data indicated high levels of benzene in the air. Members reported having headaches, nausea and dizziness due to poor air quality. Aamjiwnaang First Nation describes itself as a community of about 2,500 Chippewa Aboriginal peoples located on the St Clair River in the city limits of Sarnia. Last week, Ontario Environment Minister Andrea Khanjin said that she expected the company to “quickly identify and reduce” emissions at the site, according to news reports. In 2020, the Ministry of Environment, Conservation and Parks created the Sarnia Area Environmental Health Project to look into concerns that residents expressed about air pollutants and other quality-of-life impacts from living close to industrial operations in the area. The project includes regularly measuring air quality for potential health risks. The shutdown will further tighten the North American styrene market, which has experienced a number of outages that have put upward pressure on contract and spot prices. Styrolution’s Texas City, Texas, plant has been shut since mid-2023. In addition, Total remains on force majeure from its joint-venture CosMar unit in Carville, Louisiana, and LyondellBasell’s propylene oxide/styrene monomer (POSM) plant in Channelview, Texas, is undergoing maintenance. Shell recently restarted its Scotford, Alberta, styrene unit but it is not operating at full capacity, according to market sources. US styrene contract prices in April were assessed at their highest level since Q3 2023 due to the rise in spot prices, which are up approximately 50% since the beginning of the year. Styrene is a chemical used to make latex and polystyrene resins, which in turn are used to make plastic packaging, disposable cups and insulation. Major North American styrene producers include AmSty, INEOS Styrolution, LyondellBasell Chemical, Shell Chemicals Canada, Total Petrochemicals and Westlake Styrene.

22-Apr-2024

HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 19 April. IPEX: Global spot index edges down on softer values in northwest Europe The global spot ICIS Petrochemical Index (IPEX) edged down on the back of lower spot values in northwest Europe, where derivative production problems continue to hamper appetite for some chemicals. Argentina’s lower rates helping central bank shore up balance sheet at savers’ expense – economist Argentina’s latest cut to interest rates had more to do with shoring up the central bank’s balance sheet, possible thanks to currency controls implemented by the prior Administration, than the actual control of price rises, according to the director at Buenos Aires-based Fundacion Capital. US manufacturers ‘uniformly optimistic’ about 2024 activity – Fed Beige Book US manufacturers were "uniformly optimistic" in March about the prospects for the next 12 months on expected higher sales, the country’s Federal Reserve (Fed) Beige Book said on Wednesday. INSIGHT: Argentina’s petchems hit hardest by recession as country holds breath under Milei Argentina’s petrochemicals are taking a severe hit amid the recession, with falls in demand for some materials of up to 50%, but companies and the country are holding firm under the new President’s economic shock therapy. Green shoots spring in eastern Europe, strong interest in PPG’s architectural division – CEO Amid Europe’s industrial crisis, green shots have started to appear in eastern countries, giving hopes the downturn in the region has bottomed out, the CEO at US paints and coatings major PPG said on Friday.

22-Apr-2024

LONDON (ICIS)–Click here to see the latest blog post on Chemicals & The Economy by Paul Hodges, which looks at how autos are caught in the middle of a trade war and major changes in demand patterns. Editor’s note: This blog post is an opinion piece. The views expressed are those of the author and do not necessarily represent those of ICIS. Paul Hodges is the chairman of consultants New Normal Consulting.

22-Apr-2024

LONDON (ICIS)–Here are some of the top stories from ICIS Europe for the week ended 19 April. Europe markets downbeat, crude prices subside following blasts in Iran Europe stock markets shifted onto bearish footing in morning trading on Friday in the wake of explosions in Iran that escalated fears of ever-higher tensions in the Middle East. Europe OX demand remains flat as “higher for longer” rates hinder construction activity Demand for orthoxylene (OX) in Europe remains stable at soft levels as lacklustre appetite from the key construction industry persists due to the high interest rates imposed by central banks. PVC 2024 conference attendees gloomy on demand outlook European polyvinyl chloride (PVC) demand is likely to remain weak in 2024, as early hopes for a recovery in the first half of the year have been dashed, according to sources on the side lines of PVC 2024 in Edinburgh, UK a conference for PVC market players in Europe. France Chimie calls for sector support as crisis continues and structural changes limit investments Chemicals production growth in France could be limited to 1% in 2024 as many companies prepare to implement structural cost saving measures and limit investments for growth, the trade group France Chimie said on Tuesday. Europe market jitters ease despite ongoing Middle East tensions Chemical stocks in Europe have firmed in line with the general market in midday trading on Monday, as oil prices subsided and investor unrest eased despite ongoing tensions in the Middle East. IPEX: Global spot index edges down on softer values in northwest Europe The global spot ICIS Petrochemical Index (IPEX) edged down on the back of lower spot values in northwest Europe, where derivative production problems continue to hamper appetite for some chemicals.

22-Apr-2024

SINGAPORE (ICIS)–Here are the top stories from ICIS News Asia and the Middle East for the week ended 19 April 2024. Asia petrochemical shares tumble on Mideast concerns; oil pares gains By Nurluqman Suratman 19-Apr-24 15:43 SINGAPORE (ICIS)–Shares of petrochemical companies in Asia slumped on Friday, while oil prices surged amid escalating tensions in the Middle East following reported explosions in Iran, Syria and Iraq. Oil gains on fresh Venezuela sanctions, Iran concerns By Nurluqman Suratman 18-Apr-24 12:48 SINGAPORE (ICIS)–Oil prices rose on Thursday, reversing sharp losses in the previous session, after the US re-instated oil sanctions on Venezuela, and amid discussions by the EU about implementing new restrictions on Iran. INSIGHT: Bullish and bearish sentiment intertwines in April Asia chemical prices outlook – ICIS analysts By Joey Zhou 17-Apr-24 18:29 SINGAPORE (ICIS)–There is a mixed outlook for petrochemical prices in Asia in April. Upward support comes from stronger crude oil price forecasts. The supply of some chemicals is relatively tight on plant turnarounds and operating rate cuts. PODCAST: Asia recycled polymers slow in 2023; legislation, waste management to shape future By Damini Dabholkar 17-Apr-24 18:18 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. Singapore March petrochemical exports fall 3.6%; NODX slumps 20.7% By Nurluqman Suratman 17-Apr-24 13:22 SINGAPORE (ICIS)–Singapore's petrochemical shipments in March fell by 3.6% year on year to Singapore dollar (S$) 1.16 billion ($853 million), extending the 2% contraction in the previous month and weighing on overall non-oil domestic exports (NODX), official data showed on Wednesday. China's recovery gains pace after Q1 GDP growth; property, trade headwinds remain major hurdles By Nurluqman Suratman 16-Apr-24 13:54 SINGAPORE (ICIS)–China's economy grew stronger-than-expected in the first quarter of this year, expanding by 5.3%, but ongoing challenges in the real estate sector, slowing exports and persistent deflationary pressures remain as major risks to its recovery. Oil eases despite Iran attacks on Israel; Asian bourses rattled By Nurluqman Suratman 15-Apr-24 12:46 SINGAPORE (ICIS)–Oil prices eased on Monday as Iran’s attacks on Israel over the weekend were largely priced in by the market, according to analysts, but Asian equities tumbled amid concerns over recent escalation of geopolitical tensions in the Middle East.

22-Apr-2024

HOUSTON (ICIS)–Costs for shipping containers from Asia to South America are soaring while rates are plummeting along the other major trade lanes and Maersk will resume transits through the Panama Canal after administrators said they expect to be back to normal in 2025, highlighting this week’s logistics roundup. ASIA-SOUTH AMERICA CONTAINER RATES Rates for shipping containers from Asia to the US and Europe continue to fall, but rates from Asia to South America are spiking, according to data from ocean and freight rate analytics firm Xeneta and as shown below. Market participants said space along the Asia-South America route has tightened as China is exporting a lot of electric vehicles (EVs) to Brazil. A market participant told ICIS that Chinese automaker BYD has booked more than 10,000 containers to ship EVs to Brazil in April. Autos are typically transported using roll-on, roll-off (RoRo) ships that are designed to carry wheeled cargo. But the surge in EV imports from China has taken up most of the RoRo capacity, forcing China to send autos in containers, which is more expensive. A 20-foot shipping container can hold one or two vehicles, and a 40-foot container can hold up to four standard-sized cars, according to IncoDocs, a shipping solutions provider. ASIA-US CONTAINER RATES FALL Rates from east Asia and China to both US coasts continue to fall, along with rates from Asia to Europe, as shown in the following charts. Asia-US rates from online freight shipping marketplace and platform provider Freightos were largely steady this week, suggesting to the company's head of research that rates might be nearing a floor. Judah Levine, head of research at Freightos, said if diversions continue into the Q3 peak season months, shippers can expect rates to increase relative to this floor. STRAIT OF HORMUZ Global shippers are watching the situation in the Gulf of Hormuz after Iran’s Revolutionary Guard Corps (IRGC) seized a container ship operated by Mediterranean Shipping Co (MSC) near the Strait. "If attacks like this one continue, broaden, or Iran moves to completely close the strait, Middle East container flows would feel the strongest impact," Levine said. A closure would see ports in Kuwait, Iraq and most of the United Arab Emirates (UAE) become inaccessible. Saudi Arabia, with access to their Red Sea port access already challenged, would see their Gulf port access cut off as well. "These disruptions would also impact container hubs in India some of which are part of services that connect south Asia and the Middle East," Levine said. 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), which are shipped in pellets. They also transport liquid chemicals in isotanks. PORT OF BALTIMORE The Unified Command (UC) continues to remove containers from the Dali and clear wreckage from the collapsed bridge at the entrance to the Port of Baltimore. The US Army Corps of Engineers (USACE) expects to open a limited access channel 280 feet wide and 35 feet deep by the end of April, and are aiming to reopen the permanent, 700-foot-wide by 50-foot-deep federal navigation channel by the end of May, restoring port access to normal capacity. Source: Key Bridge Response 2024 LIQUID CHEM TANKERS US chemical tanker freight rates assessed by ICIS were stable to lower this week with rates for parcels from the US Gulf (USG) to Rotterdam and the USG to Brazil unchanged. However, rates from the USG to Asia ticked lower and all other trade lanes held steady. On this route, there is no shortage of glycol enquiries. From the USG to Rotterdam, there are bits of part cargo space still available for April. Most of the outsiders’ vessels that were on berth have already sailed, and only the regulars remain at this time as they push tonnage availability. Freight rates are now expected to remain steady for the time being. PANAMA CANAL Wait times for non-booked vessels ready for transit edged higher for northbound vessels and were unchanged for southbound vessels this week, according to the Panama Canal Authority (PCA) vessel tracker and as shown in the following image. Wait times last week were 0.9 days for northbound traffic. The Panama Canal Authority (PCA) said current forecasts indicate that steady rainfall will arrive later this month and continue during the rainy season, which would allow the PCA to gradually ease transit restrictions and traffic could return to normal by 2025. Global container shipping major Maersk said it will resume Panama Canal transits for its OC1 service beginning 10 May, ending its “two-loop” setup it established in January because of transit restrictions brought on by a persistent drought. Please see the Logistics: Impact on chemicals and energy topic page Additional reporting by Bruno Menini and Kevin Callahan

19-Apr-2024

SAO PAULO (ICIS)–Amid Europe’s industrial crisis, green shots have started to appear in eastern countries, giving hopes the downturn in the region has bottomed out, the CEO at US paints and coatings major PPG said on Friday. Tim Knavish added after PPG announced it was seeking to divest its US and Canada architectural operations, it has recorded more interest from potential buyers than expected, but “no numbers have hit our desk yet". Late on Thursday, PPG said its sales fell in the first quarter as European demand continued to be in the doldrums, but its earnings surged as input costs had fallen considerably. The company expects an overall improvement in industrial production globally in the second half of 2024. “We just have to get through the second quarter,” the CEO said, speaking to reporters and chemical equity analysts on Friday. As a paints and coatings producer, PPG's operations are petrochemicals-intensive. Among many others, one of its key raw materials is titanium dioxide (TiO2). COMING OUT OF THE DOWNTURNWhile Europe’s industrial downturn has been the steepest as the region took the largest hit from sharply higher natural gas prices after the Russian invasion of Ukraine, the US performance has been lacklustre. Amid overall economic growth, manufacturing has been the sick man of the mix for many months. That may have started to turn in March, with official and private bodies’ statistics showing growth in US manufacturing at last, and manufacturers optimistic for the months ahead. “We expect our sales volumes to continue recovering for the remainder of 2024…. We are only 19 days into the month, that’s only a sixth of the second quarter, but we are comfortable with the order book and shipments so far this quarter,” said Knavish. “We have been speaking to our key end-users in the past weeks and they are all saying the same thing about Q1 and Q2, but we are all expecting a return to more normal growth rates in H2 – we just have to get through Q2.” In Europe, however, some key markets such as France and the Nordics have yet to start any meaningful recovery, with sales there slower than the company was expecting, the CEO said. Despite this, in the eastern economies – with more emerging markets characteristics than the European western economies – there has been a notable improvement. “We are seeing green shoots in the east, where we have a strong position, so that gives optimism. We are also seeing that the deco [decorating] segment in those hard-hit countries [in Europe] is also bouncing back from the bottom, so we don’t expect it to get worse,” said Knavish. “The recoveries in the east, they are not the largest individually but when you add them together, they are an important part of our portfolio, countries such as Poland, Romania, Hungary or Czechia: we do see some green shots there.” However, he added that they were not “naive enough” to believe there will be a V shape recovery in Europe. ARCHITECTURAL DIVESTMENTAt the end of February, PPG announced it was seeking alternatives for its US and Canada architectural coatings business, which has been a drag on profits and sales volumes. The company said at the time it would study whether the division could be divested, be set as a standalone entity, or be part of a joint venture. The CEO did not give much away on Friday, saying it was early on, but the company was positively surprised with the level of interest, adding there had been “minimal if any” disruption to the daily operations of the division since the announcement. “There is a lot of chatter [about this]. But we are engaging key customers, employees, and engaging our owners. We expected strong interest, because of the strength of the brands and assets … The interest has been even higher than what we expected. We feel good right now,” said Knavish. “Until the numbers start coming in, and we can look at what is best for shareholder value creation, it is difficult to say [what the likely outcome will be]. We’ll have a much better view in another quarter or so.” INDIA TAKING OFFKnavish ended with an interesting reflection about India. Indians are about to start what is famously the largest democratic process in the world, which will end in June. Current Prime Minister Narendra Modi is widely expected to win a resounding third term in the general election, despite many analysts warning about increasing tensions between Hindus and Muslims, who are India’s largest minority, with 175 million people. But the key to Modi’s expected victory may well be all about the economy. “I have been going to India for 25 years. There has always been the talk of higher civil engineering works, higher industrial production [but it never seemed to come to fruition],” said the CEO. “Now, all that is happening, and the development is very noticeable for someone who has been going there regularly.” Front page picture: PPG's headquarters in Pittsburgh, in the US state of Pennsylvania Source: PPG Additional reporting by Deniz Koray

19-Apr-2024