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SINGAPORE (ICIS)–South Korea’s petrochemical exports in January fell by 25% year on year to $3.8bn, with overall shipments also contracting due to a combination of high-base effect and poor global demand. For the whole of 2022, the country’s petrochemical exports grew by 2.1% to $51.3bn, with a marked slowdown in the last quarter of the year. Demand weakness from its primary market China, and prolonged logistics disruptions caused by a second nationwide truckers’ strike last year (24 November – 9 December) weighed on overall trade. In January 2023, the country’s trade deficit ballooned to a record $12.7bn, with exports down 16.6% year on year at $46.3bn and imports slipping by a more moderate pace of 2.6% to $59.0bn, data from the Ministry of Trade, Industry and Energy (MOTIE) showed. Overall shipments to China – South Korea’s largest trade partner – slumped by 31.4% year on year in January, while those to the US fell by 6.1%. “The exports decline is attributed to high inflation, high interest rates and other negative factors currently affecting the global economy, as well as a high-base effect from previous year’s record-breaking January exports,” MOTIE said. January automobile exports rose 21.9% year on year to $5bn as growing demand for eco-friendly cars, sport utility vehicles and high value-added vehicles drove up unit export prices, the ministry said. South Korea’s total semiconductor exports for the month fell 44.5% year on year to $4.8bn. “Core semiconductor parts… and memory chips plunged in price as demand weakened and backlog piled up, heavily damaging overall chip export,” MOTIE said. “Display exports cratered from the falling unit prices of OLED [organic light-emitting diode] products, triggered by enhanced productivity amidst the economic slowdown. Home appliances exports were impeded as high interest rates dragged down spending in developed countries,” it said. Overall exports to the EU edged 0.2% higher and those to the Gulf Cooperation Council (GCC) nations rose 4.0%, “while those to other regions decreased, owing to global inflation, austerity measures and sluggish growth”, MOTIE said. The weaker January trade data was accompanied by a contraction in South Korea’s factory activity for the month. Its manufacturing purchasing managers’ index (PMI), based on a survey conducted by financial information and analytics firm S&P Global, inched up in January to 48.5 from 48.2 in December. The PMI reading has remained below the expansion threshold of 50 for seven consecutive months. “The deterioration in South Korean manufacturing conditions was sustained into the new year, as output, orders and exports remained in contraction territory,” said Usamah Bhatti, economist at S&P Global Market Intelligence. “Overall new order intakes also fell sharply in January as higher interest rates in response to inflationary pressures squeezed client purchasing power in both domestic and international markets,” Bhati added. Focus article by Nurluqman Suratman Thumbnail image: At a container port in Busan, South Korea on 10 June 2020. (By Ryu Seung-Il/ZUMA Wire/Shutterstock) Click here to read the Ukraine topic page, which examines the impact of the conflict on oil, gas, fertilizer and chemical markets. Visit the ICIS Coronavirus topic page for analysis of the impact on chemical markets and links to latest news.

SINGAPORE (ICIS)–Caixin’s China manufacturing purchasing managers’ index (PMI) edged higher to 49.2 in January from 49.0 a month earlier as output fell at a softer pace, the Chinese media firm said on Wednesday. A PMI reading above 50 indicates expansion in the manufacturing economy, while a lower number denotes contraction. The January reading signalled a sixth successive monthly deterioration in operating conditions, Caixin said in a statement. Output fell at a marginal pace that was the softest in five months, with some companies noting that the easing of COVID-19 containment measures had reduced pressure on operations, it said. Demand conditions remained relatively subdued overall, and this contributed to a further fall in overall new work, Caixin said. New export business also contracted further amid reports of relatively weak global demand conditions. “Since Covid controls were optimized at the end of 2022, China has seen a surge in Covid infections. According to the Chinese Center for Disease Control and Prevention, the numbers of fever clinic visits nationwide and people hospitalized with Covid peaked in late December and early January, respectively, and have declined since then,” said Wang Zhe, senior economist at Caixin Insight Group. Improving expectations, restoring confidence, increasing income, expanding consumption, and stimulating domestic demand will be among the priorities for the Chinese government, Zhe said. “There is still uncertainty in how the pandemic will develop, so full preparation should be made to deal with the next wave of the virus,” Zhe added. China’s official manufacturing PMI released on 31 January crossed to expansionary territory in January at 50.1, from a 34-month low of 47.0 in the previous month as the country relaxed its zero-COVID policy.

HOUSTON (ICIS)–US Marathon Petroleum’s Martinez Renewables Fuels project (MRF), continues on schedule, officials said during the company’s 2022 Q4 earnings conference call on Tuesday. The MRF is a joint venture of Marathon and Neste to transform the once-idled refinery in Martinez, California, into a renewable fuels production site. The facility remains on track for production of 260m gal/year of renewable diesel in Q1 of this year, with pretreatment capabilities to come online in the second half of 2023. By Q4 of 2023, MPC and Neste said they expect the converted Martinez refinery to reach its full production capacity of 730m gal/year. Additionally, Marathon officials said the Dickinson renewable diesel facility in North Dakota has optimised operations to be able to bring in more advantaged feedstocks, lowering the carbon intensity of the fuels produced. “We’ve enhanced our position in the renewables value chain … We’ll continue to look for opportunities leveraging strategic partnerships with Neste and ADM,” Mike Hennigan, Marathon CEO, said. Hennigan added than Marathon was also executing a plan at its Los Angeles refinery, which will improve energy efficiency and lower facility emissions. Company-wide, Q4 2022 crude capacity utilisation stood at 94%, with a total throughput of 2.9m bbl/day, “roughly flat” year on year, Marathon said. “Refining operating costs per barrel were $5.62 for Q4 2022, versus $5.36 for Q4 2021. The majority of this increase was primarily driven by higher energy costs, project expense associated with higher turnaround activity, as well as a special compensation expense,” said the company. Additional reporting by Jonathan Lopez

MADRID (ICIS)–UK chemical companies’ sales fell sharply between the third and the fourth quarter as half reported a fall in demand and exports, trade group Chemical Industries Association (CIA) said on Wednesday. According to the CIA, the figures for the chemicals industry showed “just how bad” the country’s economic performance is. Earlier on Tuesday, the International Monetary Fund (IMF) downgraded its UK GDP growth forecast for 2023 sharply as companies and households are set to endure higher borrowing costs and still-high energy prices. The CIA said 53% of respondents to its quarterly business survey had reported a fall in exports to the EU in the fourth quarter. Meanwhile, 50% said demand for their products had fallen in Q4 both at home and abroad. The trade group also attributed some of the woes the chemicals sector is facing to the impact that climate change-related regulations, which said could deter investment in the country. “We knew we were heading for challenging times, but the extent of contraction is worse than feared. As an industry we stand ready to deliver growth and deliver net zero for the UK, but we cannot do that while the policy-framework kills off any incentive for manufacturing investment in our country,” said the CIA’s CEO, Steve Elliott. “When a typical UK chemical business not only has to report on 17 different climate change measures, before even trying to compete with a far more attractive US investment climate, driven by the Inflation Reduction Act [IRA], why would companies want to place money into the UK?” Passed in August 2022, the IRA is set to prop up green investments in the US on the back of generous tax breaks, prompting fears among chemicals players in the EU and the UK about Europe falling behind in the green economy. The CIA’s head of economic affairs, Tom Warren, said more companies had reported a fall in sales between the third and fourth quarter of 2022 than did between the first and second quarter of 2020, at the height of the COVID-19 pandemic. “[This] shows how challenging the end of last year was for chemical manufacturers. Action is needed from Government in 2023 to convince international investors that the UK really is a place to do business,” said Warren.

LONDON (ICIS)–Investors interest in funding development of new battery storage projects across the European Union and the UK is set to grow in 2023, market sources told ICIS. “This year inflation is losing traction as renewable projects are adapting to the new environment and moving ahead,” Ro Lazarovitch, partner at law firm Bracewell said during a roundtable energy discussion on 31 January. The European Commission President Ursula von der Leyen revealed on 26 January plans for EU’s own Inflation Reduction Act (IRA)-style package – similar to the one recently implemented in the US – called the Green Deal Industrial Plan, for clean energy technologies including battery energy storage. “The Green Deal Industrial Plan is our plan for Europe to secure our place as the home of industrial innovation and clean tech and covers four key pillars: regulatory environment, financing, skills, and trade,” said von der Leyen. “Europe needs a real and very ambitious energy storage strategy that directly encourages investors and producers throughout the supply chain, from primary material extraction to recycling,” Julian Popov, a member of the advisory council at EU’s largest public-private partnership Climate-KIC and European Council on Foreign Relations told ICIS. “In the context of the IRA, we must finally support the most successful and proven innovative enterprises to increase the competitiveness of the EU. At the same time, it is extremely necessary to work closely with American companies, to build partnerships, and not to raise protectionist barriers,” he added. BATTERY STORAGE PUSH Alongside funding new renewable capacity, battery storage plants will be key for EU’s energy transition, sources said. “We are not seeing significant abandonment of renewable projects as renewable market is adapting to the inflation environment, although the execution of some projects is being delayed,” added Lazarovitch. Funding appetite for battery storage is growing given various supporting schemes across EU, added one investor. “Tenor and debt financing for battery storage projects really varies significantly between projects and regions,” explained Lazarovitch. Variables such as size, route-to-market, debt-to-equity, jurisdiction, will all play a part, he said. “A standalone, medium-sized battery storage project with floor pricing will attract a very different debt package to, for example, financing a portfolio of storage projects with low leverage and merchant pricing,” the Bracewell partner told ICIS. Popov added that the EU should not disrupt or profoundly transform the market, but use it to advance energy storage.
“During the acute energy crisis that has now passed, the market has shown that it works. This simple fact should also apply to batteries and other forms of energy storage,” he said. “One of the risks we face is a solar energy boom that will cannibalize its own success. We therefore need to encourage the rapid deployment of batteries and hydrogen production to form a more balanced renewable energy market model,” Popov concluded. CEE DEVELOPMENTS The financing market is still evolving, especially in the CEE, stressed Lazarovitch. Last year Bracewell’s deal in Greece was one of the largest in southeast Europe for battery project. Renewable developer Fotowatio Renewable Ventures acquired from Greek developer Wootis a majority stake in a 600MW battery storage project, the largest commercial operation in the field of power storage with battery systems in Greece, said an official release on 7 November.

LONDON(ICIS)–In this episode of the ICIS Hydrogen Insights podcast, hydrogen editor Jake Stones is joined by ICIS senior quantitative analyst for hydrogen Colton Chow. The pair explore the development of European hydrogen markets up to 2050, discussing hydrogen pricing, the change from grey to green hydrogen, imports and demand. Click here to access the episode on podomatic

MADRID (ICIS)–Growth domestic product (GDP) in the UK will fall by 0.6% in 2023 compared with 2022 as companies and households face tighter monetary conditions and elevated energy prices, the International Monetary Fund (IMF) said on Tuesday. The new UK GDP forecast for 2023 represents a revision of 0.9 percentage points compared with the IMF’s World Economic Outlook which was published in October. Elsewhere, growth prospects for the eurozone improved slightly with GDP in the 20-country currency union expected to grow by 0.7% year on year in 2023 as inflation moderates on the back of lower energy prices facilitated by state support. This represents an upward revision of 0.2 percentage points since October. Globally, the IMF said growth is expected to slow in 2023 and remain weak by historical standards as inflation and the war in Ukraine weigh on activity. GDP forecasts (in %) 2022 2023 Difference for 2023 from October’s WEO 2024 Difference for 2024 from October’s WEO Eurozone 3.4 0.2 0.2 1.6 -0.2 -Germany 1.9 0.1 0.4 1.4 -0.1 -France 2.6 0.7 0.0 1.6 0.0 -Italy 3.9 0.6 0.8 0.9 0.0 -Spain 5.2 1.1 -0.1 2.4 -0.2 UK 4.1 0.6 -0.9 0.9 0.3 INTEREST RATES, ENERGY WEIGH UK interest rate hikes in 2022 mean sharply higher borrowing costs for households and companies which could slow the key petrochemical-intensive construction sector further. Moreover, the government’s plan to end to subsidies on energy bills in the spring will place an additional burden on already stretched consumers. “The accelerated pace of rate increases by the Bank of England (BoE) and the European Central Bank (ECB) is tightening financial conditions and cooling demand in the housing sector and beyond,” said the IMF. Although the forecast for the eurozone was upgraded, the IMF said that the services and manufacturing sectors in Europe remain in contraction territory due to poor consumer confidence. “High-frequency indicators for the fourth quarter suggest that the manufacturing and services sectors are contracting. Consumer confidence and business sentiment have worsened. With inflation at about 10% or above in several eurozone countries and the UK, household budgets remain stretched,” said the Washington-based body. However, the IMF did highlight some “positive surprises” for economic growth in Q3 2022, when Europe was dealing with the immediate aftermath of the war in Ukraine. Better-than-expected growth during the quarter came on the back of stronger-than-expected private consumption and investment amid a tight labour markets as well as greater-than-anticipated fiscal support. “[In Q3 2022] Households spent more to satisfy pent-up demand, particularly on services, partly by drawing down their stock of savings as economies reopened. Business investment rose to meet demand,” said the IMF. “On the supply side, easing bottlenecks and declining transportation costs reduced pressures on input prices and allowed for a rebound in previously constrained sectors, such as motor vehicles. Energy markets have adjusted faster than expected to the shock from Russia’s invasion of Ukraine.”

MUMBAI (ICIS)–India’s economy is projected to post a weaker growth for the next fiscal year ending March 2024 from the 7% estimate for the current year as the global slowdown is expected to continue hurting exports. “The actual outcome for real GDP growth will probably lie in the range of 6.0% to 6.8%, depending on the trajectory of economic and political developments globally,” based on the Economic Survey presented by Indian finance minister Nirmala Sitharaman to the parliament on Tuesday, ahead of the national budget setting scheduled on 1 February. The survey examined the performance of various sectors of the economy in the current fiscal year ending March 2023. The Indian economy has recovered from the ill-effects of the coronavirus pandemic but continues to be affected by the global economic slowdown. “The recovery of the economy is complete; non-banking and corporate sectors now have healthy balance sheets and hence, we don’t have to speak of pandemic recovery anymore, we have to look ahead to the next phase,” the country’s chief economic advisor V Anantha Nageswaran said at a televised press conference. The International Monetary Fund (IMF) has pegged 6.8% economic growth in fiscal 2022-23, 6.1% for 2023-24 and 6.8% for 2024-25 this morning, largely unchanged from forecasts made in October 2022. External headwinds will cause the deceleration in GDP growth for most Asian economies in 2023. “Geopolitical frictions, persisting inflationary pressures, and subdued demand are expected to suppress global trade further in 2023. This is likely to affect many countries, including India, with the prospects of sluggish exports continuing into financial year 2023-24,” according to India’s own economic survey. Commodity prices which had risen sharply due to the Russia-Ukraine conflict that began in late February 2022 have yet to reach pre-conflict levels. High food and energy prices have kept inflation high for most of the current fiscal year. Another problem is the continued downward pressure on the Indian rupee (Rs) given likelihood of further interest rate hikes by the US Federal Reserve, according to the survey. India’s current account deficit is expected to stay high as imports would continue to rise amid a strong domestic economy, while the slowing global economy could slow down exports. “The export outlook may remain flat in the coming year if global growth does not pick up in 2023,” according to the report. Focus: India fiscal 2023-24 economic growth to fall below 7% on weak global cues Focus article by Priya Jestin ($1 = Rs81.92) Click here to read the Ukraine topic page, which examines the impact of the conflict on oil, gas, fertilizer and chemical markets. Visit the ICIS Coronavirus topic page for analysis of the impact on chemical markets and links to latest news.

SINGAPORE (ICIS)–China’s official manufacturing purchasing managers index (PMI) crossed to expansionary territory in January at 50.1, from a 34-month low of 47.0 in the previous month as the country relaxed its zero-COVID policy, official data showed on Tuesday. A PMI reading above 50 indicates expansion, while a lower number denotes contraction. The sub-index for large enterprises stood at 52.3 in January, up from 48.3 in December last year, while the production sub-index stood at 49.8, up from December’s 44.6 but remained in contraction mode, according to the National Bureau of Statistics (NBS). China’s non-manufacturing PMI, which includes the services sector, surged to 54.4 in January, up from 41.6 in December. Click here to read the Ukraine topic page, which examines the impact of the conflict on oil, gas, fertilizer and chemical markets. Visit the ICIS Coronavirus topic page for analysis of the impact on chemical markets and links to latest news.

SINGAPORE (ICIS)–China’s GDP growth is projected to rebound to 5.2% in 2023 from 3.0% last year as a sudden lifting of most its pandemic-related restrictions paved the way for a rapid rebound in economic activity, according to the World Economic Outlook (WEO) Update of the International Monetary Fund (IMF) released on Tuesday. The 2023 growth forecast for the world’s second-biggest economy was revised up from the IMF’s previous estimate of 4.4%. “The [zero-COVID] measures have served China very well in terms of protecting their population during the difficult times of the pandemic, but it was becoming increasingly difficult to sustain and there was a very rapid pivot towards the end of last year with the reopening of the economy,” IMF chief economist Pierre-Olivier Gourinchas said at a press conference in Singapore for the launch of the WEO update. “That leads currently to a situation where it is in a bit of a state of flux in the first few months after the reopening but what we are seeing after that is the stabilisation of the economy, fully reopened and fully able to produce and consume … so that is a major factor behind our upward revision for China for 2023,” he said. Fewer supply chain disruptions are also expected in China this year compared with 2022 – when lockdowns were implemented due to Beijing’s zero-COVID policy – and this will boost domestic consumption, Gourinchas told reporters. “We’re gonna get an increase in domestic demand as Chinese households are going to be able to resume activities and start spending,” he said. “Some estimates that we have computed in the fund suggests that for every percentage point higher growth in China, there is a spillover effect to the rest of the world that is about 0.3 percentage points,” he added. China’s economy posted a 3.0% growth in 2022 – the first time in more than 40 years that its growth fell below the global average, according to the IMF. Recovery could stall amid greater-than-expected economic disruptions from current or future waves of COVID-19 infections or a sharper-than-expected slowdown in the property sector, Gourinchas said. A deepening crisis in the real estate market remains a major source of vulnerability for the economy, with risks of widespread defaults by developers and resulting financial sector instability, the IMF said in its report. Spillovers to the rest of the world would operate primarily through lower demand and potentially renewed supply chain problems. “There are other forces at play when we look at the Chinese economy for instance the property sector is still showing signs of weakness,” Gourinchas said. “The property sector…. was one of the important components of growth in [the] past [but] will not be as much of an engine of growth until there’s been some cleaning up in the sector. This is something that is weighing on economic activity in China,” he said. The country’s economic growth is projected to decelerate to 4.5% in 2024 before settling at below 4% “over the medium term amid declining business dynamism and slow progress on structural reforms”, the IMF said. “We are seeing signs that the Chinese economy might not be growing at the same rate in the coming years after this rebound [in 2023],” Gourinchas said. The reopening boosts GDP growth in China and globally “through the demand that the Chinese households may have for foreign goods or services and tourism, but it can also put upward pressure on commodity prices and that will reverberate in the current environment”, he said. “On balance, our assessment is that the net of these two will be a factor that will be conducive to more growth and will not necessarily lead to an acceleration of inflation coming from commodity prices,” Gourinchas said, adding that the IMF forecasts commodity prices to decline this year. Oil prices are expected to fall by around 16.2% year on year in 2023, according to IMF projections. Thumbnail photo: Pierre-Olivier Gourinchas, chief economist and director at IMF’s research department, speaking at a press conference in Singapore. (Source: IMF) Focus article by Nurluqman Suratman Thumbnail photo: Pierre-Olivier Gourinchas, chief economist and director at IMF’s research department, speaking at a press conference in Singapore. (Source: IMF) Click here to view the ICIS Coronavirus, oil price crash – impact on chemicals topic page. Click here to read the Ukraine topic page, which examines the impact of the conflict on oil, gas, fertilizer and chemical markets.