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Crude Oil14-May-2024
LONDON (ICIS)–German economic sentiment
improved further in May from the previous month
following stronger-than-expected growth in the
first quarter, research institute ZEW said on
Tuesday.
Its sentiment indicator increased by 4.2 points
from April to 47.1, the highest level since
March 2022.
Source: ZEW
The Mannheim-based group’s assessment of the
current economic situation in Germany was also
higher, by 6.9 points to -72.3.
Source: ZEW
In the wider eurozone, ZEW’s economic sentiment
indicator and current assessment were also up
from April.
“The confidence increases. Following the
stronger-than-expected growth of the German
economy in the first quarter of 2024, both the
assessment of the current situation and
economic expectations have become more
favourable,” ZEW President Achim Wambach said.
Signs of an economic recovery are growing,
bolstered by better assessments of the overall
eurozone and of China as a key export market.
“The increased optimism is reflected in
particular in the sharp rise in expectations
for domestic consumption, followed by the
construction and machinery sectors,” Wambach
added.
Petrochemicals13-May-2024
NEW YORK (ICIS)–Chemicals distributor Univar
Solutions is seeing relatively steady demand
this year with greater strength on the
specialties side versus industrials. Meanwhile,
the North America reshoring trend is set to
drive demand in later years as new
manufacturing plants are built, its CEO said.
“We had a good Q1. We saw modest growth in our
industrial business and better growth in our
ingredients and specialties business. Our
results on [the latter] side would have stood
out very favorably against our public peers in
that space,” said David Jukes, CEO of Univar
Solutions, in an interview with ICIS.
Looking ahead, while a number of chemical
producers expect a stronger demand pick-up in
H2, there is little evidence to point to that
at the moment, he pointed out.
“Whether there will be a [meaningful] recovery
in H2, I don’t see what that’s based on, other
than hope. Hope is not a strategy and so we’re
managing our business very carefully,” said
Jukes.
“We have grounds for optimism that we’re going
to see some growth, irrespective of what the
market does. Whether the market will have a H2
recovery, I have absolutely no idea. I think
that’s based on, ‘It’s got to get better some
day’. If it does, that’s great but I’m not
banking on that. We think our future is very
much in our own hands,” he added.
Univar has improved its reliable delivery
performance and customer NPS (net promoter
scores) to record levels, with its digital
channels helping to keep customer business
“stickier”, as well as attract new customers,
the CEO said.
Demand for durables continues to lag, and there
is no surge of restocking yet.
“Consumers don’t think the economy is going
very well… That’s [US President Joe] Biden’s
problem right now. No matter how much you say
it, consumers aren’t seeing it. Airline tickets
and hotel rooms may be expensive, but
refrigerators and cars are still on discount,”
said Jukes.
“We’re through all the destocking of last year
but you’re not seeing wholesale restocking.
You’re seeing people buying for what they need
today and what they need for tomorrow [rather
than longer term],” he added.
Univar’s fast and reliable service model can
help customers stock up when they need it, but
one consequence is that it does not have solid
medium-term visibility since customers are not
ordering for six months from now, he pointed
out.
“We’re seeing steady demand. People are not
expecting prices to fall and not expecting them
to rise, and are buying things as they need
them. If something fundamental changes in
demand patterns, it would be nice, but we don’t
bank on that,” said Jukes.
HEIGHTENED COMPETITION LEADS TO
INNOVATIONA more competitive
market in chemicals is leading to greater
demand for innovation when it comes to
formulations, the CEO said.
“When markets get highly competitive as they
are now, the specialty players look for ways to
differentiate their products. Our formulation
labs and kitchens, and our applications
development people are really busy being
innovative,” said Jukes.
“People will want to change a formulation, and
create something different as a way of getting
competitive advantage, particularly as you
think about having more sustainable products in
those portfolios. We’re seeing a lot of
activity and growth in this area,” he added,
pointing to more innovation taking place in the
specialties and ingredients area.
RESHORING/NEARSHORINGMeanwhile,
the reshoring/nearshoring trend is pointed to
boost demand for chemicals in North America in
the coming years, with some impact already
kicking in, he said.
“This is happening, and macroeconomics and
global events are feeding into that, whether
it’s Red Sea disruptions, worsening relations
with China or [turmoil] in the Middle East.
We’re having them all at once at the moment, so
there is a heightened trend to that reshoring
and nearshoring,” said Jukes.
“Some of that we won’t see the full impact of,
for a couple of years because it takes time to
build the infrastructure. But certainly for our
North America business, we are seeing good
signs, and that will only pick up over the
coming years,” he added.
DOMESTIC SOURCING AND
TARIFFSFor many years, Univar
has deliberately sourced the vast majority of
its products domestically. Thus, even being a
global distributor, the rising trend of
protectionism through tariffs is not a major
concern.
“It’s been a deliberate strategy for us for a
number of years… What it does create are some
opportunities for us to move domestically
sourced product for people who are being
impacted by it. That tends to be some of the
smaller companies,” said Jukes.
“We source domestically and sometimes that
means you perhaps find yourself on the wrong
side of a very competitive product that’s
coming in, but we’re not running this business
for this month. You’ve got to take a longer
view on this – you can’t live from transaction
to transaction,” he added, noting that Univar
is celebrating its 100th year anniversary this
year.
“We’ve taken a much more longer-term strategic
view, and it’s served us well,” said Jukes.
North America accounts for 75-80% of Univar’s
sales, with Europe at 20-25%. The distributor
also has a very small presence in China.
Interview article by Joseph
Chang
Ethylene13-May-2024
SAO PAULO (ICIS)–Up to 29 April, Brazil’s
President Luiz Inacio Lula da Silva may have
been feeling optimistic: the economic recovery
seems to have now reached all economic sectors,
including manufacturing, where he promised to
create more and better paid jobs.
However, on 27 April heavy rainfall started in
Brazil’s Rio Grande do Sul and two days later,
large parts of the state were flooded, hundreds
of roads blocked, landslides were widespread,
and a dam collapsed.
More than 150,000 have been displaced. As of
Sunday, the death toll stands at 136 and as
many remain uncounted for. In the
12-million-people state, it is estimated two
million have been affected by the floods.
While the rains have mostly stopped, many
cities remain still at risk of flooding as the
stream of several overflown rivers advances
towards the sea.
The state’s economy has come to a standstill.
Not many GDP growth forecasts have been updated
yet following the floods, but last week a
report by bank Bradesco said output could be
flat in 2024, compared with 2023.
Rio Grande do Sul is the fifth largest economy
in Brazil and an agricultural stronghold,
concentrating around 70% of the country’s rice
output. It is estimated 10% of it could have
been lost, and Lula has said imports will be
stepped up to cover for any shortfall of the
grain, which is on every Brazilian table, every
day.
Petrochemicals plants at the Triunfo production
hub, near the city of Porto Alegre,
remain under force majeure, mostly due to
the difficulty of bringing workers in, and
fertilizers players fear a hit to demand as
the planting season for some crops is set to be
affected.
KATRINA 2005; RIO GRANDE DO SUL
2024As the days went by, the
extent of the disaster was becoming clearer,
and the scenes broadcast to the world from Rio
Grande do Sul were sadly very similar to those
seen in 2005 in the US in the aftermath of
Hurricane Katrina.
Financial newswire Bloomberg quickly
came up with the analogy: Brazil’s worst floods
in nearly a century were Lula’s ‘Katrina
moment’.
US former President George W Bush became the
quintessential example of lack of leadership
skills in a crisis and, many criticized, lack
of compassion for the Black residents of poorer
areas of New Orleans, which were practically
left to fend for their own.
“His [Lula’s] advisers say he’s keenly aware
this may be his ‘Katrina moment,’ a reference
to the 2005 hurricane that caught US President
George W Bush off guard and entered the global
lexicon as shorthand for the failure of
leadership in a crisis,” said Travis Waldron on
9 May on Bloomberg.
“The response to the devastation is
particularly important for Lula’s leftist
presidency, premised on the philosophy that
governments should do more to meet the people’s
basic needs. The tragedy has consumed Lula’s
government.”
Hurricane Katrina caused 1,836 fatalities and
the economic damage was estimated at between
$97 billion and $145.5 billion.
LULA AND HIS PLACE IN
HISTORYSeventy-eight-year-old
Lula is a true post-modern, spinning-expert
politician. Brazilian newspapers often report
on his inaccuracies in speeches and, just last
week, he and his Workers Party (PT) were under
scrutiny after Lula took part in a rally which
could be in breach of electoral regulations.
Under his spinning, Lula wanted his third term
– Lula 3, to differentiate it from the first
and second terms between 2003 and 2011 – to be
remembered as the Administration that
“re-built” Brazil after Jair Bolsonaro’s
pandemic-hit and rather divisive term
(2019-2023).
Facing his biggest test yet, Lula’s response
during the first week of the disaster was
rather slow. However, as the country enters the
third week of the calamity, there are
indications Lula is getting it, and has now put
his government on turbocharge mode and
practically all ministers are focused on Rio
Grande do Sul.
Following months of almost daily public
quarrels between ministers in the coalition
cabinet – Lula’s PT does not command a majority
in parliament – the renewed sense of common
purpose can only be a good thing for a country
in crisis.
Lula’s global commitments in 2024, with Brazil
holding the G20 presidency and hosting the
annual summit in Rio de Janeiro in November,
and in 2025, when the city of Belem will host
the COP30 climate summit, have now taken
something of a back seat.
Perhaps because of the authorities’ slow
response, the country at large seemed to be on
a wait-and-see mode during the first week,
hoping for the best but fearing the worst.
WAR EFFORT-LIKEBut when
the disaster was apparent both government and
citizens alike started a remarkable, war-like
almost effort to alleviate the pain of gauchos,
as citizens of the state are called in
Portuguese.
The President finally proposed the declaration
of state of emergency, which can speed up the
release of funds and the state’s wider
machinery to assist in the aftermath of the
floods, on 5 May: a week after the floods
started.
Parliament greenlit the proposal on 7 May, a
quick turnaround considering Brazil’s
standards.
Finance and Treasury ministers have announced
special credit lines for citizens and
companies, and low paid workers will have
access to special subsidies, while payments for
other benefits they are entitled to will be
brought forward.
Lula has visited the state three times.
Lula’s left-leaning cabinet does not hide its
intention to increase public spending although,
as long as taxation remains unchanged, higher
proceeds can only come from higher debt, which
has slightly increased under Lula 3. That’s
another debate for another day.
However, in what concerns the current crisis,
further increasing the debt burden to speed up
Rio Grande do Sul’s recovery will be good
debt in any case, the state being
one of the most prosperous in the country.
As we enter the third week of the floods, for
any of the 215 million residents in this
subcontinent-like country the disaster is now
inescapable and calls for action are
everywhere.
From workplaces to residential buildings, from
schools to universities, from civil
associations to companies, there is practically
no place where an effort to collect goods,
food, and money is not being deployed.
And, in a country where poverty levels are
still very high, it is humbling to see that
some of those who have very little are giving a
little bit, something. When tragedy strikes
next door, it is hard not to be moved.
Some personal thoughts to wrap up. Living in
Brazil and wishing this rich country could
deliver more of its wealth to many more of its
people, one can only hope Lula does not repeat
a ‘Bush moment’, not for his own sake or his
place in History books, but for the sake of
gauchos and Brazilians at large.
Hurricane Katrina and, mostly and foremost, the
poor way its aftermath was handled left deep
scars which are still evident. In 2019, a long
14 years after the Hurricane, this
correspondent visited outer areas of New
Orleans and, indeed, they were in stark
contrast with the quickly refurbished,
fancy-again, and tourism-heavy city center.
For many residents of the suburbs, most of them
Black, President Barack Obama’s promises of
reconstruction never materialized, while his
successor Donald Trump seemed to ignore the
issue altogether, they said.
The same cannot happen to the dynamic and
prosperous Rio Grande do Sul, an
export-intensive and diversified economy
accustomed to trade with the rest of the world
as much as with other Brazilian states.
The state has an edge in several economic
sectors, not only in agriculture but also in
industry and services. Its GDP per capita stood
at Brazilian reais (R) 50,700 ($9,830), versus
a national average of R42,250, according to the
country’s statistics office IBGE.
The poorest state in Brazil, Maranhao in the
north, had a GDP per capita of R17,500.
Rio Grande do Sul’s ambitions go as far as
having some wineries, a rarity in what is
considered a Tropical country. It is the only
state to produce wine because, given its
southernmost latitude, it has an actual winter
– of sorts – and wine connoisseurs
will know grapes can only thrive with cold in
winter months and decent heat in the summer.
Brazil needs more states like Rio Grande do
Sul, so any setback to its economic development
must be averted. Brazilian politicians, often
more focused on themselves than in those they
are meant to serve, have a golden opportunity
to show to the world that this is the new
Brazil they have been promising for decades.
The steps announced in the second week of the
disaster go in the right direction. Brazil’s
economy and its macro stability leave room for
the state to step in and support citizens and
companies in Rio Grande do Sul at their time of
most need.
The political tits-for-tats of the first week,
with exchange of futile accusations between the
conservative-led state and the left-led Federal
Administration, while on the ground the
disaster was exploding, cannot be repeated.
“Public anger over the handling of the COVID-19
pandemic by his predecessor, Jair Bolsonaro,
helped propel Lula to a narrow victory in
Brazil’s 2022 presidential contest. Now he
faces a calamity of his own,” concluded
Bloomberg’s Waldron.
“Lula’s response could help him regain public
approval of his leadership — or propel his
presidency into a downward spiral that he can’t
escape.”
($1 = R5.16)
The second part of this article, to be
published on Tuesday 14 May, will look at
Brazil’s climate change-related challenges;
whether extreme and rare events like the floods
in Rio Grande do Sul could become more common;
and the country’s preparedness for such
scenario
Insight by Jonathan Lopez
Global News + ICIS Chemical Business (ICB)
See the full picture, with unlimited access to ICIS chemicals news across all markets and regions, plus ICB, the industry-leading magazine for the chemicals industry.
Ethylene13-May-2024
HOUSTON (ICIS)–Here are the top stories from
ICIS News from the week ended 10 May.
NPE ’24: Plastics
industry headwinds likely to persist through
2024
Headwinds for the plastics industry including
higher cost of capital, weaker household
spending momentum and capacity adjustments will
likely persist through 2024, according to a
presentation by Perc Pineda, Chief Economist at
PLASTICS, at this year’s NPE show.
IPEX: April index
rises for fourth month in a row on firmer
pricing in northwest The ICIS
Petrochemical Index (IPEX) was up 1.5% in April
month on month as production constraints
continue to push contract prices up across some
commodities, mainly in northwest Europe and
northeast Asia.
NPE ’24: SABIC
eyes growth opportunities in Americas amid era
of global overcapacity
SABIC is looking for further opportunities for
growth in the Americas as part of its strategy
to navigate an era of excess capacity around
the world, one that has led it and other
producers to shutter capacity in high-cost
regions, an executive said.
Brazil’s Braskem
deliveries safe despite Triunfo shutdown taking
off third of capacity – CFO
Braskem will be able to deliver material to its
customers from its other three sites in
Brazil after it declared force
majeure at its Triunfo complex following
heaving flooding in the area, Brazilian
polymers major CFO Pedro Freitas said on
Thursday.
Brazil’s Indorama
suspends operations at Triunfo, ports still
closed, fertilizers demand to be
hit
Brazil’s state of Rio Grande do Sul remains at
a standstill from the floods, with Thai
petrochemicals major Indorama’s subsidiary in
the country also suspending operations at its
Triunfo facilities, a spokesperson confirmed to
ICIS.
Sulphur13-May-2024
LONDON (ICIS)–It is rare to see sulphur or
sulphuric acid take center stage in Europe when
discussing a lack of feedstock for downstream
petrochemicals – but the tight supply of both
have been key talking points in Q1 and Q2.
Senior editor for sulphuric acid, Andy
Hemphill, and Julia Meehan, managing editor of
ICIS Fertilizers, take a look at the origins of
this current tightness and explore any options
the industry has to counter it.
Petrochemicals13-May-2024
LONDON (ICIS)–Click
here to see the latest blog post on
Chemicals & The Economy by Paul Hodges,
which looks at the latest demand shifts in the
smartphone 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 Chemicals13-May-2024
LONDON (ICIS)–Here are some of the top stories
from ICIS Europe for the week ended 10 May.
Europe propylene supply
rebalancing on derivative restart, cracker
issues
Propylene spot supply is returning to a more
balanced position with a key derivative unit
now back on stream and a couple of cracker
issues disrupting output.
Europe businesses face
tough market and regulatory hurdles in long
term – LyondellBasell
Market conditions in Europe are likely to
remain challenging in the long term while
changing regulations are increasing costs for
businesses, LyondellBasell Industries said on
Thursday, after announcing a strategic review
for most of its operations in the region.
LyondellBasell launches
review of European assets
LyondellBasell has launched a strategic review
of the bulk of its operations in Europe, the
producer said on Wednesday, based on its
strategy to focus on assets perceived to have
long-lasting competitive advantage
Chandra Asri aspires to
become regional player with Shell Singapore
purchase
Chandra Asri is looking to develop its presence
in southeast Asia and become a key regional
player with its purchase of Shell’s refining
and petrochemicals assets in Singapore
alongside commodities major Glencore, the
Indonesia-based firm said on Wednesday.
IPEX:
April index rises for fourth month in a row on
firmer pricing in northwest Europe, northeast
Asia
The ICIS Petrochemical Index (IPEX) was up 1.5%
in April month on month as production
constraints continue to push contract prices up
across some commodities, mainly in northwest
Europe and northeast Asia.
BASF
puts ammonia, methanol, melamine plants up for
sale at Ludwigshafen
BASF has engaged plant sale specialists
International Process Plants (IPP) to sell
idled ammonia, methanol and melamine units
located at its loss-making Ludwigshafen site in
Germany.
Gas13-May-2024
SINGAPORE (ICIS)–Here are the top stories from
ICIS News Asia and the Middle East for the week
ended 10 May 2024.
PODCAST: APIC ‘24: Asia recycled plastics sees
sustainable finance focus
By Damini Dabholkar 10-May-24 12:22
SINGAPORE (ICIS)–Sustainable finance is a key
interest for companies seeking to enter the
recycled plastics market in Asia or to expand
their current capacities. Despite the various
financial instruments available, the absence of
a clear entry point often results in
uncertainty for firms. In this podcast, ICIS
analysts Chua Xin Nee and Joshua Tan explore
the different types of sustainability-related
loans available and their successful use cases.
China-SE Asia arbitrage flow for MTBE
unworkable on oil price falls
By Keven Zhang 10-May-24 11:50
SINGAPORE (ICIS)–The arbitrage of methyl
tertiary butyl ether (MTBE) from China to
southeast Asia can be reopened, after blenders
in southeast Asia finish consuming their
existing inventory.
PODCAST: Weak demand expected for Asia
propylene and downstream PO
By Damini Dabholkar 09-May-24 15:02 SINGAPORE
(ICIS)–Asia’s propylene market will continue
to see weak demand, although potential curbs in
plant run rates in China amid weak margins
could lend support.
China exports return to growth in April amid
signs of improving demand
By Nurluqman Suratman 09-May-24 14:31
SINGAPORE (ICIS)–China’s April exports rose by
1.5% year on year to $292.5 billion in April,
reversing the 7.5% contraction in March
supported by signs of improved global demand,
customs data showed on Thursday.
China petrochemical market edges up in Apr,
demand outlook remains weak
By Yvonne Shi 08-May-24 13:20 SINGAPORE
(ICIS)–China’s petrochemical market edged up
in April, with the ICIS China Petrochemical
Index – which tracks 17 key products in the
domestic market – rising slightly by 1.60% to
1267.60 by the end of the month as compared
with March.
Singapore April manufacturing slows amid
persistent external headwinds
By Nurluqman Suratman 07-May-24 11:59
SINGAPORE (ICIS)–Singapore’s manufacturing
activity fell in April as a result of decreased
export orders triggered by external demand
headwinds and high global interest rates.
NE Asia C3 talks to kick off, but supply
concerns weigh on buyers
By Julia Tan 06-May-24 12:02 SINGAPORE
(ICIS)–Discussions for June arrivals will kick
off as China returns from the Labour Day
holidays, even with the potential headwinds of
poor downstream demand and ample supply from
Southeast Asia.
Ammonia10-May-2024
HOUSTON (ICIS)–The US Department of
Agriculture (USDA) is anticipating larger corn
and soybean supplies and ending stocks
according to the May World Agricultural Supply
and Demand Estimate (WASDE) report.
For corn, the outlook is for not only increased
supply and stockpiles, but also greater
domestic use and exports with the current corn
crop being projected at 14.9 billion bushels.
This is a dip of 3% from last year’s record as
a decline in area is partially offset by an
increase in yield.
Right now, the yield projection is at 181.0
bushels per acre and is based on a
weather-adjusted trend assuming normal planting
progress and summer growing season weather,
estimated using the 1988-2023 period.
With higher beginning stocks, total corn
supplies are forecasted to be at 16.9 billion
bushels, the highest since 2017-2018.
Total US corn use is forecast to rise just
under 1% relative to a year ago on higher
domestic use and exports. Food, seed and
industrial use is forecast at 6.9 billion
bushels.
Corn used for ethanol is unchanged relative to
a year ago, based on expectations of flat motor
gasoline consumption. Feed and residual use is
projected higher on larger supplies and lower
expected prices.
Corn exports are forecasted to rise by 50
million bushels to 2.2 billion bushels,
supported by a reduction in exports for
Argentina, Brazil, Russia and Ukraine with the
US projected to be the world’s largest exporter
for the second consecutive year, with an
expected increase in global market share.
With total US corn supply rising more than use,
ending stocks are up 80 million bushels from
last year, and if realized, would be the
highest in absolute terms since 2018-2019.
The season-average farm price for corn is now
being projected at $4.40 per bushel.
For soybeans, the monthly update is calling for
not only higher supplies and ending stockpiles
but also upticks in exports.
Currently the soybean crop is being projected
at 4.45 billion bushels, up 285 million bushels
on higher area and trend yield.
With higher beginning stocks and production,
soybean supplies are forecast at 4.8 billion
bushels, up 8% from 2023-2024.
Soybean exports are forecasted to come in at
1.83 billion bushels, which would be up by 125
million bushels from 2023-2024 with higher
exports this fall due to a lower Brazilian 2024
harvest.
With strong seasonal exports after harvest
followed by pressure from larger South American
production in 2025, the US. share of global
exports is forecast at 28%, down from the prior
five-year average of 32%.
Ending stocks are projected at 445 million
bushels, up 105 million bushels from last year.
The current season-average soybean price is
forecasted at $11.20 per bushel compared with
$12.55 per bushel in 2023-2024.
The next WASDE report will be released on 12
June,
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