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DOHA (ICIS)–Global polymer markets can expect 2024 to be another challenging year, with demand likely to remain tepid. Dull demand and oversupply are expected to persist for much of next year, industry sources said on the sidelines of the 17th Annual Gulf Petrochemicals and Chemicals Association (GPCA) Forum in Doha. “We are not likely to see a major pick-up in offtake in the first half of 2024, and this may have an impact on polymer prices,” a trader from a global trading house said. Some players are hoping for a demand pick-up in H2 2024, but this is not supported by concrete data, the trader said. “We know that polymer business is cyclical and we see peaks and troughs. However, this time, the animal we are dealing with is something new – not seen before,” a second trader said. China, the world’s second-biggest economy, has yet to see signs of a seasonal uptick in polymer demand in the run-up to the Lunar New Year in February. There have been attempts throughout 2023 to rekindle overall consumption in the country via economic stimulus introduced by the government, but no significant success has been noted so far from the measures. Europe may continue to grapple with tepid demand conditions, with high cost of production likely to drive down operating rates at petrochemical plants. High interest rates and inflation are also expected to curb polymer uptakes in major markets. Meanwhile, India remains a bright spot in Asia, as it has a more promising demand growth figures and could draw attention of suppliers across geographies. In the absence of demand growth coming from bigger global markets, many suppliers have turned their attention to Africa. “Africa is the new China, and we are putting in place our strategy, infrastructure and people to gear up for the demand growth set to come from the region in the years ahead,” a source at a major regional trading house told ICIS. The 17th Annual GPCA Forum runs on 3-6 December in Doha, Qatar. Focus article by Veena Pathare Thumbnail image: Cargo ships preparing to dock at a container terminal in Lianyungang, Jiangsu province, China on 6 December 2023. (By Costfoto/NurPhoto/Shutterstock)

HOUSTON (ICIS)–US agribusiness titan Archer Daniels Midland (ADM) said that as part of a series of investments it will continue to grow its business in Brazil as it is set to expand crush capacity at three oilseed processing facilities. Those facilities are Campo Grande in Mato Grosso do Sul, Porto Franco in Maranhao and Uberlandia in Minas Gerais. In total, the investments are expected to add approximately 400,000 metric tons per year to ADM’s crush capacity in Brazil. “We’re continuing to see growing demand in both domestic and export markets in Brazil. Our facilities are perfectly located to meet this demand, and we’re investing to ensure we continue to be on the leading edge of growth in Brazil,” said Luciano Botelho, ADM South American oilseeds business president. In addition, the company said it has completed the acquisition of a controlling stake in Buckminster Química a Macatuba, a Sao Paulo-based producer of refined glycerin. “Sustainability is one of the enduring global demand trends driving growth opportunities for ADM,” said Luiz Noto, ADM director of Oils and Biodiesel in Brazil. “Bio-based refined glycerin has a broad array of uses as a component of industrial and consumer products. Adding Buckminster Química, which has already been a partner for our Brazilian business, is another way in which we’re broadening our portfolio and expanding our capabilities to meet growing customer needs for sustainably sourced products spanning food, feed, fuel, industrial and consumer products.” Buckminster Química was founded in 1999, and was privately owned, with about 65 employees. It has a single manufacturing facility whose primary product is bi-distilled vegetable glycerin.

HOUSTON (ICIS)–US November sales of new light vehicle edged slightly lower from October but are up by 7.4% compared with the same month a year ago and by 12.2% year to date, but an ICIS economist expects sales to slump in 2024 before recovering to pre-pandemic levels. According to data from the US Bureau of Economic Analysis (BEA), November sales came in at a seasonally adjusted annual rate (SAAR) of 15.3m units. Kevin Swift, senior economist for global chemicals at ICIS, said he is projecting sales to edge slightly lower to 15.2m units in 2024 before rebounding strongly to 16.8m units in 2025 as the economy stabilizes and recovers. For context, sales in 2019, prior to the pandemic, were 17.0m units. Despite the slight decrease in November volumes, Patrick Manzi, chief economist for the National Automobile Dealers Association (NADA), kept his estimate for total 2023 volumes unchanged at 15.4m units. The month-on-month decrease likely had more to do with elevated interest rates and lingering concerns of a recession or an economic slowdown keeping consumers from buying big-ticket items than with lost production from the United Auto Workers (UAW) strike against the Big Three automakers. Manzi noted that inventory on the ground and in transit at the start of November was 2.15m units, which rose to 2.33m units by the end of the month. November was the 15th consecutive month of year-on-year seasonally adjusted annual rate (SAAR) increases as the industry continues to work its way out of a sales slump brought on by supply chain issues related to the coronavirus pandemic. BATTERY ELECTRIC VEHICLES (BEVs) Total sales of battery electric vehicles (BEVs) so far in 2023 topped 1m units during November, NADA said, marking the first time BEVs have surpassed that total in a single year. Speaking last week at the 17th ICIS Pan American Base Oils and Lubricants Conference in Jersey City, New Jersey, Swift said the number of internal combustion engine (ICE) vehicles is expected to peak in 2025. ICE vehicles made up 83.4% of all vehicles sold in the US in November, as shown in the following chart. CHEMS USED IN AUTOS The sector is important to chemistry because a typical vehicle contains nearly $3,950 of chemistry – chemical products and chemical processing, Swift said. Included, for example, are antifreeze and other fluids, catalysts, plastic dashboards and other components, rubber tires and hoses, upholstery fibers, coatings and adhesives, Swift said. 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. Meanwhile, electric vehicles (EVs) and associated battery markets are an important growth opportunity for the chemical industry, with chemical producers separately developing battery materials, as well as specialty polymers and adhesives for EVs. Focus article by Adam Yanelli Please also visit the ICIS automotive topic page

BARCELONA (ICIS)–Artificial intelligence (AI) can be used by chemical company leaders to help solve their biggest challenges, such as predicting demand and pricing. AI can develop demand scenarios for chemical markets Companies should focus AI only on their biggest pain points AI could measure market sentiment ICIS is developing algorithms to forecast pricing AI allows programs to perform tasks normally carried out by humans Machine learning is an algorithm with the ability to learn Deep learning is a neural network which can learn from data In aerospace, AI already forecasts demand, alters pricing, using algorithms Click here to watch an ICIS webinar on digital transformation trends in the chemical industry In this Think Tank podcast, Will Beacham interviews tech founder, AI engineer and consultant Eleanor Manley, ICIS director of data solutions Alan Spanos, ICIS senior consultant Asia John Richardson and Paul Hodges, chairman of New Normal Consulting. Editor’s note: This podcast is an opinion piece. The views expressed are those of the presenter and interviewees, and do not necessarily represent those of ICIS. ICIS is organising regular updates to help the industry understand current market trends. Register here . Read the latest issue of ICIS Chemical Business. Read Paul Hodges and John Richardson’s ICIS blogs.

SAO PAULO (ICIS)–The Brazilian government must continue supporting beleaguered domestic chemicals producers with changes in natural gas regulations and further protectionist measures, according to the executive president of chemicals trade group Abiquim. Andre Passos said in some chemicals sub-sectors such as fertilizers industrial plants “are already closing” in Brazil due to high natural gas prices, although Unigel, a major fertilizers in Brazil has recently reverted its decision to shut a large plant. Passos added that inaction could lead to more chemicals plants closing, adding that competition from foreign material sent to Brazil at low prices continues greatly hurting domestic producers. Abiquim represents chemicals producers; other parts of the industry such as distributors are not members, and it is distributors who say imports benefit them giving them access to cheaper material. CABINET HAS HELPED, BUT MORE IS NEEDEDAbiquim’s executive president said the government president by Luiz Inacio Lula da Silva since January “has helped a lot” Brazilian domestic producers, with increases in import tariffs, one in March and one in November, as well as the re-implementation of a tax break for chemicals known as REIQ. However, more needs to be done to face up to competition from overseas product, said Passos. Abiquim held its annual meeting on Monday 4 November, with Brazil’s vice president and minister for Industry its star guest. In his speech to delegates, Geraldo Alckmin said the government is “aware” of the difficulties chemicals producers face and promised to work to reduce natural gas prices as well as the so-called ‘Brazil cost’ of doing business in the country. “Alckmin does want to help chemicals producers, as shown by the measures passed this year. But the government must intensify these efforts, for example by extend REIQ, which currently covers only basic chemicals and just a few second-generation chemicals,” said Passos. REIQ lowers the PIS/COFINS tax rates that the chemical industry pays for inputs within the xylenes chain, including naphtha, benzene, propene, ethene, toluene, and cumene. PIS and COFINS are imposed on the Brazilian entity or individual (the importer of goods or services) and should apply to the import of services at the rates of 1.65% and 7.6%, respectively. Under REIQ, the PIS/COFINS rate stands at 3.65% overall. “This must be extended to widen the base of products covered by REIQ. This would just be mirroring moves being done in other countries to protect their chemicals producers,” added Passos. NATURAL GAS PRICESNatural gas prices are three or four times higher in Brazil than in the US, the other large producer of chemicals in the Americas, and this situation continues putting a strain on the industry, said Passos. The government could do more by easing some regulations related to the way oil and gas producers treat their surplus gas. Abiquim has said that with higher natural gas output in the countries being directed at chemicals, producers could make investments of around Brazilian reais (R) 70bn ($14.1bn) to expand their facilities. “Alckmin has also created a working group at MDIC [Alckmin’s Ministry of Development, Industry, Trade and Services] exclusively focused on natural gas prices. The government obviously is not a producer of natural gas itself, but it has at its disposal regulatory actions which could lower prices,” said Passos. “Those regulatory changes would increase supply, and by increasing supply you will obviously lower prices.” OCTOBER UTILIZATION AT LESS THAN 60%Passos said Brazilian chemicals producers continue being hit by high levels of imports – Brazil’s chemicals trade deficit is expected at $47bn in 2023 – and added that capacity utilization continued falling in October, the last month data is available for. To put the figure into context, Brazil’s chemicals sales are expected to close 2023 at $167.4bn, Abiquim said this week. In a previous interview with ICIS in July, Passos had already warned about increasing imports, especially coming from China, and how that was hurting domestic producers. “[Since then] Things have not improved in the second half of 2023. Imports for the 70 main chemical products continued rising throughout the year, with capacity utilization averaging 65% in the period January-September,” he said. “In October, capacity utilization stood at less than 60% – imports are causing great pain for domestic producers, who are the big employers and key to the country’s manufacturing fabric.” This interview took place in Sao Paulo on 4 December. Interview article by Jonathan Lopez

LONDON (ICIS)–The ICIS Hydrogen Market Watch is a weekly overview of the latest developments across the global hydrogen economy, featuring coverage of policy, regulation and transmission, as well as key pricing insights for the cost of producing hydrogen.

SINGAPORE (ICIS)–South Korea’s petrochemical exports posted a 5.9% year-on-year increase to $3.8bn in November, ending 18 months of contraction, while overall shipments abroad grew for the second straight month as factory activity returned to expansion mode. Overall exports up 7.8%;  electric vehicles exports surge 69.4% Exports to China still down November manufacturing PMI rises to 50.0 Higher petrochemical shipments were backed by improved demand from the US, ASEAN and India despite lower product prices as oil markets weakened, the Ministry of Trade, Industry and Energy (MOTIE) said on 1 December. South Korea’s overall exports grew for the second consecutive month, with the 7.8% increase in November the highest recorded since July 2022, thanks to a turnaround in semiconductor shipments. November exports stood at $55.8bn, while imports declined by 11.6% to $52.0bn, resulting in a trade surplus for the sixth consecutive month at $3.8bn. SEMICONDUCTORS, EVS SHINESemiconductor exports in November jumped by 12.9% year on year to $9.5bn, ending 15 months of decline as memory chip prices spiked, it said. South Korea has the second-biggest share of the global semiconductor market at about 18% in 2022. “As new smartphone model releases and AI server products are anticipated to boost demand and enhance supply conditions, exports are forecast to continue to improve,” MOTIE said. Automobile exports also posted a double-digit growth in November at 21.5% to $6.5bn, rising for the 17th straight month, partly on strong US demand for eco-friendly vehicles. Electric vehicle exports surged 69.4% year on year to $1.6bn, accounting for more than a fifth of total automobile shipments. The automotive industry is a major global consumer of petrochemicals, which account for more than a third of raw material costs of an average vehicle. EXTERNAL DEMAND IMPROVESSouth Korea’s overall exports to six out of nine major destinations posted growths in November, led by the US, which recorded a 24.7% year-on-year increase to $11.0bn, according to MOTIE. To India, exports rose by 10.8% to $1.5bn, while shipments to Japan advanced 11.5% to $2.6bn. Shipments to the EU rose by 3.7% to $5.5bn, while those to the ASEAN and Latin America grew by 8.7% to $9.8bn, and 7.7% to $2.0bn, respectively. However, exports to China – South Korea’s biggest market – continued to contract, dipping 0.2% to $11.4bn, but the overall value remained above $10bn for the fourth straight month, MOTIE said. China, which is the world’s second-biggest economy, has been slowing down amid weakness in external demand and a domestic property crisis. South Korea’s shipments to the Middle East, meanwhile, declined 7.4% to $1.4bn. FACTORY OUTPUT ENDS 16-MONTH FALLManufacturing activity in one of Asia’s highly industrialised economies finally returned to expansion mode in November after 16 months of contraction. Its purchasing managers’ index (PMI) inched up to 50.0 from 49.8 in the previous month, based on a survey of manufacturers by financial services intelligence provider S&P Global. “Output levels broadly stabilized in November, accompanied by the softest reduction in total new orders since July 2022,” it said. New orders declined for the 17th month, but the rate of contraction has eased. “A number of firms mentioned that demand conditions remained muted amid subdued client confidence and weakness in both the domestic and global economies,” S&P Global said. Manufacturing firms in the country, however, “signalled the weakest degree of optimism for five months amid concerns over sustained economic weakness,” it said. “The rise in employment levels was often attributed to the filling of existing vacancies. Meanwhile, buying activity was partly raised in order to protect against delivery delays and further price rises,” S&P Global economist Usamah Bhatti said. “As such, manufacturers signalled another marked rise in cost burdens amid high raw material prices as well as unfavourable exchange rate trends. As a result, firms raised output charges at the strongest pace since the start of the year,” Bhatti added. Global economic growth is expected to slow down in 2024 amid prevailing high interest rates, elevated inflation and with crude prices staying firm amid output cuts by OPEC and its allies (OPEC+). South Korea posted a third-quarter annualized GDP growth of 1.4%, the fastest so far in the year. Focus article by Pearl Bantillo

LONDON (ICIS)–The outlook for global acrylonitrile (ACN) markets remains bearish as geopolitics-led economic challenges loom for 2024. In this latest podcast, editor of the US ACN report, Ramesh Iyer; editor of the Asia ACN report, Corey Chew; and editor of the Europe ACN report, Nazif Nazmul, share the latest developments and expectations for what lies ahead. Forms of oversupply expected to persist despite feedstocks volatility Buyers aiming to secure additional contractual volume flexibility Ongoing economic downturn to constrain global demand recovery ACN is used in the production of synthetic fibres for clothing and home furnishings, engineering plastics and elastomers. Click here to open in a new window.

MUMBAI (ICIS)–India’s southern states of Andhra Pradesh and Tamil Nadu and eastern state of Odisha are on high alert as severe cyclonic storm Michaung is expected to make landfall on Tuesday. “The system is likely to cross south Andhra Pradesh coast between Nellore and Machilipatnam close to Bapatla during the next four hours as a severe cyclonic storm with a maximum sustained wind speed of 90-100km/hour,” according to the Indian Meteorological Department (IMD) in its latest update. The cyclone is expected to trigger heavy rains in several districts of Andhra Pradesh and Odisha states until 6 December, IMD added. The Tamil Nadu government has declared a public holiday in four districts including its capital Chennai, on Tuesday. While the government has not asked companies to stop work, factories have been advised to allow only essential services to function. Chennai is a major electronics and manufacturing hub in south India. The micro small and medium enterprises (MSME) industry in Chennai have been severely affected by the rains and floods, industry sources said. “MSMEs have been affected badly. Industrial estates housing the MSMEs were severely flooded,” said Suresh Krishnamurthy, president of the Hindustan Chamber of Commerce (HCC). “It is too early to assess losses. There has been severe water-logging in many industrial estates and the entire business is affected,” he added. Chennai airport resumed services on Tuesday morning after being shut on 4 December due to flooding caused by the heavy rains. On 4 December, heavy rains triggered by the cyclone flooded Chennai and its neighbouring districts, killing eight people and disrupting road, air and rail traffic, a government official said. Taiwan’s Foxconn and Pegatron halted Apple iPhone production at their facilities near Chennai due to heavy rains, newswire agency Reuters reported on 4 December. Several industrial estates in Chennai and neighbouring districts were affected by the cyclone. Chennai houses many industrial clusters, including the Ambattur industrial estate, Guindy industrial estate, SIDCO industrial estate and Thirumudivakkam industrial estate. These clusters cater to various industries including automotive, electronics, engineering, chemicals, textiles, pharmaceuticals among others. Thumbnail image: Commuters pass through a flooded road during heavy rains as Cyclone Michaung is expected to make landfall on the eastern Indian coast, in Chennai, India, 04 December 2023. (By IDREES MOHAMMED/EPA-EFE/Shutterstock)

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.