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

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. The thing about petrochemicals is that events in our industry reflect what’s happening in every manufacturing chain and in the broader economy, as we supply indispensable raw materials. China’s exports of electric vehicles (but also traditional fossil-fuel motors) and solar panels have soared. This has occurred as local capacity has also soared – and as manufacturing operating rates in general have declined to record lows on weak domestic demand. China’s polypropylene (PP) exports jumped by 96% in Q1 this year over the first quarter of 2023 to 619,367 tonnes. If the same export momentum was maintained throughout 2024, this year’s total exports would reach 2.5m tonnes compared with 1.3m tonnes in 2023. The early ICIS data for 2024 suggests that this year’s PP operating rate in China will be just 75% compared with the 1992-2023 average of 87% – during the Petrochemicals Supercycle. In 1992-2023, China’s PP capacity as a percentage of demand averaged 79%. This looks set to rise to 140% in 2024-2030. Growing trade tensions – recently underlined by US Treasury Secretary Janet Yellen’s comment that China’s capacity in new green industries was “too big” for the world to absorb – tell us this: China will struggle to grow exports by enough to maintain GDP growth at 4-5% per year. Increasing domestic consumption to achieve the same end also seems very difficult because of the end of the real estate bubble, an ageing population and the just-mentioned trade tensions. “Only 37% of China’s national income is spent by Chinese households on goods and services. That level is lower than anywhere else in the world—except for a few small tax havens and commodity hyper-exporters when prices are high,” wrote Mathew Klein on his The Overshoot blog. Early data for this year suggest that China’s PP demand growth in 2024 will be 2%. Growth in 2023 appears to have been flat. This suggests that demand growth has entered a New Normal of 1-3% per year versus the 1992-2021 Petrochemical Supercycle average of 12%. The China CFR PP price spread between CFR Japan naphtha costs has averaged just $203/tonne so far this year, the lowest since our price assessments for the above three grades began in 2003. I keep reflecting-back on Gillian Tett’s masterful Fool’s Gold, her account of the Global Financial Crisis. In the book, she details how too few bankers, politicians, regulators and financial analysts were able to take a helicopter view of events that led up to 2008 because they were trapped in “silos” of specialist knowledge. This meant that the problems with mortgage-backed securities were largely missed. So I believe has been the case with the events in and surrounding China. Experts in PP and other petrochemicals were good at building plants and in sales and marketing, but not so good at seeing connections between China’s demographics, its property bubble, its relatively weak domestic consumption and the shift in its relationship with the West. 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.

LONDON (ICIS)–Crude prices will likely face downward pressure this week amid rising demand concerns. Investors will be keeping a watch on the US Federal Reserve meeting later this week after worrying GDP and inflation data. Despite a persistent risk premium, continued ceasefire talks between Israel and Hamas could contribute to bearish sentiment. ICIS experts look ahead to the likely factors that will drive oil prices in Week 18.

LONDON (ICIS)–The European and US epoxy resins markets are in a tug of war between margin and cost struggles versus still fragile underlying demand and competition from China and elsewhere in Asia. The US anti-dumping case for epoxy resins against several Asian countries and the EU anti subsidy probe against Chinese wind turbines are also talking points as the West looks to protect its industry against unfair competition. Senior editor Heidi Finch who covers the Europe epoxy market  discusses current and near term expectations with fellow senior editor Tarun Raizada, who covers the US epoxy market. Margin woes, tepid demand and Asia competition weigh on Europe, US epoxy Regulatory cases aim to tackle unfair competition from China, rest of Asia Near-term outlook cautious on demand, macroeconomics; seasonality likely to be diluted Edited by Will Beacham

HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 26 April. LyondellBasell sees continued PE momentum in North America, Europe – CEO Polyethylene (PE) demand in North America and Europe should continue to improve in Q2 and through H2 with consistently healthy demand in packaging, the CEO of LyondellBasell said on Friday. Eastman eyes 2027 startup for second US methanolysis plant, French project timing uncertain Eastman expects to reach a final investment decision (FID) on its second US methanolysis (chemical recycling) plant in Q3, CEO Mark Costa and CFO Willie McLain told analysts during the company’s Q1 earnings call on Friday. Dow sees ‘meaningful’ H2 recovery on PE margins, steady demand improvement – CFO Dow continues to expect a strong second half, mainly driven by higher integrated polyethylene (PE) margins, with Q2 sales also expected to trend higher versus the first half in all three of its segments, its chief financial officer said on Thursday. INSIGHT: Latin America’s nascent EV market increasingly a Chinese affair Latin America’s take-up of electric vehicles (EVs) has started to gain momentum, said the International Energy Agency (IEA) this week, with Chinese producers drawing customers with sharply lower prices than western, established brands. Canada moves ahead with plastics registry as UN plastics pollution session starts in Ottawa Following the conclusion of a consultation period, Canada’s federal government has published a formal notice in the Canada Gazette for its planned Federal Plastics Registry. Styrolution Sarnia closure further tightens North America styrene market INEOS Styrolution’s decision this past weekend to temporarily close its Sarnia, Ontario, styrene unit will further tighten a market already dealing with several outages. Prices are under upward pressure with contract prices the highest since Q3 2023.

SAO PAULO (ICIS)–The founder of Unigel, aged 87, is actively fighting the Brazilian chemicals and fertilizers producer’s most decisive battle, one for its survival, as it tries to restructure its debts, one step away from bankruptcy. Henri Armand Szlezynger, who founded Unigel in 1966, has fought several financial battles before, and overcame them. But the current struggle is the most decisive yet because it could see him and his family losing their controlling stake at the producer if investment funds were to take over. Last week, Brazilian financial daily Valor reported the country’s fund IG4 was seeking to acquire a controlling stake in Unigel, citing several unnamed sources. IG4 and Unigel had not responded to a request for comment at the time of writing. Unigel producers styrenics and is one of Brazil’s few fertilizers producers, a sector it entered just a few years ago and which could prove to have been the reason for the company’s threatened demise. BELGIUM-BORN, BRAZIL-MADEIf ICIS had a profile section portraying chemicals industry people, Szlezynger would have featured in it several times. Szlezynger was born to a Belgian Jewish family in 1936 which moved to Brazil when he was just three years old as Europe was entering the abyss of war. The family had a good position and sent Szlezynger to the best schools in Brazil. After that, he went to the US to study chemical engineering at the Massachusetts Institute of Technology (MIT). Aged only 30, he founded Unigel. From there, on he went to become one of Brazil’s richest citizens, with Forbes estimating his net worth at Brazilian reais (R) 17.2 billion ($3.3 billion) in 2022. From its foundation 58 years ago, Szlezynger still controls Unigel, and his presence cannot go unnoticed: he still goes to the company’s headquarters in Sao Paulo every weekday, according to previous profiles of him published in the press. A remarkable fate for an 87-year-old. Unigel’s frantic 2023 was marked by high natural gas costs which made its fertilizer plants – and the company as a whole – a loss-making enterprise, a situation it tried to fix by knocking on the door of Brazil’s state-owned energy major Petrobras. With a government-appointee CEO, to say Petrobras is to say Luiz Inacio Lula da Silva, a President who has repeatedly said that Brazil must reduce its dependence on fertilizer imports. In Brazil’s economy, entrepreneurs and politicians tend to have close relationships, and Szlezynger has recurrently ticked the right boxes to get the support his company may have needed as the years and crises went by. In the north, stronghold of Lula’s Workers’ Party (PT), he has not shied away from showing sympathy with PT politicians. In southern and generally conservative-governed states, Szlezynger has had good relationships with politicians from the right. However, the business-politics link did not work for Unigel’s current downturn. Conversations with Petrobras were going nowhere while the company continued to lose millions every month. In a way, Unigel’s annus horribilis of 2023 ended slightly earlier, in October, when everything changed: the company failed to pay a coupon on one of its bonds, effectively defaulting on its debt obligations. Brazilian financial regulations give breathing space for companies in debt stress to negotiate their obligations with creditors, and Unigel is currently undergoing that process. Earlier in April, it said negotiations were progressing, without disclosing more detail. Jonathan Szwarc, head of Latin America credit research at Debtwire, a data firm specialized on leveraged capital markets, told ICIS that Szlezynger would not easily give up his controlling interest, but added the current crisis would be difficult to circumvent. “Unigel has had financial woes before and overcame them, but this time is quite different: once you fail to pay a coupon, things can go down very quickly. You are not meeting your debt obligations: a default,” said Scwarz. “The company has now an initial agreement with some of its creditors, but it would need to convince 50% plus one of them for it to be effective: we don’t know if that is the case. That’s where they are: seeking adherents to that initial agreement to bring it before a judge, who must approve the Extrajudicial Reorganization Process.” Will Szlezynger, after 58 successful years, be forced by circumstances to call it a day? Not that fast. Szwarc said that, in Unigel’s case, sentimental issues could be as strong as economic issues. “If they are up against it, Szlezynger may decide to reluctantly sell the company, but I really think that is the last option he contemplates,” he said. “If Unigel was to be sold to a fund, I imagine he would prefer a Brazilian fund, with whom he would speak the same language business-wise, than a foreign fund.” As an example, the analyst mentioned negotiations to raise $150m just in January, in the midst of the debt restructuring negotiations, through a group led by US investment fund Pimco, which is also the largest bondholder, according to reports at Brazilian financially daily Valor at the time. That deal, which could have given Unigel breathing space amid its restructuring, fell through because it would have brought closer what Szlezynger has fiercely opposed: the funds taking away from the founding family a controlling interest. “The company’s assets are good. But Unigel was very unlucky in terms of the petrochemicals and fertilizers downcycles combined. You must keep in mind that just in 2022 Unigel’s bonds were trading well over 100% [generating returns],” said Szwarc. “The assets will continue operating in any case: either under a new ownership structure, in which the Szlezynger may still have a stake even if it’s not the controlling stake, or under a potential bankruptcy, when the assets could be sold separately.” The analyst concluded saying he did fail to understand how Petrobras – the Lula-led government, effectively – had not paid more attention to Unigel, whose production of styrenics as well as fertilizers Brazil badly needs if the country is to reduce its dependence on imports. BRAZILIAN SAGAAmid all Unigel things that occurred in 2023, one of the most fascinating was its very public charge against Petrobras in November, when the company announced it would be shutting down one fertilizer plant in Camacari, state of Bahia, due to Petrobras’ “unbearable” pricing policy for natural gas. It was part of Unigel’s strategy, however, as it became clear later in December when the two firms signed a tolling agreement for the fertilizers assets, in what seemed to be Petrobras finally giving in on natural gas pricing. A Brazilian economic-political saga could not just end there. In March, Unigel announced it was halting its fertilizers production, still mentioning high natural gas prices, while Brazil’s Federal Audit (TCU in its Portuguese acronym) raised concerns about the tolling deal, which would have meant losses for Petrobras. As a state-owned company, Petrobras is audited by TCU civil servants. And as a company, the purpose of it is to make a profit: a sweet deal for Unigel on gas would not be following that logic, the auditors said. Adding to it all, Petrobras said earlier in April it was re-entering the fertilizers sector by re-starting a large fertilizer plant in Araucaria, state of Parana, idled since 2020. The energy major said fertilizers were now part of its strategic plan to 2028, adding it would therefore focus on “assets that already belong” to it. Unigel’s fertilizers plants at the centre of the story, Camacari and Laranjeiras, state of Sergipe, were a lease from Petrobras signed in 2019, when the prior Brazilian Administration wanted Petrobras’ to focus on crude oil. It was then when Unigel decided to go big on fertilizers. What does seasoned Szlezynger think about that move now? He would not be too hard on himself if he thinks it was a bad move indeed, which is putting at risk his nearly six decades business legacy. Petrobras returning to the fertilizers sector is, on the other hand, an expected move by Lula’s cabinet, who in general wants to expand the role of the state in the economy, or at least in those sectors where the country’s trade deficit is large, such as fertilizers. The two plants leased to Unigel may end up, therefore, being run by Petrobras again at some point. Unigel and its relentless founder will need to fend for themselves amid the largest financial crisis ever hitting the company. At the end of the day, Lula’s key constituency and the PT party’s cadres would have had a hard time to digest the state was going to give strong and direct support to a private company owned by one of the richest citizens in the land. The Unigel saga continues and, whatever the next act is, Szlezynger is still likely to have a role in it. Insight by Jonathan Lopez

SAO PAULO (ICIS)–Here are some of the stories from ICIS Latin America for the week ended on 26 April. NEWS Mexico’s potential ADDs on China plastics no panacea amid wider stiff competition – Alpek CEO Mexico’s potential antidumping duties (ADDs) on several China-produced plastics will not by itself bring the Mexican market back to balance as “stiff competition” is coming from many other fronts as well, the CEO at chemicals producer Alpek said on Wednesday. INSIGHT: Latin America’s nascent EV market increasingly a Chinese affair Latin America’s take-up of electric vehicles (EVs) has started to gain momentum, said the International Energy Agency (IEA) this week, with Chinese producers drawing customers with sharply lower prices than western, established brands. Mexico’s Alpek Q1 earnings fall but volumes up on shy demand recovery Alpek’s first-quarter earnings and sales fell year on year but improved quarterly on a slight demand recovery, particularly for polyesters, the Mexican chemicals producer said on Tuesday. PRICING LatAm PP domestic prices drop in Argentina on poor demand Domestic polypropylene (PP) prices dropped in Argentina this week. Despite producer prices being unchanged, local distributors have lowered prices due to poor demand. Market participants have reported a 40-60% drop in sales in the past few weeks. LatAm PE domestic prices down in Argentina on sluggish demand After more than a year, domestic polyethylene (PE) prices in Argentina were assessed lower due to sluggish demand. Argentina January PE imports down 32% month on month Argentina polyethylene (PE) imports decreased by 32% month on month in January, totaling 19,106 tonnes, according to the latest figures from the ICIS Supply & Demand database.