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Isocyanates30-Apr-2024
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.
Ammonia30-Apr-2024
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:
Terephthalic Acid30-Apr-2024
CHINAPLAS ’24: PODCAST: China’s polymer industry targeting
high-end products amid fierce competition
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.
Global News + ICIS Chemical Business (ICB)
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Crude Oil30-Apr-2024
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
Polyethylene30-Apr-2024
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.
Crude Oil29-Apr-2024
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.
Speciality Chemicals29-Apr-2024
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
Ethylene29-Apr-2024
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.
Ammonia29-Apr-2024
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
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