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SINGAPORE (ICIS)–Click
here to see the latest blog post on Asian
Chemical Connections by John Richardson.
The China Beige Book, the independent economic
analysis service, has found that:
China services and manufacturing businesses
saw a slowdown in the second quarter from the
first quarter, reflecting the prolonged impact
of COVID controls.
· Orders for domestic consumption and
overseas export mostly fell during Q2. Orders
for textiles and chemicals processing were
among the worst affected.
This is in line with what our contacts have
been saying and what the ICIS polyolefins data
appears to be indicating. Based on the
January-May numbers 2022, the outlook for full
year polypropylene (PP)) and high-density
polyethylene (HDPE) demand seems to have
deteriorated.
We worry that China’s options for turning its
economy around in 2022 are narrowing.
At least in low-density PE (LDPE), as we
discuss in, the outlook hasn’t got any worse.
This is small consolation, as it had already
become bleak before May. Our latest worst-case
scenario is that LDPE demand may decline by 8%
this year.
LDPE stands out from the other grades of
polyolefins because China CFR LDPE price
spreads over CFR Japan naphtha costs have held
up very well this year. In PP, HDPE and
linear-low density PE (LLDPE), spreads have hit
record lows.
Why LDPE appears to be different is because
supply has been reduced, thereby keeping prices
relatively high, because ethylene vinyl acetate
(EVA)/LDPE swing plants have swung to more EVA
production as EVA demand seems to be booming.
The EVA price premiums over LDPE are at or
close-to record highs, depending on the ICIS
price assessment.
And LDPE film price premiums over C4 LLDPE film
have also reached record highs in China in
2022. The two resins compete for many of the
same end-use markets. LLDPE supply is much
longer.
So, it is not just the economy that LDPE
players in China have to worry about, but these
other dynamics as well. This may be the third
year in a row of negative LDPE demand growth in
China because of these other factors – and now
an economy that could see a recession.
Meanwhile, as with the other grades of
polyolefins, LDPE exporters to China need to be
also concerned about a potential significant
fall in China’s LDPE imports. Our worst-case
scenario sees China’s net imports in 2022 some
500,000 tonnes lower than in 2021.
We are sorry it is so gloomy, and, hopefully,
conditions will pick up. But hope is not a
strategy. The chemicals industry industry needs
to prepare for worst-case outcomes.
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.
01-Jul-2022
SINGAPORE (ICIS)–Caixin’s China manufacturing
purchasing managers’ index (PMI) rose to 51.7
in June from 48.1 in May as factory activity
recovered on the back of easing regional
COVID-19 lockdowns, the Chinese media firm said
on Friday.
A PMI reading above 50 indicates expansion in
the manufacturing economy, while a lower number
denotes contraction.
The June reading was the first expansion in
fourth months and marked the strongest rate of
increase seen since May last year, Caixin said
in a statement.
Chinese manufacturers registered the first
expansion of output since February at the end
of the second quarter.
The rate of growth was the quickest seen since
November 2020, with a number of firms linking
the rise to the return to more normal
operations and reopening of production lines as
COVID-19 restrictions were eased.
Total new orders likewise returned to growth in
June, though the rate of increase was only
modest. New export business also rose modestly.
“Covid lockdowns and other restrictions eased
in June, facilitating a gradual recovery in
manufacturers’ operations. Supply and demand
were on the rise, with supply improving more,”
said Wang Zhe, senior economist at Caixin
Insight Group.
“Restoration in the post-pandemic era remained
the focus of the current economy, yet its base
was far from strong. Deteriorating household
income and expectations caused by a weak labor
market dampened the demand recovery,” Wang
added.
China’s
official manufacturing PMI released on 30
June also showed expansion at 50.2 in June.
The Caixin PMI mostly tracks smaller and
private firms while the official PMI covers
larger, state-owned companies.
01-Jul-2022
HOUSTON (ICIS)–The National Weather Service is
tracking three disturbances in the US Gulf and
western Atlantic, one of which could bring
large amounts of rainfall to the Houston area
over the next two days.
Source: National
Hurricane Center (NHC)
Disturbance No 1 is generating showers and
thunderstorms near the south Texas coast and is
forecast to move slowly northward and inland,
meteorologists at the National Hurricane Center
(NHC) said.
Slow development of the system remains possible
as it is still over water, meaning there
remains a chance it could strengthen into a
named storm.
“Regardless of development, heavy rain is
possible along portions of the Texas coast for
the next two days,” the NHC said.
A flash flood watch is in effect for southeast
Texas, including the greater Houston area,
which is home to several chemical plants,
refineries and terminals that export oil, fuel,
liquefied natural gas (LNG) and natural gas
liquids (NGLs) such as ethane and liquefied
petroleum gas (LPG).
The Office of Emergency Management of Deer
Park, Texas, said the watch is in effect
through Friday night.
Disturbance No 2 is located several hundred
miles east of the Windward Islands and is
producing disorganised showers and
thunderstorms.
The NHC only gives a 10% chance of this
disturbance becoming a hurricane in the next
five days.
The third disturbance, referred to by the NHC
as potential tropical cyclone No 2, is likely
to generate heavy rainfall across Colombia
today before moving west across Nicaragua and
Costa Rica by Friday.
Areas of life-threatening flash flooding and
mudslides are expected.
Hurricane conditions are possible within the
watch area along the Caribbean coast of
Nicaragua late on Friday.
There is limited chemical production in the
region, according to the ICIS Supply and Demand
Database, with some caustic soda and chlorine
produced in Costa Rica.
The Gulf of Mexico hosts several offshore oil
wells, accounting for 15% of the nation’s crude
production, according to the Energy Information
Administration (EIA), and federal offshore
natural gas production in the Gulf accounts for
5% of total US dry production.
The Atlantic hurricane season runs from 1 June
to 30 November.
30-Jun-2022
HOUSTON (ICIS)–The Fertilizer Institute (TFI)
said it was praising the bipartisan leadership
efforts of Congressmen Ralph Norman and Jim
Costa for their work in organising a letter to
the Surface Transportation Board (STB)
regarding poor rail service.
The trade group, which representing the
domestic fertilizer industry, said ongoing
failures by the railroad companies are having a
negative impact on the industry and their
movement of vital products, which as a result
is have consequences for the overall
agricultural sector.
“With over half of all fertilizer moving by
rail, we are grateful for the leadership of
Congressmen Norman and Costa in bringing the
issue of inconsistent rail service to the
attention of the STB,” said Corey Rosenbusch,
TFI President and CEO.
“Their dedication to working with all
stakeholders will help ensure that essential
crop nutrient inputs reach farmers when and
where they need them.”
TFI said fertilizer shipments rely heavily on
rail to reach farmers, but imposed
restrictions, along with skeleton crews and
railroad-led initiatives such as
precision-scheduled railroading have forced
fertilizer shipping reductions and potential
production delays.
“Fertilizer is attributable to half of all crop
yields. With the world leaning on US farmers
now more than ever before to feed our growing
population, we must ensure strong yields and
our food security,” Rosenbusch said.
“Fertilizer must reach farmers in a timely
manner and crop harvests also need to get to
their destinations, including the kitchen
table.”
The letter to the STB was signed by 51 members
of Congress and it noted that during the late
April STB hearing on rail service a variety of
industries, including grain and feed and
fertilizer producers, reported severe service
problems with most of the Class I rail
carriers.
It highlighted that TFI had said recent service
problems, and imposed restrictions have forced
shipping reductions and potential production
delays. This not only can restrict supply but
can raise costs on the farmers who rely on
this necessary input for 50% of their crop
yields.
Warning about future and further consequences,
the STB was told that by placing onerous
restrictions on shippers without consulting
customers that railroads may “run the risk of
jeopardising family farms and increasing the
cost of food for consumers.”
The letter closed by stressing to the STB that
“rail service must be improved, and we
appreciate the STB’s attention to this matter.
While we respect the challenges of operating a
major railroad, communication is essential when
taking steps to make the necessary
improvements, including the imposition of
service curtailments.”
“As we work toward solutions to meet the
ongoing supply chain challenges, carriers and
the STB should also be mindful of essential
commodities and our country’s best public
interest.”
30-Jun-2022
HOUSTON (ICIS)–US Koch Ag & Energy
Solutions (KAES) announced it has successfully
completed the acquisition of a 50% interest in
Jorf Fertilizers Company III (JFC III) from
fertilizer producer OCP thereby establishing a
50/50 joint venture between the two companies.
JFC III owns and operates an industrial
facility producing up to 1.1m tonnes/year of
phosphate-based fertilizers.
Koch said that through its advantaged location
within the Jorf Fertilizer Complex, the world’s
largest phosphate fertilizer production
platform, JFC III benefits from a unique
relationship with OCP’s broader industrial
operations at the complex.
“Our long-term partnership with Koch is
reaching a new stage through the establishment
of our Moroccan-based joint venture, which
confirms our common goal to provide farmers
with high quality and reliable Moroccan
phosphate fertilizers,” said Mostafa Terrab,
OCP Group Chairman and CEO.
Koch said the acquisition marks Koch’s first
substantial investment on the African
continent.
“KAES and OCP have a long-standing
relationship, and we are excited to continue
growing our relationship as we work together to
secure JFC III’s long-term success,” said Mark
Luetters, Koch Ag & Energy Solutions
president.
30-Jun-2022
LONDON (ICIS)–ICIS editors Eashani Chavda,
Matthew Chong and Amanda Hay discuss their
latest market insights with ICIS analyst Mike
Connolly after an eventful World Base Oils and
Lubricants Conference. Key topics discussed
include: Asian arbitrage, record prices in
Europe, the US hurricane season, refinery
margins and sustainability.
30-Jun-2022
LONDON (ICIS)–Senior Editor for Recycling,
Matt Tudball, discusses the latest developments
in the European recycled polyethylene
terephthalate (R-PET) market, including:
Some signs of stability creeping into
regional markets
Flake buyers see shift in sellers’
attitudes for July
Hot weather, more tourism will help bottle
supply
30-Jun-2022
LONDON (ICIS)— The ICIS Power team presents the
key drivers for Q3 ‘22 in the main electricity
markets in Europe.
(All graphs in the video are linked below)
ICIS TTF front
month likely to remain at new highs
during Q3 ’22
Germany
German 2022 power load falls to
well below the norm
German gas
storages filling up fast
UK
UK becomes net
power exporter from May
NBP expected to retain a significant
discount to TTF through the third quarter
France
Projected nuclear
availability in Q3 will gradually rise
French run-of-river
hydropower generation stays below
2017-2021 average
Italy
Italian reservoir stocks
remain below norms
Italian gas plants poised for high margins in Q3
’22
CEE/SEE
Romanian and
Serbian hydro
stocks below 2021 levels
Hungarian Q3 ’22 premium over
Germany starts to widen
Iberia
Gas-for-power up
year on year as hydro, wind outputs drop
Iberian spot power prices remain
high year on year
30-Jun-2022
NEW YORK (ICIS)–US-based chemicals distributor
Univar Solutions is working towards providing
carbon footprints for the products it
distributes to provide transparency to
customers and enable them to meet
sustainability goals, an executive said.
“Ultimately, we need to meet our customers’
needs, so as we move forward it will be a mixed
method approach of working with suppliers to
get the most accurate data possible… but also
looking at specific product families and
product groups where that data is not currently
available,” said Liam McCarroll, director of
sustainability at Univar Solutions, in an
interview with ICIS.
“The conversations are not the same across
every industry or with every supplier, but we
certainly see much more information than even
24 months ago,” he added.
The carbon footprints of the products Univar
sources and distributes are not only part of
its own Scope 3 emissions but part of its
customers’ Scope 3 emissions.
Scope 1 emissions are those that come directly
from operations, Scope 2 from energy purchased
and Scope 3 from purchased raw materials,
logistics upstream and downstream, waste
management and other factors throughout the
value chain.
MAPPING OUT SCOPE 3
EMISSIONSUnivar has mapped out
Scope 3 emissions for its entire supply chain
for the very first time, with results disclosed
in its 2021
ESG report released in June 2022.
Of its 10.1m tonnes of CO2 equivalent Scope 3
emissions in 2021, 9.9m tonnes, or 98%, came
from purchased goods and services, using a life
cycle analysis approach. For Univar to reduce
its Scope 3 emissions, collaborating with
suppliers will be key.
“I don’t think there’s any getting away from
the fact that with 98% coming from products, it
will be largely working with the supply chain,
much in the way we do with our Supplier Code of
Conduct,” said McCarroll.
Univar Solutions’ Supplier Code of Conduct
stipulates that suppliers “actively pursue
reduction of direct and indirect greenhouse gas
(GHG) emissions in line with recognised
standards”, among a number of other
requirements.
Univar itself aims to reduce Scope 1 and 2
emissions by 20% by 2025, 40% by 2030 and
achieve net zero direct emissions by 2050.
While no target for Scope 3 emissions has been
announced, it is clearly an area of focus.
“[Scope 3] is an exciting area. As that 98%
[from products] comes down, the rest of our
Scope 3 will of course become more relevant. So
we will take a portfolio approach, working with
other service providers and looking at our
waste and resource use because that all plays
back into our Scope 3 emissions,” said
McCarroll.
DEALING WITH INCOMPLETE
DATAThe product carbon footprint
side of Scope 3 presents a big challenge as
there is often incomplete data as well as data
from different methodologies.
“We always prefer primary data… but it’s also
about recognising that not all primary data is
created the same. We should also be aiming for
transparency – understanding methodologies and
really working with suppliers and customers to
support that transparency,” said McCarroll.
“It’s important to them, as well as important
to us. It’s not just about the number – it’s
about how that number is achieved,” he added.
Univar will work with suppliers to put forward
products that contribute to more sustainable
solutions, he noted.
PART OF A HOLSITIC
APPROACHReducing Scope 3
emissions and helping customers do the same is
part of a holistic approach to sustainability.
“Carbon footprint is very important, but we
also want to ensure that we are leveraging our
portfolio of existing products, services and
practices to support our customers’
sustainability journeys, and sustainability is
more than just carbon footprinting,” said
McCarroll.
“By understanding this product framework, we’re
helping specific areas of that customer’s
journey. For some customers and suppliers,
their priorities differ. We want to be a
distributor that is capable and ready to help
them on their journey because not everyone’s
looks quite the same,” he added.
While Univar is not offering carbon footprints
for all the products it distributes, as not
every supplier provides that information, it is
sharing select data with customers and working
towards a standardised approach.
“We have multiple engagements and projects with
different customers where we are supplying data
but right now it’s part of what we are building
out… It’s not part of our standardised offering
but what we’re moving towards,” said McCarroll.
Credibility, reliability and transparency of
data on carbon footprints is critical.
“One of the most important things is making
sure that it’s aligned with a methodology – not
just an organisation saying, ‘here’s a number
and we don’t want to back it up’,” said
McCarroll.
“If we want to bring people on the journey with
us, it has to be credible and reliable but
there are multiple methods in calculating
product carbon footprints. Not all of them will
get you the same answer but broadly will take
you in the right direction,” he added.
While Univar is not stipulating which
particular methodologies should be used, they
should be transparent and credible.
“[We want to] make that information as clear
and useful as possible to the customer because
ultimately, we will use it in our emissions
reporting but also want to make sure it doesn’t
end there – that we’re able to support the full
supply chain,” said McCarroll.
TAKING EMISSIONS OUT OF
TRANSPORTATIONAside from
purchased materials or products, another
important part of Scope 3 emissions is in
transportation.
On this front, Univar aims to transition its
light and heavy fleet of vehicles over time.
“We’re aiming to transition a very significant
portion of our light fleet… by 2025, increasing
the number of electric vehicles (EVs),” said
McCarroll.
Its light fleet includes passenger vehicles for
employees, as well as some pickup trucks used
for deliveries. The heavy fleet is comprised of
trucks used to distribute most of its products.
“Diesel will remain a significant part of [the
heavy fleet] but we can do much more with it,
so we’re looking at telematics, driving
behaviours, eco-training and more streamlined
trailers. We also have in the US a number of
heavy duty EVs that we’ll be looking to
introduce towards the end of this year,” said
McCarroll.
In May, Univar saw its first
electric truck – the Nikola Tre – roll off
Nikola’s assembly line. And in June, Univar
successfully completed its pilot programme with
the truck along with Nikola’s mobile charging
trailer. That truck is now part of Univar’s
fleet.
“The initial trail worked well. The drivers
were very responsive and as excited about it as
we were,” said McCarroll, who also noted that
Univar is exploring options with other electric
truck manufacturers.
Univar is also looking towards compressed
natural gas, biodiesel, fuel additives and
hydrogen fuel cells for its heavy fleet.
Interview article by Joseph
Chang
30-Jun-2022
HOUSTON (ICIS)–Ports and dockworkers on the
western coast of the US said they will miss a 1
July deadline to sign a labour agreement,
leaving chemical companies at risk for more
supply chain problems.
Ports, workers will maintain operations as
talks continue.
Both sides say they are committed to
reaching deal.
Port disruptions characterised past talks.
The Pacific Maritime Association (PMA)
will negotiate on behalf of shippers, and the
International Longshore & Warehouse Union
(ILWU) will
represent dockworkers. The union represents
22,000 workers at 29 western coast ports from
Bellingham, Washington, to San Diego,
California.
The two sides acknowledged that they are
unlikely to reach an agreement before the
current labour contract expires on 1 July. In a
joint statement, both groups said they are not
preparing for a strike or lockdown. They
stressed their commitment to reaching an
agreement.
Still,
the concern is that talks could break down.
Past contract negotiations have been
contentious and
included disruptions at ports.
Previous labour disputes at the ports have cost
the US economy $1bn-2bn/day, according to a
letter to the US president’s office from the
American Chemistry Council (ACC) and several
other trade groups.
This time, the cost could be higher because
supply chains are already strained.
“Even a relatively short port slowdown or
shutdown could compound inflationary pressure
and cause long-lasting damage to consumer
confidence and American businesses,” the letter
said.
The two sides have provisions in place that
allow them to continue operations while
negotiations continue, said Eric Byer,
president of the National Association of
Chemical Distributors (NACD).
CONSEQUENCES OF
DISRUPTIONSUS chemical companies
rely on western coast ports to receive imports
of specialty chemicals.
The San Pedro Bay complex, made up of the ports
of Los Angeles and Long Beach, accounts for 25%
of US exports and 40% of containerised imports,
according to
Freightwaves, a trade publication.
For a lot of small businesses, San Pedro is the
prime location for their products to arrive,
Byer said.
Either the ports or the dockworkers could
disrupt port operations.
Dockworkers could purposely work slowly or call
a strike. Ports could lock out dockworkers,
which would prevent them from doing their jobs
at the ports.
The consequences of such disruptions would
trickle down through the supply chains and
cause knock-on effects.
Work disruptions could worsen the pile-up of
containers at western coast ports, said Scott
Jensen, ACC spokesman.
Chemical companies could divert shipments
through the Panama Canal and to ports along the
Gulf Coast and the eastern coast.
Ideally, Byer said shipments would arrive at
ports in Houston or New Orleans, Louisiana,
home to the nation’s petrochemical and refining
hubs.
However, both are vulnerable to restrictions
and shutdowns caused by tropical weather.
Hurricane season started on 1 June, and
meteorologists
are predicting an active season.
Also many ports are already stretched and may
have little spare capacity, said Scott Jensen,
a spokesman with the ACC.
Companies may have to ship their products
farther away to ports in Miami, Florida and up
the East Coast – to Savannah, Georgia;
Charleston, South Carolina; Morehead City,
North Carolina; or even the mid-Atlantic, Byer
said. These more distant destinations will
add weeks to delivery times.
Trucks and rail can only do so much to address
any problems caused by port disruptions.
Trucking has struggled with a chronic shortage
of drivers, a problem made worse by the
coronavirus. Railroads have had acute
service problems.
Earlier in April, the railroad companies
Union Pacific (UP) and BNSF asked their
customers to reduce volumes over the coming
days
The restrictions led INEOS Olefins and Polymers
USA to declare a
force majeure on polymer products.
THINGS ARE ALREADY
BADSupply chains already have
many problems.
Delivery times for containers from the Pacific
Northwest to Chicago are now 90 days interior
point intermodal (IPI), said Lynn Stacy,
managing director of the bulk liquid division
of the logistics firm OEC Group.
Before the pandemic, it used to take two to
three weeks, Stacy said.
Because it is taking so long for containers to
reach Chicago by rail, ocean carriers are now
terminating the boxes at the port of discharge,
leaving it up to the receivers to figure out
how to get them to their next destinations,
Stacy said.
In addition, companies are having a hard time
finding chassis, isotanks and containers, all
of which are critical equipment for keeping
supply chains humming, Stacy said. For chassis,
it is taking three times as long to obtain one
as before the coronavirus pandemic.
Much of this critical equipment is manufactured
in China, where there are 18-month lead times
to build new ones, he said.
The ACC highlighted the problems and delays
faced by chemical companies in a survey it
conducted in March, which was a follow-up to
one it did in November and December. The
findings include the following:
Port delays last 4-6 weeks.
Shipments on inland waterways take an
average of six days longer.
Because of rail rates and service problems,
75% of companies switched to truck deliveries.
Nearly all companies are paying higher
truck rates and 63% have longer transit times.
The ACC and the other trade groups did point to
some long-standing problems that a new labour
contract could address.
Their letter noted that the World Bank’s 2020
Global Container Port Productivity Index
included only four US ports in the top 100.
None ranked in the top 50.
The two sides could take some steps that could
upgrade port infrastructure, adopt automation
and prepare skilled workers for advanced jobs,
the letter said.
These steps could improve operations and US
ports and help them move up the World Bank’s
ranking.
By Al Greenwood
Thumbnail shows containers. Image by
Shutterstock.
30-Jun-2022
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