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LONDON (ICIS)–High natural gas prices in the EU are “unbearable” for energy-intensive industries, chemicals trade groups Cefic and Fertilizers Europe said on Thursday ahead of a key energy summit. EU energy ministers are set to meet on Friday (30 September) aiming to reach a political agreement on a proposed emergency intervention in the 27-country bloc’s energy markets to address high prices. Cefic and Fertilizers Europe, together with 11 other trade groups representing energy-intensive industries in the EU, undermined the need for “more immediate and efficient measures” in what they called worsening crisis circumstances. “We reiterate our call on the European leaders to urgently introduce EU-wide measures aimed at addressing the impact of natural gas prices on industrial competitiveness and measures designed to disconnect electricity prices from gas prices,” they said. “Moreover, the Temporary Crisis Framework needs to be prolonged and reviewed to adapt to the current circumstances. It must be more flexible and allow for fast approval of the state aid. For example, such requirement as negative EBITDA [earnings] must be removed, as it means the aid would arrive too late.” The EU’s temporary Crisis Framework was introduced in March to help support the economy following Russia’s invasion of Ukraine. The European Commission – the EU’s executive body – has proposed intervention in the bloc’s electricity market rules and for the 27 member states to be obliged to reduce electricity consumption by 5% at peak price hours. It proposed that Member States aim to reduce overall electricity demand by 10% until the end of March 2023. As well as Cefic and Fertilizers Europe, the statement was signed by trade groups Cembureau (cement), Glass Alliance Europe, Euromines (mining), Cepi (paper), Eurofer (steel), Eurometaux (metals), Eurima (insulation), the European Lime Association, Euro Alliages (ferro alloys and silicon), EXCA (clay), and Cerame-Unie (ceramics). Front page picture: A picture released by the Danish Ministry of Defense on 27 September shows a leak at the Nord Stream gas pipeline, which is adding further pressure to the EU’s natural gas supply, pushing up prices this weekPicture source: Chine Nouvelle
SINGAPORE (ICIS)–China, the world’s second-biggest economy, is projected to grow at a much slower pace of 2.8% this year compared with an earlier forecast of 5.0%, according to the World Bank, amid the country’s zero-COVID policy and ongoing property crisis. Heavy economic toll from COVID-19 lockdowns Real estate market in severe downturn Chinese yuan hit lowest since 2008 It represents a sharp slowdown from the 2021 growth rate of 8.1% – the fastest recorded in a decade. The World Bank’s projected slowdown for the Asian economic powerhouse was gloomier than the 3.3% forecast by other multilateral institutions such as the International Monetary Fund (IMF) and the Asian Development Bank (ADB). “China’s success in containing Covid-19 infections comes at a significant economic cost,” the World Bank said in its East Asia and the Pacific Economic Update report released on 27 September. In the second quarter, China’s GDP growth slowed to 0.4% from 4.8% in the previous three months, as private consumption shrunk due to COVID-19 curbs across multiple major cities, including its financial hub Shanghai. “The economic impact of COVID-19 is still significant in China because of the stringent local public health measures prompted by its efforts to suppress the disease,” the World Bank said. The targeted mobility restrictions from the curbs not only depress demand, but also limit production by shutting down factories and disrupting the domestic supply chain, it said. April industrial production shrank by 2.9% year on year, the first contraction since March 2020, while merchandise exports growth for the month in US dollar terms grew only 3.9% year on year – the slowest pace since June 2020. In May to August, industrial production returned to growth, while overall exports increased by more than 10% on a year-on-year basis, except in August. “China’s output is expected to grow more slowly than the output of the rest of the region in 2022, for the first time since 1990,” the World Bank said. Furthermore, China’s real estate market is now experiencing a severe downturn, with housing activity shrinking following a temporary rebound between mid-2020 and mid-2021, it said. “The surge in new home sales in the first half of 2021, fueled by a liquidation of holdings by developers to improve liquidity positions, was followed by a sharp contraction in new home sales,” the World Bank said. “Housing prices have fallen, especially for second-hand housing for which average prices dropped by almost 7% between September 2021 and July 2022,” it said. More than 30 petrochemicals and specialty chemicals are key ingredients in materials used for modern construction such as adhesives, admixtures, sealants, coatings, paints, flooring, insulation, water proofing, among others. While improvements were seen across China’s data in August including industrial output, fixed asset investment and retail sales, the pace of recovery in production, consumption and investment remains in question for the coming months, Singapore-based UOB Global Economics & Markets Research said in a note earlier this month. On a year-on-year basis in August, China’s industrial production growth picked up to 4.2% from July’s 3.8% expansion while retail sales strengthened by a stronger-than-expected pace of 5.4%, up from 2.7% in July. However, real estate information provider China Real Estate Information Corp CRIC) said the top 100 developers in the country reported a combined 32.9% year-on-year decline in home sales in August. “China continues to face challenges from its dynamic zero-COVID policy, prolonged property market weakness and expected slowdown in external demand amidst high inflation and tightening monetary policy,” UOB said. Amid a flagging economy, China’s central bank has been cutting its key interest rates in sharp contrast with the monetary tightening of other major economies led by the US, thus, exerting strong depreciating pressure on the yuan (CNY). The Chinese currency weakened on 28 September to CNY7.2458 to $1, the weakest level recorded since the global financial crisis in 2008. Focus article by Nurluqman Suratman Click here to read the Ukraine topic page, which examines the impact of the conflict on oil, gas, fertilizer and chemical markets. Visit the ICIS Coronavirus topic page for analysis of the impact on chemical markets and links to latest news.
SINGAPORE (ICIS)–Vietnam’s economy expanded by 13.7% year on year in the third quarter, supported by stronger exports, a low base effect and a sharp recovery in private consumption, official data showed on Thursday. The country’s GDP growth in the third quarter accelerated from the 7.83% expansion in the April-June quarter, data from the General Statistics Office of Vietnam showed. Vietnam’s economy expanded by 2.9% year on year in 2020 and 2.6% in 2021. Private consumption – which makes up almost 40% of the GDP growth rate in the third quarter – grew by 10.1% year on year in the third quarter, while overall exports of goods and services rose by 9.32%. The industrial and construction sector grew by 12.9% year on year in the third quarter. For the first nine months of this year, Vietnam’s GDP expanded by 8.83% year on year, which is the highest growth rate for a nine-month period since 2011. Private consumption rose by 7.26% year on year in the January-September period while exports of goods and services were up by 8.94%. The US was Vietnam’s largest export market in the first nine months of this year with an estimated turnover of $86.3bn, while China was the country’s largest import market with a projected turnover of $91.6bn. In the first nine months of 2022, Vietnam posted a trade surplus of $6.52bn, reversing the trade deficit of $3.44bn in the same period of last year. The World Bank earlier on 27 September upgraded its year-on-year GDP growth forecast for Vietnam to 7.2% from a previous estimate of 5.3% in April. The forecast places Vietnam as the top performing economy in the Asia-Pacific, outpacing the Philippines and Malaysia which are projected to grow by 6.5% and 6.4% year on year, respectively.
HOUSTON (ICIS)–More than 7.2m single- and multi-family residences with a combined reconstruction value of $1.6tr are at moderate to high risk of flash flooding from Hurricane Ian, which made landfall in Florida on Wednesday afternoon. Source: National Hurricane Center The storm had maximum sustained winds of 155 miles/hour, and brought heavy rains, but most damage is expected from storm surge that could be between 12-18 feet in some places, according to the National Hurricane Center (NHC). Storm precautions continued to have a small impact on oil production along the western areas of the Gulf of Mexico. Based on data from offshore operator reports Wednesday, the Bureau of Safety and Environmental Enforcement (BSEE) said that personnel have been evacuated from a total of 11 production platforms, which represents 2.11% of the 521 manned platforms in the Gulf of Mexico. Personnel have been evacuated from five rigs, equivalent to 35.71% of the 14 rigs of this type currently operating in the Gulf. A total of three rigs have moved off location out of the storm’s path as a precaution. This number represents 15.79% of the 19 rigs currently operating in the Gulf. The rigs are not moored to the seafloor, so they can move out of harm’s way in a relatively short time frame. Personnel remain on board and can return to the original location once the storm has passed. From operator reports, BSEE estimated that approximately 9.12% of the current oil production and 5.95% of the natural gas production in the Gulf has been shut in. Shut-in production information included in these reports is based on the amount of oil and gas the operator expected to produce that day. The US fertilizer industry has been watching the tropical threats closely as Tampa is a key centre with both trading, shipping and production operations in the area. Major domestic producers, including both Yara and Mosaic, have facilities in the surrounding region. Mosaic said its North America Incident Command Team started coordinating with operating sites last week in advance of Hurricane Ian. “All of our Florida locations have been secured, with some fully evacuated while minimal staff remain at other sites,” Mosaic said in a statement Wednesday morning. Ascend Performance Materials has a plant in Pensacola, Florida, that produces nylon 6,6 as well as feedstocks hexamethylene diamine (HMD) and adipic acid, according to the ICIS Supply and Demand Database. Pensacola is located on the far western edge of the state and is not within the projected path of the storm. Huntsman International produces maleic anhydride in Pensacola, and Reichhold Chemicals has production sites in Pensacola and in Jacksonville, Florida. Jacksonville is on the Atlantic coast side of Florida and is within the projected path. Storm impacts are also expected into southern Georgia and parts of South Carolina. Hexion produces epoxy resins and phenolic resins in Lakeland, Florida, according to the database. Lakeland is about 35 miles east of Tampa. Ian is expected to cross Florida and make another landfall by Friday, threatening the ports of Savannah, Georgia, and Charleston, South Carolina, according to the NHC. The Port of Savannah was still open as of mid-afternoon on Wednesday, according to a spokesperson for the port. US operator Kinder Morgan said on Wednesday that the 2.5mtpa Elba LNG in Georgia was expected to remain online as Hurricane Ian passes through the US southeast region. A Kinder Morgan spokesperson said the company planned to continue normal operations for both the Southern Natural Gas and Elba Express pipelines into the export plant. The 173,000cbm Murex was the last vessel to load from Elba on 25 September. No other vessels were expected to load from the US plant in the near term. Charleston, South Carolina is home to Braskem’s US polypropylene (PP) production facilities. The plant provides packaging, warehousing and export shipping services. CHEMICALS USED IN CONSTRUCTION The damage and efforts to rebuild can translate to increased demand for many chemicals and polymers that are used in the construction sector. The white pigment titanium dioxide (TiO2) is used in paints. Solvents used in paints and coatings include butyl acetate (butac), butyl acrylate (butyl-A), ethyl acetate (etac), glycol ethers, methyl ethyl ketone (MEK) and isopropanol (IPA). Blends of aliphatic and aromatic solvents are also used to make paints and coatings. For polymers, expandable polystyrene (EPS) and polyurethane (PUR) foam are used in insulation. Polyurethanes are made of methylene diphenyl diisocycanate (MDI), toluene diisocyanate (TDI) and polyols. High density polyethylene (HDPE) is used in pipe. Polyvinyl chloride (PVC) is used to make cladding, window frames, wires and cables, flooring and roofing membranes. Unsaturated polyester resins (UPR) are used to make coatings and composites. Vinyl acetate monomer (VAM) is used to make paints and adhesives. Additional reporting by JT Strasner, Zachary Moore, Sylvia Tranganida, Al Greenwood and Fauzeya Rahman Thumbnail image from the National Hurricane Center shows projected path of the storm.
HOUSTON (ICIS)–The US Department of Agriculture (USDA) said the federal government is making $500m in grants available to increase American made fertilizer production to spur competition and combat price hikes caused by the Ukraine conflict. The funding will come from the Commodity Credit Corporation under the Fertilizer Production Expansion program, which was first announced this past March when US growers were reeling from higher crop nutrient costs just as the key crop regions were starting to plant the 2022 acreage. The USDA said the programme will support fertilizer production that has several key criteria including that it must be independent, and outside the orbit of dominant fertilizer suppliers with market share restrictions apply. It must be produced by companies operating in the US, or its territories, to create good-paying jobs at home, and reduce the reliance on potentially unstable, inconsistent foreign supplies. The agency said it must be innovative and offer techniques to improve fertilizer production methods and efficient use to jumpstart the next generation of crop inputs. This new production needs to be sustainable, with a goal of reducing greenhouse gas impacts and it must be farmer-focused in providing support and opportunities for agricultural producers. The maximum award is $100m with the minimum award $1m with the grant term for five years. The USDA said it will begin accepting applications in the coming days with two opportunities for submission. There will be a 45-day application window for applicants to receive priority for projects that increase the availability of fertilizer, specifically nitrogen, phosphate or potash, and nutrient alternatives for use in crop years 2023 or 2024. The agency will also offer an extended application window, providing an additional 45 days to receive applications for financial assistance to significantly increase American-made production. This extended application window will support applicants who need more time to make additional capacity available. “USDA believes in the growth of innovative, local businesses owned and shared by people who can best serve their own unique community’s needs, fill gaps, and build opportunities. Recent supply chain disruptions have shown just how critical it is to invest in the agricultural supply chain here at home,” said Tom Vilsack, US Agriculture Secretary.
LONDON (ICIS)–Essar Oil UK has signed an offtake agreement with Vertex Hydrogen for the supply of hydrogen to Essar’s production facilities, the company said in a press release 28 September. The deal is for at least 280MW of low carbon hydrogen, which “will then be used to help decarbonise Essar’s existing production facilities including the new hydrogen powered furnace,” the press release said. Vertex, a joint venture between Essar and Progressive Energy, is developing low carbon hydrogen production as part of the HyNet Consortium. Vertex is based in northwest England and aims to have 1GW of hydrogen production capacity online around the middle of the decade, and some 1.8mn tonnes/year of CO2 captured, with 4GW of low carbon hydrogen production capacity due by 2030. Moreover, Vertex was selected as one of four hydrogen projects to proceed to the due diligence phase in the UK government’s Cluster Sequencing Programme. The UK Government has set a target of 10GW of hydrogen production capacity to be in place by 2030, of which at least 5GW will be made up of renewable hydrogen.
SINGAPORE (ICIS)–Watch industry analyst Aviva Zhang discuss the China butadiene (BD) market, with the expectation of rising supply. Import cargoes expected to arrive during end-September and end-October Some domestic plants expected to restart Volatile domestic market in August-September
SINGAPORE (ICIS)–Shares of petrochemical companies in Asia were trading lower early Wednesday afternoon, with oil prices down by more than 1%, on demand concerns amid growing adverse global economic ramifications of a strong US dollar. Recession risks are intensifying amid the strong US dollar and rising borrowing costs around the world as central banks are generally expected to continue hiking interest rates to tame surging inflation. At 05:40 GMT, Brent crude was at $84.80/bbl, while US crude was at $77.15/bbl, both down by about 1.7% from the previous session. The US dollar index – a measure of the currency’s strength against the euro, British pound, Japanese yen, Canadian dollar, Swedish kroner and Swiss franc – is currently at 114.59, hovering at a 20-year high on the US Federal Reserve’s aggressive monetary tightening stance to combat surging inflation. Asian currencies have tumbled to multi-year lows, with the Japanese yen and the Indian rupee recently slumping to record lows, causing costs of imported raw materials to spiral up, hitting demand and threatening regional production. The US Fed had hiked its key interest rates by a hefty 75 basis for the third time this year, with a fourth increase of the same magnitude likely in November. In contrast, Japan’s central bank has not budged and was maintaining its ultra-low interest rates, causing the yen to plunge recently to a 24-year low of above Y145 to the US dollar. “The Fed’s projection to deliver some 125 bps of hikes over the next four meetings suggests smaller hikes are also near, especially if it follows through with a fourth 75 bps hike in November,” DBS Research senior foreign exchange strategist Phillip Wee said on a note on Wednesday. Focus article by Pearl Bantillo Thumbnail image: US dollar banknotes – 27 September 2022 (By Daniel Irungu/EPA-EFE/Shutterstock) Click here to read the Ukraine topic page, which examines the impact of the conflict on oil, gas, fertilizer and chemical markets.
SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. There will be lots of minor dips in China polypropylene (PP) price as the market heads towards the bottom. A case in point was last week, when PP import prices edged higher because of restocking ahead of the Golden Week holiday, and/or because of the perception that the market had, in fact, already bottomed out. But, as the charts in today’s post confirm, the market is a huge, huge distance from a full recovery: The China PP price-naphtha cost spread so far this year is just $264/tonne. This the lowest annual spread since our PP and naphtha assessments began in 2003. The previous lowest annual spread was $447/tonne in 2012. The chart showing average China PP prices (block copolymer and homopolymer injection and raffia grades) versus CFR Japan naphtha costs is very instructive. This year has seen the narrowest gap between PP prices and naphtha costs for the longest period since our price assessments began in November 2002. This points to the weakest producer pricing power on record, reflecting far too much new PP capacity arriving at a time of what could well be negative real economic growth in China in 2022, despite what the official figures might say. The latest net import and local production data indicate that China continues to head towards a 1% decline in PP demand in 2022. This would compare with 6% growth last year. Will events turn around in 2023? I think perhaps not, because of the unavoidable “Common Prosperity” economic reforms and the zero-COVID policy logjam that China finds itself in. Early data also suggest that China’s crucial exports of manufactured goods may be declining because of the global inflation crisis. But you don’t have to take our word for this. Instead, just follow the spreads data, which over many years has been the most reliable guide to supply and demand balances. Follow the spreads every week across a range of chemicals and polymers in China and you will discover whether a recovery has started – and then whether, over a longer period, markets have fully returned to their “Old Normal”. 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.
HOUSTON (ICIS)–A sweeping energy infrastructure permitting bill proposed by Joe Manchin (Democrat-West Virginia) was blocked from key members, putting further doubt into the fate of the Mountain Valley Pipeline in the Appalachians. Late on 27 September, Manchin’s continuing resolution attached to the sweeping federal Inflation Reduction Act signed into law on 16 August was removed, as a growing number of both Republican and Democrat senators opposed it. Senator Tim Kaine (Democrat-Virginia) has pledged to oppose the bill, as well as Mitch McConnell (Republican-Kentucky). Kaine said in a 27 September statement that the Virginia senator strongly opposed the provision that would fast-track the stalled Mountain Valley Pipeline, an approximately 303-mile (488km) natural gas pipeline between West Virginia and Virginia that has been halted in construction due to legal and environmental opposition. Work has been halted on the pipeline since 2019. Mountain Valley is a joint venture of EQM Midstream, NextEra Capital, Con Edison Transmission, WGL Midstream and RGC Midstream. The project could start up by late 2023, although the pipeline approvals has been bogged down in pending court appeals. The interstate pipeline project was envisioned to bring Utica and Marcellus shale gas down to the southern and Mid-Atlantic regions of the US. In his statement, Kaine said that he would vote against Manchin’s proposal and urge his colleagues to do the same. Manchin’s energy permitting bill was introduced as a continuing resolution to the Inflation Reduction Act. The act also contains parts of the federal budget and an aid package for Ukraine, which could be stalled as a result of the debate over the permitting provisions. On 21 September, McConnell said in a statement that the Inflation Reduction Act was a “gigantic party-line bill that raised taxes on reliable domestic American energy” and that the permitting reform proposed was only in name. The energy permitting provisions would look to streamline federal permitting regulations, particularly in setting timeline for federal reviews. The proposal would also clarify Federal Energy Regulatory Commission (FERC)’s purview over proposed hydrogen projects. The FERC already has oversight over natural gas infrastructure projects.
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