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

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.”

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

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.

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

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.

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:

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.

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