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MADRID (ICIS)–Low water levels on the Rhine river in Germany are set to impede navigation for some barges in the coming days, while production could be affected at “individual” plants, German chemicals major BASF told ICIS on Thursday. The Rhine Waterways and Shipping Authority (WSA Rhein) also confirmed to ICIS on Thursday that the current low water levels could lead to fewer barges navigating the key petrochemicals and oil products waterway. Those barges able to navigate will need to do it at very low capacity, a situation that has been ongoing for some weeks already as Europe deals with the drought. Barges loaded at partial capacities sharply increase logistics costs for petrochemicals companies, which are forced to contract more barges for the same amount of material. EYE OF THE STORMBASF’s flagship Ludwigshafen site is located by the Rhine, and transport along the river is key for the company’s operations. A spokesperson for the company said water levels are expected to stay well below the 60cm considered safe for barges to navigate at the Kaub gauge measuring point in southwest Germany. Kaub is the shallowest part of the Rhine. “The mark of 60cm of the Rhine has been undercut at Kaub. Levels in the range of 35-55cm are forecast for the next two weeks. For the predicted levels, some types of ships can no longer be used and will stop sailing; all others will sail with reduced loads,” said the BASF spokesperson. “Currently, production is not affected by low water. However, we cannot completely rule out reductions in production rates at individual plants over the next few weeks.” It added that after the low levels on the Rhine in autumn 2018, which increased logistics costs for BASF sharply, the company has been “increasingly relying” on alternative modes of transport, especially rail. BASF also uses water from the river to cool its plants, but the record high temperatures recorded in many parts of Europe in July also threatened cooling activities. “Part of the package of measures [introduced after 2018’s drought] was also the expansion of our re-cooling capacities. In the event of a foreseeable phase of hot weather, appropriate adjustments will be made at the site,” the spokesperson said. “For example, re-cooling plants will be switched on to compensate for the lower volumes of water that can be taken from the Rhine. With measures such as the expansion and optimisation of the central re-cooling plants and the optimisation of the cooling water flows, we can prevent production interruptions during hot weather phases.” ‘UNFAVOURABLE SITUATION’A spokesperson for WSA Rhein said the current drought has come much earlier than usual, adding that the rain forecast is not favourable overall, with water levels predicted to fall even further in the coming days. “The current water levels are at an exceptionally low level for this time of year. For the next three-four days, water levels are predicted to fall another 10-15cm. The 14-day forecasts continue to point to a slight increase in water levels from the middle of next week,” said the spokesperson. “However, this is not significant: the water levels remain at a low level. Usual periods of low water last until September/October. This does not yet mean that this will also be the case in 2022, but the current starting situation is comparatively unfavourable.” The spokesperson added that barge loading capacities would depend on the size of the barge and that even in the 2018 drought, where even lower levels than the current ones were recorded, some barges could still navigate. “During the exceptionally low water levels in 2018, the lowest water level in Kaub was at 25cm (which is equivalent to a water depth of 1.37m) and some barges were still navigating,” it concluded. EUROPE PETROCHEMICALS ORDEALOther petrochemicals sources in Europe have also expressed dismay at the severity of the current crisis over Rhine navigation, with some predicting “disaster” in the coming weeks if water levels remain low or even fall further. According to Elwis, a consultancy that specialises in German waterways, water levels could fall to just over 30cm at Kaub by 15 August, a depth set to impede many barges’ navigation. Source: Elwis A source at a large producer said at 30cm “almost nothing” could navigate along the Rhine. Overall, sources are pessimistic about the gathering storm for petrochemicals in Europe: the crisis on the Rhine adds up to high energy and food prices, pushing inflation to multidecade highs, as well as potential natural gas supply curtailments from Russia in the coming months. “We are already hugely uncompetitive price-wise [in Europe, compared with other regions] and demand is shockingly low; now, fulfilment will become an issue along the Rhine,” said the source. “Everything is against European [petrochemicals] producers at the moment,” concluded another source. Map by Miguel Rodriguez-Fernandez Front page picture: The Rhine river in Dusseldorf on 10 August Source: Ying Tang/NurPhoto/Shutterstock  Focus article by Jonathan Lopez Additional reporting by Marta Fern, Nazif Nazmul, and Nel Weddle

SINGAPORE (ICIS)–Watch ICIS senior editor Hazel Goh discuss current developments in China’s polyethylene (PE) pipe grade black 100 market. Weak China demand dampens hopes of market recovery Implementation of government infrastructure projects slow Weak global economic outlook weighs on sentiment Visit the ICIS Coronavirus topic page for analysis of the impact on chemical markets and links to latest news.

MUMBAI (ICIS)–Indian Oil Corp (IOC) began operations at its 100 kilolitres/day (Kl/day) second generation (2G) ethanol plant at Panipat in the northern Haryana state on 10 August. Built at a cost of over Indian rupee (Rs) 9bn ($113.4m), the ethanol plant is located near IOC’s Panipat refinery complex. Once fully operational, the plant is expected to produce around 30m litres of ethanol using 200,000 tonnes/year of paddy straw as feedstock. Commercial production at the plant is expected by December, and this should help India achieve its target of blending 20% ethanol with auto fuel by 2025. “Biofuel is the need of the hour as it will help reduce our dependency for fuel and energy on other countries,” Indian Prime Minister Narendra Modi said at the inauguration of IOC’s 2G plant. Twelve centres will be set up to collect feedstock paddy straws from fields in the vicinity of the plant site. This is also expected help address pollution being caused by the burning of these materials in northern India. “This is just the beginning as ethanol plants will be set up in different parts of the country. Pollution-causing stubble will be used to produce ethanol,” PM Modi said. State-run oil companies such as IOC, Bharat Petroleum Corp Ltd (BPCL), Hindustan Petroleum Corp Ltd (HPCL), Mangalore Refinery and Petrochemicals Ltd (MRPL) have announced plans to invest Rs100bn to set up a total of 12 2G ethanol plants across the country. HPCL is expected to set up four 2G ethanol plants, IOC and BPCL will set up three plants each, while MRPL and Numaligarh Refinery in Assam will set up one each. ($1 = Rs79.34)

The crucial pre-winter shoulder months of August, September and October will determine the level of storage fullness at which countries start the winter. ICIS estimates that Japan and South Korea bought a combined 5.5million tonnes of spot LNG during this period last year. China alone also bought 1.5 times that combined amount in 2021. However, China is unlikely to be vying for much spot in the coming months due to the high prices and slowing economy. ICIS Analytics forecast that Japan and South Korea combined are looking to secure slightly more than 5.0m tonnes of spot in August, September and October this year – assuming that there is not much flexibility or uplift available from their long-term contract suppliers. The spot amount is less than what was bought last year, but it is still nearly 80 cargoes of spot LNG just before winter. To secure these cargoes during the current gas shortage happening in Europe, the North Asia spot price – the ICIS EAX – will need to close the gap with the ICIS TTF European gas price. KOGAS will buy more spot pre-winter this year, compared to 2021, due to much higher summer storage withdrawal and a 90% storage requirement At the time of writing, Korean energy statistics provider KESIS has confirmed that South Korea’s storage inventory is around 1.8m tonnes. This is 0.9m tonnes lower than ICIS has modelled, which is estimated to be the ‘normal’ level of inventory for previous early Augusts. Also, the mandated 90% storage fullness by the end of October will mean that an additional 0.5m tonnes will be required to fill the gap compared to the ICIS base case at the same month. Consequently, using these numbers, ICIS Analytics predict that the country will seek to purchase 2.4m tonnes of spot this year, 0.3m tonnes more than the same period in 2021. Japan is expected to buy less spot LNG pre-winter this year compared to 2021, but the tight power grid may be a concern ICIS estimate that Japan’s storage inventory level should be at 4.9m tonnes at the time of writing. This is 26% higher than the past five-years average, just slightly below the record high for the same month in previous years. In fact, there are signs that a few storages could be hitting tank-top soon, creating logistical and storage management problem going into the winter. This is likely due to several factors, such as over-stocking the summer demand and the general sentiment to maintain a high level of storage, especially when transitioning into the 2H of the year. We expect companies to draw down another 0.6m tonnes in August as the country goes through its summer peak, followed by three months of gas input into the storage, well into November. ICIS Analytics forecast Japan to buy nearly 2.7m tonnes of spot LNG in the coming three months, 20% less than was bought in the same period last year. This will lead the country to a decent level of 4.9m tonnes by the end of October and 5.4m tonnes by November, just before the winter withdrawal season begins. Overall, we believe that the North Asia spot market will be tight in the coming pre-winter months, as South Korea and Japan will be looking for around 80 spot cargoes to reach these storage levels, competing with Europe. However, competition would have been even stronger if China was buying more LNG, but it is currently less active and being priced out of the spot market. ICIS LNG Edge market intelligence The ICIS LNG Edge market intelligence platform tracks cargoes in real-time around the world and uses satellite data to monitor the imports and exports of global consumers and producers. A dedicated team of analysts supplement this physical data with commercial information from customs agencies and other sources to add in-depth price and volume data to voyage records. The ICIS LNG Supply and Demand Forecast provides a rolling 24-month forward forecast of global trade, drawing on our historic data and analysis of future trends. ICIS LNG Edge also provides a database of global LNG contracts, an infrastructure database, news and alert services and more. The ICIS publication LNG Markets Daily contains the latest news as well as a full range of price assessments. Contact us: For more information on our ICIS LNG Edge data: https://www.icis.com/explore/contact/

The crucial pre-winter shoulder months of August, September and October will determine the level of storage fullness at which countries start the winter. ICIS estimates that Japan and South Korea bought a combined 5.5million tonnes of spot LNG during this period last year. China alone also bought 1.5 times that combined amount in 2021. However, China is unlikely to be vying for much spot in the coming months due to the high prices and slowing economy. ICIS Analytics forecast that Japan and South Korea combined are looking to secure slightly more than 5.0m tonnes of spot in August, September and October this year – assuming that there is not much flexibility or uplift available from their long-term contract suppliers. The spot amount is less than what was bought last year, but it is still nearly 80 cargoes of spot LNG just before winter. To secure these cargoes during the current gas shortage happening in Europe, the North Asia spot price – the ICIS EAX – will need to close the gap with the ICIS TTF European gas price. KOGAS will buy more spot pre-winter this year, compared to 2021, due to much higher summer storage withdrawal and a 90% storage requirement At the time of writing, Korean energy statistics provider KESIS has confirmed that South Korea’s storage inventory is around 1.8m tonnes. This is 0.9m tonnes lower than ICIS has modelled, which is estimated to be the ‘normal’ level of inventory for previous early Augusts. Also, the mandated 90% storage fullness by the end of October will mean that an additional 0.5m tonnes will be required to fill the gap compared to the ICIS base case at the same month. Consequently, using these numbers, ICIS Analytics predict that the country will seek to purchase 2.4m tonnes of spot this year, 0.3m tonnes more than the same period in 2021. Japan is expected to buy less spot LNG pre-winter this year compared to 2021, but the tight power grid may be a concern ICIS estimate that Japan’s storage inventory level should be at 4.9m tonnes at the time of writing. This is 26% higher than the past five-years average, just slightly below the record high for the same month in previous years. In fact, there are signs that a few storages could be hitting tank-top soon, creating logistical and storage management problem going into the winter. This is likely due to several factors, such as over-stocking the summer demand and the general sentiment to maintain a high level of storage, especially when transitioning into the 2H of the year. We expect companies to draw down another 0.6m tonnes in August as the country goes through its summer peak, followed by three months of gas input into the storage, well into November. ICIS Analytics forecast Japan to buy nearly 2.7m tonnes of spot LNG in the coming three months, 20% less than was bought in the same period last year. This will lead the country to a decent level of 4.9m tonnes by the end of October and 5.4m tonnes by November, just before the winter withdrawal season begins. Overall, we believe that the North Asia spot market will be tight in the coming pre-winter months, as South Korea and Japan will be looking for around 80 spot cargoes to reach these storage levels, competing with Europe. However, competition would have been even stronger if China was buying more LNG, but it is currently less active and being priced out of the spot market. ICIS LNG Edge market intelligence The ICIS LNG Edge market intelligence platform tracks cargoes in real-time around the world and uses satellite data to monitor the imports and exports of global consumers and producers. A dedicated team of analysts supplement this physical data with commercial information from customs agencies and other sources to add in-depth price and volume data to voyage records. The ICIS LNG Supply and Demand Forecast provides a rolling 24-month forward forecast of global trade, drawing on our historic data and analysis of future trends. ICIS LNG Edge also provides a database of global LNG contracts, an infrastructure database, news and alert services and more. The ICIS publication LNG Markets Daily contains the latest news as well as a full range of price assessments. Contact us: For more information on our ICIS LNG Edge data: https://www.icis.com/explore/contact/

SINGAPORE (ICIS)–Singapore on Thursday trimmed its 2022 GDP growth forecast to 3-4%, from the previous estimate of 3-5%, due to the deteriorating global economic environment. “Since May, the global economic environment has deteriorated further,” the Ministry of Trade and Industry (MTI) said in a statement. “Stronger-than-expected inflationary pressures and the more aggressive tightening of monetary policy in response are expected to weigh on growth in major advanced economies such as the US and Eurozone.” Singapore’s economy grew by 4.4% year on year in the second quarter, faster than the 3.8% expansion recorded in the preceding quarter, according to the MTI. The final reading on Thursday was lower than the 4.8% GDP advance growth estimate for the second quarter published in July. On a quarter-on-quarter seasonally adjusted basis, the economy contracted slightly by 0.2%, a reversal from the 0.8% expansion in the first quarter. MTI data showed that the manufacturing sector expanded by 5.7% year on year in the second quarter, extending the 5.5% growth in the previous quarter, while the construction sector grew by 3.3% from the 2.4% it registered in January to March. “Singapore’s final Q2 GDP figures came in under their initial estimates. This is the first negative quarter-on-quarter print since Q2 2021,” Singapore-based UOB Global Economics & Markets Research said in a note on Thursday. Singapore’s official GDP growth forecast range for 2022 was narrowed even as the growth forecast for non-oil domestic exports (NODX) was raised to 5-6%, from the previous forecast of 3-5% issued in May, it added. Weakening external demand outlook Further escalations of the Russia-Ukraine conflict could worsen global supply disruptions and exacerbate inflationary pressures through higher food and energy prices, the MTI said. More persistent and higher-than-expected inflation would dampen global growth further, including through even more aggressive monetary policy tightening in many advanced economies, it said. The outlook for some outward-oriented sectors in the Singapore economy has also weakened. “For instance, as China is a key market for petroleum and chemicals products from Singapore, the weakness in its economic outlook has adversely affected the growth prospects of Singapore’s chemicals cluster and the fuels & chemicals segment of the wholesale trade sector,” the MTI said. On the other hand, the outlook for several sectors in the Singapore economy has improved, with strong recovery in in air passengers and international visitor arrivals is expected to benefit aviation- and tourism-related sectors, it said. Focus article by Nurluqman Suratman

BARCELONA (ICIS)–Global chemical prices are falling just as Europe braces itself for more summer heatwaves, drought and a winter of gas rationing. Steep fall in chemical, polymer prices continues into August Indicates falling downstream demand Autumn monitored for demand pick up All Asia prices fell in July’s ICIS Petrochemical Index (IPEX) Prices in Europe move down towards Asia Spreads at historical lows for Asian polyethylene (PE) High inflation fuels demand destruction European chemical companies face drought, high temperatures and gas rationing Evonik to boost use of liquefied petroleum gas (LPG), cut natural gas Large switch to LPG could distort trade flows Industry must prepare for possible shut downs in winter In this Think Tank podcast, Will Beacham interviews ICIS Insight Editor Nigel Davis, 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.

MADRID (ICIS)–Indorama Ventures Limited (IVL)’s second-quarter sales and earnings before interest, taxes, depreciation, and amortisation (EBITDA) rose sharply, year on year, on the back of strong sales volumes and improved profit margins, the Thai chemicals major said on Wednesday. Net profit, which the company reports in its home currency, more than doubled during the quarter to baht (Bt) 20.3bn ($571m). IVL (in millions) Q2 2022 Q2 2021 Change Sales $5,451 $3,559 53% EBITDA $1,010 $552 83% Net profit Bt20,300 Bt8,340 143% KEY POINTSIVL said it had managed to offset high energy prices in Europe and the US thanks to the “combination of strong sales and improved margins”. By division, the company said its largest unit producing polyethylene terephthalate (PET) and derivatives had posted 35% higher earnings during Q2, year on year, though they fell by 1% quarter on quarter. “[The division, called Combined PET] delivered strong EBITDA … on high margins driven by seasonally strong demand, supply chain constraints and overall market tightness,” said IVL. IVL’s Integrated Oxides and Derivatives (IOD) division also posted higher earnings, both year on year and quarter on quarter. “[Within IOD] The Integrated Intermediates vertical was hindered by low ethylene crack margins, historically low integrated MEG [monoethylene glycol] margins, and the planned turnaround of two EO [ethylene oxide] units,” the company said. However, sales and earnings fell year on year and quarter on quarter in the Fibers division as it took a hit from China’s lockdowns to contain the pandemic as well as disruption in Russia. “The segment was impacted by lower demand in the Lifestyle vertical amid the China lockdown while higher freight rates restricted exports,” it sad. “The Hygiene vertical was impacted by volumes at Avgol’s Russia site along with increased polypropylene [PP] prices, while strength in the replacement tyres market partially offset the ongoing semiconductor shortage, resulting in a stable performance for Mobility.” ($1 = Bt35.57) Front page picture: An Indorama logo display at its headquarters in Bangkok, Thailand Source: Sakchai Lalit/AP/Shutterstock 

SINGAPORE (ICIS)–Watch industry analyst Jady Ma share about the China BDO market, which has seen a slump on weak demand. BDO prices down in past two months on weak demand Cost side may support BDO market Uncertainties in supply amid turnarounds and start-ups

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. The blog worries that we face a crisis deeper and more complex than any of us have seen before because of a combination of geopolitics, demographics, the changing nature of the Chinese economy as its “Common Prosperity” reforms accelerate, China’s rising petrochemicals and polymers self-sufficiency, the high levels of global inflation with all its causes, and, last, but certainly not least, climate change. Today’s post provides an executive summary of each of these challenges, with further in-depth posts to follow. What should we do next? Here are our suggestions: Innovation must accelerate in developing low or zero-carbon chemicals production processes. Companies must help fund collection, sorting, storage and recycling systems in the developing world. Companies must work more closely with converters, brand owners and retailers to reduce the need for virgin plastics in single-use applications. New chemicals and polymer solutions are required to make finished goods last longer. The solutions must again be developed through close collaboration with converters, brand owners and retailers. Companies must shift from volume to service models. Instead of success being judged on how many extra tonnes they keep selling, success needs to be measured on the effectiveness of service-based supply models. For instance, a synthetic rubber producer works with a tyre manufacturer to secure a 30-year contract with a car hire company. Fees are based on commonly agreed and shared environmental targets to reduce consumption of new tyres through data analysis of driver behaviour – e.g. the severity of breaking and rates of acceleration over short distances. Car hire customers are incentivised to drive more smoothly. The synthetic rubber producer and tyre manufacturer are incentivised to make their products last longer. The shift to service-base models will enable companies to hit ever-more stringent emissions targets – and will allow them to capture market share as public and legislative pressure to make things last longer increases. Legislators need to get rid of quarterly financial reports to make a service-based model work. This will allow companies to build long-term business plans that may take years to be profitable. We believe that this is the direction in which the chemicals industry must travel. 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.