TOPIC PAGE: Coronavirus, oil price crash – impact on chemicals

Author: Will Beacham

2020/08/11

Vehicle sales and production in China grew for the fourth consecutive month in July, although both automakers and dealers continue to hold high inventories.

Production grew at a faster rate than sales in July. Vehicles output jumped 21.9% year on year to 2.2m units during the month, while sales rose 16.4% over the same period to 2.1m units.

On a month-on-month basis, however, both vehicle sales and production in July declined by 8.2% and 8.2%, respectively.

For the first seven months of the year, vehicles sales in the world’s largest auto market were down 12.7% year on year at 12.4m units, with production down 11.8% at 12.3m units.

In Asia’s nylon market, demand remains lacklustre amid curtailed production at downstream industries, with run rates averaging at 60-70%.

A number of end-users are not tapping the spot market are they are currently holding onto high raw material stocks.

On this topic page we analyse the impact of coronavirus and the oil price collapse on chemical markets and bring together the latest news reported by ICIS. To visit the ICIS energy markets topic page, click here

Scroll down to see the latest interactive graphics, podcasts and videos. 

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LATEST HEADLINES

China July vehicles sales grow 16.4% on year; production up 21.9%
By Fanny Zhang 2020/08/11 SINGAPORE (ICIS)--China’s vehicles sales in July increased 16.4% year on year to 2.1m units as stimulus measures from the government continued to drive broad recoveries in consumption and market vitality, industry data showed.

Asia nylon demand recovery unlikely amid weak downstream run rates
By Leanne Tan 2020/08/11 SINGAPORE (ICIS)--Hopes of an August demand recovery in Asia’s nylon market are fading, as downstream manufacturing run rates remain curtailed amid slow end-use consumption.

MMAtwo recycling project starts up pre-treatment facility despite recession woes
By: Katherine Sale 2020/08/10 LONDON (ICIS)--Despite the ongoing recession caused by the pandemic, the EU-backed MMAtwo recycling project has managed to continue its research, starting up a depolymerisation unit including a first in the field pre-treatment plant, according to the project’s chairman.

MMAtwo produced in June the first samples of recycled methyl methacrylate (R-MMA) in June and Jean-Luc Dubois said there had been a number of technological advancements in the project, which is set to use twin-screw depolymerisation technology.

Nearly all MMA is polymerised to make homopolymers and copolymers; the largest application is casting, moulding or extrusion of polymethyl methacrylate (PMMA) or modified polymers.

Europe cracker margins rise week on week on higher ethylene prices for August
By Miguel Rodriguez Fernandez 10-Aug-20 16:58 LONDON (ICIS)--European contract cracker margins rose week on week on the back of a higher ethylene price settlement for August, ICIS margins analysis showed on Monday.

Crackers using naphtha fared better than operators based on Liquefied Petroleum Gas (LPG) due to a smaller increase in naphtha costs over the last week.

The European ethylene contract reference price for August has been set at €785/tonne, up by €21/tonne from July.

In the week to 07 August:

Naphtha costs rose by more than 1%
LPG values increased by 6%

US Univar boosts digital channels as customers avoid in-person contact; virus hits Q2 sales
By Stefan Baumgarten 2020/08/07 HOUSTON (ICIS)--Univar is investing to boost its digital sales and marketing capabilities as customers are changing the way they want to interact with the US-based international chemicals distribution major in the wake of the coronavirus health crisis.

In “the Covid-19 world”, customers were seeking to avoid in-person meetings, Univar CEO David Jukes said on Friday, citing a customer survey the company conducted.

An old strategy such as having "more sellers in front of more customers, more often" was "probably not" the best approach when customers do not want to see or meet sellers in person in the current environment, Jukes said.

PODCAST: US IPA faces downwards pressure amid growing inventories, slowly falling demand
By Deniz Koray 2020/08/07 HOUSTON (ICIS)--The US isopropanol (IPA) market is facing downwards pressure from growing inventories as well as slowly falling demand.

Even as reopenings continue across the country, IPA demand has not risen as much as was expected. While demand remains nowhere near the levels seen in March or April, it has not fallen rapidly due to strong cleaning sector demand.

INSIGHT: Hopes of V-shaped recovery fade as pandemic resurges
By: Will Beacham 2020/08/07 BARCELONA (ICIS)--With the second half of the year now fully underway, there are signs of an economic rebound from very depressed levels.

But optimism for a V-shaped recovery is fading as governments struggle to contain the resurgent coronavirus pandemic.

Medical officers in France and Spain warned on Tuesday that a second wave of infections is very likely, and may already be underway in Germany.

In the UK, more local lockdowns have been imposed in the north of the country while Spain also has local restrictions in place.

VIDEO: Europe R-PET price talks mixed for August, flake may have bottomed
By: Matt Tudball 2020/08/07 LONDON (ICIS)--Senior Editor for Recycling Matt Tudball discusses early indications emerging from the recycled polyethylene terephthalate (R-PET) August price discussions.

- Change in sentiment compared to June and July
- Flake prices potentially reaching bottom
- More reactions to the EU’s €800/tonne plastic packaging waste charge

Indonesia PP imports to face challenge from competitive domestic prices
By Leanne Tan 2020/08/07 SINGAPORE (ICIS)--Import activity for polypropylene (PP) to Indonesia is poised to face more challenges going forward, as major local producers cut prices in the domestic market to stimulate buying interest.

UAE’s ADNOC, China’s Wanhua shipping JV orders three gas carriers
By Fanny Zhang 2020/08/07 SINGAPORE (ICIS)--AW Shipping, a 50:50 joint venture between China’s Wanhua Chemical and UAE’s ADNOC Logistics & Services (ADNOC L&S), has signed a contract for the construction of three very large gas carriers (VLGC), a source from Wanhua said.

US Olin to continue idling capacities, Texas closure on track for end 2020
By Stefan Baumgarten 2020/08/06 HOUSTON (ICIS)-- Olin will continue idling plants as it adapts to weakness in demand, the CEO of the US-based producer of chlorine and caustic soda, vinyls, epoxies, chlorinated organics, bleach and hydrochloric acid said in an update on Thursday.

Packaging driving strong demand growth for US LDPE - Westlake
By Zachary Moore 2020/08/06 HOUSTON (ICIS)-- Increased demand for packaging is driving strong demand growth for low density polyethylene (LDPE) in the US, Westlake executives said during a Thursday earnings call.

INSIGHT: Climate change prompts oil, petchem firms to go green in earnest
By Felicia Loo 06-Aug-20 13:20 SINGAPORE (ICIS)--A recent deal between SABIC and Spanish utility Iberdrola - to invest almost €70m to construct a 100MW solar PV facility with 263,000 panels on the SABIC-owned Cartagena site - reflects the earnestness of petrochemical and oil companies to go green amid climate change. SABIC’s move marks a trend of such companies to divert their portfolios to renewables from fossil fuels.

Philippine Q2 economy shrinks 16.5% on pandemic-induced lockdown
By Pearl Bantillo 06-Aug-20 14:45 SINGAPORE (ICIS)--The Philippine economy posted a record 16.5% year-on-year contraction in the second quarter as consumption and private sector investments slumped due to a prolonged coronavirus pandemic-induced lockdown.

Manufacturing and services sectors registered their largest contraction in decades at 21.3% and 15.8%, respectively, according to the National Economic Development Authority (NEDA).

Asia MTBE negotiations in a standoff; outlook uncertain
By Keven Zhang 06-Aug-20 14:10 SINGAPORE (ICIS)--Asia’s methyl tertiary butyl ether (MTBE) discussions were in a stalemate amid weak downstream gasoline market while upstream crude prices are rising. Spot prices on an FOB (free on board) Singapore basis are fluctuating at the $388-417/tonne range in the week. Premiums for CFR (cost and freight) Singapore were at a historical low of $5-9/tonne over FOB Singapore quotes.

Indonesia's Q2 GDP shrinks by 5.3%, deepest contraction since Q1 1999
By Nurluqman Suratman 2020/08/05 SINGAPORE (ICIS)--Indonesia's economy shrunk by 5.32% year on year in the second quarter, posting its first contraction since the first quarter of 1999, official data showed on Wednesday.

China acetone falling on subdued demand; supply to grow
By Yoyo Liu 2020/08/05 SINGAPORE (ICIS)--Spot acetone prices in east China have been falling for more than two months on weak demand from downstream markets, while supply is expected to increase on plant start-ups.

Global manufacturing PMIs jump but headwinds hinder full chemicals recovery
Global manufacturing purchasing managers’ indexes (PMIs) are finally in expansion territory, coinciding with volume recovery in some key chemicals markets in early Q3. Yet major headwinds persist and will hamper any full recovery from the coronavirus-induced recession.

German automotive industry sentiment increases in July, although employment still weak
By: Morgan Condon 2020/08/04 LONDON (ICIS)--The German automotive industry showed signs of gaining strength for the second consecutive month in July, according to the latest data from the ifo Institute business survey on Tuesday.

Business expectations for the sector rose to 43.7 points in July from 26.9 points in June, supported by growth in export expectations, which climbed to 40.8 points in July from 17.3 points the previous month.

Demand tracked more modest growth, rising to 63.2 points from 52.1 points, with this pick-up mainly met from stocks in warehouses, with the corresponding index falling from 40.2 points to 30.6 points in July.

Podcast Europe: Styrene demand slump, but contract prices continue to rise
By: ICIS Editorial 2020/08/04 LONDON (ICIS)--ICIS Head of Market Reporting, Barbara Ortner, and Deputy Managing Editor, Helena Strathearn, look at the outlook for styrene at the beginning of August.

- August Europe styrene contract passes on feedstock increases
- Seasonal demand slump
- September uptick in sight
- Contract process seamless
- Outlook for styrenics mixed

Click on the headline or scroll down to hear the podcast

July IPEX rises on US, Europe industry revival but falls 25% year on year
By: Jonathan Lopez 2020/08/04 LONDON (ICIS)--Global petrochemical prices rebounded in July as pandemic-induced lockdowns continued to ease in North America and Europe and industrial activity revived, pushing the monthly IPEX higher.

Despite continuing in July the upward trend registered in June, global petrochemicals prices were 25% lower year on year.

US benzene prices gained nearly 40% in July, with northwest Europe following suit, although in Asia they fell slightly.

Butadiene (BD) prices rose strongly in northeast Asia; methanol continued losing ground in the US and northwest Europe.

Divergent trend between China and deep-sea soda ash prices drags market
By Helen Lee 2020/08/04 SINGAPORE (ICIS)--China’s soda ash market extended gains as producers stood firm on higher offers in a bid to recover margins on the back of production cost pressures.

US manufacturing expands in July - ISM
By Tracy Dang 03/08/2020 HOUSTON (ICIS)--US manufacturing activity expanded again in July, with the overall economy growing for the third straight month, the Institute of Supply Management (ISM) said on Monday.

“In July, manufacturing continued its recovery after the disruption caused by the coronavirus pandemic,” said Tim Fiore, chair of the ISM. “Panel sentiment was generally optimistic (two positive comments for every one cautious comment), continuing a trend from June.”

PODCAST: Chems demand may never fully recover, focus on radical business models to survive
By: Will Beacham 2020/08/03 BARCELONA (ICIS)--Chemicals demand may never return to pre-pandemic levels so a radical shake up in business models is required, with a focus on local supply chains, recycling, and meeting people’s basic needs.

  • Short-term “sugar lift” from furlough and unemployment schemes
  • As these end, could be major unemployment and social problems in H2
  • Polyethylene (PE) demand has been resilient as more low-paid people have had spare liquidity
  • V-shaped recovery in China is driven by production, not true downstream demand
  • Chinese companies have built massive inventory on expectations of higher future prices
  • Floods also dampening China recovery

Click on the headline or scroll up to hear the podcast.

Eurozone industry at 18-month high but job cuts weigh on recovery

By Morgan Condon 2020/08/03 LONDON (ICIS)--Eurozone manufacturing recorded growth in July, breaking the 18-month trend of contractions, according to the latest data from IHS Markit Economics on Monday.

Job cuts continued in July, however, which could pose a risk to the medium-and long-term economic recovery.

The manufacturing purchasing managers’ index (PMI) rose to 51.8 for the month, comfortably above the 50.0 neutral mark and up from 51.1 in the flash estimate and from 47.4 in June, accounting for seasonable variables.

This rise was driven by increased demand and output as coronavirus restrictions continued to ease throughout Europe, supporting higher levels of new orders and stronger production levels.

NE Asia propylene could see wide buy-sell gap; thin talks in near future
By Joson Ng 2020/08/03 SINGAPORE (ICIS)--Northeast (NE) Asia propylene market is set to see wide gap in bids and offers as producers cite tight supply to raise prices while buyers resist any such efforts.

After tight supply and surging prices in H1, US IPA supply to be more ample in H2
By Deniz Koray 2020/07/31 HOUSTON (ICIS)--Following dramatic price increases for isopropanol (IPA) in H1 due to supply shocks and shortages for several weeks, supply is expected to be ample for H2 due to increased domestic production as well as a consistent stream of imports from Asia.

Supply is also projected to lengthen because few producers have scheduled turnarounds in the second half of the year.

Demand is expected to continue to slow from the peaks seen in the spring, even as coronavirus cases continue to grow in parts of the country that were spared by the initial wave.

LyondellBasell to delay completion of US PO/TBA plant to Q3 '22
By Al Greenwood 2020/07/31 HOUSTON (ICIS)--LyondellBasell is delaying to Q3 2022 the completion of a plant it is building in Texas that will make propylene oxide and tertiary butyl alcohol (PO/TBA), the CEO said on Friday.

"We essentially delayed the project by one year," said Bob Patel, CEO. He made his comments during an earnings conference call. The company is still updating capital forecasts for the projects.

At the end of March, LyondellBasell said it was slowing down construction at the plant because of the coronavirus. At the time, many companies were suspending projects to prevent construction workers from catching and spreading the disease.

Europe capro, nylon demand slowly picks up but uncertainty prevails
By: Marta Fern 2020/07/31 LONDON (ICIS)--Europe caprolactam (capro), nylon 6 and nylon 6,6 markets are expected to continue trading reduced volumes for quite some time, as downstream demand recovery is likely to be prolonged and slow.

European capro contract prices for July settled this week at a €25/tonne increase to the low end and a rollover to the high end of the range compared to June. Nylon 6 contract prices for July are up €0.02/kg at the low end compared to June, while the high end remained flat.

Contract prices for nylon 6,6, predominantly consumed by the automotive industry, stabilised this month, settling within the price range seen in June.

The chart below shows the spread between capro and nylon prices in Europe, and provides an insight into the profitability of nylon production. A wider gap indicates healthier price spreads for nylon producers, while a narrower gap indicates compressed price spreads.

Europe MMA July prices increase as oversupply eases, feedstocks firm
By Katherine Sale 31-Jul-20 18:16 LONDON (ICIS)--European methyl methacrylate (MMA) July contracts increased €30/tonne, rebounding after 27 months of consecutive price declines.

Third-quarter contract talks are coming to an end, also firming on the back of higher feedstocks, an easing in market oversupply, and an uptick in demand.

Spot prices were stable after recent increases, with less material available outside of contract, and some traders struggling to get volumes.

INSIGHT: China industries expand for fifth month; downside risks still high
By Pearl Bantillo 2020/07/31 SINGAPORE (ICIS)--China’s industries have remained in expansion mode for the fifth consecutive month in July, recovering from a record slump in February but downside risks to economic growth are high as the coronavirus pandemic rages on.

China factory recovery continues; July PMI rises to 51.1
By Fanny Zhang 2020/07/31 SINGAPORE (ICIS)--China’s manufacturing sector continues to rebound in July, with official purchasing managers’ index (PMI) rising to 51.1 from 50.9 in June, the National Bureau of Statistics (NBS) data showed.

US DuPont to conduct maintenance on Tyvek protective-garment lines
By Al Greenwood 2020/07/30 HOUSTON (ICIS)--DuPont expects to conduct maintenance on lines that produce its Tyvek fabric which is used to make protective garments, the company said on Thursday.

US DuPont expects idled polymer capacity to stay down in Q3
By Al Greenwood 2020/07/30 HOUSTON (ICIS)--DuPont expects most of the polymer capacity that it idled in response to the automobile slowdown will remain down in the third quarter, the company said on Thursday.

US DuPont attracts interest for every one of its noncore assets
By Al Greenwood 2020/07/30 HOUSTON (ICIS)--DuPont has attracted interest for every one of its noncore assets, the CEO of the specialty chemicals producer said on Thursday.

India NBR offers rise on BD surge; demand driven by agricultural sector
By Helen Yan 2020/07/30 SINGAPORE (ICIS)--Offers for acrylonitrile butadiene rubber (NBR) in India rose on the back of surging cost of feedstock butadiene (BD) and improved demand from the agricultural sector.

VIDEO: Mideast PE Aug offers find support from food packaging demand
By Veena Pathare 2020/07/30 SINGAPORE (ICIS)--Watch ICIS senior editor manager Veena Pathare discuss the latest developments in the Middle Eastern polyethylene (PE) market.

Thailand’s SCG Q2 chemicals profit grows 23% on better margins
By Pearl Bantillo 2020/07/30 SINGAPORE (ICIS)--Siam Cement Group’s chemicals business posted a 23% year-on-year profit growth in the second quarter on better margins despite a double-digit decline in sales due to lower prices.

Stimulus may boost resin demand from electric vehicles - Celanese
By Al Greenwood 2020/07/29 HOUSTON (ICIS)--Governments are adopting economic stimulus packages with sustainability components that could encourage sales of electric vehicles.

The coronavirus has created some new opportunities as well.

There is growing interest in ensuring the reliability of supply chains and removing risk, Ryerkerk said. Customers are interested in plastics that can hold up against disinfectants and sterilisation.

BASF mulls impairments on new normal lower demand, China on V-shaped recovery - CEO
By: Jonathan Lopez 2020/07/29 LONDON (ICIS)--The “extreme scenario” caused by the pandemic makes even short-term forecasts impossible, but petrochemicals demand may decrease in the long-term in the new normal and BASF is mulling impairment charges on its assets, the CEO at the German chemicals major said on Wednesday.

BASF’s operations in China are recovering from the lows in the first quarter, when the pandemic first hit, and it is “the only country” in the world where a V-shaped recovery is taking place, said CEO Martin Brudermuller.

Earlier on Wednesday, BASF’s second-quarter financial results showed the extent of the downturn in the second quarter; selling prices only fell 1% on average as some business divisions – agrochemicals, care, and nutrition – offset larger falls in industrial sectors, but sales volumes fell 7%.

INSIGHT: BASF remains cautious in face of limited order visibility
By: Nigel Davis 2020/07/29 LONDON (ICIS)--BASF’s comments on Wednesday on visibility and the third quarter show how cautious the German chemicals major is in the face of the uncertain recovery this July and August from coronavirus lockdowns.

The company also believes that there is a significant risk that recovery will be slower over the longer term than it might have expected.

The ‘new normal’ after coronavirus may mean that it has to reassess cash flows from a range of assets, leading to further impairments, possible in the third and even the fourth quarters of the year.

Solvay manages to weather severe headwinds in downstream markets
By Morgan Condon 2020/07/29 LONDON (ICIS)--Despite its position as a specialty chemical producer, Solvay is not far-enough removed from the global economic storm to come away unscathed.

The company's results presentation for the first half of 2020 reads like a grim weather forecast as the severe headwinds presented by the macroeconomic environment have limited visibility for the rest of the year.

Solvay's CEO Ilham Kadri said on Wednesday that authorities had not forced production to stop at any of the company’s site as chemistry continues to be “essential”, but lack of demand did weigh on output.

INSIGHT: Mixed market reaction to EU €800/tonne plastics charge as implementation details emerge
By: Mark Victory 2020/07/29 LONDON (ICIS)--The EU's €800/tonne plastic packaging waste charge, passed by the EU Council last week and which takes effect from January, sent shockwaves through the market because of both its size and narrow timeframe to implementation.

Reaction has so far been mixed, with immediate questions on how it will be calculated, how it will be passed through the supply chain, and whether it will lead to greater regulatory divergence on plastics .

In the first of a series of insights on the charge we look at the known details that have emerged since the announcements, and the outstanding concerns and questions in the recycling and virgin plastic markets.

The new charge of €800/tonne for all non-recycled packaging waste will be paid by EU nations from 1 January 2021. National contributions will be calculated by the European Commission using existing reporting obligations under the Packaging Waste Directive (Directive 94/62/ECC) and its implementing Decision (Decision (EU) 2019/665.

PODCAST: EU €800/tonne plastic waste charge to accelerate recycling, product substitution
By Will Beacham 27-Jul-20 15:32 BARCELONA (ICIS)--Europe’s new €800/tonne charge on waste plastic packaging will force chemical supply chains to take recycling more seriously and could drive product substitution.

- Charge agreed at EU summit last week could lead to substitution away from some polymers which are less easy to recycle, or to other materials
- It will accelerate adoption of recycling technology and infrastructure
- Challenges as recycled polymer sector not yet developed enough
- Polymer and carbon taxes will act as a “short, sharp shock” for chemical companies and supply chain
- Move to local, sustainable production will accelerate
- Oil prices propped up by China and India building reserves which are now full
- Hopes for a V-shaped recovery evaporating
- China may switch from being the world’s largest net importer of polypropylene (PP) to net exporter by 2022
- Global PP moving towards “perfect storm” of over-capacity amid structural changes to demand
- PP producers must focus on sustainability, affordability, local supply chains

Interview with Paul Hodges, chairman of International eChem; John Richardson, ICIS senior consultant Asia; Mark Victory, ICIS senior recycling editor, and Helen McGeough ICIS senior analyst, plastics recycling.

Asia epoxy resins demand stays limp on weak downstream production
By Ai Teng Lim 2020/07/29 SINGAPORE (ICIS)--August trade for Asian epoxy resins is poised to stay under pressure, as concrete and even downstream production recovery still seems a remote reality despite some upbeat economic data in China.

Asia PBT stagnant as demand wobbles; US-China tensions weigh on sentiment
By Clive Ong 2020/07/29 SINGAPORE (ICIS)--Activity in Asia’s polybutylene terephthalate (PBT) market remained tepid as recent escalation in tensions between the US and China dampened sentiment.

Asia NBA demand recovering; widened price gap with 2-EH may remain
By Jude Chan 28-Jul-20 12:19 SINGAPORE (ICIS)--Demand for n-butanol (NBA) in Asia is recovering gradually from a trough in the first quarter at the height of the coronavirus pandemic. But a rebound in its prices is unlikely to catch up with the gains of fellow oxo-alcohol 2-ethylhexanol (2-EH) anytime soon. The coronavirus brought the automotive and construction sectors – two of NBA’s key industries – to a near standstill in Asia.

Asia naphtha prices buoyed by spot demand; crack spread up
By Melanie Wee 28-Jul-20 12:44 SINGAPORE (ICIS)--Asia naphtha markets are finding support from pockets of demand, helping to keep spot prices afloat, along with the product's crack spread. Spot naphtha prices continue to hold above the $400/tonne mark, buoyed by steady demand amid overall healthy downstream margins, ICIS data shows.

China industrial profits grow at faster pace of 11.5% in June
By Fanny Zhang 2020/07/27 SINGAPORE (ICIS)--China’s industrial profits reached yuan (CNY) 666.6bn ($95bn) in June, up by 11.5% year on year, faster than the 6.0% growth recorded in May, official data showed on Monday.

Saudi SABIC adjusts output to meet strong pandemic-related demand
By Nurluqman Suratman 2020/07/27 SINGAPORE (ICIS)--Saudi petrochemical major SABIC has adjusted its production slate to meet increased demand from sectors such as healthcare and packaging amid the coronavirus pandemic, a company official said.

ANALYSIS AND RESOURCES

June 2020 Coronavirus presentation given by ICIS Analytics experts.