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PODCAST: Antwerp Declaration shows chemicals CEOs mean business
BARCELONA (ICIS)–Leaders are now more willing to stand up and demand positive action by the EU to save the region’s industrial value chains. Antwerp Declaration shows chemicals leaders now willing to be visible CEOs have responsibility to help drive Europe transformation Regulators, politicians can deliver better infrastructure, permitting European Parliament elections 6-9 June may elect more business-friendly MEPs Fundamental shift in Europe demand patterns BASF expected to reinvent its Ludwigshafen Verbund site Future could see domination by “supermajors” or more protected, regional 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.
BLOG: How Europe can avoid ‘sleepwalking’ towards offshoring of petrochemicals
SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson: The European petrochemicals industry, to borrow Jim Ratcliffe’s phrase, does not have to continue “sleepwalking towards offshoring its industry, jobs, investments, and emissions”. Ratcliffe, the INEOS chairman, was on the money with the phrase, contained in a call-to-action letter to European Commission President, Ursula von der Leyen, earlier this month. This came in the same week that producers launched the Antwerp Declaration for a European Industrial Deal. This is all great news for the European industry as my two scenarios for global petrochemicals in 2030 – Supermajors or Deglobalisation – will be shaped by the actions of companies and legislators. In Europe, the threat of a further flood of competitively priced and lower-carbon imports of polymers risks lost local jobs in refining, petrochemicals and downstream (the downstream jobs being many more than upstream). And if petrochemicals plants shut plant, upstream refineries important for local fuels supply may be threatened.  You can also make a case for recycling targets being hard to achieve under Supermajors. As well as lobbying legislators, what else can European producers do? Here are my suggestions: Companies need to “make their own demand” by more forcefully arguing the case for the societal and environmental value of what they produce (while, of course, also ensuring that what they produce has strong social and environmental values!). A deeper dive into the opportunities in different end-use markets and geographies is the key. Let’s take wire-and-cable grade low-density PE (LDPE) as an example. A lot more electricity transmission in Europe will have to be built to distribute renewable energy, which of course is an environmental gain and elsewhere in the world. Could European wire-and-cable LDPE producers be a leader in providing product to Africa? This is a very different approach than during the 1993-2021 Supercycle, when booming demand was guaranteed. All producers had to do as ensure there was enough supply, preferably with low feedstock costs and efficient logistics. 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.
Saudi SABIC swings to net loss in 2023 on Hadeed sale, challenging market
SINGAPORE (ICIS)–Saudi Arabia’s chemicals major SABIC swung to a net loss of Saudi riyal (SR) 2.77bn ($739m) in 2023, largely due to one-off losses related to a divestment, while earnings from continued operations shrank amid challenging global market conditions. in Saudi Riyal (SR) bn 2023 2022 % Change Revenue 141.5 183.1 -22.7 EBITDA 19.0 36.4 -47.7 Net income from continuing operations 1.3 15.8 -91.8 Net income attributable to equity holders of the parent -2.8 16.5 – The company’s net loss for 2023 was “driven mainly from the fair valuation of the Saudi Iron and Steel Co (Hadeed) business”, SABIC in a filing to the Saudi bourse Tadawul on 27 February. In early September 2023, SABIC announced it had agreed to sell its entire stake in the Saudi Iron and Steel Co (Hadeed) to Saudi Arabia’s sovereign wealth fund for SR12.5bn. The sale resulted in non-cash losses worth SR2.93bn. From continuing operation, full-year net income declined by 91.8% on reduced profit margins for major products, as well as lower earnings of joint ventures and associated firms. SABIC also incurred charges from non-recurring items amounting to SR3.47bn in 2023,“as a result of impairment charges and write-offs of certain capital and financial assets as well as provisions for the restructuring program in Europe and constructive obligations”. Meanwhile, SABIC’s average product sales price in 2023 fell by 21%, reflecting the global downturn in petrochemical markets, it said. Overall sales volumes fell by 2% year on year in 2023 amid sluggish end-user demand, the company said. “Year 2023 presented numerous challenges for the petrochemical industry – the market environment was shaped by lackluster macroeconomic sentiment, weak end-user demand, and a wave of incremental supply for a large suite of products,” it said. The company’s petrochemicals business posted a 20% year-on-year decline in sales to SR131.3bn in 2023, with EBITDA down by 42% at SR14.6bn. “The petrochemical industry navigates a challenging operating environment – underwhelming demand within our target markets led to lower year end product prices and there remains considerable uncertainty heading into the first quarter of 2024,” SABIC CEO Abdulrahman Al-Fageeh said. “The announced divestment of Hadeed is proceeding as planned – this optimization of internal resources will enhance our core focus on petrochemicals,” he said. SABIC is also pursuing a number of initiatives to address the “competiveness of our European assets” aimed at a “maintainable and modernized footprint in the region”, Al-Fageeh added. The company plans a higher capital expenditure of between $4bn and 5bn in 2024, compared with $3.5bn-3.8bn last year. SABIC has started construction of its $6.4bn manufacturing complex in China’s southern Fujian province. The project will include a mixed-feed steam cracker with up to 1.8m tonne/year ethylene (C2) capacity and various downstream units producing ethylene glycols (EG), polyethylene (PE), polypropylene (PP) and polycarbonate (PC), among other products. SABIC is 70%-owned by energy giant Saudi Aramco. ($1 = SR3.75)

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AdvanSix petitions US to impose Superfund taxes on imports of nylon 6, capro
HOUSTON (ICIS)–AdvanSix has requested that the US impose Superfund taxes on imports of nylon 6 and caprolactam (capro). On Tuesday, AdvanSix did not immediately respond to a request for comment. AdvanSix proposed a tax rate of $14.77/ton. The next step is for the government to gather comments and consider requests for hearings about AdvanSix’s request. The deadline to file comments or request hearings is 22 April. HOW THE SUPERFUND TAX WORKSThe US introduced the Superfund taxes in mid-2022 on taxable chemicals and imports of taxable substances. The proceeds raised by the taxes will help replenish the government’s Superfund program, which pays for clean-up at waste sites. The Superfund tax regime divides materials into two groups. The first group is levied on the sale or use of 42 chemicals by producers or importers. Many of these chemicals are fundamental building blocks such as ethylene, propylene, butadiene (BD), benzene, toluene, xylene and methane. The second group is restricted to imports and covers substances that are sold or used in the US. This second batch of taxes applies to substances that contain at least 20% of the 42 taxable chemicals. In addition, the taxable rate would depend on the proportion of the 42 taxable chemicals contained in the substance. The request by AdvanSix falls under this second group. As part of its request AdvanSix filed two petitions asking the US to add nylon 6 and capro to its list of taxable substances. Thumbnail shows nylon Image by Shutterstock.
European Commission calls for member states to maintain gas demand cuts
LONDON (ICIS)–The European Commission on Tuesday urged member states to maintain current gas consumption reductions as the expiration date of emergency legislation mandating the cuts approaches. Introduced in the wake of Russia’s invasion of Ukraine and the subsequent scramble in the EU to reduce its exposure to natural gas supplies from the country, the two-year emergency bill called for EU countries to reduce gas consumption by 15% compared to April 2017 – March 2022 averages to shore up limited reserves. According  to the Commission, governments collectively reduced demand by 18% between August 2022 and December 2023, with efforts to reduce consumption driven by soaring prices in the winter of 2022 that led to the introduction of price caps in the EU and by some individual member states. ENERGY IMPACT Prior to the onset of the war, the EU derived over half of its supplies of natural gas, which had been embraced as a means of lowering CO2 emissions, particularly following Germany’s move to phase out nuclear energy. Gas had surged from under $200 per metric million British thermal units (/MMBtu) at the start of the 2022 to over $1,700 in October of that year. Pricing has subsided since then but energy pricing remains a concern, particularly for energy intensive industries. Citing energy costs as a key factor behind a decision to push for drastic cuts at its Germany headquarters, BASF stated that 2023 natural gas pricing in Europe remained twice the 2019-21 average and five times US Henry Hub averages, although prices have fallen this year. BASF’s move to scale back its Ludwigshafen Verbund complex was attributed by CEO Martin Brudermuller to what he termed temporary factors such as demand, and other drivers such as higher energy costs, which he claimed are “structural” in Europe. FUTURE PROPOSALS The current emergency legislation is set to expire on 31 March this year, but the European Commission is proposing to adopt a Council recommendation calling for member states to maintain the voluntary reductions that have been adopted over the last two years. The target would be to maintain gas consumption at 15% below 2017-22 averages, the Commission said, with Commissioner for Energy Kadri Simson and EU energy ministers to discuss the measure on 4 March. Despite a more stable European gas market outlook and less volatile pricing, tight global markets and geopolitical upheaval mean that EU economies need to remain vigilant, according to a Commission statement. “The persistence of geopolitical tensions, tight global gas markets and the EU’s objective to completely get rid of Russian fossil fuels, continued energy savings are still necessary,” the Commission said. Thumbnail photo source: Hollandse Hoogte/Shutterstock
ICIS Hydrogen Market Watch
LONDON (ICIS)–The ICIS Hydrogen Market Watch is a weekly overview of the latest developments across the global hydrogen economy, featuring coverage of policy, regulation and transmission, as well as key pricing insights for the cost of producing hydrogen. .
Falling Ukraine VTP prices may help resurrect gas market competition – trading association CEO
Ukrainian VTP prices are converging with EU values Falling prices could incentivise return to free market rules Gas Traders of Ukraine CEO says softening supply risks could see cross-border trading resume LONDON (ICIS)–Ukraine could lift gas trading regulatory restrictions and revert to free market arrangements as a window of opportunity is opening up, the CEO of the association Gas Traders of Ukraine said. Andrii Myzovets said falling gas prices on the Ukrainian domestic market may soon converge with tariffs on the regulated household segment, which means the cap could be lifted if the downward trend continues. The government implemented martial law at the start of Russia’s invasion of Ukraine in February 2022. This translated into restrictions across the board, including the gas market, where household tariffs were capped and gas exports banned. As civilian infrastructure has come under attack over the last two years, gas demand has fallen, with this decrease exacerbated by bearish fundamentals. Front month Ukraine VTP prices exclusive of value added tax (VAT) have been falling below Ukraine hryvnia (UAH) 11,300/kscm (€25.75/MWh). To compare, the Ukrainian regulated household tariff exclusive of VAT is UAH 6,633/kscm and exceeds UAH 7,000/kscm when retail related charges are added. MORE COMPETITION The household segment is critical to revitalising the wholesale and retail markets because demand from industrial consumers who buy at free market prices has shrunk. Myzovets said industrial consumption prior to the war was close to 10 billion cubic meters (bcm) annually. However, industrial demand has now dropped to 4bcm/year. Ukraine’s overall annual demand has now shrunk by a third to nearly 20bcm/year. This means that most of the remaining demand is covered by the state-owned producer Naftogaz at regulated tariffs. Since the start of the war, Naftogaz has consolidated its position, either expanding domestic output via its production arms Ukrgasvydobuvannya (UGV), taking over nationalised distribution assets, expanding its retail services or dominating the wholesale market by snapping up volumes produced by indepedents. By the end of 2023, Naftogaz’s total share in production was 74%. While UGV and Ukrnafta increased their production by more than 5% in 2023 compared to the previous year, independents saw their output plunge by 15% as some of the privately-owned assets were nationalised. Prior to the start of war, Ukraine had sought to liberalise its wholesale and retail markets, successfully lifting all price caps in August 2020, in line with commitments to align with EU free market rules. Nevertheless, rising demand following the lifting of covid related lockdown restrictions and the turmoil sparked by war also led to a decoupling of the Ukrainian market from neighbouring EU hubs. LIFTING RESTRICTIONS Myzovets believes that as supply risks are now softening, there is a case to lift other restrictions including a ban on gas exports from the internal market and reignite cross-border trading. Non-resident traders who are injecting gas in storage can reexport the gas to their home markets but locally produced volumes cannot be sold abroad. Cross-border trading with neighbouring EU markets came to a halt after the war as companies could not afford to buy comparatively more expensive gas on hubs. Naftogaz has also sought to pause its dependence on imports to limit costs. Nevertheless, as Ukrainian and EU hub prices are now beginning to align, there could be greater incentives to rekindle cross-border trading interest. Finally, Myzovets also believes that by allowing the privatisation of smaller shares in the state-producer UGV, the state could also help to increase competition and gradually revert to pre-war free market arragements. “Naftogaz could keep a majority stake and sell smaller shares to western buyers,” he said.
Japan January inflation at 2.0%; end to negative interest rates in sight
SINGAPORE (ICIS)–Japan’s core consumer inflation in January rose by 2.0%, matching the Bank of Japan’s (BoJ) price stability target and supporting expectations that the central bank will end its ultra-low interest rates policy by April. Consumer inflation at lowest since March 2022 BoJ’s benchmark interest rate at -0.1% since Jan 2016 Weaker yen drives up import costs The core consumer price index (CPI) – which excludes volatile fresh food prices – in January weakened from 2.3% in the previous month, marking its third straight month that the country’s inflation has slowed, data from the Statistics Bureau showed on Tuesday. January’s core CPI reading also marks its lowest point since March 2022 as cost of imported raw materials decreased but the number came in higher than market expectations. “[BoJ] Governor Kazuo Ueda has expressed confidence of anchoring inflation above the government’s target of 2% and inflation reading is expected to pick up in February as the impact from the government’s price relief measures fades on a year-on-year basis, boosting market expectations that the BOJ is nearing the end of its ultra-loose monetary policy soon,” Malaysia-based HongLeong Bank said in a research note on Tuesday. The sharp depreciation of the yen has caused Japan’s import bill to soar. At 03:45 GMT, the yen was trading at Y150.48 against the US dollar, down by more than 6% from the start of the year. Source: xe.com Japan relies significantly on imported crude oil as it lacks substantial domestic production. About 80-90% of its crude oil imports are sourced from the Middle East, according to the International Energy Agency (IEA). While the country’s domestic refineries can satisfy demand for transportation fuels, it imports liquefied petroleum gas (LPG) and naphtha heavily as domestic production does not meet the required levels. ALL EYES ON BOJ The BoJ is widely expected to end its negative interest policy, introduced in January 2016, by April this year. The policy was kept for years to stimulate credit growth and investment, in the central bank’s fight against deflation. In its latest meeting in January, the central bank kept its benchmark interest rate at -0.1%, but its quarterly economic report hinted at possible policy normalisation. For the whole of 2023, Japan’s consumer inflation posted an annualized average of 3.1%, up from the previous year’s 2.3% average and the highest recorded since 1982, because of the weaker yen, which made imports more expensive. Despite BoJ officials’ confidence in hitting the 2% inflation target, recent data undermines this view following two consecutive quarters of GDP contraction due to weak consumption. Japan’s economy shrank by an annualised rate of 0.4% in the fourth quarter of 2023, following a 2.9% contraction in the July-September period. For the whole of 2023, it posted a 1.9% growth. Because of the recession in the second half of last year, the country was overtaken by Germany as the third-biggest economy in the world. “The challenging growth outlook for Japan adds further risk to a delay to our projected timeline for BOJ normalisation in 2024,” Singapore-based UOB Global Economics & Markets Research said. “That said, we still expect BOJ’s normalisation to commence only after 2024’s Shunto Spring wage negotiations between major corporations and unions which takes place around March,” it added. Shunto is the Japanese term for “spring wage offensive”. The season, which is typically between February and April, refers to a period when thousands of Japanese labor unions simultaneously negotiate wages and working conditions with their employers. Focus article by Nurluqman Suratman Thumbnail image: Large container cranes stand at a port in Tokyo, Japan on 15 February 2024. (FRANCK ROBICHON/EPA-EFE/Shutterstock)
Americas top stories: weekly summary
HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 23 February. LyondellBasell to lease California plant to produce recycled resins from waste LyondellBasell has acquired a recycling plant in California from PreZero in which it plans to produce post-consumer recycled resins from plastic waste, the US chemicals major said on Tuesday. Brazil’s Unigel gets green light from creditors for debt restructuring Unigel has agreed a Brazilian reais (R) 3.9 billion ($791 million) debt restructuring with its creditors, which has saved the beleaguered styrenics, acrylics and fertilizer producer from filing for bankruptcy for the time being. Mexico’s Orbia to pause PVC investments after weak Q4 results Orbia will be pausing polyvinyl chloride (PVC) capacity expansion due to weak market economics which weighed on its 2023 earnings, the Mexico-based producer said. US Huntsman expects gradual recovery, seeks to boost prices and volume Huntsman expects a gradual recovery to take hold in 2024, in which the company will attempt to pursue higher prices and recover share, the CEO said on Thursday. Pembina to supply Dow Canada net-zero petchem project with ethane Canadian midstream energy firm Pembina Pipeline has entered into long-term agreements to supply Dow’s upcoming net-zero petrochemicals project at Fort Saskatchewan in Alberta province with 50,000 bbl/day of ethane.
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