HOUSTON (ICIS)–Following a better-than-expected 2024 first quarter, US compounder and formulator Avient raised its full-year guidance for adjusted earnings before interest, tax, depreciation and amortization (EBITDA) by $5 million at the low end. Sales into the defense market, along with raw material deflation, were the key earnings drivers in Q1 and Avent expects both to support earnings through 2024, CEO Ashish Khandpur and CFO Jamie Beggs told analysts during the company’s Q1 earnings call on Tuesday. New 2024 guidance Previous 2024 guidance Pro forma 2023 adjusted EBITDA $505 to $535 million $510 to $535 million $501.8 million SALES IMPROVING IN MOST END MARKETSAvient sees demand conditions “generally improving across all regions”, with improved momentum in consumer, packaging, healthcare, defense and industrial end markets, the executives said. After a 35% year-on-year increase in Q1, defense sales amid the ongoing geopolitical tensions, Avient expects those sales to continue growing through 2024, albeit not at the first quarter’s hot pace, they said. Avient’s Dyneema-brand fiber technology is used in the personal protection of soldiers and law enforcement and border control officers. While Avient’s utilization rates in defense are high, the company is able to meet forecast demand growth and expects no capacity limitations this year. However, it may add capacities in the future, depending on demand, which can be “lumpy” in that market, they said. Defense accounted for 7% of Avient’s total 2023 sales of $3.14 billion, with more than half of those sales in the US. Avient acquired the Dyneema business from DSM in 2022. Telecommunications and energy, however, are among the weaker end markets, with first-quarter sales down double-digit and weakness continuing into the second quarter. Destocking in the capital-intensive telecommunications market continued in Q1, with no meaningful rebound in that market expected until 2025, the executives said. Telecommunications accounted for 4% of Avient’s 2023 sales. BY REGION Regionally, Avient sees good momentum in the US in markets such as consumer packaging, defense, building and construction, industrial and infrastructure. “Destocking in those markets is over”, Khandpur said. With the exception of telecommunications and energy, overall demand in North America is “coming back quite well”, he said. However, persistent inflation is delaying the timing of interest rate cuts, which could weigh on sales in end markets such as building and construction, transportation and industrial, the executives said. In China, about 70% of Avient’s sales go into the local market, putting the company into a good position as that country’s economic policies transition to focus on the domestic market, the executives said. In Europe, demand in packaging and healthcare is improving, but Avient expects the region’s overall year-on-year sales growth to be soft. Consumer confidence in Europe is weak and eurozone manufacturing continues to signal contraction, they noted. Meanwhile, the stronger US dollar has become a headwind, they added. Sales by region in 2023: RAW MATERIAL DEFLATION Raw material deflation will continue to support margin expansion in the second quarter, albeit to a lesser extent than in the first quarter, the executives said. In the first quarter, Avient saw better-than-expected pricing for non hydrocarbon-based raw materials such as pigments and certain performance additives. Primary raw materials used in Avient’s manufacturing operations include polyolefin and other thermoplastic resins, titanium oxide (TiO2), inorganic and organic pigments, specialty additives and ethylene. Pricing, net of raw materials, should help drive year-on-year earnings growth in 2024, the executives said. Also, the company expects additional margin expansion due synergies and plant closures related to its acquisition of Clariant’s masterbatch business back in 2020, Beggs noted. M&A NOT A PRIORITY In the near-term, Avient will focus on organic growth and margin expansion whereas growth through mergers and acquisitions (M&A) is not a priority. While Avient is not ruling out M&A, any deals would be “small and bolt-on in nature”, in areas like healthcare, sustainable solutions or composites, with focus on Asia and Latin America, Khandpur said. “Premiums are pretty high” in M&A, he added. Thumbnail photo of Ashish Khandpur, who took over as Avient’s CEO and president on 1 December 2023; photo source: Avient

SINGAPORE (ICIS)–Asia’s olefins brace for headwinds amid sustained weak demand in May, although some support is expected from curtailed supply in China. Lengthening supply from South Korea could continue to weigh on the market’s outlook as it navigates upstream volatility amid tensions in the Middle East. Asia’s olefins market to see increasing supply from South Korea in May Relatively low PDH run rates could lend support to NE Asia C3 Poor demand weighing on Asia C2 amid multiple supply options for June arrivals In this chemical podcast, ICIS editors Julia Tan and Josh Quah discuss recent market conditions with an outlook ahead in Asia.

SINGAPORE (ICIS)–Saudi Aramco’s net income fell by 14.4% year on year to Saudi riyal (SR) 102.3 billion in the first quarter amid lower crude oil volumes and weakening downstream margins, the energy giant said on Tuesday. in SR billions Q1 2024 Q1 2023 % Change Sales 402.04 417.46 -3.7 Operational Profit 202.05 222.18 -9.1 Net profit 102.27 119.54 -14.4 Early this year, Saudi Arabia’s government ordered Aramco to halt its oil expansion plan and to target a maximum sustained production capacity of 12m barrels/day, 1m barrels/day below the target announced in 2020. In the first quarter, Aramco’s downstream income before interest, income taxes and zakat (annual Islamic tax) slumped by 64% year on year to SR4.62 billion. The drop in downstream earnings reflects weakening refining and chemicals margins, partially offset by inventory valuation movement, it said. The drop in group earnings was partially offset by lower production royalties, an increase in crude oil prices compared to the same period last year and lower income taxes and zakat. Despite having a capacity of 12 million barrels/day, Saudi Arabia currently produces about 9 million barrels/day as part of production cuts initiated by OPEC and its allies in October 2022 and further voluntary cuts by Saudi Arabia and other OPEC+ members in April 2023, all designed to stabilize oil prices. Following an OPEC+ meeting in June 2023, Saudi Arabia – the world’s top crude exporter – announced a further oil production cut of 1 million barrels/day. “Looking ahead, I expect our portfolio to continue to evolve as we aim to contribute to an energy transition that offers solutions to climate challenges, but at the same time recognizes the need for affordable, reliable, and flexible energy supplies,” added Amin Nasser, Aramco’s President and CEO. Aramco’s chemicals arm SABIC and China’s Fujian Energy and Petrochemical Group Co held a groundbreaking ceremony to mark the start of construction at the SABIC Fujian Petrochemical Complex in China’s Fujian province during the first quarter. The project will include a mixed-feed steam cracker with up to 1.8m tonne/year ethylene (C2) capacity and various downstream units producing ethylene glycols (EG), polyethylene (PE), polypropylene (PP) and polycarbonate (PC), among other products. Thumbnail photo : One of Aramco’s US offices (Source: Saudi Aramco)

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. No matter which petrochemical or polymer you examine, the story is similar. To illustrate this point, let’s today look at polyvinyl chloride (PVC). As China’s economy boomed, largely thanks to the growth in its exports, so did its petrochemicals demand, increasing the gap between China’s consumption and that of the much more populous Developing World ex-China region. China’s 2008-2009 US$586bn economic stimulus package – which largely went into housing and infrastructure – seems to have had a much bigger effect on the country’s PVC demand than in some other products. Up until the Evergrande turning point in September 2021, China’s investment in housing and infrastructure continued at apace. It appears as if stimulus greatly increased the importance of Chinese PVC demand as a driver of global PVC demand: Between 1992 and 2008, China’s share of global demand averaged 17% per year; in 2009-2024, the ICIS Supply & Demand Database expects China’s share to reach 40%. China’s demand growth averaged 10% per annum between 1992 and 2023. But growth is forecast to decline to 3% per year in 2024-2030. This decline is in line with what ICIS expects in other products. Between 1992 (the start of what I see as the Petrochemicals Supercycle) and 2023, global PVC capacity exceeding demand was estimated by ICIS as averaging 8m tonnes a year. As with many other products, ICIS forecasts a big increase in global PVC capacity exceeding demand in 2024 -2030. During this period, capacity exceeding demand is expected to average 15m tonnes a year. In another parallel with other products, China’s self-sufficiency in PVC has reached the point where it has swung from being a major net importer to being a net exporter. Trade tensions between China and the West have been building since Mike Pence, the then US Vice President, made a landmark speech in October 2018. Could this translate to more protectionism in global PVC markets? It is a scenario worth considering as China seeks to increase its exports, challenging the US which accounts for the lion’s share of export trade. During the Petrochemicals Supercycle, the world was becoming ever-more globalised rather than what we are seeing today – the reverse. China was the tide that lifted all ships. Almost every year, its growth surprised on the upside, guaranteeing success for even the least-competitive plants. We didn’t we have to worry about big increases in China’s self-sufficiency in PVC, polyethylene (PE) and polypropylene (PP). Now everything has changed, making big picture analysis of China’s economic problems and the global geopolitical landscape crucial. This kind of analysis has become as important if not more important than studying cost-per-tonne economics. 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.

HOUSTON (ICIS)–US corn plantings are now 36% completed with soybeans at 25%, according to the latest US Department of Agriculture (USDA) weekly crop progress report. The progress on crop sowings comes despite many states experiencing rough weather conditions with more forecasted to come this week, especially within the central US. The current pace of the corn crop is behind the 42% rate achieved in 2023 and the five-year average of 39% completed. North Carolina is now the leading state with 86% of the crop done, followed by Texas at 76%. There is now 12% of the crop emerged, which is ahead of the 10% from 2023 and the five-year average of 9%. Soybeans are now at 25% completed, which trails the 30% level from last year, but it is above the five-year average of 21%. The top state for plantings is now Mississippi with 67% of their crop completed, with Arkansas close behind at 65%. There is 9% of the crop emerged, which is ahead of both the 7% from 2023 and the five-year average of 4%. For the other key crops, the USDA said cotton plantings have reached 24% completed, with sorghum at 23% and spring wheat now at 47%.

ORLANDO (ICIS)–NPE2024 is underway in Orlando, Florida, after a six-year hiatus, and Senior Market Editor Emily Friedman and Senior Marketing Executive Natalie Stephens break down the key topics among discussions and presentations at the show: Sustainability is a pillar of the industry, one which companies should prioritize to future-proof their business Risk management remains paramount, following several years of instability and unprecedented highs and lows Technology and data have never been more critical to embed within each step of the value chain To learn more, ICIS market experts Emily Friedman, Kim Haberkost and Ramesh Iyer will be giving separate presentations at 8:00AM EST in W414AB on Tuesday, Wednesday and Thursday mornings, diving into these critical issues and more. NPE2024 takes place on 6-10 May in Orlando, Florida. Please stop by our booth, S20165, to connect with us at the show!

ORLANDO (ICIS)–Headwinds for the plastics industry including higher cost of capital, weaker household spending momentum and capacity adjustments will likely persist through 2024, according to a presentation by Perc Pineda, Chief Economist at PLASTICS, at this year’s NPE show. The US Consumer Price Index (CPI) was up 3.5% year on year in March, with economists expecting inflation to average 3.1% this year, which is above the US Federal Reserve’s target of 2%. As a result, interest rate futures are now moving towards fewer cuts. Elevated interest rates continue to negatively impact the petrochemicals industry, including US polyethylene terephthalate (PET), as high interest rates continue to result in weaker household spending. Additionally, the US PET market continues to experience capacity adjustments. In March of 2023, Alpek Polyester announced it would be indefinitely shutting down its Cooper River, South Carolina, PET site. A few months later in September of 2023 the integrated polyester plant being built by Alpek, Indorama and Far Eastern New Century (FENC), under the joint venture Corpus Christi Polymers, announced it was pausing construction at its Corpus Christi, Texas, site because of inflation as well as high construction and labor costs. Globally, Indorama announced in March 2024 that it is eyeing multiple sites and it is aiming to shut down. Without interest rate cuts, headwinds in the US and global PET market will likely continue through 2024, despite an optimistic demand outlook for 2024 compared to 2023. Thumbnail image shows multicolored PET preforms for plastic bottles Produced by Plastics Industry Association (PLASTICS), NPE: The Plastics Show takes place 6-10 May in Orlando, Florida.

HOUSTON (ICIS)–Heavy rainfall that caused flooding from rising rivers over the weekend was mainly to the north and east of the major petrochemical plants closer to the Gulf Coast, and has had little to no impact on operations. Rainfall totals over the past 48 hours were around 2 inches at the most, according to data from the Harris County Flood Control District. But the region was already waterlogged as rainfall totals for the previous seven days were as high as 13 inches, meaning the additional weekend rains had no avenue to drain and collected in low-lying areas. There are no significant chances of more rain in the near term, according to the latest forecast from the National Weather Service. The flooding did not affect power generation or delivery in the region. According to poweroutage.us, there were almost 5,000 customers in Texas without power on Monday morning, with none in Harris county.

HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 3 May. Besieged by imports, Brazil’s chemicals put hopes on hefty import tariffs hike Brazilian chemicals producers are lobbying hard for an increase in import tariffs for key polymers and petrochemicals from 12.6% to 20%, and higher in cases, hoping the hike could slow down the influx of cheap imports, which have put them against the wall. US manufacturing falls back into contraction in April, prices rise Economic activity in US manufacturing contracted in April after expanding in March, according to the Institute of Supply Management’s (ISM) latest purchasing managers’ index (PMI) survey released on Wednesday. SABIC Q1 net income falls 62%, warns of industry overcapacity SABIC’s net income fell by 62% year on year to Saudi Riyal (SR) 250 million in the first quarter amid a drop in prices and sales volumes, the chemicals major said late on Wednesday. US TiO2 producer Kronos to shut down production via sulfate process in Varennes, Canada Kronos Worldwide, a titanium dioxide (TiO2) producer headquartered in Dallas, Texas, US is planning to permanently shut down sulfate-based production at its location in Varennes, Quebec, Canada. US Huntsman assets in Europe spare from energy hit, but EU policies erratic – CEO Huntsman’s assets in Europe are not energy intensive and have been spared from the energy crisis, but more broadly, the 27-country EU is still lacking a comprehensive policy to address the issue, the CEO at US chemicals major Huntsman said on Friday.