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Crude Oil15-May-2024
SINGAPORE (ICIS)–US President Joe Biden is
ramping up tariffs on $18 billion worth of
imports from China, including electric vehicles
(EVs), semiconductors, batteries and other
goods, in a move that the White House said was
a response to unfair trade practices and
intended to protect US jobs.
US tariffs on Chinese EVs to quadruple to
100%
Targeted China products account for 4.2% of
total US imports
Near-term impact on China’s EV exports
likely limited
“Following an in-depth review by the United
States Trade Representative, President Biden is
taking action to protect American workers and
American companies from China’s unfair trade
practices,” the White House said in a statement
on 14 May.
In response, China’s Ministry of Commerce said
that it “will take resolute measures to
safeguards its own right and interests”.
“The US should immediately correct its wrong
actions and cancel the additional tariff
measures against China,” the ministry said in a
statement.
There is growing concern over a potential
“vicious cycle of tit-for-tat retaliatory
actions” between the world’s two biggest
economies ahead of the US presidential
elections on 5 November, Japan’s Nomura Global
Markets Research said in a note.
EVs and associated battery markets are an
important growth opportunity for the chemical
industry, with chemical producers separately
developing battery materials, as well as
specialty polymers and adhesives for the
environment-friendly vehicles.
“With extensive subsidies and non-market
practices leading to substantial risks of
overcapacity, China’s exports of electric
vehicles (EVs) grew by 70% from 2022 to
2023—jeopardizing productive investments
elsewhere,” the US said.
“A 100% tariff rate on EVs will protect
American manufacturers from China’s unfair
trade practices,” it added. The new rate
represented a quadruple increase from 25%
previously.
However, the impact on China’s EV exports may
be limited in the near term, as the US
constitutes a small portion of the Asian
giant’s total EV shipments.
According to Nomura, the US imported in 2023
$400m worth of Chinese EVs, accounting for 1%
of China’s total shipments to the world’s
biggest economy.
“We expect limited near-term impact, as the
targeted $18bn worth of products account for
only 4.2% of total US imports from China and
less than 1% of China’s total exports,” the
Japanese brokerage said.
US-CHINA TRADE WAR ADDS TO GLOBAL
JITTERS
The US and China have been embroiled in a trade
war since 2018, when then US President Donald
Trump imposed tariffs on around two-thirds of
goods imported from China valued at an
estimated $360 billion at the time.
China has recently faced criticism from major
trade partners for operating at “overcapacity,”
dumping cheap products, and deepening trade
relations with Russia, Nomura said.
This leads to growing concerns that China may
face similar trade-restrictive measures from
other regions.
With the EU and UK accounting for about 40% of
China’s EV exports in 2023, the EV sector could
face increased pressure if Europe follows the
US’ lead.
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.
Late last year, the European Commission
initiated an anti-subsidy investigation into
China’s EVs.
Europe’s open approach and ambitious
decarbonization goals have made it the main
target market for Chinese-made EVs in 2023.
The EU accounted for 30% of China’s total EV
export volumes last year, down from 36% in
2022, while the UK accounted for 8%, down from
10% in 2022, according to Nomura.
Focus article by Nurluqman
Suratman
Thumbnail image: Aerial photo shows over
2,000 BYD Song Plus new energy vehicles to be
exported at Lianyungang Port in east China’s
Jiangsu Province, 25 April 2024.
(Shutterstock)
Polyethylene Terephthalate14-May-2024
HOUSTON (ICIS)–US plastic scrap trade
continues to show robust import activity amid
flat export volumes in the first quarter.
Polyethylene terephthalate (PET) plastic scrap
in particular continues to see strong growth in
import and export volumes despite domestic
recyclers citing only moderate-to-weak demand.
This is likely due to the wide window of
arbitrage for recycled flake and pellet resin
into the US. On the other hand, US PET bale
prices have minimally improved following last
year’s market crash, creating export
opportunities to other global destinations.
US remains a net importer of plastic scrap
US PET scrap imported increased 88% Q1 2024
vs Q1 2023
US PET scrap exported increased 33% Q1 2024
vs Q4 2023
Q1 2024 trade data from the US Census Bureau
shows US imports of plastic scrap – noted by
the HS code 3915 – remain strong, having
dropped only 2% quarter on quarter, but having
jumped 38% year on year when comparing with Q1
2023.
Exports on the other hand were nearly identical
quarter on quarter, having leveled off over the
last several quarters around 100,000 tonnes.
US plastic scrap imports totaled 127,176 tonnes
in Q1 2024, marking it the strongest first
quarter in the last 10 years, and only the
second strongest quarter ever, following Q4 of
last year. Plastic scrap imports include items
such as used bottles, but also other forms of
recycled feedstock such as purge, leftover
pairings and now also flake material.
PET SCRAP IMPORTS CONTINUE RECORD
PACEPET in particular continued
to see growth in imported scrap volumes,
increasing 88% year on year. PET scrap now
constitutes nearly 50% of all US imported
plastic scrap, followed by the “other” plastic
scrap category at 29% and polyethylene (PE)
scrap at 14%.
Overall plastic scrap imports from Mexico
continued to drop, down both year on year and
quarter on quarter, largely driven by declines
in PET scrap imports.
Canada on the other hand increased year on year
but declined quarter on quarter with the
broader volume trend.
Together, plastic scrap coming from Canada and
Mexico continues to constitute nearly half
(46%) of US plastic scrap imports.
Material from Thailand comes in as the third
largest region for US plastic scrap imports at
7% of the total volume. When considering just
PET scrap, Thailand continued their strong
growth trajectory with nearly identical volumes
to Q4 2023. US PET scrap imports from Thailand
in Q1 2024 increased 82% year on year.
Despite this growth, Canada still sends the
largest volume of PET scrap to the US at 11,960
tonnes in Q1 2024.
When considering other countries, PET imports
from Asian-based countries now makes up over
40% of the total PET scrap import volume,
passing up Canada and Mexico at a combined 21%.
Market participants confirm they have seen a
notable rise in imported recycled polyethylene
terephthalate (R-PET) activity from Asia and
Latin America, particularly due to their
cost-competitive position when it comes to
feedstock, labor and facility costs in light of
cheaper ocean freight rates.
Though, other regions may not always be in a
cost-competitive position, as most recently
seen in South American countries like Peru and
Colombia, where local bale prices have
increased significantly, while US feedstock
prices remain relatively stable.
Supporting the increase in imported scrap
plastic, US recyclers who continue to have
strong order volumes were heard to be
supplementing their operations with imported
feedstock. Several recyclers now purchase
low-cost spot or imported R-PET flake to
process into their food-grade pellet product
and redirect their internally produced flake
from high-cost domestic bale feedstock to sell
directly to customers.
This in turn has alleviated pressure from US
PET bales, thus enabling price stability for
pellet material which is formulated to US bale
feedstock costs.
In the long term, the US will seek imports of
bale or flake feedstock not just due to the
cost driver but to feed growing plastic
recycling capacities amid stagnant plastic
collection rates domestically.
PET SCRAP EXPORTS TO MEXICO
ACCELERATEUnlike many other
polymer types which continue to see declining
volumes following the Chinese National Sword
and Basel Convention adoption several years
ago, exports of PET scrap have increased, as
many global regions with growing R-PET
capacities see a cost-play opportunity.
PET scrap exports, which could include PET
bales, rose 33% quarter on quarter and 21% year
on year, coming in at 21,662 tonnes in Q1 2024.
Specifically, exported PET scrap to Mexico
increased 38% year on year, making up 61% of
all US PET scrap exports.
At present, aggressive buying activity from
Mexican recyclers continues to drive up West
Coast PET bale prices. Exports to Mexico have
always made up a small portion of US PET bale
sales from southern California or states like
Texas, though the current activity has been
notably strong.
PE SCRAP TRADE REMAINS
ROBUSTPE continues to be a
leading polymer type for US plastic scrap
exports, coming in at 35,359 tonnes in Q1 2024.
Of that volume, India is the largest
destination at 25%, followed by Malaysia and
Canada tied at 16%.
On the other hand, PE scrap imports show mixed
trends. While Canada and Mexico continue to
make up nearly 75% of imported PE scrap
volumes, US imports from Mexico increased 24%
quarter on quarter. On the other hand, imports
from Canada decreased 40% quarter on quarter.
This time last year, India did not export any
PE scrap to the US, and now is the third
largest per Q1 data.
Speciality Chemicals14-May-2024
HOUSTON (ICIS)–The container ship that
essentially closed the Port of Baltimore on 26
March after it struck the Francis
Scott Key Bridge, causing its collapse, is set
to be moved now that the mangled remnants of
the span was removed from the ship’s bow with
controlled blasts on 13 May.
The Key Bridge Response Unified Command
(UC) used precision cuts made with small
charges to remove a large section of the
bridge from the Dali, which will now be
refloated and moved to another part of the
port.
While not a big hub for chemical
imports/exports, the closure of the port had
some ripple effects for logistics in the
region.
US-based catalyst producer WR
Grace said operations
at its Curtis Bay Manufacturing site, located
to the northwest of the collapsed bridge, have
been unaffected despite its proximity to the
accident site.
Chemicals make up only about 4% of total
tonnage that moves through the port, according
to data from the American Chemistry Council
(ACC).
The ACC said less than 1% of all chemicals
involved in waterborne commerce, both domestic
and trade volumes, pass through Baltimore.
But Baltimore is the largest US port for
handling exports and imports of vehicles and
farm equipment.
Since opening a fourth temporary channel into
the port earlier this month, 171 commercial
vessels have transited the waterway, including
five of the vessels that were trapped inside
the port.
The MSC Passion III entered the port on 29
April, according to vesselfinder.com, making it
the first container ship to enter the port
since the accident.
There are two container ships and a roll-on,
roll-off (RoRo) vessel – designed to carry
wheeled cargo – in the port on 14 May,
according to vesselfinder.com.
The US Army Corps of Engineers (USACE) is
aiming to reopen the permanent, 700-foot-wide
by 50-foot-deep federal navigation channel by
the end of May, restoring port access to normal
capacity.
Container ships have been rerouting to other
East Coast ports.
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Polypropylene14-May-2024
SAO PAULO (ICIS)–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.
As such, they have made calculations for losses
in revenue during a month, since 29 April when
the floods started until the end of May.
According to the trade group, the estimated
impact on plastics producers in the state could
come up to Brazilian reais (R) 680 million
($132 million), or an estimated daily impact of
R$23 million since the floods started on 29
April.
Rio Grande do Sul and its petrochemicals hub in
Triunfo, near the city of Porto Alegre, is home
to 40% of Brazil’s polyethylene (PE) and
polypropylene (PP) production capacities.
Despite the end of May hypothesis, a
spokesperson for the trade group conceded that
as things stand – with hundreds of roads still
blocked and workers unable to turn up for duty
– to set a date for restart of operations would
be premature, however.
“Plastics transformers’ plant have stopped …The
[estimated costs would include the] costs of
potential renovations and recovery of assets in
the areas degraded,” said Abiplast.
“The main plastic products could also suffer
price increases if there is an increase [in
selling prices] by manufacturers.”
Several petrochemicals companies based at the
Triunfo production hub, near the state’s
largest city of Porto Alegre,
declared force majeure last week, including
Brazil’s polymers major Braskem, Innova and
Arlanxeo.
Thai major Indorama’s subsidiary in Brazil said
to ICIS it had suspended operations.
Meanwhile,
fertilizers players have said to ICIS
demand could be hit considering the state’s
prowess within Brazil’s large agricultural
sector.
Analysts at S&P Global have also said
fertilizers could be greatly hit, although they
said
petrochemicals could be spare from a large
impact if the situation normalizes in coming
days or weeks, at most.
TRIUNFO: KEY TO
PLASTICSAccording to figures by
Abiplast, Triunfo has production capacities of
740,000 tonnes/year for PP, and of 1.2 million
tonnes/year for PE, with a large chunk of that
belonging to Braskem, for whom the Triunfo
facilities represent 30% of its production
capacity in Brazil.
Braskem is the sole manufacturer of
polyethylene (PE) and polypropylene (PP). Its
market shares in 2023 were about 56% and 70%,
respectively, according to figures from the
ICIS Supply and Demand Database.
Brazil’s PP capacity is nearly 2 million
tonnes/year, while PE capacity is about 3
million tonnes/year, of which 41% is high
density polyethylene (HDPE), 33% is linear low
density polyethylene (LLDPE) and 26% is low
density polyethylene (LDPE).
The 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.
The company said last week it was confident it
will be able to deliver material from its
other sites in the country, but
sources have pointed out some of the
specialized PE grades are only produced at
Triunfo, and feared a hit to supply and
increasing prices if the disruption in Rio
Grande do Sul prolongs.
According to Abiplast, there are 1,428 plastic
processing and recycling companies in Rio
Grande do Sul, the second largest state in
Brazil in number of plastic processing
companies, behind Sao Paulo’s 5,200 companies.
The state’s plastics sector employs 33,100,
added the trade group.
Their sales in 2023 stood at R8.2 billion, or
7.1% of the total revenue posted by Brazilian
plastics processing industry of R117 billion.
The tragedy has consumed the Brazilian
government since the second week of the floods
– after a rather slow response during the first
days.
Some analysts have described this as Brazilian
President Luiz Inacio Lula
da Silva’s ‘Katrina moment’ as a reference
to the poor handling of the Hurricane Katrina
in the US in 2005 by former President George W
Bush.
Additional reporting by Bruno Menini
Front page picture: A sign in Sao Paulo
calling residents to collaborate in the floods
relief effort
Source: Jonathan Lopez/ICIS
Acrylonitrile Butadiene Styrene14-May-2024
HOUSTON (ICIS)–The biggest plastics trade show
in the Western Hemisphere returned last week
after a six-year hiatus. Delegates returned to
consider an industry that is increasingly being
shaped by government policy which is favoring
sustainability and electric vehicles (EVs)
while restricting the use of some classes of
chemicals that are used in processing aids.
SUSTAINABLE CONTENTThe
regulatory outlook is influencing companies’
sustainability goals, and that is influencing
which plastics they buy and which ones are made
by producers.
Sustainability was the most prominent theme at
the show. The title of
the keynote address given by BASF Corp CEO
Mike Heinz was “Our Plastics Journey: The Road
to Shaping a Sustainable Future”.
Other examples of sustainability at the show
include the following:
Executives from SABIC and
NOVA Chemicals talked at lengths about
what their companies are doing to incorporate
more recycled content into their materials.
Renewable plastics producers CJ CheilJedang
and Danimer Scientific had booths showcasing
their grades of polyhydroxyalkanoate (PHA), a
renewable polyester.
GREENMANTRA showcased
its chemical recycling technology, which
breaks down plastics to produce waxes, which
are then then uses to make additives that
make it easier to incorporate waste plastic
into finished products.
If the exhibitor booths and keynote address
weren’t enough to drive home the prominence of
sustainability, delegates only had to consider
the recent round of talks for
the UN plastic waste treaty. It was held
just days before NPE.
While the plastics industry is advocating curbs
on pollution, several groups at the talks were
pushing for curbs on production. US lawmakers
have repeatedly introduced bills that would
impose moratoria on new plants.
A small number of US states
are adopting mandates that require minimum
amounts of recycled content. A few states are
also adopting policies calling for extended
producer responsibility (EPR).
The outlook of regulations is causing consumer
goods producers and other plastic consumers to
start seeking out sustainable materials now, so
they have time to rearrange their supply chains
and so prepare for the anticipated regulations.
POLICIES PROMOTING EVS,
LIGHTWEIGHTINGGovernment support
should rekindle sales of EV and pull them
out of what could be a temporary lull,
according to BASF. The world will need more EVs
if it wants to achieve its carbon-cutting
goals.
In the US, the federal government and
individual states are adopting and proposing
policies that will promote EV adoption.
The Environmental Protection Agency (EPA)
introduced a new tailpipe rule that will
require the US light vehicle fleet to emit
progressively smaller amounts of carbon dioxide
(CO2).
The EPA is
expected to decide if California can
adopt its Advanced Clean Car II (ACC II),
which would phase out the sale of ICE-based
vehicles by 2035. If the EPA grants
California’s request, that would trigger
similar programs in several other states.
The US Department of Transportation (DOT)
is
proposing stricter efficiency
standards under its Corporate
Average Fuel Economy (CAFE) program.
EVs have material challenges that are
different from automobiles powered by internal
combustion engines (ICEs), and these are
increasing demand for new grades of plastics.
Some plastics will need to tolerate higher
voltage environments, while others will need
good thermal management properties.
BASF and other companies at NPE showcased how
several of their materials were meeting these
challenges.
At the same time, auto companies will want
materials that will lighten their vehicles so
they can travel farther on a battery charge.
ICE automakers also want to lighten their
vehicles, in part to comply with stricter
emission requirements.
Longer term, Dow highlighted
the revolutionary ramifications that
autonomous vehicles will have on the plastic
industry.
Such vehicles are driven almost entirely by
machines, which should greatly reduce crashes
and accidents. Dow said automakers could
replace nearly all steel and aluminum paneling
used in automobiles with plastic alternatives.
SUBSTANCES OF CONCERNDow
and Clariant highlighted the ramifications of
substances of concern, so called because
regulators are concerned about their effects on
safety.
The latest such substance include per- and poly
fluorinated alkyl substances (PFAS), which are
used in many polymer processing aids (PPAs).
Clariant has recently introduced a
hydrocarbon-based processing aid.
Longer term are the possible ramifications of
the prioritization process that the EPA
has started on five chemicals. The
regulator would like to start the
prioritization process on five additional
chemicals each year.
The prioritization process is the first step in
determining whether a chemical poses an
unreasonable risk. If the EPA makes such a
finding, then it will proceed with the risk
management phase, in which it will propose ways
to manage the unreasonable risks.
If the chemicals are used in plastics, then any
subsequent restrictions could cause companies
to find alternative materials.
EXCESS PLASTICS
CAPACITYExcess plastic capacity
will likely persist even as destocking ends and
demand recovers. NOVA Chemicals expects future
expansion
will be on pause until later in the decade.
Lost cost regions like North America should
suffer less than higher cost regions like
Europe. SABIC recently started up its first
ethylene and PE production in the US through
its joint venture with ExxonMobil, while
announcing plans to shut down a cracker in
Europe. The company did not rule out further
capacity rationalizations
Produced by Plastics Industry Association
(PLASTICS), NPE: The Plastics Show took place
6-10 May in Orlando, Florida.
Insight by Al Greenwood
Thumbnail shows cups made out of plastic.
Image by Shutterstock.
Speciality Chemicals14-May-2024
BARCELONA (ICIS)–The closure of chemical
plants in Europe and elsewhere could remove
essential raw material supplies, threatening
the future of downstream industrial value
chains.
Global oversupply, driven by China,
forecast to reach over 200 million tonnes/year
by 2028
Interconnected value chains threatened if
important raw materials cease production
Globally 20 million tonnes of ethylene
capacity may need to shut down to keep
operating rates healthy
In Europe 5.6 million tonnes/year of
polypropylene (PP) capacity may need to close
Integrated chemicals sites under threat if
parts shut down
Industry associations could help plan to
maintain critical raw materials supplies
Anti-dumping measures could protect exposed
markets
China polyvinyl chloride (PVC) overcapacity
may increase exports globally
In this Think Tank podcast, Will
Beacham interviews ICIS Insight
Editor Nigel Davis, ICIS
Senior Consultant Asia John
Richardson and Paul
Hodges, chairman of New Normal
Consulting.
Editor’s note: This podcast is an opinion
piece. The views expressed are those of the
presenter and interviewees, and do not
necessarily represent those of ICIS.
ICIS is organising regular updates to help
the industry understand current market trends.
Register here .
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Read Paul Hodges and John Richardson’s
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blogs.
Crude Oil14-May-2024
LONDON (ICIS)–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.
The group projects that crude supply growth
from countries that are not signed up to the
declaration of cooperation (DoC)– encompassing
OPEC member states and ally nations that have
agreed to coordinated production cuts – will
stand at 1.1 million barrels/day next year.
Representing a modest decline from the 1.2
million barrel/day production growth OPEC
projects for non-DoC nations this year, the
2025 increase is expected to drive total output
from the region to 54.1 million barrels/day.
The US is expected to drive a substantial
proportion of the total production growth
expected from non-DoC nations, representing
nearly half of the total projected growth at
0.5 million barrels/day, while Canada is
expected to increase output by an average of
0.2 million barrels/day.
Latin America is expected to be the key source
of non-OECD growth excluding OPEC+ countries,
with output expected to grow 0.3 million
barrels/day next year on average, a slight
decline from the 0.4 million barrels/day
projected for this year.
Interest rates, inflation, geopolitics and
reduced investment in exploration and
production by oil majors as players seek to
clip costs are all serving to cloud the picture
on future demand and output, OPEC added.
“The anticipated trajectory and pace of
inflation’s decline, particularly within the
services sector, are poised to influence crude
oil production costs going forward,” OPEC said
in its monthly oil report.
“The potential influence of the present limited
investment commitment in upstream E&P
projected for 2024 and 2025 on production
levels remains uncertain amid an ongoing drive
for efficiency and enhanced productivity
throughout the industry,” the cartel added.
The organization left its 2024 non-DoC oil
supply, global demand and GDP forecasts
unchanged from its April report, at 1.2 million
barrels/day, 2.2 million barrels/day and 2.8%
respectively.
Thumbnail photo: An oil well in Jebel
Dukhan, Bahrain. Source: Jakub
Porzycki/NurPhoto/Shutterstock
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
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