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UK inflation hits 40-year high in April as energy and fuel
      costs continue to rise
UK inflation hits 40-year high in April as energy and fuel costs continue to rise
LONDON (ICIS)–UK inflation rose to a 40-year-high in April as energy and fuel costs continued to rise, the Office for National Statistics (ONS) said on Wednesday. April’s 9% rise in the Consumer Prices Index (CPI), which excludes housing costs, is the highest level since 1982, based on indicative ONS modelling for earlier periods which pre-date its current CPI series. The rise in April was up from 7% in March. UK households have faced higher energy, food and petrol costs as crude oil and gas prices have continued to rise, partly driven by the war in Ukraine. Also on 1 April, the UK government’s energy regulator Ofgem (Office of Gas and Electricity Markets) raised the price cap which limits the price energy suppliers can charge consumers. In the transport sector, costs rose as petrol prices were driven up by higher crude oil values. “Average petrol prices stood at 161.8 pence per litre in April 2022, compared with 125.5 pence per litre a year earlier. The April 2022 price is the highest recorded,” the ONS said in a statement. The Bank of England raised its key interest rate on 5 May to the highest level in more than a decade in a bid to curb escalating inflation levels. UK Q1 GDP data from the ONS on 12 May showed 0.8% growth for the quarter but contracted in March as consumer spending slowed due to a surge in living costs.
UAE’s Borouge to launch IPO; eyes Abu Dhabi listing in early
UAE’s Borouge to launch IPO; eyes Abu Dhabi listing in early June
SINGAPORE (ICIS)–UAE-based polyolefins producer Borouge on Wednesday said that it is planning to launch an initial public offering (IPO) and list on the Abu Dhabi Securities Exchange (ADX) by early June this year. The IPO will consist of around 3bn ordinary shares, representing 10% of Borouge’s shares held by Abu Dhabi National Oil Company (ADNOC) and Austria-based producer Borealis. The subscription period for the UAE retail offering will be from 23-28 May, while that for qualified investors will be from 23-30 May. The shares are expected to be admitted for trading on the ADX on 3 June. Borouge is a joint venture between ADNOC and Borealis. Post-IPO, ADNOC will have a 54% stake in Borouge, while Borealis’ stake will be 36%. Its production capacity currently stands at around 2.7m tonnes/year of polyethylene (PE) and 2.2m tonnes/year of polypropylene (PP), according to the company. In the first quarter of 2022, the company started up its fifth 480,000 tonne/year PP unit at its Ruwais site. The fifth PP unit boosted Borouge’s overall polyolefins production capacity to 5m tonnes/year. Development of the company’s phase four project at the Ruwais complex is underway. The $6.2bn Borouge 4 project is expected to be completed in 2025 and will boost the site’s polymers capacity to 6.4m tonnes/year. Borouge’s sales volumes from its consumer solutions and infrastructure solutions units totaled 2.5m tonnes/year and 1.7m tonnes/year in 2021. The company’s polymer products were mainly sold in Asia, representing about 59% of total sales volumes, as well as the Middle East and Africa – which, combined, accounted for around 33% of overall sales volumes. “Global polyolefins demand in Borouge’s markets is forecasted to account for approximately 86% of global polyolefin demand growth between 2022 and 2026, resulting in a forecasted 1.2x GDP growth in consumer solutions and approximately 1.4x GDP growth in infrastructure solutions,” the company said. (adds details throughout)
UAE’s Borouge to sell 10% of its shares via IPO; to list in
      Abu Dhabi
UAE’s Borouge to sell 10% of its shares via IPO; to list in Abu Dhabi
SINGAPORE (ICIS)–UAE-based polyolefins producer Borouge on Wednesday said that is planning an initial public offering (IPO), and to list the company on the Abu Dhabi Securities Exchange (ADX) by early June this year. The offering will consist of around 3bn ordinary shares representing 10% of the petrochemical producer’s issued share capital, Borouge said in a statement. The offering will run from 23 May to 28 May for retail investors. The company expects its shares to be admitted for trading on the ADX on 3 June. Borouge is a 50:50 joint venture between Abu Dhabi National Oil Company (ADNOC) and Austria-based producer Borealis. Under the IPO plan, ADNOC will hold a 54% shareholding in Borouge, while Borealis’ stake will be 36% in the joint venture firm. Borouge’s production capacity currently stands at around 2.7m tonnes/year of polyethylene (PE) and 2.2m tonnes/year of polypropylene (PP), according to the company. The company in March this year started up its new 480,000 tonne/year fifth polypropylene (PP) unit at its Ruwais site.
INTERVIEW: Quimica Anastacio highlights flexibility, organic
      growth amid price volatility – CEO
INTERVIEW: Quimica Anastacio highlights flexibility, organic growth amid price volatility – CEO
NEW YORK (ICIS)–Brazil-based chemical distributor Quimica Anastacio is sharpening its focus on flexibility and nimbleness, along with organic growth versus M&A, amid a period of elevated price volatility, its CEO said. Throughout the COVID-19 pandemic, with outbreaks rolling through different regions of the world and disrupting supply chains, the distributor has had to pivot quickly to replace some suppliers of critical materials and secure containers in short supply. A big part of this pivot was having its purchasing department shift to about 70% FOB (free on board) in sourcing supply, where it arranges freight to directly pick up product from the port of the supplier, as opposed to CFR (cost and freight), where the supplier ships containers directly to the distributor’s port. Prior to the pandemic, only about 30% of its global sourcing was done on an FOB basis. Quimica Anastacio sources products from 62 different countries. “This capability was very important during this period. We had to go after the containers because suppliers had difficulty finding them and price was an issue as well,” said Jan Krueder, CEO. He made his comments in an interview with ICIS. “The supplier has two issues – one is to have product available during a crisis. The supplier has its own challenges in producing and having enough raw materials. Then the second issue is getting the freight to our port – the port of Santos for example – when it already exports to many countries,” he added. Thus, having the capability to arrange its own freight to pick up product directly from the supplier is a critical advantage. Quimica Anastacio’s strong relationships with suppliers is also an advantage during periods of limited supply, the CEO pointed out. While supply chain disruptions are still a challenge, product availability is now normalising, Krueder said. However, the Russia/Ukraine war is causing commodity prices to surge, not only for oil-based chemicals, but for those based on corn and other agricultural inputs as well, he noted. Price volatility is a “bigger issue”, and the key is to stay competitive under different pricing scenarios by being aligned with pricing trends, said the CEO, who also pointed out that it’s not about all prices rising, but major fluctuations both up and down for different chemicals. In cases where prices are rising, there have so far been no signs of demand destruction, he noted. Amid the long period of supply chain disruptions and now more volatile pricing, “customers are perhaps seeing distribution with different eyes”, said Kruder. “Before the COVID crisis, there was more incentive and pressure to buy directly and just on price. But nowadays buyers value companies that really can see the supply chain in a more complete way. So I think we are not just distributors but consultants,” he added. “It’s not just about pressing a button and buying, but about knowing the chain, where the movements are, and what the risks are in supplies from certain countries, and in certain products. And so that’s where we can be more useful and relevant to the customer because we live and breathe these markets,” said Krueder. GROWTH AMID A CHALLENGING LATIN AMERICA OUTLOOKLatin America, the key region where Quimica Anastacio operates, is undergoing a period of turbulence with greater political polarisation, changes in governments, rising interest rates to counter inflation and currency exchange rate volatility, he noted. With anaemic GDP growth expected in 2022 in Latin America (consensus ex-Venezuela at 2.0%), chemicals demand growth will be challenging. However, Krueder still sees strong organic growth opportunities for Quimica Anastacio with its target of launching at least eight new products every month by working with customers. Much of the new product development will be in specialties, where the CEO aims to boost this part of the business to 30% of sales from around 20% currently. “This is something which sustains growth even when the economy is not growing,” said Krueder. The company operates 18 segments across three large divisions of Beauty and Health, Nutrition and Industrial Processes. The latter’s segments include polyurethanes (PU), lubricants, plastics, polyvinyl chloride (PVC), household cleaning products, and paints and construction. “We see them as independent entities with their own strategies, targets, marketing budgets and product development targets. If you don’t see each segment as a single company, it does not make sense to stay in these markets because we compete with some companies which are only focused on these markets,” said Krueder. “If each business unit sees itself as its own company, they have to show results, and one of those results is to bring more products,” he added. New product launches for Quimica Anastacio are primarily driven by customers looking for more efficient and economical solutions for existing specifications, rather than new formulations. This could involve everything from modifying a product from powder to liquid form, blending, sourcing from a different country, sourcing a consolidated package of products, improving logistics or changing packaging to offer a better solution. NO M&A IN NEAR TERMThese days, it’s hard to find a sizeable chemical distributor that is not focused on M&A but Quimica Anastacio stands out in this respect as being completely focused on organic growth. The company generated sales of around $553m in 2021, essentially doubling sales since 2016. It ranks No 39 globally in the latest ICIS Top 100 Chemical Distributors listing. “Our strategy is to stay independent. And it would make zero sense in this moment to go into the M&A market because we already have been growing continuously in Brazil and Latin America, and are one of the market leaders,” said Krueder. Quimica Anastacio instead prefers to sustain sales growth by investing its own capital and launching new products with customers. Staying independent also allows for faster decision making and being nimble in adjusting to different market scenarios, the CEO pointed out. “We want to focus 100% of our energy on our business, and not on M&A strategies. We of course see many companies focusing on M&A with [assets] coming in and coming out. We prefer to to grow, but in a healthy, gradual way,” said Krueder. Quimica Anastacio’s main presence is in Brazil, but it has boosted operations in Argentina and recently started distribution in Mexico. Meanwhile, its Anastacio Overseas trading company sells in almost all counties in Latin America and has recently entered Africa, he noted. While the company has never made an acquisition, the CEO does not completely rule M&A out in the future. “If we see our model of launching new products is getting saturated, we could in one or two years come to the conclusion that it would make sense to buy a small specialty company to get stronger in some segments. But it’s not the case right now,” said Krueder. CAPTION: Quimica Anastacio is expanding its warehouse footprint in Brazil. Pictured is its distribution center in Barueri, Sao Paulo. SUSTAINABILITY AND REDUCING CARBON FOOTPRINTQuimica Anastacio is also focused on sustainability, expanding the number of warehouses across Brazil to cut transport distance and thus carbon footprint, as well as offering reverse logistics. “Those that are not looking at sustainability now will be out of the game in a couple of years,” said Krueder. “What we try to do is reduce the kilometres transported,” he added. To this effect, the company recently opened a new warehouse in Porto Alegre in Rio Grande do Sul state in the south of Brazil, and plans to open another in Curitiba in Parana state by the end of the year, bringing the number of warehouses in Brazil to seven. In an example of “reverse logistics”, the company supplies packaging for customers, and then arranges the logistics to collect this packaging when its use is finished. Interview article by Joseph Chang Thumbnail shows Jan Krueder, CEO of Quimica Anastacio.
LNG VIDEO: Europe's May imports could reach new record
LNG VIDEO: Europe’s May imports could reach new record
MADRID (ICIS)–This short outlook video on the LNG market looks at: The latest tenders from EGAS, IEASA and more Maintenance work in the US, a planned terminal expansion in France NBP prices and impacts on LNG, Russian LNG flows and Japan’s demand role in Asia
PODCAST: Slowing China will hurt global economy, chemicals
PODCAST: Slowing China will hurt global economy, chemicals
BARCELONA (ICIS)–As lockdowns, the Common Prosperity policy and lacklustre export markets cut growth in China’s economy, the global chemical industry should prepare for negative demand growth in 2022. Lockdowns have frozen large sections of China’s economy Some restrictions may be in place until November May be no China demand rebound in 2022 Demand for polymers in China may fall this year China could drag down global polymer, chemicals demand growth China PE, PP margins have often been negative since last year Slowing global economy hurts China exports China may not remain driver of global economic growth Common Prosperity policy undermined by zero-COVID policy, economic problems Common Prosperity aims to redistribute wealth, tackle property bubble, environmental problems In this Think Tank podcast, Will Beacham interviews ICIS senior consultant for Asia, John Richardson. Editor’s note: This podcast is an opinion piece. The views expressed are those of the presenter and interviewees, and do not necessarily represent those of ICIS. ICIS is organising regular updates to help the industry understand current market trends. Register here . Read the latest issue of ICIS Chemical Business. Read Paul Hodges and John Richardson’s ICIS blogs.
Petronas to buy Sweden’s Perstorp for €1.54bn
Petronas to buy Sweden’s Perstorp for €1.54bn
LONDON (ICIS)–Petronas has agreed to acquire Sweden-based firm Perstorp, the Malaysia state oil and gas company said on Tuesday, in a move set to further expand its specialty chemicals footprint. Petronas has agreed to acquire the entire equity interest in Perstorp Holding AB for Malaysian ringgit (M$) 7.02bn (€1.54bn) from private equity firm PAI Partners, giving the firm an enterprise value of €2.3bn. The deal is being carried out through its Petronas Chemicals Group (PCG) arm, which has stated a strategy to expand its basic chemicals portfolio and to diversify further into derivatives and specialties, with the Perstorp acquisition representing the creation of a specialty chemicals portfolio. The acquisition is “a major milestone for PCG in establishing a key platform to diversify into the specialty chemical industry and capture new growth opportunities, whilst enabling us to future proof our business against market cyclicality and volatility” said PCG CEO Mohd Yusri Mohamed Yusof. Petronas also acquired Netherlands-based silicones, lube oil additives and chemicals producer BRB Group in 2019. Acquired by PAI Partners in 2006 and transferred from its IV fund to a new investment vehicle managed by the firm and counting Landmark Partners as a cornerstone investor in 2018, Perstorp focuses on the resins and coatings, engineering fluids and animal nutrition markets. The company has dealt with “continued challenges” in recent years, according to chief Jans Secher, speaking when the company announced a loss for the fourth quarter of 2019, and has pursued a lengthy programme of cost-cutting measures, but has seen stronger financial growth since then. Perstorp saw a downgrade to its credit rating in April 2020 by S&P Global Ratings due to the COVID-19 pandemic, to B- with a negative outlook, citing heavy exposure to cyclical end markets such as transportation, industrial and construction. The agency upgraded the company’s outlook from negative to stable in December 2021, but maintained the B- rating. Perstorp has since swung back to profit, recording record earnings before interest, taxes, depreciation and amortisation (EBITDA) in the fourth quarter of 2021 on the back of improved margins despite the energy price surge, and healthy demand. The company reported a record in the first quarter with the highest EBITDA in its history at Swedish kroner (Skr) 845m (€81m). PCG estimates that the purchase will add 28% incremental revenue based on 2021 results and add 2.3m tonnes/year to its production portfolio. “By tapping into PCG’s strength and market leading position in the Asia Pacific region, we are confident that Perstorp can continue to develop into its next phase of growth,” said Secher. ($1 = M$4.39; €1 = SKr 10.44) Thumbnail picture: Petronas Towers in Kuala Lumpur, Malaysia (Source: C F Tham/AP/Shutterstock)
Thailand Q1 GDP growth accelerates to 2.2% as COVID-19
      restrictions ease
Thailand Q1 GDP growth accelerates to 2.2% as COVID-19 restrictions ease
SINGAPORE (ICIS)–Thailand’s economy posted a first-quarter annualized growth of 2.2%, faster than the 1.8% pace set in the previous quarter, on the back of stronger private consumption and exports as COVID-19 restrictions have eased. On a seasonally adjusted quarter-on-quarter basis, the economy expanded by 1.1% in the period January to March 2022, data from the Office of National Economic and Social Development Council (NESDC) show on Tuesday. On a year-on-year basis, private consumption in the first quarter accelerated to 3.9% from 0.4% in the previous quarter. Exports during the period grew 14.6% to $73.3bn, with chemicals and petrochemical products posting an 18.7% increase year on year. Manufacturing posted a slower growth of 1.9% in the first quarter from 3.8% in the previous quarter. Tourism receipts grew for the first time in 11 quarters, rising 63.8% year on year to $4.2bn in January-March 2022 as COVID-19 measures were relaxed. The sector is a major component of the Thai economy. For the whole of 2022, the Thai economy is projected to grow by 2.5-3.5%, supported by improvement in domestic demand, recovery of domestic tourism, and continued export growth, NESDC stated. Exports are projected to post a 7.3% growth, while headline inflation is estimated to be in the 4.2-5.2% range, it said. ($1 = Bt34.52) Visit the ICIS Coronavirus topic page for analysis of the impact on chemical markets and links to latest news.
BLOG: Big divergence between Europe PE, PP markets continue,
      creating seller/buyer opportunities
BLOG: Big divergence between Europe PE, PP markets continue, creating seller/buyer opportunities
SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. Regular readers of the blog will know that we first highlighted the great polyolefins market divergence in April 2021. We said that: Asian and Middle East producers needed to sell more to Europe because of much better netbacks than in China. Buyers should secure more resin supplies from Asia. Until comparative price differentials and spreads started to normalise – which we would be able to recognise from the historic ICIS Pricing data – producers and buyers needed to focus on these two parallel opportunities. But this would require dealing with very challenging container-freight markets. ICIS trade-flow data suggest this can be done. We also presented a scenario where European demand remained strong with supply tight as China moved in the opposite direction. This scenario has happened, as we detail in today’s post. If you haven’t done so already you can literally, make or save millions of dollars from these highly unusual trading patterns. It is never too late to start. 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.
Malaysia’s PRefChem eyes Johor complex restart amid Asia
      demand worries
Malaysia’s PRefChem eyes Johor complex restart amid Asia demand worries
SINGAPORE (ICIS)–Malaysia’s Pengerang Refining and Petrochemical (PRefChem) is widely expected to restart its manufacturing complex soon, after more than two years of outage, which would inject fresh supply in Asia at a time of soft demand. Some market sources said the refinery and cracker could be in the process of restarting, with others saying the downstream polymer units could resume production in June. PRefChem has yet to respond to ICIS’ query on the issue, at the time of writing. Its site in Johor, Malaysia, houses an integrated refinery and petrochemical complex. Naphtha output from its 300,000 bbl/day refinery will be fed to the cracker, which can produce 1.2m tonnes/year of ethylene and 609,000 tonnes/year of propylene, for captive use of downstream units. If fully operational, PRefChem’s annual petrochemical production capacity is expected to be 7.7m tonnes. The restart may weigh on overall sentiment across the petrochemical markets in Asia, coming at a time of downbeat demand amid continuing COVID-19 lockdowns in China. Olefin production margins in Asia have remained squeezed by high feedstock costs, prompting regional cracker operators to keep output curbed. Regional supply, nonetheless, may still be long, given severe weakness in demand. While not expecting fresh supply to hit the spot market when PRefChem restarts, the naphtha market has been bearish, with recent prompt cargoes fetching discounts. In the downstream polyethylene (PE) markets, some apprehensions remained, over whether the planned restart could be carried out without any major hiccups, according to sources close to the matter. PRefChem’s downstream units are expected to produce linear low-density PE (LLDPE) and polypropylene (PP) at the initial stages, the sources said. The company can produce 350,000 tonnes/year of LLDPE, 400,000 tonnes/year of high-density PE (HDPE) and 900,000 tonnes/year of PP at the site. If the restart is successful, the additional capacity is expected to have a major impact on the southeast Asian market, especially in current market conditions where China’s market is effectively closed to imports due to the lockdowns. This would mean PRefChem would probably try to sell most of their available volume to southeast Asia, a market that is already struggling with poor downstream demand. For some buyers though, the resumption of supply from PRefChem could mean better days ahead, as they would then have more diversity in terms of PE supply which, they hope, could equate to more price competition. Suppliers, however, are concerned because they expect pre-sales of PRefChem cargo to be priced below market levels, in order to build acceptance of the new product. “We have to stand by for [market] turbulence,” a market player said. PRefChem’s Johor site was in the process of starting up when a fatal fire hit the diesel hydrotreating (DHT) unit at the refinery in mid-March 2020, shutting down the whole complex. The company, which comprises Pengerang Refining and Pengerang Petrochemical, is a 50:50 joint venture between energy firms PETRONAS of Malaysia and Saudi Aramco. Focus article by Pearl Bantillo Additional reporting by Melanie Wee, Izham Ahmad and Julia Tan
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