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LONDON (ICIS)–Here are some of the top stories from ICIS Europe for the week ended 21 January. Europe PET a basket of confusion, with imports arriving and costs escalating Polyethylene terephthalate (PET) in Europe is split between those who see incoming imports pressuring the market lower, and those who see limited supply and high costs keeping the market firm. UK’s Britishvolt to build EV battery factory in north of England Britishvolt has announced plans to build a £1.7bn electric vehicle (EV) battery factory in Northumberland, the north England, the UK company said on Friday. Europe bioethanol prices tumble amid healthy availability European bioethanol fuel prices fell for the first time in nearly a month amid healthy availability, as the first spot trades of the year were conducted last Thursday and Friday. Crude market could reach surplus in Q2 on muted Omicron impact – IEA The crude oil market could post a surplus in Q2 as producers increase output to take advantage of prices at multi-year highs, the International Energy Agency (IEA) said on Wednesday. INSIGHT: Chemically recycled content to be exempt from Spain’s plastic packaging tax Spain’s draft legislation on the circular economy proposes that material produced by chemical recycling will not be subject to its €450/tonne tax on single-use plastic packaging. INSIGHT: Shifting global investment in chemicals research is a challenge for established markets The chemical industry developed through the clever application of chemistry and technology and will continue to do so as companies adapt to meet the climate threat alongside the needs of growing market demand. Eastman invest $1bn in French hard-to-recycle PET waste chemical recycling facility Eastman is to invest up to $1bn in a hard-to-recycle polyethylene terephthalate (PET) waste methanolysis-based chemical recycling facility in France, the US chemicals major said on Monday.

SINGAPORE (ICIS)–Watch ICIS senior editor Melanie Wee discuss the latest developments in the Asian naphtha market: Naphtha prices driven by surge in oil futures Swift downstream margins rebound prospect slim Olefins production cuts could be sustained Visit the ICIS Coronavirus topic page for analysis of the impact on chemical markets and links to latest news.

SINGAPORE (ICIS)–au Jibun Bank’s flash manufacturing purchasing managers’ index (PMI) for Japan rose to 54.6 in January from 54.3 in December but the recent surge in local COVID-19 cases is weighing on sentiment, the Japanese bank said on Monday. A PMI reading above 50 indicates expansion in the manufacturing economy, while a lower number denotes contraction. The flash January reading signals the strongest improvement in operating conditions since January 2018, au Jibun Bank said in a statement. Both output and new order growth quickened last month, with the latter rising at the fastest pace for nine months, the bank said. “Manufacturers remained confident regarding the health of the sector and continued to take on additional staff, as indicated by a further moderate increase in employment,” it said. “Though firms remained strongly optimistic regarding the 12-month outlook for output, positive sentiment dipped to a five-month low,” the bank said. Japan is currently facing a record number of daily COVID-19 infections, with over 50,000 cases reported on Sunday, according to local media reports. Japan earlier reported a record of over 54,000 cases on 22 January. Tokyo reported 9,468 new cases of COVID-19 on Sunday, a day after the daily figure went over the 10,000-threshold for the first time ever. The Japanese government is expected to place more prefectures under a quasi-state of emergency, according to Kyodo News. Tokyo and 12 other prefectures were added to regions subject to the quasi-emergency measures on 21 January after three prefectures – Hiroshima, Yamaguchi and Okinawa  – were placed under the measures from 9 January. The COVID-19 restrictions are slated to be in place until 13 February in Tokyo and the 12 prefectures. “Private sector firms reported that the surge in COVID-19 cases from the more transmissible Omicron variant had hindered client confidence, most notably in customer-facing industries across the service sector as restrictions were re-introduced across various prefectures including the capital Tokyo,” said Usamah Bhatti, an economist at financial information services provider IHS Markit. Focus article by Nurluqman Suratman

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. As climate pressures build, and as the UN prepares to discuss a global agreement on plastic waste, here are some thoughts on how the polymers industry may change over the next ten years: In the West, niche polymer producers emerge that largely or entirely give up on investing in big new polymer plants because they don’t have the feedstocks, and, anyway, cannot get the regulatory approval or the financing. Value over volume becomes their key metric as they increase output from bio-feedstocks, provided food supply is not jeopardised, and from recycled plastics. Refineries that are still operating focus more heavily on making petrochemicals feedstock to meet booming demand growth. But these refinery-petrochemical complexes reduce carbon through carbon capture and storage and electric cracker furnaces etc. And/or we will see the emergence over the next ten years of alternative production processes that provide sufficient volumes to meet demand, while also solving the carbon problem. But this seems a big stretch without an awful lot more investment. Take the challenges confronting blue and green hydrogen as examples. Producers in general work with brand owners to “redesign the future”, producing packaging solutions that solve both the carbon and plastic waste issues (more on this theme in later posts). Thoughts? Let’s discuss as there is nothing more important for our industry. 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.

SINGAPORE (ICIS)–Here are the top stories from ICIS News Asia and the Middle East for the week ended 21 January 2022. NE Asia ethylene supply overhang to ease as crackers cut run rates The glut in northeast Asia’s ethylene (C2) supply will likely ease next month as production falls as more regional crackers cut run rates and Japanese plants undergo scheduled turnarounds. Weak demand to weigh on China EPDM imports China’s import prices for ethylene propylene diene-monomer (EPDM) have continued to lose grounds in the last few weeks with slow buying. Asia ACN in oversupply near term; producers face cost pressure Asia’s acrylonitrile (ACN) market faces a supply overhang in the near term with recent new capacities that started up in China, while producers are currently grappling with cost pressure. Crude up $1/bbl on rising Middle East tensions after attack on UAE Benchmark crude prices rose more than $1/bbl on Tuesday following an attack on a Abu Dhabi National Oil Company (ADNOC) fuel depot in the UAE, fuelling concerns of an escalation of tensions in the Middle East which could impact supply conditions. China petrochemical demand to take hit from recent COVID-19 outbreaks China’s petrochemical demand is expected to weaken as downstream factories start shutting down operations ahead of the week-long Lunar New Year holiday, aggravated by heightened restrictions in regions currently experiencing COVID-19 outbreaks.

HOUSTON (ICIS)–Intel will make an initial investment of $20bn to build two new microchip factories in Ohio, the US semiconductor producer said on Friday. Planning for the first two factories will start immediately, with construction expected to begin later this year. Production is expected to come online in 2025 at what would be the company’s first new manufacturing site location in 40 years. “Intel’s actions will help build a more resilient supply chain and ensure reliable access to advanced semiconductors for years to come,” said Intel CEO Pat Gelsinger. CHIP SHORTAGE A global shortage of microchips emerged as economies across the globe began to reopen after shutting down to help stop the spread of COVID-19, which led to a surge in demand. The shortage directly contributed to auto manufacturers cutting production, which weighed on demand for chemicals as the automotive industry is a major consumer of petrochemicals that contribute more than a third of the raw material costs of an average vehicle. Polymers used in automobiles include polypropylene (PP), polyurethanes, nylon, acrylonitrile butadiene styrene (ABS), styrene acrylonitrile (SAN), polycarbonate (PC) and styrene butadiene rubber (SBR). Sales of new light vehicles in 2021 totalled 14.93m units, which was up by 3.1% from 2020 but well below the 17m sold in 2019, prior to the pandemic. CHIPS ACT The US Congress introduced legislation in June (Facilitating American-Built Semiconductors Act) aimed at incentivising increased domestic production of chips with an investment tax credit and providing funding (CHIPS for America Act) for semiconductor manufacturing, design, and research provisions. US President Joe Biden said his administration is working with the House and the Senate to finalise the legislation. The CHIPS for America Act would provide $52bn to accelerate additional private sector investment. According to the Semiconductor Industry Association, almost $80bn has been invested in the industry since the start of 2021. Texas Instruments is investing up to $30bn to build a new 300mm wafer fab production facility in north Texas with the potential for up to four fabs at the site to meet future demand. The company also said it continues to add incremental capacity at existing sites. Samsung is also building a $17bn manufacturing facility in Texas, with groundbreaking in the first half of 2022. A Taiwanese firm, Sunlit Chemical, broke ground this week on a $100m plant in Phoenix, Arizona to produce hydrofluoric acid and other high-purity industrial chemicals for the semiconductor sector. The project’s first phase is expected to be operational in early 2023, with the remaining $50m phase 2, involving raw material purification, expected operational in 2025. AUTOMAKER PARTNERSHIPS Some automakers have entered into deals with chip manufacturers to secure their own lines of supply. US automaker Ford and semiconductor manufacturer GlobalFoundries announced in November a deal to create additional semiconductor supply. US automaker General Motors (GM) will work with chip manufacturers Qualcomm Inc, STMicroelectronics NV, Taiwan Semiconductor Manufacturing Co, Renasas Electronics Corp, ON Semiconductor Corp, NXP Semiconductors and Infineon Technologies AG on new strategies designed to improve the supply of microchips needed for modern vehicles. And German car maker BMW sealed a trilateral “direct supply assurance agreement” with microchip firms INOVA Semiconductors and GlobalFoundries in December to secure semiconductor chip supplies for the long term. Focus story by Adam Yanelli Additional reporting by Stefan Baumgarten, Will Beacham

HOUSTON (ICIS)–A potential spread of the Omicron coronavirus variant to China would hurt US coatings major PPG, which has production and distribution facilities in Suzhou, Tianjin and Zhangjiagang, the company’s CEO warned on Friday. “What we are really worried about is, if Omicron gets to China,” Michael McGarry told analysts during the company’s Q4 earnings call. He noted in particular China’s zero tolerance approach to the pandemic. PPG’s largest plant in China is in Tianjin, where a recent small COVID outbreak prompted authorities to test 14m people within two days, he said. “So, if Omicron were to get to China, and they continue with their zero COVID policy, that could have a pretty disruptive effect” on PPG’s business in that country, McGarry said. Even without Omicron, economic activity in China is expected to be soft in the current quarter ending 31 March, due to the more severe operating restrictions because of COVID-19, as well as limitations related to the Beijing Winter Olympics from 4-20 February, he said. However, while China is currently “a little bit soft”, its economy continues to grow, although not as fast as it used to, he added. OMICRON HITS LABOUR, FREIGHT Outside China, Omicron was a major negative for PPG during Q4 2021, and the labour absenteeism it causes continues to be a worry in Q1 2022, McGarry said. Some of PPG’s plants recently had up to 40% of their workforce taken out because of COVID infections and quarantines, hampering the company’s ability to meet demand, which continues to be “robust” in most end-use markets, he said. “The toughest job at PPG right now is plant manager: they wake up in the morning, check their phone to see how many people called off sick”, and once at work, they check how many trucks did not get picked up and what raw materials did not come in, he said. Freight, with truck drivers off because of infections or preventative quarantines, “is the single biggest challenge we have right now”, he added. Furthermore, PPG continues to experience raw materials shortages, with the biggest impact in its US architectural coatings business, he said. As a result of the workforce and raw material issues, the company’s sales backlog grew to $150m at the end of Q4, notably in PPG’s aerospace, automotive refinish and the general industrial businesses. PPG’s main raw materials include epoxy and other resins, titanium dioxide (TiO2) and other pigments, and solvents in the coatings businesses and sand and soda ash in the specialty coatings and materials business. While raw material prices have “levelled off”, PPG is closely watching the recent “pop” in oil prices, which could have an effect on solvents, he said. OUTLOOK PPG will continue to raise its selling prices in Q1, after price hikes in Q4 did not offset the rising labour, transportation and other costs and raw material price inflation. The company will also be working to further diversify its raw material supplier base and to strengthen back-integration into resin manufacturing in the US, McGarry said. While Q1 remains difficult to predict, he expects that as 2022 progresses there should be more reopening of economies from COVID restrictions, an easing of supply chain problems, inventory rebuilding across many end-use markets, along with “a healthy consumer willing to spend”, he said. PPG expects recoveries in automotive refinish, OEM and aerospace coatings,  which combined accounted for 40% of PPG pre-pandemic sales, he said. He noted improving demand trends in: – Automotive OEM coatings, as the semiconductor shortages in the auto sector ease; – Automotive refinish coatings, due to high prices for used cars; – Aerospace coatings, with the Boeing 737 Max being readmitted into service; – Industrial coatings, with the shift away from single-use plastics to metal. (Thumbnail shows a model of COVID-19. Image by Shutterstock) Please click here for the ICIS topic page: Supply ChainPlease click here for the ICIS topic page: Coronavirus, oil price direction – impact on chemicals

LONDON (ICIS)–The European Commission’s delayed decision on whether to include natural gas in its green taxonomy is already slowing LNG investment plans, showing just how effective removing the label would be in stalling natural gas investments. After it emerged at the end of last year that the Commission was planning on labelling gas green, a final plan from the Commission was delayed from December to early 2022. It is now expected to be published later this month. A binding season for the German Hanseatic Energy Hub, which would include an LNG terminal, has already postponed several times and is being held later this year instead of over the winter as was scheduled. Potential customers, which include gas and energy multinationals, told the terminal’s planners that taxonomy was key to their own investment agenda in Germany and in the rest of Europe. Small-scale LNG suppliers also say it will dent forecast expansion plans, with a growing network of bunkering and truck-loading facilities reliant on Trans-European Transport Network funding. Cutting public investment in pure fossil fuels, even if encouraging pure LNG market growth as well, has already forced investing companies to allocate more to renewables and realign long-term strategies. The draft taxonomy criteria for natural gas facilities for energy are intended to prescribe a progressive shift from natural gas-powered facilities to low carbon gases by 2035, which could help hydrogen market growth. It means infrastructure like gas transmission and distribution networks will continue to receive state support, but should not increase gas transmission by volume, a feat opposers say is impossible.

LONDON (ICIS)–Turkish energy companies are braced for further curtailment orders for electricity and natural gas consumers as demand remains at some of the highest levels ever seen and Iranian pipeline deliveries are suspended. A source said gas and electricity transmission system operators BOTAS and TEIAS may be forced to ask medium-sized commercial consumers to reduce consumption of natural gas after all large industrial clients were notified they would receive only 60% of their contracted January gas. The latest curtailment order to industrial clients pushed up electricity prices to a record Turkish lira (TL) 1,345.00/MWh for Saturday. It helped to slash gas demand by 10mcm/day on Wednesday after it reached a record 288mcm/day the previous day, but traders told ICIS BOTAS would need to take more drastic action because of fast-depleting line pack and gas storage levels. Line pack, namely the level of gas that can be stored in the pipeline as opposed to dedicated storage facilities, has been dropping fast, hovering around 366mcm/day on Wednesday compared to 432mcm/day five days before. Storage levels were also falling, with natural gas held in the Turkey’s two storage facilities hovering around 1.2bcm. Storage levels were close to 1.5bcm at the end of December. The trader said there may be only 10-12 days’ worth of gas left at the smaller Tuz Golu storage site, if withdrawal levels continue at current rates. The trader said many industrial companies which rely on natural gas for production may not be able to comply with the curtailment order and would face hefty penalties. He said some dual-fuel power plants may be asked to switch to fuel oil. Turkey is facing a difficult period because the cold snap is expected to drag on, with temperatures set to remain some 2°C below the seasonal average. Meanwhile, pipeline supplies from Iran have been cut for 10 days. BOTAS said the cut was linked to technical difficulties but some traders said Iran itself was facing a period of cold weather and was struggling to supply natural gas to the high-consumption northern areas. Most of its gas reserves are in the south of the country and Iranian consumers have been historically relying on Turkmen imports during periods of peak winter demand. On the other hand, Turkish hydro generation has been significantly reduced in recent months because the country has experienced one of its driest year in a decade in 2021.

LONDON (ICIS)–The massive proliferation in end products for semiconductors in the wake of digitisation led the sector as a whole to focus on cost and optimisation of supply chains over resilience, according to the CEO of producer Intel. Demand spikes and logistics disruption during the coronavirus pandemic have driven extreme chronic supply tightness for semiconductor chips, which has resulted in automotive manufacturers missing production forecasts and scarce availability of many consumer electronics products. The drive towards digitisation has resulted in far more widespread demand for chips as well as increased usage for products such as vehicles that already relied heavily on them. Surging demand led the sector to focus on efficient, cost-effective supply chains, with resilience less of a priority, according to Intel chief Pat Gelsinger. “Everything is becoming digital, and everything digital runs on semiconductors, and what we saw is that focused on cost of supply chain and the optimisation of that and we lost sight of [that] resilience, what I would call a geographically-balanced resilient supply chain,” he said, speaking at a World Economic Forum (WEF) event. As the sector has evolved, Europe has diminished in prominence from the source of 44% of semiconductor chips globally to less than 10%, while the US’ share of the market has fallen from 37% to 12%, as players in other regions scaled up production and western players built out capacity in the rest of the world. Lawmakers in some regions are looking to reverse this shift, with European Commission President Ursula von der Leyen announcing this week plans to propose draft legislation aimed at increasing local EU semiconductor supplies. “By 2030, 20% of the world’s microchips production should be in Europe,” Vvon der Leyen said this week. The CHIPS for America act, introduced in the US Senate in November 2021, aims to offer tax credits and other stimulus measures for investments in semiconductor manufacturing facilities in the US through to 2026. “We’re enthusiastic to see that rebuilding,” Gelsinger said. Calling the measures a “moon shot”, Gelsinger added that security of supply for semiconductor chips stands to become as important than oil in the years to come. “If we would accomplish [stronger US and EU supplies], we would now be building a resilient global supply chain for something that’s more important to our future than where the oil reserves are,” he added. The move in western markets to reduce reliance on chip supplies further afield is understandable in light of the issues of the last few years, but the drive to rebuild domestic production in mature markets and reduce reliance on global producers risks making the supply chain less competitive, according to Ngozi Okonjo-Iweala, director-general for the World Trade Organization (WTO). “I understand the phenomenon of trying to secure supply chains and diversify them, it’s also a way of managing risk,” she said, also speaking at the event. “So, it’s understandable to see people trying to near-shore or on shore some of their supply chains, but I would caution not to take this too far.” Focus article by Tom Brown