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Crude Oil21-May-2024
LONDON (ICIS)–Oil benchmarks could be subject
to bearish sentiment this week amid rising
demand concerns.
Minutes from the latest US Federal Reserve
meeting and US economic data due this week will
provide further clarity on future monetary
policy.
ICIS experts look ahead to the likely factors
that will drive oil prices in Week 21.
Crude Oil21-May-2024
SINGAPORE (ICIS)–China’s industrial output
grew by 6.7% year on year in April, signalling
a further strengthening of its manufacturing
sector, but weaker retail sales and bleak
property data suggest that its overall growth
momentum remains weak.
The April industrial output reading accelerated
from the 4.5% expansion in the previous month,
data from the National Bureau of Statistics
(NBS) showed.
The strong April data brought year-to-date
growth to 6.3% year on year, and industrial
activity looks like it will be one of the main
growth drivers in the second quarter of the
year.
The transition toward high-tech manufacturing
continues to be one of the major driving forces
for China’s industrial output.
High-tech manufacturing grew 11.3% year on year
in April, and 8.4% over the first four months
of the year, while auto production also
rebounded strongly, up to 16.3% in April up
from 9.4% in March.
The upbeat manufacturing outlook follows
earlier April data which showed the country’s
exports and imports both returning to growth in
April after contracting in the previous month,
while the official April manufacturing
purchasing manager’s index (PMI)
remained in expansionary territory at 50.4
in April from 50.8 in March.
Despite a partial retreat after peaking during
the pandemic, China’s share of global goods
exports has recently rebounded, reaching 14.7%
in the second half of 2023, up from 14% in the
first half and exceeding pre-pandemic levels of
13.3% in 2019, according to Christine Peltier,
an economist at French bank BNP Paribas.
In addition, China’s recent market share gains
have been recorded across a wide range of
products, including low value-added consumer
goods such as furniture and toys, organic
chemicals and plastics, vehicles, electrical
and electronic machinery and equipment and
parts thereof, she noted.
They have been particularly impressive for
electric vehicles, with export volumes
multiplied by 7 between 2019 and 2023, solar
panels, exports multiplied by 5 between 2018
and 2023, and lithium batteries.
These three products accounted for around 4% of
China’s total exports in 2023, about three
times their 2019 share.
The flood of Chinese products has given rise to
growing concerns among industrial entrepreneurs
and governments in the US, the EU and now
emerging countries, and is likely to lead to
new trade confrontations in the coming months,
Peltier added.
RISKS STILL OUTWEIGHING
POSITIVES”While we acknowledge
the resilience in some parts of the [China]
economy amid this economic rebalancing, we
believe these are insufficient to outweigh the
drags from the property woes and geopolitical
headwinds,” Nomura Global Markets Research said
in its Global Economic Outlook Monthly
report.
“Export growth is holding up steadily for now,
thanks to cheap prices and resilient external
demand, but could face further headwinds as
countries launch anti-dumping investigations,”
it said.
Although China’s
export growth has been strong this
year due to the global tech upswing, resilient
external demand, and competitive prices, rising
trade tensions may hinder the export sector and
prompt more supply chain relocations away from
China in the long term.
US President Joe Biden
is increasing tariffs on $18 billion worth
of imports from China, including electric
vehicles (EVs), semiconductors, batteries, and
other goods. The White House stated that this
decision is a response to unfair trade
practices and aims to protect US jobs.
In response, China’s Ministry of Commerce
announced that it “will take resolute measures
to safeguard its own rights and interests.”
PRIVATE CONSUMPTION REMAINS
WEAK
April’s data revealed that retail sales growth
fell to a new post-pandemic low, further
indicating a shift away from consumption as a
primary growth driver for 2024.
Retail sales growth fell to 2.3% year on year
in April, slowing from the 3.1% expansion in
March, bringing the year-to-date growth rate to
4.1%.
The largest drag to retail sales in April was
tied to automotive sales, which declined by
5.6% year on year, and the data may add fuel to
the fire for the critics of China’s
overcapacity in this sector.
Another major category, household appliances,
also slowed to 4.5% year on year. As trade-in
policies take effect later in the year, these
categories could see some recovery, Dutch
banking and financial information services firm
ING said in a note.
“Consumption growth is likely to remain
moderate through most of 2024, as consumer
confidence remains downbeat amid tepid wage
growth and the lingering negative wealth
effects from the past several years of
declining asset prices,” it said.
“A possible bottoming out of prices would also
take some time before translating to stronger
consumer activity.”
HOUSING SECTOR CONTINUES TO
SLUMPThe persistent weakness in
China’s property sector, accounting for roughly
a quarter of its economy, continues to weigh on
overall economic growth.
April data showed that in the 70-city sample
from the NBS, property prices continued to
slide.
New home prices fell by 0.58% month on month in
April, and secondary market prices fell by
0.94%, which were the steepest sequential
declines since the start of the housing slump
in 2021.
At the city level, 69 out of 70 cities
continued to see declining prices in the
secondary home market in April, unchanged from
March.
Although new home prices rose in 6 out of 70
cities, including Shanghai and Tianjin, the new
home market’s performance was weaker in April
compared to March when 11 out of 70 cities saw
price increases.
Separately, property investment fell by 9.8%
year on year in January-April, extending the
9.5% contraction in January-March, NBS data
showed on Friday.
China is now exploring a bold plan to revive
its struggling property market by having local
governments purchase millions of unsold homes.
Chinese authorities on 17 May pledged new
support to enable state-owned enterprises to
purchase unsold apartments, aiming to provide
developers with more funding to complete
pre-sold properties.
The People’s Bank of China also on 17 May
eliminated the minimum mortgage interest rate
and reduced the minimum down payment ratio for
both first-time and second-time home buyers.
“A recent flurry of supportive policy
announcements including removing purchase
restrictions, housing “trade-in” policies, and
plans to directly purchase housing units for
social housing programmes, has boosted market
optimism that we will see a bottoming out of
housing prices sometime this year,” ING said.
As these policies roll out in the coming months
and help alleviate downward pressure on
property prices, data indicates that homebuyers
may still remain cautious and on the sidelines
until a trough is established, it said.
“While it is arguably one of the most important
signs of a stabilization of sentiment in China,
it is worth noting that a potential bottoming
out of housing prices would only be the first
step; elevated housing inventories will likely
keep real estate investment suppressed for some
time yet, and the property sector will remain a
major drag on the economy this year,” ING
added.
Recent announcements from local governments,
including the Dali government of Yunnan
Province, have expressed intentions to
facilitate the acquisition of existing homes
for conversion into public housing, Singapore’s
OCBC Bank said in a note.
This move is seen as a way to not only address
the housing surplus but also potentially
stimulate economic growth by increasing public
spending and boosting the construction sector.
Moreover, China’s Finance Ministry announced on
13 May a plan to issue 1 trillion yuan of
ultra-long special bonds over a period of six
months, ending in November.
This moderate issuance pace marks only the
fourth time in 26 years that China has employed
this type of debt for fiscal stimulus, allowing
for targeted spending.
China has set an ambitious economic growth
target of around 5% this year, a level which
analysts are cautiously optimistic about. The
world’s second-largest economy expanded by 5.3%
in the first quarter of this year.
Thumbnail photo: A man rides a scooter next
to a construction site of residential buildings
in China (Source: ANDRES MARTINEZ
CASARES/EPA-EFE/Shutterstock)
Insight by Nurluqman Suratman
Ammonia20-May-2024
HOUSTON (ICIS)–US farmers continue to overcome
their recent weather challenges and have now
reached 70% of the corn crop planted with
soybeans at 52%, according to the latest US
Department of Agriculture (USDA) weekly crop
progress report.
Reflecting some of the wet field conditions,
the current pace of the corn sowings is
trailing both the 76% achieved in 2023 and the
five-year average of 71%.
North Carolina remains ahead of the other key
corn states with 98% of its crop planted,
followed by Texas at 85%.
There is now 40% of the corn crop which has
emerged. It is lagging the 46% achieved in
2023, but the current rate is slightly ahead of
the five-year average of 39%.
Soybean plantings are 52% completed, with this
pace behind the 61% level reached last year but
it is above the five-year average of 49%.
Mississippi remains the leading state for
soybean plantings at 86% completed, with
Arkansas now at 82%.
There is 26% of the crop which has emerged;
this is less than the 31% seen in 2023, yet it
is ahead of the five-year average of 21%.
For the other key crops, the USDA said cotton
plantings have reached 44% completed, with
sorghum at 32% and spring wheat now at 79%.
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Polypropylene20-May-2024
SAO PAULO (ICIS)–Braskem has restarted its
facilities at the Triunfo petrochemicals hub in
the floods-hit state of Rio Grande do Sul, a
spokesperson for the Brazilian polymers major
said to ICIS on Monday.
Braskem said it hopes to have all facilities up
and running normally in 15 days.
Triunfo represents around 30% of Braskem’s
production capacities in Brazil.
The company said the restart will be undertaken
by phases, as long as weather and access to the
site allows.
While most petrochemicals plants at Triunfo
were not damaged by the flooding, access of
workers as well as inputs into the plants was
very difficult as the floods blocked several
roads in the state.
Braskem and other chemical companies at Triunfo
declared force majeure at the beginning of May.
“In recent days, our teams have been focused on
seeking safe conditions to resume production
and, thus, contribute more actively to the
supply of raw materials for the production of
important items for this time of need,” said
Braskem’s industrial director, Nelzo da Silva.
“To start up the plants, it will be necessary
to activate the flare, a standard safety device
used by the chemical and petrochemical
industries. As part of this process… in the
coming days, residents in the area may notice a
different light than usual coming from our
factories.”
Braskem is Brazil’s sole manufacturer of
polyethylene (PE) and polypropylene (PP), the
most widely used polymers. Its market share in
2023 for PE stood at 56% and for PP at 70%,
according to figures from the ICIS Supply and
Demand Database.
The Triunfo complex, meanwhile, is key for the
country’s polymers supply chain, accounting for
nearly 37% of Brazil’s PP capacity and 40% of
PE capacity.
Brazil’s PP production capacity is nearly 2
million tonnes/year. PE capacity is about 3
million tonnes/year, with 41% being high
density polyethylene (HDPE), 33% being linear
low density polyethylene (LLDPE) and 26% being
low density polyethylene (LDPE).
Braskem’s Triunfo complex can produce 740,000
tonnes/year of PP, 550,000 tonnes/year of HDPE,
385,000 tonnes/year of LDPE and 300,000
tonnes/year of LLDPE.
Front page picture: Braskem’s facilities in
Triunfo
Source: Braskem
Additional reporting by Bruno Menini
Ethylene20-May-2024
SAO PAULO (ICIS)–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.
At the same time, a spokesperson for
Stellantis, another major auto producer,
confirmed to ICIS that it had shut down its
plant in Ferreyra, in Argentina’s Cordoba
province, also due to a lack of input.
Rio Grande do Sul is Brazil’s southernmost
state and petrochemicals-intensive automotive
parts producers there are major suppliers to
the rest of Brazil and Argentina.
However, the state is still reeling from severe
flooding on 29 April which has brought around
90% of industrial activity to a standstill,
according to local authorities.
VOLKSWAGENVW is using a
so-called “collective vacation” clause under
Brazilian labor laws to send workers at its
plants in Anchieta, Taubate, and Sao Carlos
home for at least 10 days.
However, a plant operated by VW in Sao Jose dos
Pinhais, in the state of Parana, continues to
operate normally, VW said.
“Volkswagen do Brasil informs that continues
with the same preventive vacation position. The
situation of parts supply is being monitored
minute by minute,” said the spokesperson.
The workers at the Anchieta and Taubate plants
will start a 10-day collective vacation on
Monday, and the workers at the Sao Carlos plant
will start an 11-day collective vacation on the
same day.
‘Collective vacation’ is a measure regularly
applied by industrial companies to manage
production. Brazil’s labor laws normally grant
employees around 30 days/year of annual leave.
In the industrial sector, as work is a
“collective” activity, vacation periods can be
organized by the employer for a group of
employees, hence the name.
STELLANTISIn the
meantime, Stellantis – the result of the merger
between Fiat Chrysler and PSA Group – told ICIS
that it is analyzing whether its other plants
in Argentina and Brazil will also need to be
shut down.
In Cordoba, a province in north Argentina and a
major trading partner with Rio Grande do Sul,
there are fears that its economy – which is
already suffering after the country went into
recession – could take a further hit.
In Argentina, Stellantis operates another plant
in El Palomar, in the Buenos Aires
department.
In Brazil, its main facilities are in Betim in
the state of Minas Gerais.
“Stellantis is following with dismay and
expresses its solidarity with the victims of
the floods in Rio Grande do Sul. The
unprecedented impact of the catastrophe has
directly affected the logistics system for the
transportation and supply of industry
components.
“The company had to stop production at the
Stellantis Automotive Centers in Córdoba,
Argentina, and is still analyzing the need for
further stoppages at its plants in the region,”
said the spokesperson.
Both General Motors (GM) and South Korea’s
Hyundai – who also have production facilities
in Brazil – had yet to respond to a request for
a comment.
A spokesperson for Brazil’s automotive trade
group Anfavea did not respond to questions from
ICIS about the impact of the floods on the
sector’s annual output.
However, it did say that it would make its
first estimates at a press conference on 6
June, when it will publish production, sales
and export data for May.
Earlier, the trade group said it feared the sector could
be hit given Rio Grande do Sul’s importance
to Brazil’s auto industry.
INDUSTRY REELS AFTER
FLOODSCompanies based in the
petrochemicals hub of Triunfo, near Porto
Alegre – the biggest city in Rio Grande do Sul
– have also shut, mostly as employees are
having problems getting to and from work.
Companies including Braskem, Innova, and
Arlanxeo all declared force majeure from
Triunfo in the first week of May.
Sources said some of them will try to restart
operations this week, although that has not
been officially confirmed to ICIS.
The automotive industry is a major global
consumer of petrochemicals, and chemicals make
up more than one-third of the raw material
costs for an average vehicle.
The automotive sector drives demand for
chemicals such as polypropylene (PP), along
with nylon, polystyrene (PS), styrene butadiene
rubber (SBR), polyurethane (PU), methyl
methacrylate (MMA) and polymethyl methacrylate
(PMMA), among others.
Front page picture: Volkswagen’s plant in
Anchieta, state of Sao Paulo
Source: Volkswagen
Ethylene20-May-2024
HOUSTON (ICIS)–Here are the top stories from
ICIS News from the week ended 17 May.
IPEX: Global spot
IPEX slips as decline in Asia offsets gains in
other regions, crude
The global spot ICIS Petrochemical Index (IPEX)
slipped 0.1%, as a fall in the northeast Asia
index failed to offset gains in other regions
and a rise in crude oil prices.
Univar sees scope
for both industrial and specialty chemicals
M&A – CEO
Chemicals distributor Univar Solutions will
target both industrial and specialty chemicals
and ingredients acquisitions as it seeks to be
a consolidator in a still-fragmented market,
its CEO said.
Brazil’s
floods-hit state plastics sector under
‘hypothesis’ operations could normalize end May
– trade group
Plastics producers in Rio Grande do Sul remain
shut following the floods but are working under
the “hypothesis” operations could normalize by
the end of May, a full month after the floods
hit the Brazilian state, trade group Abiplast
said.
US home builder
confidence dives as mortgage rates exceed
7%
US builder confidence in the market for newly
built single-family homes fell sharply in May
as higher mortgage rates “hammer” confidence,
the National Association of Home Builders said
on Wednesday.
Chemical cycle
has bottomed and now ‘beginning to turn’ – Dow
CEO
The global chemical cycle has bottomed out and
is starting to turn higher, with a higher
degree of confidence in a sustainable recovery
ahead, said the CEO of Dow.
Houston storm
disrupts chems, knocks power out for
thousands
Powerful thunderstorms in Houston and the Gulf
Coast disrupted operations at chemical plants
while leaving more than 700,000 without power
as of Friday.
Petrochemicals20-May-2024
LONDON (ICIS)–Click
here to see the latest blog post on
Chemicals & The Economy by Paul Hodges,
which looks at how boom is turning to bust in
China’s housing market.
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.
Speciality Chemicals20-May-2024
LONDON (ICIS)–Here are some of the top stories
from ICIS Europe for the week ended 17 May.
Europe PET/PTA industry
on high alert as freight costs soar
Another shock to the logistics system is
rippling through the European polyethylene
terephthalate (PET) value chain but the impact
is only so far just touching the surface.
Europe oxo-alcohol spot
prices face pressure from growing
supply
Prices in the European oxo-alcohols spot market
were stable to lower this week as there is now
plenty supply of all grades.
IEA
cuts 2024 crude forecast as OECD Q1 demand
slips into contraction
The International Energy Agency (IEA) on
Wednesday cut its expectations for global crude
oil demand growth as demand from the OECD
shifted into contraction territory in Q1 and as
refinery margins continued to slump into the
spring period.
Non-OPEC+ crude supply
growth to slip in 2025, Latin America to drive
non-OECD output – OPEC
Increases in crude oil supplies from outside
the OPEC+ bloc of countries is expected to
decline slightly year on year in 2025, with the
US and Canada expected to remain the backbone
of OECD production increases and Latin America
driving the rest of the world, according to
OPEC.
IPEX:
Global spot IPEX slips as decline in Asia
offsets gains in other regions, crude
The global spot ICIS Petrochemical Index (IPEX)
slipped 0.1%, as a fall in the northeast Asia
index failed to offset gains in other regions
and a rise in crude oil prices.
Crude Oil20-May-2024
SINGAPORE (ICIS)–Thailand’s economy grew by
1.5% year on year in the first quarter, slowing
from the 1.7% expansion in the preceding
quarter, as private consumption continued to
remain robust.
On a quarter-on-quarter seasonally adjusted
basis, the Thai economy – southeast Asia’s
second largest – expanded by 1.1% in the first
three months of 2024, the National Economic and
Social Development Council (NESDC) said in a
statement.
The quarterly growth prevented the economy from
entering a technical recession, following a
revised 0.4% contraction in the final quarter
of 2023.
Thailand’s economy expanded by 1.9% year on
year in 2023.
Private consumption rose by 6.9% year on year
in the first quarter, continuing the 7.4%
expansion in the previous quarter, and
offsetting a 2.1% decline in government
spending.
Exports by value fell by 1.0% year on year in
the first quarter, weighed by lower volumes,
while imports were up 3.2%.
Manufacturing declined by 3.0% year on year on
in the first quarter, extending the 2.4%
decline in the previous quarter.
The manufacturing sector in Thailand is
dominated by older industries with declining
global demand and lags in sectors where global
demand is increasing, Nomura Global Markets
Research said in a report released on 17 May.
This reflects Thailand’s failure to move up the
supply chain and add value to its export
products, a trend that has become increasingly
evident in its post-pandemic export structure,
it said.
Of the ten largest export products, Thailand
has gained an increasing share in the global
exports of air-conditioners, hard disk drives,
and rubber tires.
However, the global export share of these
products has been declining, with hard disk
drives, the largest export product,
experiencing a significant drop in global
market share.
Meanwhile, Thailand’s global export share in
integrated circuits has declined slightly, even
as the segment has seen substantial growth in
the global market.
“This implies the current global tech
turnaround will result in the export
underperformance of the country,” Nomura added.
2024 FORECAST LOWEREDThe NESDC now
expects the Thai economy to expand by 2-3% year
on year in 2024, down from the previous range
of 2.2-3.2%.
The Thai economy still faces downside risks and
limitations, particularly from high household
and corporate debt levels, the risk of floods
affecting agricultural production, and the
uncertain and volatile global financial market,
it said.
As for trade, a downward revision in exports
for 2024 was mainly attributed to a decline in
export volume during the first quarter of the
year and a lowered forecast for global trade
volume growth.
Initially, export value was anticipated to grow
by 2.9%, but this has been revised down to
2.0%, while export volume growth was adjusted
from 2.4% to 1.5%.
“On the external front, while exports of goods
may not benefit from the global tech
turnaround, given structural constraints, the
slow economic recovery in China should continue
to limit the pace of the tourism recovery [in
Thailand],” Nomura said.
Focus article by Nurluqman Suratman
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