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APIC ’24: Global energy transition to impact chemical feedstocks availability – consultant
SEOUL (ICIS)–The effect of the global energy transition will extend beyond energy sources and become more pronounced after 2030 – impacting the availability of petrochemical feedstocks, a senior industry consultant said on Thursday. “The energy transition is a very wide terminology, which actually goes well beyond energy and materials that will be used in the future,” Stefano Zehnder, vice president of consulting at ICIS, told delegates at the Asia Petrochemical Industry Conference (APIC) in Seoul, South Korea. This shift, he explained, will significantly affect the types of materials used in the future and this has important implications for the refining industry. “Oil demand alone does not describe the role of global refining,” Zehnder said. Large-scale refining capacity rationalization is expected as refining operations become more exposed to fluctuations in fuel demand, he said. “As refining operation will become more and more exposed to the fuel side, they will be increasingly targeting the petrochemical feedstock area,” Zehnder projects. Zehnder also presented a longer-term scenario projecting a substantial reduction in oil demand post-2030, driven by the increasing penetration of sustainable fuels. Despite the evolving energy landscape, “the refining industry remains the dominant provider of feedstock for the petrochemical industry”, he said. “We don’t think is going to change much into the future.” “Post 2030, longer-term scenarios will envisage an important reduction of oil demand, accelerating the trends visible in the medium term,” Zehnder added. Although the reduction size in demand will be function of specific assumptions on the key drivers of fuel demand, the impact on “conventional” refiners is likely to be even more pronounced. “This scenario implies a loss of 11 million barrels/day of crude processing. The main factor is [the] assumption related to sustainable fuels, with annual contributions from non-gas liquids (NGLs) gradually flattening.” The shift away from fossil fuels to sustainable alternatives will also affect the production of petrochemical feedstocks that are traditionally derived from oil refining. Zehnder highlighted that this transition could lead to a shift in the availability of key feedstocks such as naphtha and propylene. Through to 2049, reducing refinery runs and gasoline yields will affect propylene availability from global refineries, Zehnder explained. “As FCC capacity will decline, higher propylene yields will be required.” During the same period, Zehnder noted, “SAF technologies can contribute to renewable naphtha availability, with bio/renewable also potentially contributing to renewable naphtha availability, including bio/renewable diesel to bunkers.” Focus article by Nurluqman Suratman
APIC ’24: Overcapacity weighs on Japan petrochemical production – JPCA
SINGAPORE/SEOUL (ICIS)–Cracker operations in Japan will remain “challenging” this year amid soft demand while capacity expansion in China continues, according to the Japan Petrochemical Industry Association (JPCA). C2 output falls to record low in 2023 Production of five major plastics shrink by around 5% Capacity optimization among industry main tasks “With new cracker capacities being planned in China almost every year at a pace far exceeding demand, the operation rates of domestic crackers are expected to remain challenging,” said a JPCA report prepared for the Asia Petrochemical Industry Conference (APIC) being held in Seoul. The two-day conference ends on 31 May. In 2023, Japan’s ethylene (C2) production shrank 2.3% to a record low of 5.32 million tonnes, as domestic crackers ran below full capacity, JPCA data showed. “The operation rates of domestic crackers have remained below 90% (this rate is said to be the criterion for judging the economic situation) since August 2022 and the monthly operation rate dropped below 80% four times in 2023,” JPCA said. Japan, which was dislodged by Germany as the world’s third-biggest economy in 2023, is projected to post a 2024 GDP growth of around 1.3%, down from last year’s 1.9% pace. In Q1 2024, the economy shrank at an annualised rate of 2.0% as both consumption and capital spending weakened. For the whole of 2023, the country’s total production of five major plastics – namely, linear density polyethylene (PE), high density PE (HDPE), polypropylene (PP), polystyrene (PS) and polyvinyl chloride (PVC) – declined by an average of 4.7% to 6.02 million tonnes. Japan production of major petrochemicals (in thousand tonnes) Product 2023 2022 % change Ethylene 5,324 5,449 -2.3 LDPE 1,223 1,347 -9.2 HDPE 661 714 -7.4 PP 2,075 2,120 -2.1 PS 564 654 -13.8 PVC 1,496 1,483 0.9 Styrene monomer (SM) 1,428 1,542 -7.4 Ethylene glycol (EG) 264 351 -24.8 Acrylonitrile (ACN) 341 422 -19.2 Sources: JPCA, Japan’s Ministry of Economy, Trade and Industry (METI), Japan Styrene Industry Association (PS, SM) and Vinyl Environmental Council (PVC) Domestic demand as ethylene equivalent for the year declined by 11.9% to 3.87 million tonnes, according to JPCA data. “In 2024, there is a risk of a decline in demand due to the deterioration of the global economy, such as price hikes of raw commodities due to supply disruptions caused by several problems,” JPCA said, citing Russia’s prolonged invasion of Ukraine, the Israel-Hamas war, and attacks on commercial ships in the Red Sea. “But a certain amount of demand growth is expected due to the resilience of the US and some developing countries’ economy, and the global economy would have a possibility to make a ‘soft landing’,” JPCA stated. Economists are growing more confident that the US – the world’s biggest economy – will be able to post a 2024 growth rate of 2.4%, easing from the actual GDP growth of 2.5% in 2023. China, although beset by a slumping property sector, should be able to post a 5.0% GDP growth, according to the revised forecast by the International Monetary Fund (IMF). In the report, JPCA also emphasized the petrochemical industry’s tasks to engage in “green” or environmental-friendly transformation toward carbon neutrality by 2050; to enhance and optimize excess production capacity amid a declining population; to push for digital transformation; and contribute to a recycling-oriented society. “In Japan, demonstration experiments using new process technologies and raw materials that contribute to green activities have begun, such as biomass-based fuel, bio-material-based olefins, ammonia synthesis, and hydrocarbon synthesis,” it said. Focus article by Pearl Bantillo
APIC ’24: Chemical plant closures to accelerate amid unprecedented oversupply
SEOUL (ICIS)–Announcements of chemical plant closures are expected to gain momentum throughout 2024 as the industry now realizes that demand will not improve measurably anytime soon to offset languishing margins, a senior industry analyst said on Thursday. Speaking at the Asia Petrochemical Industry Conference (APIC) in Seoul, South Korea, ICIS vice president of chemical analytics Alex Lidback said that “margins for most products are suffering”. Lidback that demand is still growing for base chemicals overall but noted that the growth is slowing. “It’s very difficult to grow your way out of this [excess capacity],” he said. Global base chemical demand growth Lidback attributed the current market woes to excess capacity additions in recent years, particularly in China, resulting in persistent excess capacity in base chemicals such as ethylene, propylene, ethylene glycol, paraxylene (PX), and styrene. “The over-capacity is unprecedented – unless there are extensive shutdowns, the market will not rebalance most products anytime soon,” Lidback said. “Major capacity shutdowns will take place when companies decide not to maintain existing assets and delay FIDs [final investment decisions].” This glut of supply has severely eroded profit margins, pushing many producers into the red. “If you go back to previous down cycles, China helped grow out of this excess capacity,” Lidback noted. The situation is different this time around, as China is no longer able to absorb the excess capacity, adding that the imports of base chemicals have declined by 12 million tonnes from 2020 to 2023, he said. China’s imports “Growing out of this excess capacity state will take too long, China will not be the savior,” Lidback said. The industry will need to make some difficult decisions to rebalance the market, including permanent plant closures, project delays, and even cancellations. “So, what we think is gonna happen over the next few years is starting this year is we’re gonna start to see the announcements of permanent closures.” While low-cost assets in the Middle East and North America are secure, higher-cost producers in other regions are vulnerable, the ICIS analyst said. Several factors have delayed necessary decisions, including the financial stability of many companies entering the downturn, the integration of some chemical firms with refining operations that benefited from favorable crack spreads, and the lingering hope of a strong demand rebound. “A lot of companies entered this down cycle in a pretty good financial state, which allowed them to ride the wave a little bit further through these tough margins,” Lidback said. However, the anticipated demand recovery has not materialized. Lidback recalled the optimism that followed a strong first half of 2022, but noted that the second half was “terrible,” and that the hoped-for improvement in 2023 had not occurred. “The hope was that the first half of 2023 would be slow, but the second half of 2023 would be a very strong demand year. Obviously, that didn’t just transpire, and we haven’t seen really any major improvement in 2024.” Lidback also pointed to the high cost of capital as a factor that is making it more difficult for companies to invest in new projects. “It’s a lot harder with these types of interest rates in reverse sitting around 7%. And I’ll tell you that for FIDs, you go to a [management] board right now and ask for a project – that’s going to be really difficult.” Focus article by Nurluqman Suratman

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APIC ’24: PODCAST: Asia ethylene June supply, demand likely stable
SEOUL (ICIS)–In this podcast, ICIS markets editor Josh Quah shares an update on the ethylene (C2) market in Asia based on discussions during the Asia Petrochemical Industry Conference (APIC) 2024. S Korea Jun cracker run rates may see some downward adjustment, though unlikely to be significant July arrival demand uncertain amid turnarounds, some recovering margins C2 export allocations to hinge on polymer profitability Visit us at Booth 13 at the Grand Ballroom Foyer, Grand InterContinental Seoul Parnas! Book a meeting with ICIS here.
APIC ’24: S Korea petrochemical output, exports to grow at low single digits
SINGAPORE/SEOUL (ICIS)–South Korea’s petrochemical production is projected to grow at 2.2% this year, with exports rising by an average of 2.8%, faster than domestic demand’s 1.3% increase, industry data showed. “However, this is mainly due to the base effect of a significant decrease in production from the previous year,” the Korea Petrochemical Industry Association (KPIA) said in a report prepared for the Asia Petrochemical Industry Conference (APIC) being held in Seoul on 30-31 May. “The supply and demand situation is expected to improve this year as global supply declines, but it will take a long time to resolve due to the large accumulated capacity expansion,” it said. Full-year petrochemical production is expected to grow to 22.1 million tonnes, “largely due to the base effect of large-scale regular maintenance in the previous year”, KPIA said. In 2023, production declined by 2.1% to 21.7 million tonnes. “Production is also expected to increase y-o-y due to the restart of facilities that were shut down due to the deteriorating market conditions and an increase in the utilization rate of companies in anticipation of an improvement in the market,” it added. The country’s petrochemical export volumes are projected to reach 12.8m tonnes in 2024, with growth slowing from the 3.1% pace posted last year. South Korea is heavily dependent on exports, with their share to total production at around 58% in 2023, based on three major sectors, namely synthetic resin, synthetic fiber and synthetic rubber. S Korea 2024 Petrochemical Industry Forecasts (in ‘000 tonnes) Products Production Exports Exports share to total output (%) 2023 actual export growth (%) 2024 projected export growth (%) Synthetic resins 15,641 9,787 62.6 -0.4 3.0 Synthetic fibre raw materials 5,846 2,604 44.5 21.0 1.5 Synthetic rubber  655  429 65.5 -6.8 7.0 Source: KPIA “Korea’s domestic market is stagnant, so most of the increased production will be exported,” the KPIA said. Domestic petrochemical consumption this year is projected to post a minimal increase to 10.4m tonnes, following a 6.3% contraction in 2023. A sizeable chunk of South Korea’s petrochemical exports goes to China, whose own demand has been slowing down amid an economic slowdown. Focus article by Pearl Bantillo Additional reporting by Nurluqman Suratman
APIC ’24: Thailand chemicals demand to recover after challenging 2023 – FTIPC
SEOUL (ICIS)–Thailand’s petrochemical industry is expected to recover in 2024 as demand improves following a challenging 2023, which was marked by a global economic slowdown, inflation, and high energy costs that dampened consumption. The Federation of Thai Industries’ Petrochemical Industry Club (FTIPC), in a report prepared for the Asia Petrochemical Industry Conference (APIC), noted that uncertainties in the global economy, including the recent Israel-Hamas conflict, China’s economic stagnation, and instability in US and European financial markets, have impacted the Thai economy. KEY SEGMENTS IMPACTED This challenging environment has already impacted key petrochemical segments. Ethylene consumption, for example, declined in 2023 due to weaker economic conditions and subdued demand. in ‘000 tonnes/year 2020 2021 2022 2023 Total Capacity 4,609 5,409 5,409 5,360 Production 4,516 5,045 4,530 4,463 Consumption by derivative products* 4,719 5,040 4,478 4,463 Exports 44 99 63 41 Import 163 43 87 95 *Consumption netbacked from polyethylene (PE), ethylene dichloride/vinyl chloride monomer (EDC/VCM), ethylene glycol (EG), and styrene monomer (SM) production Demand for ethylene is expected to remain under pressure in 2024 due to feedstock volatility, weak derivative demand, and increased competition from new capacities in China, southeast Asia, and the US. Additionally, polymer converters are grappling with major concerns such as geopolitical uncertainties, global recession fears, and high inflation rates, as consumers limit spending and further weaken demand for end-use sectors. OUTLOOK AND CHALLENGES AHEAD Looking ahead, Thailand, southeast Asia’s second-largest economy, is projected to grow by 2.2%-3.2% in 2024, fueled partly by a rebound in exports and increased private and public investment. However, the recovery in global demand for petrochemicals is not expected to fully materialize until the second half of 2024, according to the FTIPC. This is due in part to a supply glut in Asian markets caused by increased production capacity in China, Vietnam, Indonesia, and Thailand itself, as well as the Middle East, which has prompted producers to reduce output or maintain inventory levels to preserve profit margins. Volatile economic conditions, geopolitical conflicts, new rules of global trade, and the trend of reducing carbon emissions and greenhouse gases present both opportunities and challenges for the petrochemical sector, the FTIPC said. “Businesses must adapt to this changing landscape by enhancing competitiveness, flexibility, and continuous adaptation amidst external uncertainties,” it said. “Integrating business operations with sustainable development is crucial, with a focus on sustainable business growth that meets the demands of consumers in a low-carbon and net-zero emission society.” Focus article by Nurluqman Suratman
Canadian fertilizer producer Nutrien halts three Brazil fertilizer blending plants
HOUSTON (ICIS)–Canadian fertilizer major Nutrien has announced a decision to halt three fertilizer blending plants in Brazil as it undergoes a reorganization of their operations for improved efficiency within the country. The plants are in Alfenas, Minas Gerais and Morrinhos and Cristalina, Goias, and comes amid what the producer is describing as tougher market conditions with Nutrien saying it will continue to be able to meet the needs of their farmer customers. The current strategy is to continue to provide fertilizers via its other two blenders in Brazil and through their local partners and if necessary restart these three outlets. There are also plans advancing to shutter an older facility in the state of Sao Paulo. “Nutrien is committed to serving our farmer customers in Brazil with the solutions they need and fertilizer is an important component of our overall portfolio. At the same time, we are reviewing our operating model to find efficiencies and as a result we are assessing future options for our three blenders located in the cities of Alfenas, Morrinhos and Cristalina,” said Nutrien spokesperson. “The decision allows Nutrien to restart these assets in a short time period if needed. We are well positioned to serve our customer with the same technical quality, volume and breadth of the fertilizer portfolio, through strategic partnerships and other blenders that remain in operation.”
German consumer confidence improves, but economic recovery ‘bumpy’
LONDON (ICIS)–Consumer confidence in Germany improved in May but the country’s economic recovery remains bumpy, with no significant GDP growth expected in Q2, according to the latest reports by research groups on Wednesday. Consumer confidence improves Industrial economy continues to struggle May core inflation flat at 3.0% year-on-year pace CONSUMER CONFIDENCE Although consumers remain pessimistic overall, confidence continued to pick up in May, Nuremberg-based market research firm GfK said. Income expectations rose in May, the inclination to save declined, and consumers’ economic expectations improved compared with April, GfK said. Lower inflation rates combined with a noticeable increase in wages and salaries, were boosting consumers’ purchasing power, the group said. Nevertheless, uncertainty among consumers remains “pronounced”, prompting them to delay larger purchases, the group said. The GfK consumer climate index for Germany rose from -27.3 points in April to -24.0 points in May, and GfK is currently forecasting that the index will improve further to -20.9 in June. A minus value indicates consumer pessimism. The GfK index is based on monthly interviews with about 2,000 consumers. The May interviews were conducted from 2-13 May. INFLATION Meanwhile, core inflation, as measured by the consumer price index (CPI), is expected at a 3.0% year-on-year pace in May, unchanged from April, according to an initial estimate by the country’s federal statistics agency on Wednesday. Core inflation excludes volatile energy and food prices. The headline CPI is estimated to gain 0.1% month on month in May and run at a 2.4% year-on-year pace (April: 2.2%). Analysts at German regional state bank NordLB said that inflation pressures remained “stubborn” in services. However, the latest inflation data out of Germany were no obstacle to an expected interest rate cut by the European Central Bank (ECB) next month, the analysts said. ECONOMY Economic research group DIW Berlin said on Wednesday that Germany’s economic recovery remained “bumpy”, with no significant acceleration of GDP growth expected in the second quarter. In the first quarter, GDP grew 0.2% from the 2023 fourth quarter. The main positive for Germany is that the global economy is “surprisingly robust”, despite high interest rates, continued high inflation, and geopolitical uncertainties, DIW said. A stronger global economy supports German exports. Domestically, higher wages and salaries, moderating inflation and expected interest rate cuts should translate into a slow increase of demand this year, DIW said. However, Germany’s industrial producers have yet to find a way out of the slump, although there were “signs” that a recovery in the industrial economy could get under way in the second half of the year, DIW said. The DIW economic barometer for Germany fell from 92.9 points in April to 86.1 in May – well below the neutral 100-point mark which indicates average economic growth. MANUFACTURING CLIMATE IMPROVES Meanwhile, another indicator, the ifo business climate index, remained unchanged at 89.3 points in May, Munich-based ifo reported. In manufacturing, the business climate improved for a third consecutive month as companies were considerably more satisfied with their current business and their outlook for the coming months was less pessimistic than in April, ifo said. The manufacturing order backlog, however, continued to decline, the group said. The ifo index is based on about 9,000 monthly survey responses from businesses in manufacturing, services, trade and construction. Germany chemical producers’ trade group VCI expects the country’s chemical production (excluding pharmaceuticals) to rise 5.0% in 2024, which would come after a 10.4% decline in 2023. Focus article by Stefan Baumgarten Please also visit Macroeconomics: Impact on Chemicals. Thumbnail photo of Germany’s economic affairs minister and vice-chancellor Robert Habeck: source: German government
VIDEO: ‘ICIS Innovation Awards can boost your reputation’ – 2023 winner
BARCELONA (ICIS)–Entering the ICIS Innovation Awards can raise your company’s profile as a leader in this important area, according to the 2023 overall winner. In this video interview, ICIS Chemical Business deputy editor Will Beacham interviews David Dupont, Arkema’s vice president specialty polyamides. Arkema was the overall winner of the 2023 ICIS Innovation Awards. Click here to find out how to enter this year’s  ICIS Innovation Awards. Entry deadline Friday 7 June.
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