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SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson: I used to say to clients, when presenting charts such as the main chart in today’s blog, “This is very unlikely to happen”. I would say, for example, that there was no real chance that global high-density polyethylene (HDPE) operating rates would average 76% between 2023 and 2030 compared with 88% in 2000-2022. My message was that project cancellations and strong demand growth would quickly bring markets back into balance. Now I am not so sure because of the impact on demand the end of the China property bubble, its ageing population, ageing populations elsewhere, sustainability and the effects of climate change. China could become almost completely self-sufficient in all three grades of PE by 2030. There are rumours of many crude-oil-to-chemicals (COTC) investments in the Middle East that have yet to be officially announced. China’s push to balanced positions in the above products is expected to receive big support from COTC projects. There’s also a big wave of new ethane crackers being planned in the Middle East and North America. This business could end up being largely dominated by oil and gas majors integrated downstream into petrochemicals. Even in a world of persistently very low operating rates, the Supermajors may continue to build new plants. This is because the Supermajors would have excellent cost-per-tonne economics – and they may need to maintain oil production as electrification of transport gathers pace. There is a scenario this leads to a major wave of capacity closures in Europe, Southeast Asian and Northeast Asia that return operating rates to normal. Instead, though, what about jobs? In my 26 November post, I said that every one job lost through a refinery or petrochemical plant closure equalled six jobs lost downstream. “More like 12,” I was told by a contact. Even if petrochemical plants on a standalone basis continue to lose money, we might see government intervention to maintain employment. Refineries may need to continue to run for security of local fuels supply in a very uncertain geopolitical world. In countries such as South Korea and Thailand, petrochemical companies are important for broader economic growth. Another argument supporting long-term low operating rates is the scale of the shutdowns required to bring markets back into balance. Sticking to HDPE an example, and assuming China’s demand grows at an annual average of 5% between 2023 and 2030 (which is our base case), global capacity would have to be an average 1.8m tonnes a year lower than our base case for operating rates to return to their 2000-2022 average of 88%. This demonstrates that the range and depth of your scenario planning needs to be stepped up to deal with the New Petrochemicals Landscape. 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.

SAO PAULO (ICIS)–The Brazilian government is working to reduce natural gas prices to help the chemicals industry and aims to reduce the so-called ‘Brazil cost’ of doing business in the country, its vice president said on Monday. Geraldo Alckmin, who also leads Brazil’s Ministry of Development, Industry, Commerce and Services (MDIC), added the cabinet presided by Luiz Inacio Lula da Silva since January is “aware” of the difficulties the chemicals industry faces due to high input costs and the competition from more competitive imports. Alckmin, currently acting president as Lula is travelling in Europe after taking part in the UN’s COP28 climate summit in Dubai, was speaking to delegates at the annual assembly of Brazil’s chemicals trade group Abiquim in Sao Paulo. NATURAL GASThe vice president conceded the country’s high natural gas prices, compared with the US, the other large chemicals producer in the Americas, are a drag for an industry he considered key to rebuild Brazil’s industrial fabric, a target set by Lula to create more manufacturing jobs. “Lula established MDIC to focus on creating industrial jobs and expand manufacturing. We are aware we have a problem with energy costs and natural gas costs in Brazil. In the US, natural gas prices stand at around $4.5/MMbtu, while in Brazil they stand at around $12/MMbtu,” said Alckmin. “Natural gas prices in Brazil have fallen slightly and the government is working towards achieving a larger fall.” Brazil’s cabinet has a commanding voice in the decisions taken by Petrobras, the state-owned energy major, which is a large producer of crude oil and natural gas. However, Brazil’s gas needs are hardly covered by domestic demand and the country is heavily import dependent. Abiquim has for years been saying that more domestic output of natural gas and associated natural gas liquids (NGLs) is key to help the competitiveness of the chemicals industry globally. However, given the unmet demand in the residential sector as well as the fertilizers industry, some petrochemicals players think the sector would come last in the list of priorities in the case of higher domestic natural gas output. Alckmin said there were “some good news” as Brazil’s domestic output could increase considerably in 2024 as Petrobras finalises the long-running construction of infrastructure to bring gas from offshore fields to its Itaborai facilities in Rio de Janeiro. “In 2023, Brazil produced 50m cubic metres [cbm] and this could increase in 2024 by more than 15m cbm at Itaborai. Extracting gas in the US is easier than here: they do it inland, we do it 3km offshore and at 5km depth [in pre-salt fields],” said Alckmin. “Brazil can increase domestic natural production and that will have a positive effect in strategic industrial sectors such as chemicals.” Brazil’s polymers producer Braskem, Latin America’s largest petrochemicals company, has repeatedly said that more NGLs output at Itaborai would allow it to expand its facilities in Duque de Caxias, Rio de Janeiro. BRAZIL COST: LESS REGULATIONThe so-called ‘Brazil cost’ (Custo Brasil in Portuguese) refers to the country’s barriers to doing business, ranging from the regulatory and tax burdens, the existence of cartels in several economic sectors, corruption in public bodies, or a complex fiscal legislation, among many others. Alckmin said the government is working hard to pass the fiscal reform currently being debated in parliament, which would simplify the several taxes Brazilian households and corporates have to pay. He said around 10% of the Brazil cost comes from the regulatory burden, and he listed the three key protectionist measures passed by the government this year, all of them reversing decisions taken by the prior Jair Bolsonaro Administration. “We are aware of the chemicals industry’s competitive problems, not least with the global fall in prices which have caused imports into Brazil to rise sharply. That is why, in April, we reverted the fall in import tariffs in some polymers, and did so again in November,” he said. “We have also brought back REIQ [a tax break for some chemical inputs], which is also to greatly help the sector.” Alckmin preferred to see the glass half full when it came to Brazil’s economy, which this year greatly surpassed expectations thanks to a strong agricultural season. Inflation has fallen since the 2022 peaks, which has prompted the Banco Central do Brasil (BCB) to lower interest rates three times since August, although “they remain high” at 12.25%, added the vice president. “However, we cannot rest in our laurels. Improving the competitiveness of Brazil’s economy remains our great challenge,” he concluded. Front page picture: Brazil’s vice president Geraldo Alckmin at the annual assembly of chemicals trade group Abiquim Source: ICIS

HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 1 December. US natural R-HDPE prices return to 2022 premium over virgin The premium between natural post-consumer recycled high density polyethylene (R-HDPE) resin and its virgin high density polyethylene (HDPE) counterpart has now fallen to levels not seen since this time last year, a trend that may incentivize demand. Dow makes FID on Canada net-zero cracker project, construction to start next year Dow’s board of directors has made a final investment decision (FID) to proceed with the “Path2Zero” cracker project at the company’s site in Fort Saskatchewan in Canada’s Alberta province, officials said on Tuesday. US chemical volumes to rebound slightly in 2024 with destocking mostly over – ACC economist US chemical volumes are poised to rebound modestly in 2024 as inventories are low and destocking is largely done across most value chains, said the chief economist of the American Chemistry Council (ACC). US ethylene market long as crackers return from outages The US ethylene market remains long with sufficient supply, weak demand and recent operating rates in the high 70% range. Several crackers have recently restarted which will add length to supply. Brazil’s polymers players unfazed by import tariff hike, producers upbeat Brazilian petrochemicals sources have said the slight hike in polymers’ import tariffs will have little overall impact, although it is expected to help shore up margins for domestic producers. US base oils demand on track to hit 40-year lows with 19% decline in 2023 – ICIS US base oils demand has plunged this year and is set to hit 40-year lows as the market responds to consistently elevated prices amid a relatively weak economy, ICIS experts said. Argentina bracing for ‘very tough’ H1, but healthier growth could follow – Anastacio CEO Argentina is to have a “very, very tough” first half of 2024 as President-elect Javier Milei implements a shock therapy for the beleaguered economy, but a healthier country should emerge from the trauma, said the CEO at Brazilian chemicals distributor Quimica Anastacio. North America ICE car parc to decline very slowly through 2030 – ICIS economist The North America car parc – the number of vehicles on the road – for internal combustion engine (ICE) vehicles is expected to peak by 2025 and only decline slowly through 2030, supporting demand for lubricants, said an ICIS economist.

NEWSBrazil’s Braskem monitoring Alagoas mine as collapse risk emergency declared Braskem continues “to be mobilized and monitoring” the situation at mine 18 of its facilities in Alagoas, north Brazil, after the municipality declared an emergency due to the imminent risk of collapse, the Brazilian petrochemicals major said on Friday. Mexico’s manufacturing expands strongly in November Mexico’s manufacturing sectors continued expanding in November at a healthy rate as output and job creation rose on the back of healthy demand, analysts at S&P Global said on Friday. Brazil’s manufacturing contracts again in November but ‘positive pockets’ spring up Brazil’s manufacturing sectors remained in contraction territory in November, but a few “positive pockets” appeared with job creation steady, more positive sentiment and softer falls in sales and production, analysts at S&P Global said on Friday. Argentina bracing for ‘very tough’ H1, but healthier growth could follow – Anastacio CEO Argentina is to have a “very, very tough” first half of 2024 as President-elect Javier Milei implements a shock therapy for the beleaguered economy, but a healthier country should emerge from the trauma, said the CEO at Brazilian chemicals distributor Quimica Anastacio. Brazil’s polymers players unfazed by import tariff hike, producers upbeat Brazilian petrochemicals sources have said the slight hike in polymers’ import tariffs will have little overall impact, although it is expected to help shore up margins for domestic producers. Brazil’s Grepar to take legal action against Petrobras after refinery sale cancelled Grepar will take legal action and seek compensation from Petrobras after the Brazilian energy major unilaterally cancelled the sale of its Lubnor refinery, the prospective buyer said late on Monday. Brazil’s chemicals trade deficit expected at $47bn in 2023 Brazil’s chemicals trade deficit is expected to reach $47bn this year as imports continue by far outpacing exports, the country’s chemicals trade group Abiquim said on Monday. PRICINGArgentina political scenario may change PET imports in the short term The Argentine polyethylene terephthalate (PET)  market continues to face challenges in bringing feedstock to the country, which slightly limits PET resin availability in November. Prices for PET are flat; however, potential price fluctuation remains possible based on the future political scenario in the country. Lat Am PP domestic, international prices steady on high feedstock costs Domestic polypropylene (PP) prices were assessed as steady across Latin American countries on the back of stable international prices and high feedstock costs. LatAm international PE prices stable to soft on lower US export offers International polyethylene (PE) prices were assessed as stable to soft across the region on the back of competitive offers from the US.

SAO PAULO (ICIS)–Brazil’s high levels of chemicals imports are a “sensitive” issue because while they bite into domestic producers’ market share, smaller players require the “competitive” prices offered by cheaper overseas material, according to the CEO at Brazilian chemicals distributor Quimica Anastacio. Jan Krueder added that this issue remains a “key challenge” for the government of Luiz Inacio Lula da Silva as it tries to balance out the interest of domestic, large producers and those of players down the value chain who, in his view, are the ones with more impact on job creation and the expansion of manufacturing Lula advocates for. Earlier in November, Brazil hiked import tariffs for some polymers after intense lobbying from domestic producers, represented by chemicals trade group Abiquim. Sources on other sides of the market such as distribution, however, were less enthusiastic about a measure which is to increase their costs slightly. It was the third protectionist policy towards chemicals taken by the Brazilian government this year. In April, it had already hiked import tariffs on certain polymers and rubber and, earlier in November, a tax break for the sector that was withdrawn by the previous Administration, known as REIQ, was reinstated. “Domestic producers are having to deal with tough competition coming from Asian material, which obviously they don’t like. It is true that these companies are big investors, and are strategic for Brazil to have healthy basic chemicals industries,” said Krueder. “But I have a more liberal view [regarding protectionism]. We must pay attention to the competitiveness of small and medium companies: they create thousands of jobs, and these firms need competitive raw materials. Equally, it is in the downstream chain where manufacturing adds value by reaching end consumers both at home and abroad, increasing exports.” Krueder went on to say that this dichotomy will be one of Lula’s recurrent challenges in coming years, not only in chemicals but in other industrial sectors where large and domestic producers dominate the market. “It is a very sensitive discussion. We will need to find a balance which enables these [large, domestic] companies to stay in business with all the challenges they face on high input costs and so on. But you also must pay attention all these other smaller companies have access to competitively priced raw materials,” he said. “This is one of the biggest challenges for the government: to find the middle ground in this difficult issue.” LULA 3: CLEARER POLICY NOWIn a prior interview with ICIS in June, Krueder said the new Administration of Lula – in office since January – remained an unknown when it came to economic policy. By now, the CEO said things are becoming clearer but said the government should put more efforts onto undertaking structural reforms in Brazil which could prop up investments and job creation. “Perhaps Brazil’s DNA is sightlier more conservative than other Latin American countries, and governments will never be able to go too much to the right or too much to the left. We have a strong Congress to counterbalance the Executive, a strong legal system, and an independent central bank,” said Krueder. “They say they want to reduce the budget deficit, and that is good, but the problem I see is an unwillingness to implement important administrative and structural reforms to reduce the size of the state. All in all, the new government is not as good as it could be, but it is not as bad as some people had feared, either.” Interview article by Jonathan Lopez

SINGAPORE (ICIS)–Petrochemicals producers in the Gulf Cooperation Council (GCC) are facing strong earnings headwinds as a result of the global downturn in demand, which has pressured production margins and earnings growth this year. The slow growth environment also casts a shadow over planned sustainability projects as part of a wider push towards decarbonisation and green chemicals. However, a more positive global economic outlook driven by easing inflation and expected interest rate cuts is driving new hopes for the petrochemicals sector in 2024, said Jassim Al-Jubran, the head of sell-side research at Saudi-based brokerage AlJazira. The GCC petrochemical sector profitability is likely to improve after a weak performance this year due to global economic concerns, inflationary pressures, and high interest rates. “The recovery in product prices is likely to receive support from higher oil prices, expected acceleration in China’s recovery underpinned by government support, lower feedstock costs, reduced shipping costs and normalised supply chain issues,” Al-Jubran said. “Prices are now close to the COVID-19 level and substantially below historical averages. Thus, we believe there is limited further downside risk and recovery may kick off during 2024,” he added. In Saudi Arabia, major producers reported sharp earnings losses for the first nine months of this year as lower product prices outweighed generally improved production volumes. Chemicals giant SABIC filed a net loss of Saudi Saudi Riyal (SR) 1.04bn for the first nine months of this year versus the SR16.2bn profit in the same period of 2022 as sales dropped by 25%, while Sahara International Petrochemical Co (Sipchem) posted a 67% drop in net income. The stagnation in global demand for chemicals led to a decrease in average selling prices and a decline the value of sales by SR7.3bn Saudi riyals in the third quarter, SABIC said. In the UAE, polyolefins major Borouge reported a 39% year-on-year decline in its nine-month net profit to $713m despite a 2% increase in revenue. “The overall polyolefins market remains challenging, with pricing expected to operate within a narrow band of volatility throughout the fourth quarter of 2023,” the company said in an earnings statement on 30 October. In its latest half-yearly earnings report in August, Kuwait’s EQUATE Group said that its net income after tax fell 83% year on year in the January-June period to $89m, with sales down by 32%. The EQUATE Group includes EQUATE Petrochemical Company (EQUATE), The Kuwait Olefins Company (TKOC), as well as a number of subsidiaries such as MEGlobal and Equipolymers. Commenting on the results, Naser Aldousari, President and CEO of EQUATE Group, said: “EQUATE continues to maintain a distinguished operational performance although it has experienced lower year-over-year sales and earnings due to ample supply and sluggish market conditions. In Oman, state energy firm OQ reported a 48.8% decline in its half-year net profit to $1.09bn, with revenues weighed partly by a decline in the downstream segment amid lower refining margins. “Chemicals products experienced distress as a result of market turbulence in Europe, and elevated feedstock gas prices,” it said in presentation slides for investors. LONG-TERM COMMITMENT TOWARDS GREEN GOALS REMAINS STRONGDespite the near-term challenges to their bottom lines, several chemical producers across the GCC have furthered their sustainability efforts via carbon reduction projects, as well as advanced recycling and recovery. The UAE and Saudi Arabia, in particular, have set ambitious goals for the production of decarbonized hydrogen and serving the global hydrogen market. In Saudi Arabia, Aramco, TotalEnergies, and SABIC in July announced that they have for the first time in the Middle East and North Africa successfully converted oil derived from plastic waste into ISCC+ certified circular polymers. The plastic pyrolysis oil, also called plastic waste derived oil (PDO), was processed at the SATORP refinery jointly owned by Aramco and TotalEnergies, in Jubail, Saudi Arabia. It was then used as a feedstock by PETROKEMYA, a SABIC affiliate, to produce certified circular polymers. In Geleen, the Netherlands, SABIC – in a joint venture with technology firm Plastic Energy – is currently building its first pyrolysis-based chemical recycling plant, which will use mixed plastic waste as feedstock. The plant is due for start-up in Q4 2023. In October, Borouge announced that it has signed a Memorandum of Understanding (MOU) with India’s APPL Industries Ltd (APPL), to develop polymer compounds that will incorporate recycled content, marking its first venture with an Indian compounding partner to create products with recycled material. Global and regional chemical players are gathered for the 17th Gulf Petrochemicals and Chemicals (GPCA) Forum with carbon neutrality issues continuing to be high on the agenda amid an upcoming wave of new downstream regional capacities in the next couple of years. The GPCA Forum will take place for the first time in Doha, Qatar from 3-6 December 2023, with the theme “Mobilizing Chemistry for Impactful Transformation”. Thumbnail photo shows the logo for the 17th Annual GPCA Forum to be held in Doha, Qatar on 3-6 December (Source: Gulf Petrochemicals and Chemicals Association) Insight by Nurluqman Suratman

LONDON (ICIS)–Click here to see the latest blog post on Chemicals & The Economy by Paul Hodges, which highlights how central banks are beginning to realise that demographics are destiny for the economy. 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.

MUMBAI (ICIS)–State-owned Indian Oil Corp (IOC) has pushed back completion of its Panipat Refinery and Petrochemical Complex expansion by more than a year to 2025, with the project cost raised by 10% to rupees (Rs) 362.3bn ($4.4bn). The refinery’s capacity is being expanded to 25m tonnes/year from the current 15m tonnes/year and build a 450,000 tonne/year polypropylene (PP) plant among other downstream units at the site. IOC now expects to complete the expansion project by December 2025, against its earlier target of September 2024, the company said in a disclosure to the Bombay Stock Exchange (BSE) on 1 December. The company did not provide any reasons for the extension in the completion deadline. In July, IOC selected engineering and construction firm McDermott for the expansion project, which includes phase II expansion of the naphtha cracker at the site, along with downstream PP and new ethylene derivative units. McDermott is also executing IOC’s 120,000 tonnes/year maleic anhydride project at the complex. Other chemicals including butanediol (BDO) used to produce engineering-grade plastic and biodegradable fibres, and tetra hydro furan (THF) used in adhesives and vinyl film will also be produced in Panipat. IOC is also building a 60,000 tonnes/year polybutadiene rubber (PBR) plant and a 387,000 tonne/year styrene monomer unit at the site. ($1 = Rs83.33)

LONDON (ICIS)–Here are some of the top stories from ICIS Europe for the week ended 1 December. INSIGHT: COP28 pushes climate emergency, chemicals regulation up the agenda With the COP28 climate summit in Dubai now underway, there is a renewed focus on the climate emergency – what has (or has not) been achieved so far and what steps need to be taken on the road towards a net zero carbon future. Eurozone inflation tipped to fall closer to ECB target in November Eurozone inflation continued to fall closer to the European Central Bank’s (ECB) target, according to flash data released by the EU’s statistics agency Eurostat on Thursday. Energy crisis drives 45% increase in efficiency spending since 2020 – IEA The energy crisis brought about by the Russia-Ukraine war has driven a sharp increase in energy efficiency demand and policies, with growth in heat pump and electricity vehicle (EV) purchases helping to drive the improvements, according to the International Energy Agency (IEA). INSIGHT: New packaging waste regulation draft could prove controversial The latest draft of the Packaging and Packaging Waste Regulation (PPWR) – which passed its plenary vote in the EU Parliament on Wednesday 22 November – brings further sweeping changes to the proposed legislation, some of which are likely to prove controversial. Europe automotive sector faces up to prospect of mandatory recycling targets The European Commission’s draft end-of-life vehicles (ELVs) directive could force the automotive industry into the world of recycled plastic content targets – and the struggle to find adequate feedstocks that comes with it.

DOHA (ICIS)–Global demand for petrochemicals will continue to grow at a rapid pace even as the industry ramps up decarbonisation efforts to meet climate change goals, Saudi Arabia’s energy minister Prince Abdulaziz bin Salman said on Sunday. “Petrochemicals are here to stay, and the hydrocarbon sector will continue to generate income and generate money for investors,” Abdulaziz told delegates at the annual Gulf Petrochemicals and Chemicals Association (GPCA) in Doha, Qatar. Globally, the fast growth in the petrochemical sector will be reflected in greater demand for hydrocarbons as a feedstock, he said, adding that the industry is expected to grow by more than 50% to around 1.2tr tonnes/year by 2040, with demand for basic chemicals such as ethylene and propylene growing by more than 60%. “To capture this global growth and play a role in meeting the future demand for petrochemicals, Saudi Arabia’s strategy in petrochemicals aim at maximizing added value, while minimizing the carbon footprint… by focusing on liquids to chemicals and upgrading low value streams that being burned as fuel to feedstock for petrochemicals,” he said. The industry is now advancing through leveraging innovative and emerging technologies to maximise the yield of crude oil and conventional fuel into petrochemicals, Abdulaziz said. Given that green and low carbon chemicals are at the heart of the Kingdom’s sustainability goals, Saudi Arabia is assessing production of sustainable and low carbon chemicals, such as e-methanol and clean urea by building a carbon dioxide utilization hub, he said. E-methanol is produced with renewable energy. “We envision the hub will maximise the value for carbon dioxide and enable a new green industry in the Kingdom’s planned clean energy economy.” Saudi Arabia is expanding its portfolio with at least four projects coming online in the next few years, and many more that focus on liquids to chemicals, the minister added. The country, which is the world’s biggest crude exporter, is the de facto leader of oil cartel OPEC. The 17th Annual GPCA Forum runs from 3-6 December. Thumbnail image: Saudi energy minister Prince Abdulaziz bin Salman at GPCA in Doha, Qatar. (Source: GPCA)