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Viewing 1-10 results of 56683
Ethylene26-Apr-2024
SINGAPORE (ICIS)–Siam Cement Group (SCG)
posted an 85% year-on-year decline in Q1 net
profit on losses from chemicals operations, but
the Thai conglomerate expects the segment’s
earnings to recover in H2 on improved olefins
demand and expected restart of its Vietnam
petrochemical complex.
H2 conditions to improve on chemicals
recovery
Long Son Petrochemicals complex restart
targeted in July
Olefins prices to stabilize in Q2, recover
later in 2024
In Thai baht (Bt)
million
Q1 2024
Q1 2023
% Change
Revenue from sales
124,266
128,748
-3.5
EBITDA
12,623
12,170
3.7
Net profit
2,425
16,526
-85.3
*Earnings before interest, tax,
depreciation and amortization
First-quarter EBITDA increased on higher
contribution of businesses related to cement
and construction.
The company’s listed SCG Packaging (SCGP)
subsidiary, meanwhile, posted a 15%
year-on-year increase in EBITDA to Bt5.2
billion as sales rose by 1% to Bt34.0 billion.
Chemicals results
in Bt million
Q1 2024
Q1 2023
% Change
Revenue from sales
45,376
46,805
-3.1
EBITDA
1,289
2,445
-47.3
Net profit
-1,866
1,356
–
Petrochemicals demand remained weak in the
first quarter due to ongoing geopolitical
tensions and weak global economic conditions,
the company said in a filing to the Stock
Exchange of Thailand on 24 April.
The first-quarter loss in the chemicals
business, however, was mainly due to lower
equity income from associates and start-up
expenses of the company’s Long Son
Petrochemicals Complex (LSP) in Vietnam.
Its 100%-owned integrated petrochemical complex
completed initial test-runs early this year but
was shut in March due to equipment issues and
will remain down up to June.
SCG expects to restart the facility in July for
the final test run, followed by commercial
operations beginning August 2024.
In the first quarter, the company sold around
306,000 tonnes of both polyethylene (PE) and
polypropylene (PP) products, down 22% year on
year following the
shutdown at Rayong Olefins’ (ROC) cracker.
SCG now expects olefins demand to improve
gradually in the second half of 2024 as supply
in the region is expected to be limited due to
a series of planned maintenance, particularly
in China and southeast Asia.
It expects stable olefins prices in the second
quarter and a recovery in the latter half of
2024 as demand growth is expected to exceed
capacity additions.
Polyvinyl chloride (PVC) demand in Asia
continues to face challenges due to the
persistent real estate crisis in China, while
supply is impacted by high inventory in China
resulting in more exports to Asia.
Focus article by Nurluqman
Suratman
($1 = Bt37.05)
Crude Oil26-Apr-2024
SINGAPORE (ICIS)–Indonesia’s central bank has
unexpectedly raised its key interest rate to
stabilize its slumping currency – the rupiah
(Rp) – against the strong US dollar, with
further monetary tightening likely given high
possibility of worsening global risks.
Central bank move prompted by rupiah’s fall
to lowest since 2020
Strong US dollar sends global currencies
tumbling
2024 GDP growth forecast at 4.7-5.5%
At 02:45 GMT, the rupiah was trading at
Rp16,223 against the US dollar, easing from a
four-year low of Rp16,316 hit on 17 April.
On 24 April, Bank Indonesia (BI) hiked its
seven-day reverse repurchase rate by 25 basis
points to its highest since 2016 at 6.25%, and
also raised its overnight deposit and lending
rates by a quarter point to 5.50% and 7.00%,
respectively.
“Bank Indonesia continues orienting exchange
rate policy towards maintaining rupiah
stability against the impact of broad-based US
dollar appreciation,” the central bank said in
a statement.
RATE HIKES MAY CONTINUE AMID RUPIAH
WEAKNESS
The rupiah, along with other currencies in
Asia, has been tumbling against the US dollar,
which is being supported by higher-for-longer
interest-rate stance of the US Federal Reserve.
The US dollar is also generally considered a
“safe haven” for investors in times of global
economic distress.
From the start of the year to 23 April, the
rupiah tumbled against the US dollar by 5.1%,
according to Bank Indonesia, noting that the
depreciation was less severe compared with the
Thai baht’s 6.6% fall, the South Korean won’s
7.9% plunge and the Japanese yen’s 8.9% slump
over the same period.
“The key message delivered by BI was that
developments in the global economy have changed
rapidly alongside heightened risks and
uncertainties especially due to the shifting
stance of the Fed’s rate policy and
deteriorating geopolitical tensions in the
Middle East,” Singapore-based UOB Global
Economics & Markets Research said in a
note.
BI has been intervening to stabilize the
rupiah, which slumped to its lowest since 2020
around mid-April as the US Fed is unlikely to
cut interest rates anytime soon while escalated
tensions in the Middle East continue.
The Indonesian central bank’s April monetary
policy decision, like in October last year, was
in response to recent foreign exchange (FX)
weakness amid worsening external conditions, it
said. In October 2023, the central bank had
issued an urgent 25bps interest rate hike.
It deemed the move a “pre-emptive and
forward-looking step” to reduce the impact on
imported inflation and ensure headline
inflation remains within its 1.5-3.5% target.
In March, Indonesia’s inflation was higher than
expected at 3.05%.
“We think today’s decision was a hawkish hike,
and the rationale provided by BI underscores
that its strong focus on FX stability remains
in place,” Japan’s Nomura Global Markets
Research said in a note.
“We believe if the external backdrop does not
improve and IDR [Indonesian rupiah] pressures
persist, this may not yet be the end of BI’s
hiking cycle.”
GDP ON TRACK FOR SOLID
GROWTH
Southeast Asia’s biggest economy remains
resilient despite the build-up of global
uncertainty, BI said in a statement, with
average growth in the first two quarters of
2024 likely to exceed the 5.04% expansion in Q4
2023.
The central bank forecasts a 4.7-5.5% GDP
growth in 2024, compared with the actual 5.04%
expansion rate posted the previous year.
“Goods exports remain unfazed by declining
commodity exports given lower international
commodity prices and weak demand from
Indonesia’s main trading partners, such as
China,” it said.
Indonesia has been in trade surplus for the
47th consecutive month in March. The trade
surplus for the month at $4.5 billion
represents more than a fivefold increase from
February’s $800 million.
On a month-on-month basis, March exports
increased by 16.4%, the first monthly growth
this year, supported by the acceleration of
non-oil and gas (non-OG) exports, particularly
in crude palm oil (CPO), coal, and steel
commodities.
On a year-on-year basis, however, March exports
were down 4.2% to $22.4 billion, but the rate
of decline was narrower than February’s 9.6%;
while imports fell by 12.8% to $18 billion.
Indonesia is one of the biggest net
importers of petrochemicals in southeast
Asia, fulfilling around half of its PE and PP
requirements respectively through imports,
according to the ICIS Supply and Demand
Database.
Focus article by Nurluqman
Suratman
Speciality Chemicals25-Apr-2024
LONDON (ICIS)–Lower pricing across most
business divisions drove a 12.4% drop in BASF’s
first-quarter net income year on year, with the
chemicals major maintaining full-year guidance
as sector demand shows early signs of recovery.
in € million
Q1 2024
Q1 2023
% Change
Sales
17,553
19,991
-12.2
Income from operations before
depreciation and amortization (EBITDA)
2,655
2,811
-5.6
Income from operations (EBIT)
1,689
1,867
-9.5
Net income
1,368
1,562
-12.4
The decline in sales was mainly driven by
“considerably reduced prices” as a result of
lower raw materials and energy prices in almost
all segments as well as lower precious metal
prices in the Surface Technologies segment, the
company said in a statement.
Despite across the board sales drops, earnings
before interest, taxes, depreciation and
amortisation (EBITDA) firmed for most units
other than surface technologies, which posted
an 11.5% decline year on year to €327 million.
The company saw strongest profitability
increases for the materials and nutrition and
care divisions, which saw EBITDA increase 21.8%
and 37% respectively during the quarter, to
€549 million and €261 million.
Negative currency effects contributed to the
sales decrease in all segments.
Q1 EBITDA, adjusted for one-off items, fell by
5.3% year on year to €2.7 billion.
Despite the decline in sales, the Germany-based
producer projects that EBITDA before special
items for 2024 will be between €8.0 billion and
€8.6 billion this year, up from €7.67 billion
in 2023 and in line with earlier forecasts.
Chemicals demand growth in the first three
months of 2024 was stronger than levels for the
wider industrial sector due to customer
restocking, after an extended period of low
reserves.
“The global chemical industry recovered
slightly in the first quarter of 2024. It grew
considerably faster than overall industrial
production because the customer industries
somewhat restocked their very low inventories,”
BASF said.
The announcement comes as Martin Kamieth
steps
into the role of BASF CEO, succeeding
Martin Brudermuller.
A 36-year veteran of the company, Kamieth steps
into the CEO role at a point where the company
is preparing to cut costs by €1 billion at its
Ludwigshafen headquarters, with the form of
those cuts and any closures to ensue yet to be
announced.
Speaking at today’s shareholders’ meeting
outgoing CEO Brudemuller acknowledged the
challenges facing BASF and Europe’s chemical
sector.
He spoke about the difficult choices which will
have to be taken at the company’s flagship
Ludwigshafen Verbund site, adding:
“Ludwigshafen will remain BASF’s largest site
and should be the leading chemical site in
Europe.”
The company expects global GDP growth of 2.3%,
substantially below IMF forecasts this month
of 3.2%.
The trend of chemicals demand slightly
outpacing general industrial output growth is
also expected to continue, according to the
company, which forecasts industrial production
increases of 2.2% compared to 2.7% for the
sector.
Despite recent volatility in crude oil pricing
on the back of escalated tensions between
Israel and Iran, which pushed Brent costs above
$90/barrel, the company continues to project
average values of $80/barrel for the year.
Additional reporting by Nurluqman Suratman
and Will BeachamThumbnail photo:
BASF’s Ludwigshafen, Germany headquarters
(Source: BASF)
(Update releads, adds detail throughout)
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Gas25-Apr-2024
LONDON (ICIS)–On 19 April 2024, the UK
government’s hydrogen support scheme Hydrogen
Allocation Round 2 (HAR2) closed for
applications. To review the support programme
and the current position of the UK hydrogen
market, ICIS hydrogen editor Jake Stones speaks
with hydrogen consultant and demand-side
project manager Duncan Yellen. Over the
conversation, Yellen outlines:
Potential challenges facing the UK’s
hydrogen development plans
The best markets for selling hydrogen today
and their price points
What is the impact of transporting hydrogen
When can a tradeable hydrogen market
emerge?
Ethylene24-Apr-2024
SAO PAULO (ICIS)–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.
Globally, electric car sales stood at 14
million in 2023. The IEA predicts this could
reach around 17 million in 2024, more than one
in five cars sold worldwide.
In the IEA words, these figures are already
showing the update in EVs is “shifting from
early adopters to the mass market.”
Comparatively, Latin America’s numbers are
still very low, however, with EV sales in 2023
at 90,000 units, according to the IEA’s
Global EV Outlook 2024, its annual
report on the industry.
In Brazil, Latin America’s largest economy with
215 million people, sales stood at 50,000 units
in 2023, which tripled 2022 sales but still
represented just 3% of the market.
In Mexico, a 130-million-strong country, EV
sales in 2023 stood at 15,000, up 80% year on
year but still only a market share of just over
1%.
Elon Musk’s Tesla reported on Wednesday that Q1
sales and earnings had fallen fell due to
increased competition from hybrid models.
Meanwhile, China’s EV market has grown
exponentially in just a decade as the state
helped to ensure firms could compete in
favourable conditions.
The government took the decision to strongly
develop its EV sector, with billions of dollars
spent in subsidies over the last decade and a
half, and now western players are playing catch
up.
BRAZIL ETHANOL
EXCEPTIONAs well as Europe and
the US, another key automotive market for EVs
was Brazil.
There, however, producers at least had a green
fuel to justify their inaction: ethanol, which
since the 1970s started to transform Brazil’s
transport emissions landscape, although at the
time the decision was mostly taken to avoid oil
shocks the world had just witnessed.
By the 2010s, when the key Paris Accord and
successive upgrades to it were agreed, Brazil
had already achieved some of the targets for
transport emissions reductions.
The country’s growing role as one of the
world’s breadbaskets and ethanol-powered cars
are, of course, related.
Transport is going electric, however, and there
are some attempts from western established
players to start closing Brazil’s gap with the
rest of the world – as well as the Chinese
producers’ presence.
“Growth in Brazil was underpinned by the entry
of Chinese carmakers, such as BYD, Great Wall,
and Chery, [whose models] immediately ranked
among the best-selling models in 2023. Road
transport electrification in Brazil could bring
significant climate benefits given the largely
low-emissions power mix, as well as reducing
local air pollution,” said the IEA.
“Today, biofuels are important alternative
fuels available at competitive cost and aligned
with the existing refuelling infrastructure.
Brazil remains the world’s largest producer of
sugar cane, and its agribusiness represents
about one-fourth of GDP.”
The Brazilian government approved at the end of
2023 the so-called Green Mobility and
Innovation Programme, which provides tax
incentives for companies to develop and
manufacture low-emissions road transport
technology, with nearly Brazilian reais (R)
19.0 billion ($4.0 billion) to be deployed up
to 2028.
Several major automotive producers do
commercialise hybrid ethanol-electric models,
but all-electric models have been more elusive.
In comes China, again. BYD said earlier this
year it
plans to invest $600 million in a new plant
in Brazil, its first outside Asia, aiming to
produce 150,000 units per year.
General Motors, long established in Brazil,
also said around the same time it was to invest
$1.4 billion up to 2028 at its Brazil
facilities to implement a “complete renewal” of
its vehicle portfolio, focusing on EVs.
Stellantis – the company resulting from the
merger of Italian-American conglomerate Fiat
Chrysler Automobiles and France’s PSA Group –
said recently it would
invest €5.6 billion up to 2030 in South
America, with most of the funds channelled to
its Brazilian operations.
These investments, overall, have given the
beleaguered Brazilian automotive sector the
impetus to potentially recover part of its old
glory. Just a decade ago, Brazil produced well
over 3 million cars per year. In 2023, it
produced 2.3 million.
But Chinese producers’ strong entry into
Brazil’s market – as well as Mexico’s – could
have lasting consequences for consumption
patterns.
Earlier in April, a source at a chemicals
producer in Brazil, for whom the established
producers are a key customer, conceded with
some apprehension it had just purchased a
China-made car.
“Chinese brands are newcomers and as such they
are disrupting the market with lower prices. I
paid for my electric car around R150,000
[$29,200], but some of the established brands
are selling their EV models for well over
R200,000,” the source said.
While inaccessible for most Brazilians, where
the minimum monthly wage stands at R1412
($275), those who can afford SUVs are
increasingly turning their eyes to Chinese
brands.
“They are good cars, and the prices are just so
competitive – the choice for me was clear,” the
source concluded.
According to automotive publications, the
cheapest EV car sold in Brazil, at R120,000, is
manufactured by Chery Automobile, a state-owned
Chinese manufacturer which is the third largest
in its home market.
CHINA MOVES INTO
MEXICOChina’s approach to
subsidising its EV industry is causing concern,
especially in the US, now also in a race to
prop up its own EV sector.
Twenty Chinese EV companies have set up
operations in Mexico, which is part of the
tariff-free North American trade deal USCMA
between Mexico, the US, and Canada.
Washington fears Mexico could act as the gate
of entry into the USMCA free trade zone after
the US imposed hefty tariffs in most EV-related
Chinese goods, precisely because of the
generous state support they enjoy at home.
Last week, Mexican media reported how the US
had put pressure on Mexico to withdraw
subsidies or any other Federal or state support
for Chinese EV manufacturers; Mexican states
are in a race to attract foreign direct
investment (FID) in manufacturing, tapping into
the nearshoring trend.
Also last week, the Mexican Association of
Automotive Distributors (AMDA) showed its
concerns about Chinese firms “invading” the
country’s automotive sector, according to a
report in ABC Noticias.
Since 2020, Chinese-manufactured products and
brands have gained traction among Mexican
consumers, capturing 8.2% of sales during the
first quarter of 2024.
Guillermo Rosales Zarate, AMDA’s president,
said this influx had played a pivotal role in
the industry’s recovery following the
challenges posed by the Covid-19 pandemic, but
the polite words stopped there.
AMDA published a report, compiled with official
data from Mexico’s statistical office Inegi,
which showed the sharp increase in China-made
automotive parts and vehicles now present in
the market.
“In this first quarter, the sale of products
imported from China, manufactured in China and
imported into the Mexican market, and sold
through the various participating brands,
already represents 19.2%,” said Cristina
Vázquez Ruiz, coordinator of economic studies
at AMDA.
“If we extract Chinese brands from this
percentage, this would represent 8.2% [of car
sales in Mexico].”
The IEA in its annual report stayed away from
this controversy. The IEA is a lobby group
which advocates for greener technologies and
decarbonisation, as most of its key member
countries – and financiers – lack the
traditional energy sources of their own: the
green transition for most of them is a simply a
strategic must do.
“Given its proximity to the US, Mexico’s
automotive market is already well integrated
with North American partners, and benefits from
advantageous trade agreements, large existing
manufacturing capacity, and eligibility for
subsidies under the IRA [US regulation propping
up green investments],” said the IEA.
“As a result, local EV supply chains are
developing quickly, with expectations that this
will spill over into domestic markets. Tesla,
Ford, Stellantis, BMW, GM, Volkswagen (VW), and
Audi have all either started manufacturing or
announced plans to manufacture EVs in Mexico.”
Elsewhere in Latin America, EVs update has been
rather poor. In Colombia, a country of 50
million, sales in 2023 stood at 6,000 units.
In Costa Rica, with a population of five
million, sales stood at 5,000 units. The IEA
did not have date for other countries in the
region.
ELECTRIC BUSES
STRONGERUptake of electric buses
in Latin America, especially in urban areas
where much of the investments required come
from public or semi-public entities, has been
stronger.
City buses are easier to electrify than
long-distance coaches thanks to their
relatively fixed driving patterns and lower
daily travel distances.
Once again, Chinese manufacturers are exporting
“large volumes” of electric buses, accounting
for over 85% of electric city bus deployments
in Latin America, said the IEA.
“Cities across Latin America, such as Bogota
and Santiago, have deployed nearly 6,500
electric buses to date. There are also
longer-standing programmes, such as the Zero
Emission Bus Rapid-deployment Accelerator
partnership that was launched in 2019 to
accelerate the deployment of zero-emission
buses in major Latin American cities,” it
added.
“Buenos Aires is targeting a 50% zero emission
bus fleet by 2030, and a wider study of 32
Latin American cities expects that 25,000
electric buses will be deployed by 2030, and
55,000 by 2050.”
Globally, almost 50,000 electric buses were
sold in 2023, equating to 3% of total bus sales
and bringing the global stock to approximately
635,000, concluded the IEA.
Front page picture: EV charging
points.
Source: Shutterstock
Insight by Jonathan Lopez
Petrochemicals24-Apr-2024
MUMBAI (ICIS)–India’s Bhansali Engineering
Polymers Ltd (BEPL) plans to nearly triple its
acrylonitrile butadiene styrene (ABS) capacity
at Abu Road in the northwestern Rajasthan state
to 200,000 tonnes/year by March 2026.
The plant’s current capacity is 70,000
tonnes/year.
The company has determined that a bigger
expansion than initially planned is possible
after awarding work on the expansion to Japan’s
Toyo Engineering, it said in a filing to the
Bombay Stock Exchange (BSE) on 20 April.
In January 2024, BSEL had proposed a capacity expansion to
145,000 tonnes/year.
“After [a] detailed analysis [by Toyo
Engineering] it was concluded that overall ABS
capacity of 200,000 tonnes/year can be achieved
and will be a better option compared to the
earlier proposal,” BEPL said.
The expansion project will be funded through
internal accruals, it said, adding that cost of
the expansion project will be finalised by
June.
Recycled Polyethylene Terephthalate23-Apr-2024
TORONTO (ICIS)–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.
The registry will require plastic resin
manufacturers, producers of plastic products
and service providers to annually report on the
amounts and types of plastic they put out in
the market, and where the plastic ends up.
Environment minister Steven Guilbeault said at
a webcast press event on Monday that the
registry would create an inventory of plastics
data, with the objective of providing
transparency about the production,
distribution, sale, use and disposal of
plastics in Canada.
Industry knew what kind of plastics is being
produced, to whom it is sold, and how it is
used, the minister said.
The registry, in turn, would put this
information into one place and make it
accessible to the public, researchers and
non-governmental organizations, enabling them
to track plastics production and plastics use,
he said.
The registry would have a similar role in
fighting plastic pollution as the annual
greenhouse gas (GHG) inventory reports the
government uses in combatting emissions, he
said, adding that without this information it
was hard to tackle these challenges.
The first phase of reporting to the plastics
registry’s IT system is due to begin on 29
September 2025.
UN PLASTICS POLLUTION
TREATYIn related news, delegates
from more than 170 countries on Tuesday
gathered in Ottawa for the fourth session of
the UN’s Intergovernmental Negotiating
Committee on Plastic Pollution (INC-4) to
develop an international legally binding treaty
on containing plastic pollution.
The event runs from 23-29 April.
German chemical producers’ trade group VCI and
Chemistry Industry Association of Canada (CIAC)
said they are supporting the fight against
plastics pollution.
VCI is looking to INC-4 and a subsequent final
INC-5 to be held in South Korea in November for
a global commitment to a circular economy, in
which plastic products are reused or recycled,
rather than ending up as waste in the
environment, it said.
At the same time, VCI stressed the benefits of
plastics.
An across-the-board “demonization” of plastics
would end up harming the climate and the
environment, rather than helping it, said VCI
director general Wolfgang Grosse Entrup.
“A sustainable future requires plastics,” he
said and pointed, as examples, to plastics used
in wind turbines, electric vehicles (EV) and
packaging – applications in which plastics help
avoid carbon dioxide (CO2) emissions, he said.
Likewise, CIAC vice president of policy
Isabelle Des Chenes told media in a webcast
event that plastics, for example, help preserve
food.
“There’s a lot of plastic and there’s a lot of
plastic for a reason,” she added.
Additional reporting by Tom Brown
Thumbnail photo of environment minister
Steven Guilbeault; photo source: government of
Canada
Speciality Chemicals23-Apr-2024
BARCELONA (ICIS)–Recent cracker closure
announcements in Europe and Japan may be the
first of many as the industry grapples with
chronic overcapacity driven by China and the
Middle East.
Three cracker closure announcements in
Europe, Japan since late March
1.4 million tonnes of capacity affected,
but up to 20 million may be needed
Europe, Japan, South Korea suffer from
higher costs
Negative chemicals demand growth possible
in China
China still dominates global chemical
markets
Opportunity to pivot sites to low carbon,
local markets
In this Think Tank podcast, Will
Beacham interviews ICIS Insight
Editor Nigel Davis, ICIS
Senior Consultant Asia John
Richardson and Paul
Hodges, chairman of New Normal
Consulting.
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.
Speciality Chemicals23-Apr-2024
LONDON (ICIS)–Eurozone private sector activity
continued to thaw in April, moving further into
growth territory as a resurgent service sector
offset a manufacturing industry sinking deeper
into contraction.
North-south divide eases as Germany, France
condition improve
Manufacturing sector weakens in eurozone,
UK
Input cost inflation likely to pressure
European Central Bank
The eurozone composite purchasing managers’
index (PMI) for the month firmed to 51.4, a
substantial increase from 50.3 in March and the
highest level in nearly a year, as the bloc
continued to gradually lift out of a protracted
downturn. A PMI score of above 50.0 signifies
growth.
The north-south divide that has characterised
recent months, with Mediterranean nations
firming while Germany and France remained mired
in contraction, eased during the month, with
more-broad-based momentum among key economies.
Germany returned to growth during the month,
while France came close to stabilising,
according to PMI data provider S&P Global.
Momentum also continued to build for the UK
economy, which hit an 11-month high of 54.0,
despite the manufacturing sector slipping back
into recessionary territory at 49.1, with
momentum also sinking for producers in the
eurozone.
At 45.6, the eurozone manufacturing sector PMI
reading represented a four-month low and the
13th consecutive month of contraction, although
the industry outlook was buoyed by signals of
firmer demand driven by the global inventory
cycle.
Price pressures intensified slightly during the
month as average input costs across the goods
and services sector saw the fastest combined
increase over the past year after cooling in
March. Despite manufacturing sector input
pricing remaining on contraction footing, the
decline was the smallest in 14 months.
Higher cost and sales price inflation is likely
to be noted by the European Central Bank’s
monetary policy committee, according to Cyrus
de la Rubia, chief economist at Hamburg
Commercial Bank, which helps to assemble the
eurozone PMI dat.
Odds are still strong for the first interest
rate cuts to fall in June, he added, but
the price increases are likely to present a
stronger challenge to the decision, and
potentially slow the cadence of additional
reductions.
“The PMI figures are poised to test the ECB’s
willingness to cut interest rates in June.
Accelerated increases in input costs, likely
driven not only by higher oil prices but also,
more concerningly, by higher wages, are a cause
for scrutiny,” he said.
“Concurrently, service sector companies have
raised their prices at a faster rate than in
March, fuelling expectations that services
inflation will persist. Despite these factors,
we expect the ECB to cut rates in June.
However, we… expect a more cautious approach,”
he added.
Consultancy Oxford Economics also expects the
first rate cut to come in June despite the
growing evidence of stronger upward pressure on
inflation.
“The increase in output prices remains above
its long-term average, driven by the services
sector, but we do not think sticky services
prices will prevent the ECB from cutting rates
in June,” said Oxford senior economist Leo
Barincou.
Despite the ongoing disruption in the Red Sea,
supply chains continued to tighten, with
manufacturing supplier delivery times falling
for the third consecutive month as a result of
fewer shipping delays. A steep reduction in
input purchases by eurozone manufacturers also
eased pressure on logistics.
Early second-quarter conditions point so far to
a 0.3% expansion in eurozone GDP and a 0.4%
uptick in for the UK compared to the first
three months of the year, according to the
data.
Focus article by Tom Brown.
Thumbnail photo: A statue of a bull outside
the Amsterdam Stock Exchange, Netherlands
(Source: Hollandse Hoogte/Shutterstock)
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