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Crude Oil02-May-2024
LONDON (ICIS)–ICIS senior oil analyst David
Jorbenaze discusses developments in the global
crude markets, with geopolitical tensions and
global economic trends continuing to shape the
Q3 2024 market outlook, as the OPEC+ alliance
weighs the next steps in its production
accords.
Highlights:
-OPEC Supply Strategy Adjustments: Considering
easing production cuts in Q3 2024 if oil prices
stay above $90/bbl, in response to rising
global demand and increased output from
non-member countries.
–Economic Recovery and Demand Growth: Supported
by a rebounding Chinese economy and global
economic growth, leading to higher expected oil
consumption into 2025.
-Geopolitical Risks and Market Volatility:
Increased tensions, particularly between Israel
and Iran, along with potential interest rate
hikes by the Federal Reserve, contribute to
heightened market uncertainty and price
fluctuations.
Ammonia02-May-2024
TORONTO (ICIS)–Workers at freight rail
carriers Canadian National (CN) and Canadian
Pacific Kansas City (CPKC) have voted in favor
of a strike.
A first work stoppage could occur as early as
22 May, if no new collective agreements are
reached by then, officials at labor union
Teamsters Canada Rail Conference (TCRC) said in
a televised announcement on 1 May.
The rail carriers warned that a work stoppage
would disrupt supply chains throughout North
America and constrain trade between Canada and
the US and Mexico.
The two railroads account for the bulk of
freight rail traffic in Canada.
Canada-based chemical and fertilizer producers
rely on rail to ship more than 70% of their
products, with some exclusively using rail.
In the run-up of strikes, producers have to
make preparations. Longer strikes can force
plant shutdowns and after a strike ends it can
take weeks for normal operations to resume.
For the first 17 weeks of 2024, ended 27 April,
Canadian chemical railcar loadings
were 233,074, up 3.1% from the same period
in 2023, according to the latest freight rail
data released on 1 May.
Chemical industry sources had warned about the
possibility of a rail strike in Canada early
last month.
The country’s labor law requires a minimum of
72-hours notice prior to a strike or lockout.
TCRC represents about 9,000 CN and CPKC
engineers and conductors. The previous
collective agreements expired on 31 December
2023.
Thumbnail photo source: CN
Speciality Chemicals02-May-2024
LONDON (ICIS)–Eurozone industrial sector
momentum sank further into contraction
territory in April, to hit a four-month low as
new orders declined by the sharpest rate seen
in 2024.
The eurozone manufacturing purchasing managers’
index for April slumped to 45.7 in April
compared with 46.1 in March, a third month of
consecutive declines, after jumping to 46.6 in
January from 44.4 in December.
Driven by still-bearish conditions in Germany,
Austria, France and Italy which counterbalanced
firmer growth in Greece and Spain, the figure
represents the 22nd straight month of recession
for the sector. A PMI score of above 50.0
signifies growth.
On the plus side, factory output shrank at the
slowest rate this year, delivery times
shortened during the month and declines in
manufacturer operating costs were the most
modest seen in 2024.
Released on Thursday by S&P Global, the
data is in line with recent reports from the
UK and the US, showing that
manufacturing activity in both economies sank
back into contraction territory last month.
For the UK and US, March was the first month of
tentative expansion in months, but since then
demand in the US has softened and the Red Sea
crisis has exacerbated declining output, new
orders, employment and stocks of purchases in
the UK.
What is going to rescue the eurozone economy?
Although it is a difficult question, one thing
is clear: It’s not the manufacturing sector,”
said Hamburg Commercial Bank chief economist
Cyrus de la Rubia.
“A plethora of evidence highlights the stark
absence of demand, as evidenced by a rapid
decline in new orders, unmatched in speed over
the past four months and devoid of
international support,” he added, noting that
current conditions “portends a postponement of
any semblance of recovery.”
Thumbnail photo source: Photo source:
Ying Tang/NurPhoto/Shutterstock
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Crude Oil02-May-2024
SINGAPORE (ICIS)–SABIC’s net income fell by
62% year on year to Saudi Riyal (SR) 250
million in the first quarter amid a drop in
prices and sales volumes, the chemicals major
said late on Wednesday.
Losses from discontinued operations
continue to weigh on results
Overcapacity persists, pressuring the
industry as market growth lags – CEO
Spending range of $4 billion to $5 billion
expected for 2024
in Saudi riyal (SR)
billions
Q1 2024
Q1 2023
% Change
Sales
32.69
36.43
-10
Operational profit
1.21
1.76
-31
Net income
0.25
0.66
-62
“The decrease in net profit is attributed to
lower revenues, lower results from associates
and joint ventures in addition to losses from
discontinued operations,” SABIC said in a
filing on the Saudi bourse, Tadawul.
SABIC swung to a net loss of Saudi riyal (SR)
2.77bn ($739m) in 2023, largely due to
one-off losses related to a divestment.
Q1 revenue fell following a 3% decline in
average selling prices and a 7% reduction in
sales quantities.
“Global economic uncertainty remained high
during the first quarter of 2024, caused by
geopolitical and logistical issues. Adding to
these challenges were high global inflation
levels and strict lending policies,” SABIC CEO
Abdulrahman Al-Fageeh said in a separate
statement.
Al-Fageeh in an investor call cautioned that
overcapacity remains a challenge for the
industry, creating a gap between supply and
demand that is likely to persist throughout
2024.
While positive demand signals emerged in Q1
2024, “the year outlook remains uncertain as
the world still navigates through geopolitical
situations with high inflation”, he said.
SABIC plans to adopt a disciplined approach to
capital expenditure, projecting a spending
range of $4 billion to $5 billion for the year,
compared with $3.5 billion to 3.8 billion last
year.
NEW PROJECTS
SABIC has started construction of its $6.4bn
manufacturing complex in China’s southern
Fujian province.
The project “would add a qualitative range of
products to SABIC’s portfolio of chemicals and
polymers and enhance the company’s presence in
the Chinese market”, the company said.
The project will include a mixed-feed steam
cracker with up to 1.8m tonne/year ethylene
(C2) capacity and various downstream units
producing ethylene glycols (EG), polyethylene
(PE), polypropylene (PP) and polycarbonate
(PC), among other products.
SABIC also inaugurated the world’s first
large-scale electrically heated steam olefins
cracking furnace in Netherlands, which will
pave the way for the company to fulfill its
commitment to reach carbon neutrality by 2050.
SABIC is 70%-owned by energy giant Saudi
Aramco.
($1 = SR3.75)
Thumbnail photo by SABIC
Focus article by Nurluqman
Suratman
Ammonia01-May-2024
HOUSTON (ICIS)–Global technology provider
Topsoe has signed a contract with fertilizer
producer CF Industries for support on a
front-end engineering and design (FEED) study
for a proposed low-carbon ammonia plant in
Louisiana.
Topsoe said it will license its SynCOR ammonia
technology to CF which when combined with
carbon capture and storage will enable the
production of low-carbon ammonia.
Currently CF is evaluating development of the
plant project in collaboration with ammonia
marketer Mitsui & Co. If the project
advances, it is intended to create low-carbon
ammonia for use as a decarbonized energy
source.
“We believe low-carbon ammonia helps unlock the
door towards a net zero future. Our technology
offers a cost-effective route to producing low
carbon ammonia while also enabling carbon
capture, at industrial proven scale,” said
Henrik Rasmussen, Topsoe, managing director,
the Americas.
“CF and Topsoe have a long-standing
relationship spanning many decades and we are
proud to extend our collaboration with this
award.”
Ethylene01-May-2024
HOUSTON (ICIS)–Economic activity in US
manufacturing contracted in April after
expanding in March,
according to the Institute of Supply
Management’s (ISM) latest purchasing managers’
index (PMI) survey released on Wednesday.
March’s expansion followed 16 consecutive
months of contraction.
In April, the PMI fell from 50.3 points in
March to 49.2 in April. PMIs below the neutral
50.0 mark indicate a contraction in
manufacturing activity, readings above 50.0
indicate an expansion.
In commenting on the April PMI survey, Kevin
Swift, ICIS senior economist for global
chemicals, noted that:
Nine industries out of 18 expanded in
April.
The chemical industry gained for the fourth
month after 16 months of decline.
Overall manufacturing production fell back
but continued to expand.
Demand remains at the early stages of
recovery and was softer last month.
Customer inventories were deemed “too low”
and employment contracted again during the
month.
New orders slipped back into contraction
territory.
Order backlogs contracted at a faster pace
than in March.
Inventories contracted at the same pace as
in March.
Both new orders and order backlogs, when
combined with the reading on inventories, are
good indicators of future activity, the
economist said.
PRICES
He also noted that prices registered a
5.1-point gain to reach 60.9 in April – their
strongest reading since June 2022.
Prices are sensitive to changes in supply and
demand and tend to provide a leading signal, he
said.
The rise in prices is “troubling” as it
suggests that inflation readings in coming
months may come in above expectations, he said.
“The key is to watch the price of oil, which is
a cost component for most manufactured goods,
logistics, and many services,” he said.
“If gains in disinflation prove
stubborn, higher and longer interest rates are
likely, and combined with an election year,
provide an argument for no interest rate cuts,”
he said.
“Not good for housing and light
vehicles, but good for savers,” he added.
(source: ISM)
Please also visit Macroeconomics:
Impact on Chemicals.
Thumbnail shows an automobile production
line. Image by Martin
Divisik/EPA-EFE/Shutterstock
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.
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