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Japan's ENEOS to close Wakayama refinery in October 2023
Japan’s ENEOS to close Wakayama refinery in October 2023
SINGAPORE (ICIS)–ENEOS Corp is planning to cease operations at its 127,500 bbl/day Wakayama refinery in October 2023, the Japanese producer said on Tuesday. “The rapid reduction in demand due to the recent spread of COVID-19 besides structural domestic demand decline for petroleum products and severe international competition mainly in Asia—were considered comprehensively [for the closure],” the company said in a statement. “There was a pressing need to optimise the manufacturing of refineries and plants as well as the supply network for petroleum products. ENEOS therefore decided to terminate all functions of the Wakayama refinery,” it said. ENEOS produces close to 355,000 tonnes/year of Group I base oils in Wakayama, according to the ICIS Supply & Demand Database. The company also produces benzene, toluene and mixed xylenes (MX) at the site. ENEOS currently operates 10 refineries in Japan, with an overall 1.87m bbl/day of crude processing capacity.
PODCAST: China’s 2-EH rises on pre-holiday stocking, eye on
      supply-demand post-Lunar New Year
PODCAST: China’s 2-EH rises on pre-holiday stocking, eye on supply-demand post-Lunar New Year
SINGAPORE (ICIS)–ICIS analyst Jady Ma and Claire Gao discuss the current state and outlook of China’s 2-ethylhexanol (2-EH) market. 2-EH prices rise on plasticisers’ active pre-holiday buying Domestic and overseas plants post more stable operation Downstream demand changes become the hotspot
South Korea Q4 GDP rises by 4.1%, expands by 4.0% in 2021
South Korea Q4 GDP rises by 4.1%, expands by 4.0% in 2021
SINGAPORE (ICIS)–South Korea’s economy expanded by 4.1% year on year in the fourth quarter of last year, supported by strong exports as well as expansions in the manufacturing and services sector, official data showed on Tuesday. Manufacturing expanded by 3.6% year on year in the fourth quarter, slowing down from the 5.7% growth  in the third quarter of 2021, the Bank of Korea said in a statement. The services sector grew by 4.8% year on year in the fourth quarter of 2021, accelerating from the 3.9% expansion in the third quarter. Exports rose by 6.1% year on year in the fourth quarter, slowing down from the 7.2% expansion in the third quarter of 2021. Imports were up by 9.7% year on year in the fourth quarter. For the full year of 2021, South Korea’s GDP expanded by 4.0% year on year, reversing the 0.9% contraction in 2020. Manufacturing expanded by 6.6% year on year in 2021 and services grew by 3.7%. Construction contracted by 2.2% year on year in 2021. Exports expanded by 9.7% year on year in 2021 while imports were up by 8.4%.
Japan's Sumitomo Chemical to expand LCP capacity at Ehime
Japan’s Sumitomo Chemical to expand LCP capacity at Ehime
SINGAPORE (ICIS)–Sumitomo Chemical is building additional production lines for its liquid crystal polymer (LCP) super engineering plastic at the company’s site in Ehime, the Japanese producer said on Tuesday. This expansion will increase the group’s production capacity of LCP by around 30%, it said in a statement. The new production lines are scheduled to be completed in the summer of 2023. LCP has been used for a broad range of applications, including electronic components for PCs and smartphones. “Demand for LCP is continuing to grow strongly as the rollout of 5G data communications systems is progressing at scale, while electric vehicles are becoming more popular on the back of accelerated efforts to mitigate environmental impact,” the company said. Investment and capacity details of the new production lines were not disclosed.
INSIGHT: Omicron hits labour, logistics amid higher raws,
      darkens Q1 outlook
INSIGHT: Omicron hits labour, logistics amid higher raws, darkens Q1 outlook
NEW YORK (ICIS)–The Omicron wave is pressuring supply chains with staffing shortages. Along with higher raw material costs, this is leading to downward earnings revisions among US chemicals companies for Q4 and Q1 2022 as well. Late last week, US-based coatings producer PPG reported Q4 earnings and guidance for Q1 that both fell short of Wall Street expectations – the latest in a string of disappointing announcements from coatings companies. “Omicron-related staffing shortages at chemical firms, their suppliers and customers have created expected, but hard to quantify, reductions to near-term earnings,” said UBS analyst John Roberts in a research note. “Before Omicron, there were already reports of improving supply chains. Reports indicate that Covid will likely continue to mutate, so this may not be the last supply chain disruption firms face. But reports also indicate the rapid spread of Omicron may also lead to a rapid recovery, so that supply chain issues could begin to ease again shortly,” he added. The uncertainty around Omicron, plus more vocal warnings in the scientific community about the potential for another mutation, is roiling financial markets worldwide. Shares of chemicals companies, which had held up relatively well amid rising interest rates ahead of expected rate hikes by the US Federal Reserve, have lately been selling off along with the broader market. Q4 2021 EBITDA shortfall $m Company Consensus Actual/pre-announce % Miss Axalta $220 $186 -15% Ashland $124 $106 -15% Ecolab $760 $720 -5% PPG $499 $452 -9% Sherwin-Williams $733 $601 -18% RPM* $197 $195 -1% Q1 2022 EBITDA shortfall $m Company Consensus Guidance % Miss PPG $629 $486 -23% RPM $117 $110 -6% Source: UBS, company reports, FactSet *RPM’s fiscal Q2 ends on 30 November, roughly corresponding to a calendar Q4, which ends on 31 December. PLANT MANAGER THE ‘TOUGEST JOB’For now, companies are grappling with the immediate impacts of Omicron, as vividly described by PPG CEO Michael McGarry on the company’s Q4 earnings conference call. “The toughest job at PPG right now is a plant manager. They wake up in the morning, check their phone to see how many people called off sick. And then they get to work… and go to the dock area and see how many trucks didn’t get picked up, and then they go to the receiving area and find out what didn’t come in that was supposed to,” said McGarry. “And then they move into the plant, and the supply chain people are telling them that they’re going to have to make smaller batches because of a lack of raw materials. And then the sales team is telling them that if we don’t get paint out the door, here’s how many customers we’re going to impact,” he continued. Wells Fargo analyst Michael Sison cited lingering labour cost inflation and availability issues as headwinds in Q1 for PPG, and downgraded his rating on the company to “equal weight” from “overweight”. Such challenges, along with raw material cost inflation on the order of 25-30% year on year, will dent Q1 earnings for PPG, and likely those of other coatings and specialty chemicals companies. Raw materials for coatings include titanium dioxide (TiO2), acrylates, isocyanates and epoxy resins, along with a wide range of solvents. “Raw material availability remains a headwind, specifically for key materials such as emulsions and isocyanates. Availability issues impacted Q4 2021 sales by $150m, and PPG anticipates sales volumes in Q1 seeing further impact from raw material availability issues, especially in Performance Coatings,” said Sison. While higher raw materials costs are generally good for chemicals companies, that’s only when they are relatively stable at high levels, or rising steadily, giving producers a chance to raise their own prices. In contrast, spiking raw material costs typically lead to a quarter or two of lower margins as price hikes lag. “There is always a lag between cost changes and prices, and the transient penalty to earnings is a function of the rate of change of raws – not just the amount of change,” Roberts at UBS pointed out. “Recent raw material cost increases have been among the most rapid in the history of the chemical industry. Volatile oil prices globally, gas prices in Europe and coal prices in China have made it challenging to forecast chemical raw material costs,” he added. PPG, along with other coatings companies, is aggressively raising prices to pass along not only higher raw materials but logistics costs. SPECIALTIES, COATINGS MOST VULNERABLESpecialty chemicals and coatings producers are more vulnerable to labour disruptions and raw material shortages, and this has been evidenced by the earnings shortfalls thus far. “These are all specialty chemical firms who purchase many chemical ingredients, create formulated products in small batch operations and have significant technical service and sales organisations that interact closely with customers,” said Roberts. “When one raw material is missing due to a supply chain issue, the formulation can’t be completed. The plants and customer interactions are much more people intensive. And pricing lags raw material cost increases by longer than for basic chemicals,” he added. US-based coatings producer Sherwin-Williams recently noted the Omicron variant’s spread among the company’s store managers, field sales representatives and drivers in December. At some locations, the company cut store hours and reduced staff. Many of Sherwin-Williams’ suppliers and customers suffered similar problems from Omicron, the company said. PROSPECTS FOR IMPROVEMENT IN H2While Q1 is set to be a challenging time for many chemicals producers, business could start to improve in Q2 and through the rest of the year if Omicron peaks and wanes as expected in many regions, and semiconductor shortages and other supply constraints ease. “I see automotive OEM definitely improving. The chip shortage is going to continue to get marginally better,” said McGarry. ICIS projects 2022 US light vehicle sales to rebound to 16.0m from 15.0m in 2021 as chip constraints ease later in the year. However, this would still be below the pre-pandemic 2019 level of 17.0m, according to ICIS senior economist Kevin Swift. The PPG CEO also sees higher auto refinish paint demand from a harsher winter in the US, greater aerospace coatings demand from recovering air travel and China eventually approving the Boeing 737 MAX aircraft, and more demand from new metal packaging plants opening up to replace plastics packaging. “Every quarter from this point out we should start to see improvement in margins,” said McGarry. Raw material costs should flatten out, price increases will be implemented, manufacturing issues resolved, and cost savings and acquisition synergies realised. Plus, volumes should bounce back, led by auto and aerospace, he noted. CHINA ZERO-COVID POLICY AND POTENTIAL FOR MORE DISRUPTIONSHowever, China’s zero-Covid policy, where it shuts down cities and large sections of the country in the event of even limited COVID-19 infections, could prove to be severely disruptive if such a policy is maintained amid higher infections from Omicron. “What we are really worried about is, if Omicron gets to China,” said McGarry, noting China’s zero-Covid policy. PPG’s largest plant in China is in Tianjin, where a recent small COVID-19 outbreak prompted authorities to test 14m people within two days, he said. “So, if Omicron were to get to China, and they continue with their zero-Covid policy, that could have a pretty disruptive effect” on PPG’s business in China, McGarry noted. A major Omicron spread in China met with stringent lockdowns and restrictions would obviously have a disruptive impact not just on coatings, but the entire global manufacturing and chemicals chain. Additional reporting by Stefan Baumgarten and Al Greenwood Insight article by Joseph Chang Thumbnail shows paint. Image by imageBROKER/Shutterstock
LNG VIDEO: Diversions to Europe continue as Freeport sees
      weekend outage
LNG VIDEO: Diversions to Europe continue as Freeport sees weekend outage
LONDON (ICIS)–This short outlook video on the LNG market looks at: – Latest tenders from China and others in Asia – US production news from Calcasieu and Freeport, nuclear shutdowns in South Korea – Africa January exports on the rise
PODCAST: Concerns about supply security trouble global potash
      fertilizer market
PODCAST: Concerns about supply security trouble global potash fertilizer market
LONDON (ICIS)–With sanctions on Belarusian muriate of potash (MOP) exports beginning to bite, many questions about supply security in the year ahead remain unanswered. Sylvia Traganida, senior editor for phosphates and UAN, and Andy Hemphill, senior editor for potash and sulphuric acid, discuss this week’s market-moving news. Click here to listen in a new window.
Trinseo downgrades 2021 full-year guidance on energy pricing,
      production halt
Trinseo downgrades 2021 full-year guidance on energy pricing, production halt
LONDON (ICIS)–Trinseo has downgraded its expectations for full-year 2021 earnings and profits on the back of the sharp rise in natural gas pricing late last year and lost styrene production at its Terneuzen site in the Netherlands, the US-headquartered plastics and rubber specialist said on Monday. The company projects that full-year net income for 2021 will stand at $279m-281m, compared to earlier guidance of $336m-376m, while fourth-quarter net income is expected to be as little as $1m. Citing an “unprecedented” rise in European natural gas costs that outpaced the company’s capacity to pass on price increases and production losses at Terneuzen due to an upstream force majeure, Trinseo expects fourth-quarter net income from operations to be $1-3m, compared with $67m during the same period in 2020. Full-year 2021 adjusted earnings before interest, taxes, depreciation and amortisation are expected to be $726m-732m, compared with earlier forecasts of $750m-800m. Since the previous financial guidance was issued, the company has absorbed a hit of around $30m to net income from the sharp increases in natural gas pricing and $20m from Terneuzen. The company halted styrene production at Terneuzen in December 2021 due to feedstock supply constraints arising from a Dow cracker outage, returning to normal output for styrene derivatives before the end of the year. Monomer production remains offline. “While we implemented pricing actions in the fourth quarter, these were unable to keep pace with the unprecedented rise in natural gas prices that occurred late in the quarter,” said Trinseo CEO Frank Bozich. “Despite this and the Terneuzen outage, we were still able to generate significant cash and returns to shareholders during the fourth quarter, while continuing on our path of transformation via the completion of our sale of the synthetic rubber business and the acquisition of plastics recycler Heathland,” he added. Trinseo is projecting 2022 adjusted EBITDA of $700m-750m. Picture source: Xavier Bonilla/NurPhoto/Shutterstock Clarification: Recasts sixth paragraph to reflect that styrene derivatives production has resumed at Terneuzen. Styrene monomer production remains offline.
INSIGHT: France’s ‘friendlier’ industrial policy attracts
      chemicals investments
INSIGHT: France’s ‘friendlier’ industrial policy attracts chemicals investments
MADRID (ICIS)–The French chemical industry has seen some of its historic demands fulfilled under President Emmanuel Macron’s five-year term and the “friendlier” environment has contributed to a flurry of chemicals investments recently announced, trade group France Chimie told ICIS. Just three months away from the next presidential election in April, Macron is now courting the chemicals sector, in a sign he needs to shore up his support among the urban working classes who protested over his policies in the so-called ‘yellow vests’ revolts in 2018. In the past two weeks, Macron has been photographed with the CEO of the largest European chemicals company, Germany’s BASF, as well as with the CEO of US major Eastman, after both companies announced investments in France. Significantly, Eastman’s plans would fall under the umbrella of the more circular economy the EU wants to build, in line with the Green Deal which is aiming to make the 27-bloc a carbon neutral economy by 2050. Earlier in January, Eastman said it was aiming to invest up to $1bn to build a plant that would chemically recycle up to 160,000 tonnes/year of polyethylene terephthalate (PET) waste via a methanolysis depolymerisation unit. BASF also announced this month it was to build in Chalampe, northeast France, a hexamethylenediamine (HMDA) plant, a chemical used as a feedstock for polyamide 6,6 (or nylon 6,6), also used in specialty amines for coatings, plastics, personal care, and rubber additives. Within the flurry of chemicals investments announced as of late, US-based cellulose specialties producer Rayonier Advanced Materials is to build a 21m litre/year second-generation (2G) bioethanol plant at its site in Tartas, southwest France. The facility would produce fuel from wood and start up in 2023; its output is to be sold to a large international petrochemical company under a long-term offtake deal, said Rayonier, without disclosing more details. Other investments have also been announced within pharmaceuticals. France’s chemical industry is the second largest in Europe after Germany’s. Its sales in 2020, the latest full-year dataset available, stood at nearly €70bn; the figure was 15% lower than the prior year, before the pandemic hit. INDUSTRY-FRIENDLY AND THE NUCLEAR FACTORWhile Macron’s opportunistic photography set with big wigs from the chemical industry are aimed to shore up his support ahead of the April poll, his re-election probably was the last thing the companies investing in France had in mind. The policies implemented in the past five years under his watch may have helped, however, with legal changes to improve infrastructure at chemicals parks as well as lower taxes for corporations. France’s nuclear energy prowess – which produces around two thirds of electricity demand – make the country’s energy costs much lower than those in Germany or Spain. With natural gas-produced electricity costs rocketing in the past few months, the certainty of France’s reliable, safe, and lower-cost electricity must have been at the centre of company executives’ deliberations about their investments. In fact, the EU’s executive body, the European Commission, got in trouble earlier in January when it proposed to catalogue nuclear as a ‘green energy’, a move widely seen as of France’s making and vehemently opposed by countries turning away from nuclear, like Spain or Germany. High electricity costs are always cited by Germany’s trade group VCI as a deterrent for chemical companies to invest in that country – industry and consumers have for years been paying a fee to finance green energy assets which have dented its competitiveness, according to VCI. ‘Choose France’ is precisely the motto of one of Macron’s plans to attract investments, a plan praised by France Chimie. Back in 2017, soon after Macron took office, France Chimie’s director general, Magali Smets, set in an interview with ICIS some homework for the new Administration. The trade group, at the time called Union des Industries Chimiques (UIC), demanded a friendly corporate tax environment and, crucially, more specific legislation targeting chemical parks to make them more competitive. Both demands became a reality under Macron. “The legal and tax environments are much better than a few years ago, with lower taxes for industrial companies and the wider private sector. Legally, things have been made simpler and legislation has been implemented to improve chemicals’ parks competitiveness,” said the France Chimie spokesperson. Under this model, long rehearsed in Germany’s thriving chemicals parks, companies enjoy lower electricity costs thanks to exemptions as well as legislation that allows several companies in a chemical park to share the services, splitting the costs. Those services can range from utilities, waste management or logistics, for example. “The implementation of this changed has increased interest from chemical companies to invest in France,” added the spokesperson. In Spain, its chemicals trade group Feique keeps demanding the same legal changes now implemented in France without much success so far. France Chimie cited another factor helping attract investment into chemicals: the country’s ageing facilities, which companies can acquire at relatively low prices to overhaul them. “Over the past years, we have put a lot of effort in explaining to the different public administrations nationally and regionally, that things for chemicals parks had to be made easier to keep the industry’s competitiveness: the efforts have paid off,” said the France Chimie’s spokesperson. “Things are now better, not only for chemicals but for all industrial sectors. Moreover, President Macron’s ‘France 2030’ strategy placed chemicals at its heart, and in the past three years large public investments benefitting the sector have been announced. This is all good and prepares the country for the future.” Insight article by Jonathan Lopez
Americas top stories: weekly summary
Americas top stories: weekly summary
HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 21 January. INSIGHT: Shifting global investment in chemicals research is a challenge for established markets The chemical industry developed through the clever application of chemistry and technology and will continue to do so as companies adapt to meet the climate threat alongside the needs of growing market demand. US Axalta to miss guidance because of high inflation, supply constraints Axalta Coating Systems will miss its Q4 and 2021 full-year guidance, issued in October, mainly because of greater-than-expected adverse impacts from raw material price inflation and supply chain constraints, the US-based company said in an update on Tuesday. Crude market could reach surplus in Q2 on muted Omicron impact – IEA The crude oil market could post a surplus in Q2 as producers increase output to take advantage of prices at multi-year highs, the International Energy Agency (IEA) said on Wednesday. US January epoxy firm as weariness grows over high prices Firm sentiment continues to linger in US domestic epoxy resin markets, but improved supply-demand fundamentals are making buyers more weary of high prices. SABIC, ExxonMobil start commercial operation of Texas JV project SABIC and joint venture partner ExxonMobil have started commercial operation of the large-scale cracker and petrochemicals complex the two firms have been developing on the US Gulf Coat, the Saudi Arabia-headquartered firm said on Thursday. US coatings firm PPG fears spread of Omicron to China ‒ CEO A potential spread of the Omicron coronavirus variant to China would hurt US coatings major PPG, which has production and distribution facilities in Suzhou, Tianjin and Zhangjiagang, the company’s CEO warned on Friday.
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