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01-May-2024
China’s energy regulator expects tight power supply in summer
Yunnan province drought and hot weather could lead to higher
LNG demand
Focus on China’s economy recovery
SINGAPORE (ICIS)-China’s National Energy Administration (NEA)
expects that power demand will rise rapidly and the maximum
power load will increase by more than 100GW this summer
compared to the previous year, it said in a press
conference on 29 April.
High power demand could further support LNG imports to
support gas-fired generation – China’s April LNG imports were
already the highest on record for that month, ICIS data
shows.
The NEA expects tight power supply during the summer,
especially in some areas of the eastern, central, southern
and southwestern provinces and Inner Mongolia.
The pressure on power markets could become more acute if more
extreme heatwaves occur, the NEA added.
To secure energy and power supply, China’s government will
accelerate the construction of coal power plants and put them
into operation before the peak demand periods of summer and
winter.
This comes after a relatively comfortable winter where coal
and gas stocks were not heavily drawn down.
The State Council has urged the NEA to increase inspections
of power transmission lines in forests to prevent large-scale
outages.
Several forest fires in Sichuan and Guizhou provinces
occurred in early 2024, causing large-scale power
transmission line closures.
FOCUS ON YUNNAN
Yunnan province, one of the major hydro-electric power
producers in China, has been experiencing severe drought
since last winter.
This has cut hydropower generation which plays a vital role
in the power supply of Guangdong province, and will likely
lead to a rise in gas demand for power generation.
Guangdong province is the biggest gas-for-power customer in
China.
The China Meteorological Administration (CMA) assessed
that Yunnan province is still experiencing severe-to-extreme
drought levels on 30 April.
The CMA forecasts 0.5-1.5°C hotter-than-average weather from
June to August except in some small areas of central China
with forecasts slightly below average.
China’s spot LNG demand would likely increase if the drought
in Yunnan province extends into a particularly hot summer.
But Chinese buyers do not expect spot demand to increase in
the short term as downstream demand remains sluggish over the
shoulder months, sources said.
China’s overall LNG imports in April reached 6.7m tonnes, a
record high for the month, underpinned by high contractual
supply.
ECONOMIC RECOVERY
China’s economy has shown some signs of improvement with
policy support since the start of 2024.
China’s first-quarter GDP stood at $4.1 trillion, up by 5.3%
year on year, National Bureau of Statistics (NBS)
data showed on 17 April.
But NBS also released the April Purchasing Manufacturers’
Index on 30 April which stood at 50.4, down from 50.8 the
previous month.
The manufacturing industry faltered again even though it held
above 50 points which still means some expansion.
China’s economic recovery will require more policy stimulus
amid a weak property market, sources said.
Ethylene30-Apr-2024
SAO PAULO (ICIS)–Brazilian chemicals producers
are lobbying hard for an increase in import
tariffs for key polymers and petrochemicals
from 12.6% to 20%, and higher in cases, hoping
the hike could slow down the influx of cheap
imports, which have put them against the wall.
For some products, Brazil’s chemicals trade
group Abiquim, which represents producers, has
made official requests for the import tariffs
to go up to a hefty 35%, from 9% in some cases.
On Tuesday, Abiquim said several of its member
companies “are already talking about
hibernating plants” due to unprofitable
economics. It did so after it published another
set of somber statistics for the first quarter,
when imports continued entering Brazil em
masse.
Brazil’s government Chamber of Foreign Commerce
(Camex) is concluding on Tuesday a public
consultation about this, with its decision
expected in coming weeks.
Abiquim has been busy with the public
consultation: it has made as many as 66
proposals for import tariffs to be hiked for
several petrochemicals and fertilizers,
including widely used polymers such
polypropylene (PP), polyethylene (PE),
polyethylene terephthalate (PET), polystyrene
(PS), or expandable PS (EPS), to mention just a
few.
Other chemicals trade groups, as well as
companies, have also filed requests for import
tariffs to be increased. In total, 110 import
tariffs.
HARD TO FIGHT OFFBrazil
has always depended on imports to cover its
internal chemicals demand, but the
extraordinary low prices coming from
competitors abroad has made Brazil’s chemicals
plant to run with operating rates of 65% or
lower.
More and more, the country’s chemicals
facilities are becoming white elephants which
are far from their potential, as customers find
in imported product more competitive pricing.
Considering this dire situation and taking into
account that the current government in Brasilia
led by Luiz Inacio Lula da Silva may be more
receptive to their demands, Abiquim has put a
good fight in publica and private for measure
which could shore up chemical producers’
competitiveness.
This could come after the government already
hiked import tariffs on several products in
2023 and re-introduced a tax break, called
REIQ, for some chemicals which had been
withdrawn by the previous Administration.
While Brazil’s chemicals production
competitiveness is mostly affected by higher
input costs, with natural gas costs on average
five times higher than in the US, the industry
is hopeful a helping hand from the government
in the form of higher import tariffs could slow
down the flow of imports into Brazil.
As a ‘price taker region’ given its dependence
on imports, Latin American domestic producers
have taken a hit in the past two years. In
Brazil, polymers major Braskem is Abiquim’s
commanding voice.
Abiquim, obviously, has always been very
outspoken – even apocalyptic – about the fate
of its members as they try to compete with
overseas countries, namely China who has been
sending abroad product at below cost of
production.
The priorities in China’s dictatorial system
are not related to the balance of markets, but
to keep employment levels stable so its
citizens find fewer excuses to protest against
the regime which keeps them oppressed.
Capitalist market dynamics are for the rest of
the world to balance; in China’s dictatorial,
controlled-economy regime the priority is to
make people feel the regime’s legitimacy can
come from never-ending economic growth.
The results of such a policy for the rest of
the world – not just in chemicals but in all
industrial goods – is becoming clear:
unprofitable industries which cannot really
compete with heavily subsidized Chinese
players.
The results of such a policy in China are yet
to be seen, but subsiding at all costs any
industry which creates employment may have
debt-related lasting consequences: as they
mantra goes, “there is no such thing as
a free lunch.”
Abiquim’s executive president urged Lula’s
cabinet to look north, to the US, where the
government has imposed hefty tariffs on almost
all China-produced industrial goods or raw
materials for manufacturing production.
“[The hikes in import tariffs] have improved
the US’ scenario: despite the aggressive
advance in exports by Asian countries, the drop
in US [chemicals] production in 2023 was of 1%,
while in Brazil the index for production fell
nearly by 10%,” said Andre Passos.
“The country adopted an increase in import
taxes of over 30% to defend its market from
unfair competition. The taxation for some
inputs, such as phenol, resins and adipic
[acid], for example, exceeds three digits.
“Here, we are suggesting an increase in rates
to 20% in most claims … We need to have this
breathing space for the industry to recover,”
he concluded.
As such, the figures for the first quarter
showed no sign of imports into Brazil slowing
down.
The country posted a trade deficit $9.9 billion
during the January-March period; the 12-month
accumulated (April 2023 to March 2024) deficit
stood at $44.7 billion.
A record high of 61.2 million tonnes of
chemicals products entered Brazil in Q1; in
turn, the country’s industry exported 14.6
million tonnes.
Abiquim proposals for higher
import tariffs
Product
Current import tariff
Proposed tariff
Expandable polystyrene, unfilled,
in primary form
12.6%
20%
Other polystyrenes in primary
forms
12.6%
20%
Carboxymethylcellulose with
content > =75%, in primary
forms
12.6%
20%
Other polyurethanes in liquids
and pastes
12.6%
20%
Phthalic anhydride
10.8%
20%
Sodium
hydrogen carbonate (bicarbonate)
9%
35%
Copolymers of ethylene and
alpha-olefin, with a density of less than
0.94
12.6%
20%
Other orthophthalic acid
esters
11%
20%
Other styrene polymers, in
primary forms
12.6%
20%
Other silicon dioxides
0%
18%
Other polyesters in liquids and
pastes
12.6%
20%
Commercial ammonium carbonates
and other ammonium carbonates
9%
18%
Other unsaturated polyethers, in
primary forms
12.6%
20%
Polyethylene terephthalate, with
a viscosity index of 78 ml/g or
more
12.6%
20%
Phosphoric acid with an iron
content of less than 750 ppm
9%
18%
Dinonyl or didecyl
orthophthalates
11%
20%
Poly(vinyl chloride), not mixed
with other substances, obtained by
suspension process
12.6%
20%
Poly(vinyl chloride), not mixed
with other substances, obtained by
emulsion process
12.6%
20%
Methyl polymethacrylate, in
primary
form
12.6%
20%
White mineral oils (vaseline or
paraffin oils)
4%
35%
Other polyetherpolyols, in
primary forms
12.6%
20%
Other unfilled epoxy resins in
primary forms
12.6%
20%
Silicon dioxide obtained by
chemical precipitation
9%
18%
Acrylonitrile-butadiene rubber in
plates, sheets, etc
11%
35%
Other organic anionic surface
agents, whether or not put up for retail
sale, not classified under previous
codes
12.6%
23%
Phenol (hydroxybenzene) and its
salts
7%
20%
Fumaric acid, its salts and
esters
10 ,8%
20%
Plasticizers and
plastics
10 ,8%
20%
Maleic anhydride
10 ,8%
20%
Adipic acid salts and
esters
10 ,8%
20%
Propylene copolymers, in primary
forms
12.6%
20%
Adipic acid
9%
20%
Unfilled polypropylene, in
primary form
12.6%
20%
Filled polypropylene, in primary
form
12.6%
20%
Methacrylic acid methyl
esters
10 ,8%
20%
Other ethylene polymers, in
primary forms
12.6%
20%
Acrylic acid 2-ethylhexyl
esters
0%
20%
2-Ethylexanoic acid (2-ethylexoic
acid)
10. 8%
20%
Other copolymers of ethylene and
vinyl acetate, in primary forms
12.6%
20%
Other unfilled polyethylenes,
density >= 0.94, in primary
forms
12.6%
20%
Polyethylene with a density of
less than 0.94, unfilled
12.6%
20%
Other saturated acyclic
monoalcohol acetates, c atom <=
8
10. 8%
20%
Polyethylene with a density of
less than 0.94, with filler
12.6%
20%
Triacetin
10. 8%
20%
Sodium methylate in
methanol
12.6%
20%
Stearic alcohol (industrial fatty
alcohol)
12.6%
20%
N-butyl
acetate
11%
20%
Stearic acid (industrial
monocarboxylic fatty acid)
5%
35%
Alkylbenzene mixtures
11%
20%
Organic, non-ionic surface
agents
12.6%
23%
Ammonium nitrate, whether or not
in aqueous solution
0.0%
15%
Monoethanolamine and its
salts
12.6%
20%
Isobutyl alcohol
(2-methyl-1-propanol)
10.8%
20%
Butan-1-ol (n-butyl
alcohol)
10.8%
20%
Styrene-butadiene rubber (SBR),
food grade as established by the Food
Chemical Codex, in primary forms
10.8%
22%
Styrene
9%
18%
Hexamethylenediamine and its
salts
10.8%
20%
Latex from other synthetic or
artificial rubbers
10.8%
35%
Propylene glycol (propane-1,
2-diol)
10.8%
20%
Preparations
12.6%
20%
Linear alkylbenzene sulfonic
acids and their salts
12.6%
23%
4,4′-Isopropylidenediphenol
(bisphenol A, diphenylolpropane) and its
salts
10.8%
20%
Dipropylene glycol
12.6%
20%
Butanone (methyl ethyl
ketone)
10.8%
20%
Ethyl
acetate
10.8%
20%
Methyl-, ethyl- and
propylcellulose, hydroxylated
0.0%
20%
Front page picture: Chemical production
facilities outside Sao Paulo
Source: Union of Chemical and Petrochemical
industries in the state of Sao Paulo
(Sinproquim)
Focus article by Jonathan
Lopez
Additional information by Thais Matsuda and
Bruno Menini
Isocyanates30-Apr-2024
LONDON (ICIS)–Market players expressed bearish
views on consumption throughout value chains at
the recently concluded polyurethanes (PU)
exhibition and conference UTECH Europe held on
23-25 April in Maastricht, the Netherlands.
Zubair Adam, ICIS’s editor of European toluene
diisocyanate (TDI), methylene diphenyl
diisocyanate (MDI) and polyols, and Umberto
Torresan, ICIS senior analyst for isocyanates
and polyols, attended the event. They share
their engagements and discuss future
developments that will shape demand in Europe
for these products.
Polyols are reacted with isocyanates to make
PUs, which are used to make mattresses, foam
insulation for appliances, refrigerators and
freezers, home and automotive seats,
elastomeric shoe soles, fibres and adhesives.
The two main isocyanates, polymeric PMDI and
TDI, are used mainly for the production of PU
rigid and flexible foams used in insulation,
construction, upholstery, mattresses and
automotive seats.
Global News + ICIS Chemical Business (ICB)
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Ammonia30-Apr-2024
LONDON (ICIS)–On 30 April 2024, the European
Commission published the results of the first
auction for the EU Hydrogen Bank. Further, on
24 April 2024 the commission published its
updated terms and conditions for the second
auction.
ICIS has produced the following summary
infogram explaining the results:
Terephthalic Acid30-Apr-2024
CHINAPLAS ’24: PODCAST: China’s polymer industry targeting
high-end products amid fierce competition
SINGAPORE (ICIS)–ICIS analysts Sijia Li,
Yvonne Shi, Zhibo Xiao, Lucy Shuai, Joanne Wang
and Cindy Qiu discuss the trends in China’s
polyolefins and polyester markets.
CHINAPLAS is a major annual plastics and
rubbers exhibit in Asia which ran on 23-26
April in Shanghai.
Crude Oil30-Apr-2024
SINGAPORE (ICIS)–China’s manufacturing
activity expanded for a second month in April
amid improved overseas demand, but the rate of
expansion weakened amid higher production
costs, official data showed on Tuesday.
China’s April manufacturing purchasing
manager’s index (PMI) moderated to 50.4 in
April from 50.8 in March, but remained in
expansion territory, indicating that the
recovery of industrial activity will continue
into the second quarter, data from to the
National Bureau of Statistics (NBS) showed.
A PMI reading above 50 indicates expansion in
the manufacturing economy, while a lower number
denotes contraction.
The production subindex rose to 52.9 in April
from 52.2 in March, hitting a 13-month high,
while both new orders and new export orders
remained in expansion, indicating that the
demand recovery seen in March “was not just a
blip”, Dutch banking and financial services
firm ING said in a note.
“Though economic activities continued to
expand, more manufacturers are facing higher
costs,” said senior NBS statistician Zhao
Qinghe.
“The new order index and new export order index
for industries including automobiles and
electrical machinery and equipment are both
above 53, indicating domestic and foreign
market demand in related industries has
increased.”
The employment sub-index was little changed but
remained in contraction for the 14th
consecutive month, as there continues to be a
mismatch between hiring demand and the labor
supply, it said.
Separately, a
joint private-sector survey conducted by
Chinese media group Caixin and S&P Global
of Chinese manufacturers rose to 51.4 in
April from 51.1 in March, marking the sixth
successive monthly improvement, with growth the
most pronounced in 14 months.
The April reading was the highest since
February last year as manufacturers’ output and
total new orders continued to grow, with the
corresponding subindexes reaching new highs
since May 2023 and February 2023, respectively.
“Price levels remained low. Although the gauge
for input costs reached a six-month high, the
cost increase was limited,” said Wang Zhe,
senior economist at Caixin Insight Group.
Improved supplier logistics in April led to
shorter delivery times, encouraging
manufacturers to increase purchasing and build
larger inventories of raw materials and
finished goods, he said.
“China’s economic performance in the first
quarter surpassed market expectations, with
steady growth in manufacturing and a gradual
recovery in consumption,” Wang said.
“Across different product categories, consumer
goods were no longer the best performer as
investment goods gained momentum in April with
increased production and sales, showing signs
of the improved downstream gradually benefiting
upstream markets.”
Focus article by Nurluqman
Suratman
Polyethylene30-Apr-2024
SINGAPORE (ICIS)–Click here to
see the latest blog post on Asian Chemical
Connections by John Richardson.
The thing about petrochemicals is that events
in our industry reflect what’s happening in
every manufacturing chain and in the broader
economy, as we supply indispensable raw
materials.
China’s exports of electric vehicles (but also
traditional fossil-fuel motors) and solar
panels have soared. This has occurred as local
capacity has also soared – and as manufacturing
operating rates in general have declined to
record lows on weak domestic demand.
China’s polypropylene (PP) exports jumped by
96% in Q1 this year over the first quarter of
2023 to 619,367 tonnes. If the same export
momentum was maintained throughout 2024, this
year’s total exports would reach 2.5m tonnes
compared with 1.3m tonnes in 2023.
The early ICIS data for 2024 suggests that this
year’s PP operating rate in China will be just
75% compared with the 1992-2023 average of 87%
– during the Petrochemicals Supercycle.
In 1992-2023, China’s PP capacity as a
percentage of demand averaged 79%. This looks
set to rise to 140% in 2024-2030.
Growing trade tensions – recently underlined by
US Treasury Secretary Janet Yellen’s comment
that China’s capacity in new green industries
was “too big” for the world to absorb – tell us
this: China will struggle to grow exports by
enough to maintain GDP growth at 4-5% per year.
Increasing domestic consumption to achieve the
same end also seems very difficult because of
the end of the real estate bubble, an ageing
population and the just-mentioned trade
tensions.
“Only 37% of China’s national income is spent
by Chinese households on goods and services.
That level is lower than anywhere else in the
world—except for a few small tax havens and
commodity hyper-exporters when prices are
high,” wrote Mathew Klein on his The Overshoot
blog.
Early data for this year suggest that China’s
PP demand growth in 2024 will be 2%. Growth in
2023 appears to have been flat. This suggests
that demand growth has entered a New Normal of
1-3% per year versus the 1992-2021
Petrochemical Supercycle average of 12%.
The China CFR PP price spread between CFR Japan
naphtha costs has averaged just $203/tonne so
far this year, the lowest since our price
assessments for the above three grades began in
2003.
I keep reflecting-back on Gillian Tett’s
masterful Fool’s Gold, her account of the
Global Financial Crisis.
In the book, she details how too few bankers,
politicians, regulators and financial analysts
were able to take a helicopter view of events
that led up to 2008 because they were trapped
in “silos” of specialist knowledge. This meant
that the problems with mortgage-backed
securities were largely missed.
So I believe has been the case with the events
in and surrounding China. Experts in PP and
other petrochemicals were good at building
plants and in sales and marketing, but not so
good at seeing connections between China’s
demographics, its property bubble, its
relatively weak domestic consumption and the
shift in its relationship with the West.
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.
Crude Oil29-Apr-2024
LONDON (ICIS)–Crude prices will likely face
downward pressure this week amid rising demand
concerns.
Investors will be keeping a watch on the US
Federal Reserve meeting later this week after
worrying GDP and inflation data.
Despite a persistent risk premium, continued
ceasefire talks between Israel and Hamas could
contribute to bearish sentiment.
ICIS experts look ahead to the likely factors
that will drive oil prices in Week 18.
Speciality Chemicals29-Apr-2024
LONDON (ICIS)–The European and US epoxy resins
markets are in a tug of
war between margin and
cost struggles versus still fragile underlying
demand and competition from China and elsewhere
in Asia.
The US anti-dumping case for epoxy resins
against several Asian countries and the EU anti
subsidy probe against Chinese wind turbines are
also talking points as the West looks to
protect its industry against unfair
competition.
Senior editor Heidi Finch who covers the Europe
epoxy market discusses current and near
term expectations with fellow senior editor
Tarun Raizada, who covers the US epoxy market.
Margin woes, tepid demand and Asia
competition weigh on Europe, US epoxy
Regulatory cases aim to tackle unfair
competition from China, rest of Asia
Near-term outlook cautious on demand,
macroeconomics; seasonality likely to be
diluted
Edited by Will Beacham
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