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Crude Oil16-May-2024
SINGAPORE (ICIS)–Japan’s economy shrank by
2.0% on an annualized basis in January-March
2024 as domestic consumption and capital
spending weakened.
Weak yen fuels inflation, hurts consumer
spending
Core inflation slows but remains above 2%
target
Japan central bank faces tough challenge of
balancing growth and inflation
The first-quarter reading reverses the 0.4%
year-on-year growth in October-December 2023.
On a quarter-on-quarter basis, Q1 GDP posted a
0.5% contraction, according to preliminary data
released by Japan’s Cabinet Office on Thursday.
Private consumption, which makes up more than
half of Japan’s economic growth, fell by 0.7%
in the first three months of 2024, marking the
fourth straight quarter of decline and
extending the 0.4% decline in the last three
months of last year.
Capital spending – a crucial component of
private demand – decreased by 0.8% in the first
quarter, reversing the 1.8% expansion in the
fourth quarter.
Net exports of goods and services fell by 0.3%
in the first quarter.
The sharp decline of the Japanese yen (Y) to
levels not seen since 1990 has raised concerns
about increasing living costs and depressed
consumer spending.
At 04:12 GMT, the yen was trading at around
Y154 to the US dollar, strengthening from the
recent record low of around Y159 in late April.
In March to April, the yen had continued to
weaken despite the Bank of Japan’s (BoJ)
decision to hike interest rates in March for
the first time in 17 years, ending eight years
of negative rates.
The central bank is expected to proceed
cautiously in tightening monetary policy due to
the fragile state of the economy.
Japan’s nationwide core consumer price index
(CPI), which excludes fresh food items but
includes energy items, rose by 2.6% year on
year, data from the BoJ showed on 14 May.
The number represented a deceleration from
February’s 2.8% print but remained well above
the central bank’s 2% target.
“The year-on-year rate of increase in the CPI
is likely to be in the range of 2.5-3.0% for
fiscal 2024 [year ending 31 March 2025] and
then be at around 2% for fiscal 2025 and 2026,”
Japan’s Ministry of Finance (MoF) said in a
report on 15 May.
Meanwhile, underlying consumer inflation, which
excludes temporary fluctuations, is expected to
increase gradually and then be at a level that
is generally consistent with the price
stability target of 2%, it said.
“If the BOJ also expects GDP to recover in
2Q24, then the BoJ’s focus should remain on
high inflation and the JPY [Japanese yen] as a
major contributor to high inflation,” Dutch
banking and financial information services
provider ING said in a note on Thursday.
“April inflation is expected to ease quite
sharply due to a high base last year, but
pipeline inflation indicates upward
inflationary pressures building for the coming
months,” it said.
“We believe that the BoJ is ready to act in
July, as it confirms that strong wage growth is
boosting household spending,” it added.
Japan’s economy is likely to keep growing at a
pace above its potential growth rate, with
overseas economies growing moderately, as well
as financial conditions being accommodative,
the finance ministry said in its 15 May report.
Focus article by Nurluqman
Suratman
Isocyanates15-May-2024
HOUSTON (ICIS)–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.
Mortgage rates averaged above 7% for the past
four weeks as a lack of progress on reducing
inflation pushed
long-term interest rates higher, NAHB said.
The NAHB/Wells Fargo Housing Market Index (HMI)
fell by six points from April to 45 in May –
its first decline since November 2023.
HMI readings below the 50 neutral mark indicate
that builders are pessimistic, readings above
50 that they are optimistic.
The high mortgage rates have pushed many
potential buyers back to the sidelines and the
market has slowed, NAHB said.
Another worry are new code rules that require
the US Department of Housing and Urban
Development and the US Department of
Agriculture to insure mortgages for new
single-family homes only if they are built to
the 2021
International Energy Conservation Code.
This would further increase the cost of
construction in a market “that sorely needs
more inventory for first-time and
first-generation buyers”, said NAHB chairman
Carl Harris.
NAHB chief economist Robert Dietz added: “The
last leg in the inflation fight is to reduce
shelter inflation, and this can only occur if
builders are able to construct more attainable,
affordable housing.”
The housing market is a key consumer of
chemicals, driving demand for a wide variety of
chemicals, resins and derivative products, such
as plastic pipe, insulation, paints and
coatings, adhesives and synthetic fibers, among
many others.
Please also visit the ICIS
construction topic page and
Macroeconomics: Impact on Chemicals.
Thumbnail photo source: NAHB
Acrylic acid15-May-2024
SINGAPORE (ICIS)–Asian oxo-alcohols buyers
maintained a wait and watch approach, amid the
possibility of added plant capacities in China
weighing on market sentiment.
The acrylonitrile (ACN) market continues to see
limited spot demand in the northeast Asia
market. Even as downstream
acrylonitrile-butadiene-styrene (ABS) has seen
higher production rates recently, ACN producers
were unlikely to increase operating rates.
For the acrylates downstream, butyl-A market in
Asia continues to take direction from Chinese
domestic prices. With India’s Bureau of Indian
Standards (BIS) requirements preventing Chinese
origin imports, cargoes from China were flowing
into SE Asia and NE Asia.
In this podcast, ICIS editors Julia Tan and
Corey Chew discuss trends in the Asia propylene
and derivatives markets.
Visit ICIS during APIC ’24 on 30-31 May at
Booth 13 in the Grand Ballroom Foyer in the
Grand InterContinental Seoul Parnas.
Book a meeting with ICIS
here.
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Gas15-May-2024
LONDON (ICIS)–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.
Demand slows on global economic health
concerns
Refinery margins near two-year lows
More balanced supply-demand expected in
2025
The IEA now expects global crude demand to slip
to 1.1 million barrels/day this year, down from
projections of 1.2 million barrels/day in its
previous monthly oil
forecast, and a further decline from the 1.3
million barrels/day projected in March.
The upward revisions seen in February and March
were driven by higher demand expectations on
the back of improved economic momentum,
particularly for the US, with the agency
predicting that the market could move into
supply deficit.
Weaker-than-expected deliveries to OECD
countries, particularly in Europe, drove demand
from the bloc into the negative in Q1,
according to the IEA, while pricing fell
through the early spring as economic concerns
outpaced the upward impact of geopolitical
tensions.
Crude futures have fallen from over $90/barrel
earlier in the year to $82.53 at midday Brent
trading on Wednesday.
Refinery margins have also fallen to near a
two-year low in the wake of a sell-off across
many crude and downstream markets such as
middle distillates.
Particularly pronounced in Europe, the slump in
refinery margins could lead to run rate cuts
that undermine the usual seasonal output
uptick, the IEA added.
“The slump in European refinery margins in
April outpaced those seen in the US Gulf Coast
and Singapore, reflecting its heavy reliance on
diesel output and weak regional demand eroding
the premium needed to attract long-haul imports
from East of Suez,” the IEA said in its monthly
report.
European gasoil demand dropped 140,000
barrels/day year on year in the opening three
months of the year, following a 210,000
barrel/day decline in Q4 2023.
Despite declining demand expectations for 2024,
supply growth is expected to be subdued, with a
1.4 million barrel/day increase in non-OPEC+
output offset by a projected 840,000 barrel/day
decline in OPEC+ output, amounting to a total
increase of 580,000 barrel/day.
The latest deliberations among OPEC member
states and allied country ministers is expected
at the start of June in Vienna, Austria, with
decisions taken there potentially setting the
tone for the second half of the year.
“Despite the recent weakness, our current
balances show the call on OPEC+ crude oil at
around 42 million barrels/day in the second
half of this year – roughly 700,000 barrels/day
above its April output,” the IEA added.
The agency projects that crude demand growth
will rise modestly to 1.2 million barrels/day,
but production is likely to reach 1.8 million
barrels/day, with 1.4 million of that total
expected from non-OPEC+ countries.
“Even if OPEC+ voluntary production cuts were
to stay in place, global oil supply could jump
by 1.8 million barrels/day compared with this
year’s more modest 580,000 barrels/day annual
increase,” the IEA said.
“The United States, Guyana, Canada and Brazil
continue to dominate gains, even as the pace of
the US supply expansion decelerates,” the IEA
added.
Focus article by Tom Brown.
Thumbnail photo: A crude oil tanker moored
off the coast of Cyprus (Source: Danil
Shamkin/NurPhoto/Shutterstock)
Ammonia15-May-2024
LONDON (ICIS)–Phosphates prices have been
under pressure in India recently, while demand
is expected to revive soon. Meanwhile, a lack
of ammonia spot demand globally is weighing on
the market.
Phosphates editor Chris Vlachopoulos talks to
senior editor Sylvia Traganida about the state
of the phosphates market ahead of the
International Fertilizer Association (IFA)
annual conference (20-22 May).
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.
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
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