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HOUSTON (ICIS)–US farmers have now harvested 15% of their corn crop and 12% of the soybean acreage according to the US Department of Agriculture (USDA) weekly crop progress report. The current pace for corn is above both the 2022 level of 11% and the five-year average of 13%. Right now, North Carolina is the leading state with 78% of its crop completed, followed by Texas at 73%. In other updates on the corn acreage the weekly report showed that there is now 95% of the crop which is dented and 70% that is mature. There is 53% of the crop being rated as good to excellent. Soybean harvest has reached 12% which is above the 7% achieved in 2022 and just ahead of the five-year average of 11%. The leading state for harvest progress is Louisiana at 79% completed, followed by Mississippi at 61%. Currently there is now 73% of the soybean acreage, which is dropping leaves, with 50% of the crop now rated as good to excellent.

HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 22 September. US auto workers union to expand strike at 38 GM, Stellantis parts distribution facilities United Auto Workers (UAW) membership will begin a “Stand Up Strike” at 38 Stellantis and GM parts distribution centres at 16:00 GMT (noon EST) after negotiations with two of the Big Three have made no progress since the strike began eight days ago. INSIGHT: Large construction cost overruns hit US chemical plants A surge in new US industrial projects and a chronic shortage of construction labourers are contributing to cost overruns of about 50% for some renewable fuel and chemical projects. Ford reaches tentative labour deal in Canada, avoids strike Ford and labour union Unifor have reached a tentative three-year collective deal for about 5,600 Ford auto workers in Canada, thus avoiding a strike. US auto union’s ‘Stand Up Strike’ enters fourth day The United Auto Workers (UAW) union’s “Stand Up Strike” entered its fourth day on Monday, targeting one plant from each of the Big Three automakers amid efforts to improve wages and benefits for its 146,000 members.

LONDON (ICIS)–Click here to see the latest blog post on Chemicals & The Economy by Paul Hodges, which looks at where ‘normal’ interest rates might be today 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. Paul Hodges is the chairman of consultants New Normal Consulting.

LONDON (ICIS)–Here are some of the top stories from ICIS Europe for the week ended 22 September. Turkey PE, PP spot prices stable to firm as market braces for tougher access to loans Turkish polyethylene (PE) spot values remained unchanged this week, while prices in the polypropylene (PP) market were stable to firm, according to market sources. European jet fuel prices steady as demand woes offset by supply constraints With peak travel demand season long gone, the rally observed in European jet kerosene prices, tracking gains in upstream values, stalled earlier this week, lacking demand-side support. September Europe PX contract price up by €50/tonne The European September paraxylene (PX) contract reference price has risen by €50/tonne month on month on the back of an increase in feedstock costs and firmer PX values in the influential Asian market. Eurozone inflation modest decrease in August could stifle further interest rate hikes Eurozone inflation edged down in August, according to the latest data from the EU’s statistics agency Eurostat on Tuesday. Europe MMA prices firm on lack of imports Europe methyl methacrylate (MMA) prices have firmed due to a lack of cheap imported material.

Updated on 25 September. On this topic page, we gather the latest news, analysis and resources, to help you to keep track of developments in the area of sustainability in the fertilizers industry. LATEST NEWS HEADLINES Tecnicas Reunidas, Allied Green Ammonia to build green hydrogen and green ammonia plant in Australia By Sylvia Traganida 22-Sep-23 LONDON (ICIS)–Tecnicas Reunidas and Allied Green Ammonia have signed an agreement to start the first phases of green hydrogen and green ammonia production facilities in the Northern Territory, Australia. Australian fertilizer producer Orica accelerates climate change targets By Sylvia Traganida 19-Sep-23 LONDON (ICIS)–Australian fertilizers and explosive manufacturer Orica has stepped up its climate change targets amid a strong business performance. Nestle, Cargill and CCm Technologies launch joint UK trial on sustainable fertilizer By Chris Vlachopoulos 12-Sep-23 LONDON (ICIS)–Nestle and Cargill have launched a UK, two-year trial to assess whether cocoa shells from a local confectionery could be used to create low-carbon fertilizer. The volumes of cocoa shells are provided by Cargill, as well as CCm Technologies. EnBW acquires stake in planned Norwegian ammonia plant  By Amun Lie 29-Aug-23 LONDON (ICIS)–German utility EnBW announced on 29 August it has acquired a 10% equity stake and offtake right for a renewable ammonia production plant developed by Norwegian company Skipavika Green Ammonia (SkiGA). The production facility is set to completed in 2026, to be powered by renewable electricity and with a planned production capacity of 100,000 tonnes/year. Yara Germany signs agreement for decarbonisation of cereal cultivation using green fertilizers By Sylvia Traganida 10-Aug-23 LONDON (ICIS)–Yara Germany has signed a co-operation agreement with the Bindewald & Gutting Milling Group and Harry-Brot for the decarbonisation of cereal cultivation in Germany through the use of green fertilizers. Hyphen, ITOCHU ink MoU to explore potential Namibia hydrogen collaboration By Gary Hornby 09-Aug-23 LONDON (ICIS)–Hyphen Hydrogen Energy and the ITOCHU Corporation announced 8 August that the two companies have signed a memorandum of understanding (MoU) surrounding hydrogen in Namibia. INSIGHT: BASF grapples with demand trough, slow road back By Tom Brown 02-Aug-23 14:12 LONDON (ICIS)–BASF and the wider chemicals sector is dealing with an environment more singular even than the conditions seen in the pandemic and 2008 financial crash according to BASF chief Martin Brudermuller, with little sign of a V-shaped recovery from the current demand trough. SABIC AN ships low-carbon urea to New Zealand By Deepika Thapliyal 24-Jul-23 14:57 LONDON (ICIS)–The first global shipment of low-carbon urea from SABIC Agri-Nutrients Company (SABIC AN) arrived in Timaru, New Zealand, the Saudi-based producer said. US Cargill and John Deere collaborate to enable revenue for farmers adopting sustainability By Mark Milam HOUSTON (ICIS)–US agribusiness titans Cargill and John Deere have announced a collaborative effort to streamline the digital and in-field experience for farmers using John Deere’s technology and electing to participate in Cargill’s RegenConnect program. Canada’s Lucent Bio announces approval of biodegradable nutrient delivery patent By Chris Vlachopoulos LONDON (ICIS)–In Canada, Lucent Bio has announced the approval of a biodegradable nutrient delivery technology (US Patent No 11,691,928) which, the company claims, has the potential to re-invent the delivery of nutrients in agricultural practices by using water-insoluble biopolymers in crop nutrition. Rather than delivering nutrients to the plants all at once, Lucent Bio’s technology aims to deliver nutrients to plants more gradually, through microbial mineralisation. Aker, Statkraft’s 10-year PPA to spur European renewable ammonia push further By Luka Dimitrov 06-Jul-23 16:50 LONDON (ICIS)–A 10-year renewable ammonia power purchase agreement (PPA) between renewable developer Aker Horizons and European energy firm Statkraft is expected to ramp up of the European hydrogen economy further, both companies said in a release 5 July. EU CARBON BORDER ADJUSTMENT MECHANISM (CBAM) EXPLAINED What is it? The risk of carbon leakage frustrates the EU’s efforts to meet climate objectives. It occurs when companies transfer production to countries that are less strict on emissions, or when EU products are replaced by more carbon-intensive imports. This new mechanism would counteract this risk by putting a carbon price on imports of certain goods from outside of the EU. How will it work? EU importers will buy carbon certificates corresponding to the carbon price that would have been paid, had the goods been produced under the EU’s carbon pricing rules. Conversely, once a non-EU producer can show that they have already paid a price for the carbon used in the production of the imported goods, the corresponding cost can be fully deducted for the EU importer. This will help reduce the risk of carbon leakage by encouraging producers in non-EU countries to make their production processes greener. A reporting system will apply from 2023 with the objective of facilitating a smooth roll out and to facilitate dialogue with non-EU countries. Importers will start paying a financial adjustment in 2026. How is the fertilizer industry affected? The fertilizer industry is one of the sectors to fall under the CBAM. The more energy-intensive nitrogen fertilizers will be affected most in the sector by the mechanism. DEFRA CONSULTATIONS EXPLAINED The UK’s Department for Environment, Food & Rural Affairs (DEFRA) launched a consultation at the beginning of November 2020 on reducing ammonia emissions from urea fertilizers. The consultation ran until 26 January 2021. It set out three options for tackling ammonia emissions: A total ban on solid urea fertilizers A requirement to stabilise solid urea fertilizers with the addition of a urease inhibitor. A requirement to restrict the spreading of solid urea fertilizers to between 15 January and 31 March of a given year. Liquid urea is excluded from any new rules or restrictions. DEFRA is currently analysing the feedback received. In March 2022, DEFRA announced that it had delayed introducing restrictions on the use of urea by at least a year to support farmers with fertilizer availability and keep their costs down Should DEFRA decide to restrict the use of urea in the future, growers would be left with just ammonium nitrate-based fertilizers. PREVIOUS  NEWS HEADLINES BASF, Yara Clean Ammonia to evaluate low-carbon blue ammonia production facility in US Gulf Coast Yara Clean Ammonia, Cepsa to launch clean hydrogen maritime corridor EU details CBAM reporting obligations Saudi Arabia’s Ma’aden exports its first low-carbon blue ammonia shipments to China US Bunge and Nutrien Ag announce alliance to support sustainable farming practices Maire subsidiary Stamicarbon wins US green ammonia engineering contract India’s IFFCO launches liquid nano-DAP fertilizer EU Parliament backs CBAM, emissions trading measures OCP granted €100m green loan to build solar plants at Morocco facilities EU unveils plans to tackle greenwashing India’s IFFCO and CIL to manufacture nano DAP for three years USDA awards Ostara funds to boost sustainable phosphate fertilizer output Canadian prime minister confirms fertilizer emission goal is voluntary US fertilizers industry increases carbon capture in 2021 – TFI Indian president calls for reduction in chemical fertilizer use IFFCO plans to export nano urea to 25 countries Amman selects Elessent Clean Technologies for Indonesia sulphuric acid plant Lotte Chemical forms clean ammonia consultative body with RWE and Mitsubishi Corporation Global 2020-2021 specialty fertilizer demand growth led by north America, Asia BASF and Cargill extend enzymes business and distribution to US Saudi Aramco awards sulphur facilities overhaul contract to Technip India sets green hydrogen targets for shipping, oil & gas, fertilizer sectors Germany misses climate target despite lower energy consumption TFI reacts to US Congress passing the Water Resources Development ActHelm becomes a shareholder in UK bio-fertilizer company Unium Bioscience Yara inks deal to deliver fossil-free green fertilizers to Argentina Canadian firms plan fuel cell generator pilot using green ammonia Deepak Fertilizers awards contract to reduce emissions, increase productivity Saudi Aramco launches $1.5bn sustainability fund to support net zero ambition CF Industries and ExxonMobil plan CCS project in Louisiana Canada’s plan to cut fertilizer emissions is voluntary – minister Canada’s fertilizer emission goal raises food production concerns Uniper, Vesta to cooperate on renewable ammonia site in the Netherlands German Uniper to work with Japan’s JERA on US clean ammonia projects ADNOC ships first cargo of low-carbon ammonia to Germany US Mosaic and BioConsortia expand collaboration to microbial biostimulant IMO deems Mediterranean Sea area for sulphur oxides emissions control Canada’s Soilgenic launches new enhanced efficiency fertilizers technology for retail Austria’s Borealis aims to produce 1.8m tonnes/year of circular products by 2030 European Parliament rejects proposed carbon market reform IFA ’22: southern Africa looks to bio-fertilizer as cheaper, sustainable option IFA ’22: Indian farmers will struggle to embrace specialty fertilizers – producer Canadian Nutrien plans to build world’s largest clean ammonia facility in Louisiana Japan’s JGC Holdings awards green ammonia plant contract to KBR Bayer to partner with Ginkgo to produce sustainable fertilizers Australia Orica and H2U Group partner on Gladstone green ammonia project Canada sets tax credit of up to 60% for carbon capture projects UK delays urea restrictions to support farmers as fertilizer costs at record high EU states agree to back carbon border tax Yara to develop novel green fertilizer from recycled nutrients USDA announces plans for $250m grant programme to support American-made fertilizer Canada seeks guidance to achieve fertilizer emissions target Fertilizer titan Pupuk Indonesia develops hydrogen/blue ammonia business India launches green hydrogen/ammonia policy, targets exports Canada AmmPower to develop green hydrogen and ammonia facility in Louisiana US DOE awards grant to project to recover rare earth elements from phosphate production Fertiglobe, Masdar, Engie to develop green hydrogen for ammonia production Czech Republic’s Spolana enhances granular AS production India’s Reliance to invest $80bn in green energy projects Yara, Sweden’s Lantmannen aim to commercialise green ammonia by 2023 Novatek and Uniper target Russia to Germany blue-ammonia supply chain Fertz giant Yara goes green with electrification of Norwegian factoryCanada Arianne Phosphate exploring use of phosphate for hydrogen technology FAO and IFA renew MoU to promote sustainable fertilizer use Sumitomo Chemical, Yara to explore clean ammonia collaboration Sri Lanka revokes ban on imports Tokyo scientists convert bioplastic into nitrogen fertilizer Aramco plans Saudi green hydrogen, ammonia project China announces action plan for carbon peaking & neutrality Saudi Aramco targets net zero emissions from operations by 2050 Fertiglobe goes green with Red Sea zero-carbon ammonia pro Australian fertilizer major Incitec Pivot teams up for green ammonia study INTERVIEW: BASF to scale up new decarbonisation tech in second half of decade – CEO India asks fertilizer companies to speed up production of nano DAP Japan’s Itochu set to receive first cargo of blue ammonia for fertilizer use Norway’s Yara acquires recycled fertilizers maker Ecolan Bayer Funds US start-up aims to cut nitrogen fertilizer use by 30% BP: Green ammonia production in Australia feasible, but needs huge investment Origin and MOL explore shipping green ammonia from Australia India’s IFFCO seeks to export nano urea fertilizer Sri Lanka reinstates ban on import of chemical fertilizers Nutrien to cut greenhouse gas emissions 30% by 2030 RESOURCES IFA – Fertilizers and climate change  TFI – Sustainability report 

SINGAPORE (ICIS)–Here are the top stories from ICIS News Asia and the Middle East for the week ended 22 September 2023. US-Asia ethylene trade slows in Oct; Korea’s supply sees uptick By Yeow Pei Lin 22-Sep-23 11:21 SINGAPORE (ICIS)–Northeast Asia’s spot demand for November-delivery regional ethylene (C2) supply will increase, as exports from the US are expected to dwindle next month due to a tightly shut arbitrage window. Asia glycerine offers stay firm despite deep-sea Brazilian spot availability By Helen Yan 21-Sep-23 12:39 SINGAPORE (ICIS)–Despite more deep-sea Brazilian glycerine coming to the region, producers in southeast Asia are keeping their offers firm in a bid to compensate for the eroded margins in the fatty acids market. Japan August chemical exports fall 12% amid China slowdown By Nurluqman Suratman 20-Sep-23 12:52 SINGAPORE (ICIS)–Japan’s chemical exports in August fell by 11.7% year on year to yen (Y) 873.1bn ($5.9bn), weighing on its overall shipments abroad which fell for the second straight month, with China’s slowdown continuing to dampen trade. INSIGHT: SE Asia packaging consumption behaviours are changing, but not in the way you think By Jackie Wong 20-Sep-23 14:00 SINGAPORE (ICIS)–Demand for packaging products in southeast Asia is clearly changing for better or worse, judging by trends observed in Indonesia, the region’s most populous nation. INSIGHT: Better sentiment to boost September prices of Asia petrochemicals By Lina Xu 19-Sep-23 11:20 SINGAPORE (ICIS)–Asia’s petrochemical prices are expected to increase in September on improved macroeconomic sentiment and forecasts of higher crude oil values, which are being supported by key producers’ output reduction plan until the end of the year. Singapore Aug petrochemical export fall narrows; China demand may rebound By Nurluqman Suratman 18-Sep-23 12:47 SINGAPORE (ICIS)–Singapore’s petrochemical exports declined for the 12th month although the rate of contraction has narrowed to a single-digit level in August, possibly indicating that the worst may be over in view of upbeat China data.

HOUSTON (ICIS)–Australian producer Agrimin Limited has announced it has entered into a Share Sale Agreement (SSA) with the receivers of former potash producer Kalium Lakes which held the Beyondie project which was focused on manufacturing sulphate of potash (SOP). The deal includes Kalium Lakes subsidiaries, Kalium Lakes Potash and Kalium Lakes Infrastructure. These entities comprise all of the operations and employees of the Kalium Lakes group. Kalium Lake ran into an issue of funding and after lacking further means it went into administration in early August 2023 and appointed McGrathNicol Restructuring, who then announced the project will continue on while it considers options for the sale or recapitalisation efforts. Agrimin said to undertake its own assessment of the ongoing requirements of the Beyondie project it will initially transition the site to a period of care and maintenance before targeting a recommencement of brine field and pond operations in mid-2024. The current intention is for a plant restart in H1 2025 and expansion thereafter. The agreement remains subject to several conditions and events being satisfied before the transaction completes including Agrimin raising capital in the coming weeks to fund the transaction. It will also need a respective deeds of company arrangement being approved by the creditors of each company. On the assumption that all conditions are satisfied, completion of the transaction is anticipated in early November with the administrators to have the second meeting of creditors on 3 October.

HOUSTON (ICIS)–United Auto Workers (UAW) membership will begin a “Stand Up Strike” at 38 Stellantis and GM parts distribution centres at 16:00 GMT (noon EST) after negotiations with two of the Big Three have made no progress since the strike began eight days ago. UAW President Shawn Fain said during a live stream that no additional actions have been taken against Ford because that automaker has made concessions to the union and progress during negotiations this week. The parts distribution facilities are in 20 states and across all nine of the UAW regions. The strikes at three assembly plants that began eight days ago, which affects about 12% of North American production for the Big Three, will continue, Fain said. Ramesh Iyer, director, engineering plastics at Chemical Data (CDI), said the latest action will not only impact the automakers, but also service departments at dealerships as they tend to keep only the most common parts in stock. “This will become a bigger headache for consumers,” Iyer said. Kevin Swift, ICIS senior economist for global chemicals, said estimates from Anderson Economic Group that economic losses over the first week of the strike exceeded $1bn including the $250m in lost wages for striking and laid-off workers are reasonable given the limited scope. “If prolonged, it will add up,” Swift said. The petrochemical industry is closely monitoring the situation because an extended strike would massively disrupt demand for polymers as a typical vehicle contains nearly $3,950 of chemistry including chemical products and chemical processing. The UAW strike could slash monthly polymers demand from the Big Three by 26,000 tonnes for polypropylene (PP), 11,000 tonnes each for polyurethanes (PU) and nylon, and 5,000 tonnes each for acrylonitrile-butadiene-styrene (ABS) and polyvinyl chloride (PVC), based on H1 2023 volumes, according to an analysis of industry data obtained by ICIS. For the US economy as a whole, a prolonged strike and its ripple effects would be a major blow, according to Swift. Swift estimates that the impact could be about $2.5bn/day. Virtually every component of a light vehicle, from the front bumper to the rear taillights, features some chemistry. The latest data indicate that polymer use is about 437lb (198kg) per vehicle, he said. Additional reporting by Al Greenwood, Joseph Chang and Stefan Baumgarten Please also visit the ICIS automotive topic page Thumbnail shows an automobile. Image by Ford.

NEW YORK (ICIS)–Economics pose a major challenge to the scale-up and adoption of sustainable aviation fuel (SAF) but advancements in early-stage technology, particularly in eFuels, will dramatically lower costs in the coming years, according to executives at Honeywell and HIF Global. The challenge is huge. To meet climate goals, the industry will need to produce 23bn litres (23m tonnes) of SAF by 2030, an order of magnitude from the 300m litres produced in 2022, said Peter Cerda, regional vice president, the Americas, at the International Air Transport Association (IATA). Cerda moderated a panel of executives from Honeywell, United Airlines, HIF Global and Supernal at an event in New York. “Today the cost of producing eSAF [eFuel SAF] is about 2-3x the cost of regular aviation fuel. That’s why it’s going to be very important to spread that over the entire fuel base so that on a per unit of total aviation fuel in the world, it’s a very small increase,” said Meg Gentle, executive director of eFuels producer HIF Global. Green hydrogen is being combined with carbon dioxide (CO2) to produce methanol. The methanol is then used to produce eFuels, including SAF or eSAF. These eFuels represent an 85-95% reduction in carbon intensity, she pointed out. “These technologies are at a fairly early stage of adoption so there’s a lot of runway ahead of them,” said Gavin Towler, corporate chief scientist, sustainable technologies, and chief sustainability officer at Honeywell, who pointed out that the oil and gas industry has been improving refining technologies for the past 160 years. Electrolysis will be one key area of advancement as it is “very early days for green hydrogen”, he said. Scaling up solar manufacturing and leveraging developments in electronics will also be applied to the production of green hydrogen via electrolysis. With eFuels, the production of SAF is no longer constrained by limited supplies of used cooking oil and other residual fats as feedstock. “The fears of a feedstock limitation to SAF are really more related to biofuels or used cooking oil but eFuels don’t use those feedstocks,” said Gentle from HIF Global. On the cost side, it will come down to electrolysers and carbon capture, including reducing the cost of direct air capture (DAC) of CO2 by a factor of 10, she added. “The industry is going to be able to do that. As we start manufacturing electrolysers – not one at a time but hundreds at a time, we’re going to bring down the cost of producing hydrogen,” said Gentle. “And many new technologies, which HIF is also testing to bring the cost of DAC down from $800/tonne today to less than $200/tonne, will make the CO2 feedstock essentially limitless because it’s just the air,” she added. Direct air capture (DAC) of CO2 is currently very expensive but also will improve over time, Towler noted. While CO2 can more cheaply be captured from industrial sources, that feedstock source will also become more limited as sectors decarbonise, he said. Producing SAF from cellulosic ethanol will also see cost reductions as this industry becomes more efficient, he added. In October 2022, Honeywell announced its new ethanol-to-jet fuel (ETJ) processing technology that can reduce greenhouse gas emissions by 80% on a total lifecycle basis versus conventional jet fuel. Honeywell has a suite of technologies to produce SAF – from used cooking oil, to ethanol to green methanol (to produce eFuels or eSAF). The future of SAF at scale is eFuels, which in theory would be free from feedstock limitations. “To really go to the ultimate [destination], you want to go to eFuels – a full circular carbon economy where you take renewable power, pull CO2 out of the air, electrolyse water to hydrogen, react [CO2] and hydrogen to make methanol, and then turn the methanol into jet fuel,” said Towler. “All of these things give me optimism that costs will continue to come down, and that the idea of SAF being on parity with petroleum jet is not a technical impossibility,” he added. However, the expectation that the cost of SAF will be lower in the future is not a reason to delay action, he said, pointing out the potential for irreversible climate change impacts. Government incentives to develop and scale the industry will be critical for the ultimate transition to SAF, the panellists emphasised. “The long-term objective is parity to conventional fuel… There is a transition period… That’s where government participation is important, whether it’s a carrot or stick based approach. Someone needs to fund that in an interim period,” said Andrew Chang, managing director at United Airlines Ventures. United Airlines shares the green premium of SAF purchases with corporate partners that have their own sustainability targets, but this is temporary as customers want a viable long-term economical solution, he noted. And it’s not only the aviation sector seeking low-carbon fuels but shipping and ground transport as well. “The challenge we have is not only serving aviation demand but also eFuels going to shipping and also for road transport,” said Gentle, who pointed out that Porsche is partnering with HIF to produce eFuel in Chile. Porsche in 2022 announced a $75m investment in HIF Global. HIF Global is planning to build an eFuels project in Matagorda County, Texas that would produce around 200m gal/year of shipping fuel and eGasoline by 2027. Insight article by Joseph Chang

NEW YORK (ICIS)–The US economy is at a crossroads with the Federal Reserve “navigating by the stars under cloudy skies” as it attempts to engineer the rarest of economic feats – a soft landing. Our ICIS base case calls for a rolling recession in the US moving from sector to sector, with the overall economy bottoming in Q1 2024. GDP is expected to decline just 0.2% in Q1 followed by a slim 0.1% recovery in Q2. This soft landing scenario is gaining traction as inflation eases while the labor market and consumer spending remain resilient for now. For all of 2023, we see US GDP growth of 2.1%, followed by a slim 0.8% gain in 2024. While inflation is moderating, it stubbornly remains well above the Federal Reserve’s 2% target. The recent surge in crude oil prices will put upward pressure on headline inflation in the coming months. The Consumer Price Index (CPI) in August was up 3.7% from a year ago with core CPI (excluding food and energy) up 4.3%. The culprit continues to be the services sector, as goods inflation has eased significantly. The unemployment rate ticked higher to 3.8% but consumers are still spending, largely on experiences while shunning durables. Retail sales for August rose a much higher-than-expected 0.6% from July and were up 2.5% from a year ago with notable year-on-year gains for restaurants and bars (+8.5%), health and personal care stores (+7.8%) and ecommerce (+7.2%). Manufacturing is firmly in recession, evidenced by the latest ISM US Manufacturing Purchasing Managers’ Index (PMI) reading of 47.1 in August. While this rose 1.2 points from July, it was the 10th consecutive month of contraction (under 50). In contrast, the Services PMI at 54.5 was in expansion for the eighth consecutive month. The strike by the United Auto Workers (UAW) against the Big Three US automakers GM, Ford and Stellantis that started on 15 September threatens to upend the sole bright spot for chemicals demand. While strike action at the Big Three is thus far limited to select plants, it is poised to further broaden if negotiations stall. In H1 2023, the Big Three produced 2.53m light vehicles in the US, representing 46% of total production. ICIS projects light vehicle sales to rebound 12% to 15.3m units in 2023 but this would be jeopardised by an extended strike. Whatever the outcome, it will be inflationary from a wage perspective. Another shutdown, this one of the Federal government, also looms on 1 October if a spending bill fails to pass. These two developments stand to further dampen the economy in the short term if they turn out to be extended affairs. Meanwhile, the housing market is rolling over from the weight of the Fed’s rate hikes with mortgage rates the highest in over two decades. Housing starts plunged 11.3% in August to a 1.28m rate – down 14.8% from a year ago. ICIS projects housing starts to fall from 1.55m in 2022 to 1.42m in 2023, flattening out to 1.41m in 2024. The Fed is signaling higher rates for longer. At the September meeting of the Federal Open Market Committee (FOMC), the median projection for the benchmark Fed Funds rate was revised higher for both 2024 and 2025. Most Fed officials see one more hike this year as appropriate. After a relentless period of destocking, inventories today are much leaner – not just at chemical companies but throughout the value chain, including all the way downstream at major retailers. Source: Companies Recall back in Q1 2022 we flagged the massive pile-up in US Big Box retailer inventories as a clear warning sign for downstream chemicals demand. What followed was the longest and most severe destocking period in history with chemical CEOs harking back to conditions during the Global Financial Crisis of 2008-2009. So where are we today? At the end of Q2 2023, major US retailer inventories were much lower from the peak in Q1 2022 as well as versus Q2 2022 – both on an absolute basis and as a percentage of sales. This hardly presages a robust restocking cycle in the immediate future. But lean inventories throughout the chain should remove a big overhang weighing on demand, setting the stage for a bottom.