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NEW YORK (ICIS)–Brazil-based chemical distributor Quimica Anastacio is sharpening its focus on flexibility and nimbleness, along with organic growth versus M&A, amid a period of elevated price volatility, its CEO said. Throughout the COVID-19 pandemic, with outbreaks rolling through different regions of the world and disrupting supply chains, the distributor has had to pivot quickly to replace some suppliers of critical materials and secure containers in short supply. A big part of this pivot was having its purchasing department shift to about 70% FOB (free on board) in sourcing supply, where it arranges freight to directly pick up product from the port of the supplier, as opposed to CFR (cost and freight), where the supplier ships containers directly to the distributor’s port. Prior to the pandemic, only about 30% of its global sourcing was done on an FOB basis. Quimica Anastacio sources products from 62 different countries. “This capability was very important during this period. We had to go after the containers because suppliers had difficulty finding them and price was an issue as well,” said Jan Krueder, CEO. He made his comments in an interview with ICIS. “The supplier has two issues – one is to have product available during a crisis. The supplier has its own challenges in producing and having enough raw materials. Then the second issue is getting the freight to our port – the port of Santos for example – when it already exports to many countries,” he added. Thus, having the capability to arrange its own freight to pick up product directly from the supplier is a critical advantage. Quimica Anastacio’s strong relationships with suppliers is also an advantage during periods of limited supply, the CEO pointed out. While supply chain disruptions are still a challenge, product availability is now normalising, Krueder said. However, the Russia/Ukraine war is causing commodity prices to surge, not only for oil-based chemicals, but for those based on corn and other agricultural inputs as well, he noted. Price volatility is a “bigger issue”, and the key is to stay competitive under different pricing scenarios by being aligned with pricing trends, said the CEO, who also pointed out that it’s not about all prices rising, but major fluctuations both up and down for different chemicals. In cases where prices are rising, there have so far been no signs of demand destruction, he noted. Amid the long period of supply chain disruptions and now more volatile pricing, “customers are perhaps seeing distribution with different eyes”, said Kruder. “Before the COVID crisis, there was more incentive and pressure to buy directly and just on price. But nowadays buyers value companies that really can see the supply chain in a more complete way. So I think we are not just distributors but consultants,” he added. “It’s not just about pressing a button and buying, but about knowing the chain, where the movements are, and what the risks are in supplies from certain countries, and in certain products. And so that’s where we can be more useful and relevant to the customer because we live and breathe these markets,” said Krueder. GROWTH AMID A CHALLENGING LATIN AMERICA OUTLOOKLatin America, the key region where Quimica Anastacio operates, is undergoing a period of turbulence with greater political polarisation, changes in governments, rising interest rates to counter inflation and currency exchange rate volatility, he noted. With anaemic GDP growth expected in 2022 in Latin America (consensus ex-Venezuela at 2.0%), chemicals demand growth will be challenging. However, Krueder still sees strong organic growth opportunities for Quimica Anastacio with its target of launching at least eight new products every month by working with customers. Much of the new product development will be in specialties, where the CEO aims to boost this part of the business to 30% of sales from around 20% currently. “This is something which sustains growth even when the economy is not growing,” said Krueder. The company operates 18 segments across three large divisions of Beauty and Health, Nutrition and Industrial Processes. The latter’s segments include polyurethanes (PU), lubricants, plastics, polyvinyl chloride (PVC), household cleaning products, and paints and construction. “We see them as independent entities with their own strategies, targets, marketing budgets and product development targets. If you don’t see each segment as a single company, it does not make sense to stay in these markets because we compete with some companies which are only focused on these markets,” said Krueder. “If each business unit sees itself as its own company, they have to show results, and one of those results is to bring more products,” he added. New product launches for Quimica Anastacio are primarily driven by customers looking for more efficient and economical solutions for existing specifications, rather than new formulations. This could involve everything from modifying a product from powder to liquid form, blending, sourcing from a different country, sourcing a consolidated package of products, improving logistics or changing packaging to offer a better solution. NO M&A IN NEAR TERMThese days, it’s hard to find a sizeable chemical distributor that is not focused on M&A but Quimica Anastacio stands out in this respect as being completely focused on organic growth. The company generated sales of around $553m in 2021, essentially doubling sales since 2016. It ranks No 39 globally in the latest ICIS Top 100 Chemical Distributors listing. “Our strategy is to stay independent. And it would make zero sense in this moment to go into the M&A market because we already have been growing continuously in Brazil and Latin America, and are one of the market leaders,” said Krueder. Quimica Anastacio instead prefers to sustain sales growth by investing its own capital and launching new products with customers. Staying independent also allows for faster decision making and being nimble in adjusting to different market scenarios, the CEO pointed out. “We want to focus 100% of our energy on our business, and not on M&A strategies. We of course see many companies focusing on M&A with [assets] coming in and coming out. We prefer to to grow, but in a healthy, gradual way,” said Krueder. Quimica Anastacio’s main presence is in Brazil, but it has boosted operations in Argentina and recently started distribution in Mexico. Meanwhile, its Anastacio Overseas trading company sells in almost all counties in Latin America and has recently entered Africa, he noted. While the company has never made an acquisition, the CEO does not completely rule M&A out in the future. “If we see our model of launching new products is getting saturated, we could in one or two years come to the conclusion that it would make sense to buy a small specialty company to get stronger in some segments. But it’s not the case right now,” said Krueder. CAPTION: Quimica Anastacio is expanding its warehouse footprint in Brazil. Pictured is its distribution center in Barueri, Sao Paulo. SUSTAINABILITY AND REDUCING CARBON FOOTPRINTQuimica Anastacio is also focused on sustainability, expanding the number of warehouses across Brazil to cut transport distance and thus carbon footprint, as well as offering reverse logistics. “Those that are not looking at sustainability now will be out of the game in a couple of years,” said Krueder. “What we try to do is reduce the kilometres transported,” he added. To this effect, the company recently opened a new warehouse in Porto Alegre in Rio Grande do Sul state in the south of Brazil, and plans to open another in Curitiba in Parana state by the end of the year, bringing the number of warehouses in Brazil to seven. In an example of “reverse logistics”, the company supplies packaging for customers, and then arranges the logistics to collect this packaging when its use is finished. Interview article by Joseph Chang Thumbnail shows Jan Krueder, CEO of Quimica Anastacio.

MADRID (ICIS)–This short outlook video on the LNG market looks at: The latest tenders from EGAS, IEASA and more Maintenance work in the US, a planned terminal expansion in France NBP prices and impacts on LNG, Russian LNG flows and Japan’s demand role in Asia

BARCELONA (ICIS)–As lockdowns, the Common Prosperity policy and lacklustre export markets cut growth in China’s economy, the global chemical industry should prepare for negative demand growth in 2022. Lockdowns have frozen large sections of China’s economy Some restrictions may be in place until November May be no China demand rebound in 2022 Demand for polymers in China may fall this year China could drag down global polymer, chemicals demand growth China PE, PP margins have often been negative since last year Slowing global economy hurts China exports China may not remain driver of global economic growth Common Prosperity policy undermined by zero-COVID policy, economic problems Common Prosperity aims to redistribute wealth, tackle property bubble, environmental problems In this Think Tank podcast, Will Beacham interviews ICIS senior consultant for Asia, John Richardson. 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.

LONDON (ICIS)–Petronas has agreed to acquire Sweden-based firm Perstorp, the Malaysia state oil and gas company said on Tuesday, in a move set to further expand its specialty chemicals footprint. Petronas has agreed to acquire the entire equity interest in Perstorp Holding AB for Malaysian ringgit (M$) 7.02bn (€1.54bn) from private equity firm PAI Partners, giving the firm an enterprise value of €2.3bn. The deal is being carried out through its Petronas Chemicals Group (PCG) arm, which has stated a strategy to expand its basic chemicals portfolio and to diversify further into derivatives and specialties, with the Perstorp acquisition representing the creation of a specialty chemicals portfolio. The acquisition is “a major milestone for PCG in establishing a key platform to diversify into the specialty chemical industry and capture new growth opportunities, whilst enabling us to future proof our business against market cyclicality and volatility” said PCG CEO Mohd Yusri Mohamed Yusof. Petronas also acquired Netherlands-based silicones, lube oil additives and chemicals producer BRB Group in 2019. Acquired by PAI Partners in 2006 and transferred from its IV fund to a new investment vehicle managed by the firm and counting Landmark Partners as a cornerstone investor in 2018, Perstorp focuses on the resins and coatings, engineering fluids and animal nutrition markets. The company has dealt with “continued challenges” in recent years, according to chief Jans Secher, speaking when the company announced a loss for the fourth quarter of 2019, and has pursued a lengthy programme of cost-cutting measures, but has seen stronger financial growth since then. Perstorp saw a downgrade to its credit rating in April 2020 by S&P Global Ratings due to the COVID-19 pandemic, to B- with a negative outlook, citing heavy exposure to cyclical end markets such as transportation, industrial and construction. The agency upgraded the company’s outlook from negative to stable in December 2021, but maintained the B- rating. Perstorp has since swung back to profit, recording record earnings before interest, taxes, depreciation and amortisation (EBITDA) in the fourth quarter of 2021 on the back of improved margins despite the energy price surge, and healthy demand. The company reported a record in the first quarter with the highest EBITDA in its history at Swedish kroner (Skr) 845m (€81m). PCG estimates that the purchase will add 28% incremental revenue based on 2021 results and add 2.3m tonnes/year to its production portfolio. “By tapping into PCG’s strength and market leading position in the Asia Pacific region, we are confident that Perstorp can continue to develop into its next phase of growth,” said Secher. ($1 = M$4.39; €1 = SKr 10.44) Thumbnail picture: Petronas Towers in Kuala Lumpur, Malaysia (Source: C F Tham/AP/Shutterstock)

SINGAPORE (ICIS)–Thailand’s economy posted a first-quarter annualized growth of 2.2%, faster than the 1.8% pace set in the previous quarter, on the back of stronger private consumption and exports as COVID-19 restrictions have eased. On a seasonally adjusted quarter-on-quarter basis, the economy expanded by 1.1% in the period January to March 2022, data from the Office of National Economic and Social Development Council (NESDC) show on Tuesday. On a year-on-year basis, private consumption in the first quarter accelerated to 3.9% from 0.4% in the previous quarter. Exports during the period grew 14.6% to $73.3bn, with chemicals and petrochemical products posting an 18.7% increase year on year. Manufacturing posted a slower growth of 1.9% in the first quarter from 3.8% in the previous quarter. Tourism receipts grew for the first time in 11 quarters, rising 63.8% year on year to $4.2bn in January-March 2022 as COVID-19 measures were relaxed. The sector is a major component of the Thai economy. For the whole of 2022, the Thai economy is projected to grow by 2.5-3.5%, supported by improvement in domestic demand, recovery of domestic tourism, and continued export growth, NESDC stated. Exports are projected to post a 7.3% growth, while headline inflation is estimated to be in the 4.2-5.2% range, it said. ($1 = Bt34.52) Visit the ICIS Coronavirus topic page for analysis of the impact on chemical markets and links to latest news.

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. Regular readers of the blog will know that we first highlighted the great polyolefins market divergence in April 2021. We said that: Asian and Middle East producers needed to sell more to Europe because of much better netbacks than in China. Buyers should secure more resin supplies from Asia. Until comparative price differentials and spreads started to normalise – which we would be able to recognise from the historic ICIS Pricing data – producers and buyers needed to focus on these two parallel opportunities. But this would require dealing with very challenging container-freight markets. ICIS trade-flow data suggest this can be done. We also presented a scenario where European demand remained strong with supply tight as China moved in the opposite direction. This scenario has happened, as we detail in today’s post. If you haven’t done so already you can literally, make or save millions of dollars from these highly unusual trading patterns. It is never too late to start. 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.

SINGAPORE (ICIS)–Malaysia’s Pengerang Refining and Petrochemical (PRefChem) is widely expected to restart its manufacturing complex soon, after more than two years of outage, which would inject fresh supply in Asia at a time of soft demand. Some market sources said the refinery and cracker could be in the process of restarting, with others saying the downstream polymer units could resume production in June. PRefChem has yet to respond to ICIS’ query on the issue, at the time of writing. Its site in Johor, Malaysia, houses an integrated refinery and petrochemical complex. Naphtha output from its 300,000 bbl/day refinery will be fed to the cracker, which can produce 1.2m tonnes/year of ethylene and 609,000 tonnes/year of propylene, for captive use of downstream units. If fully operational, PRefChem’s annual petrochemical production capacity is expected to be 7.7m tonnes. The restart may weigh on overall sentiment across the petrochemical markets in Asia, coming at a time of downbeat demand amid continuing COVID-19 lockdowns in China. Olefin production margins in Asia have remained squeezed by high feedstock costs, prompting regional cracker operators to keep output curbed. Regional supply, nonetheless, may still be long, given severe weakness in demand. While not expecting fresh supply to hit the spot market when PRefChem restarts, the naphtha market has been bearish, with recent prompt cargoes fetching discounts. In the downstream polyethylene (PE) markets, some apprehensions remained, over whether the planned restart could be carried out without any major hiccups, according to sources close to the matter. PRefChem’s downstream units are expected to produce linear low-density PE (LLDPE) and polypropylene (PP) at the initial stages, the sources said. The company can produce 350,000 tonnes/year of LLDPE, 400,000 tonnes/year of high-density PE (HDPE) and 900,000 tonnes/year of PP at the site. If the restart is successful, the additional capacity is expected to have a major impact on the southeast Asian market, especially in current market conditions where China’s market is effectively closed to imports due to the lockdowns. This would mean PRefChem would probably try to sell most of their available volume to southeast Asia, a market that is already struggling with poor downstream demand. For some buyers though, the resumption of supply from PRefChem could mean better days ahead, as they would then have more diversity in terms of PE supply which, they hope, could equate to more price competition. Suppliers, however, are concerned because they expect pre-sales of PRefChem cargo to be priced below market levels, in order to build acceptance of the new product. “We have to stand by for [market] turbulence,” a market player said. PRefChem’s Johor site was in the process of starting up when a fatal fire hit the diesel hydrotreating (DHT) unit at the refinery in mid-March 2020, shutting down the whole complex. The company, which comprises Pengerang Refining and Pengerang Petrochemical, is a 50:50 joint venture between energy firms PETRONAS of Malaysia and Saudi Aramco. Focus article by Pearl Bantillo Additional reporting by Melanie Wee, Izham Ahmad and Julia Tan

SINGAPORE (ICIS)–Singapore’s petrochemical exports in April rose by 2.2% year on year to Singapore dollar (S$) 1.57bn ($1.13bn), reversing the 1.9% contraction in March, official data showed on Tuesday. The country’s overall April non-oil domestic exports (NODX) posted a slower growth of 6.4% to S$17bn, compared with a 7.7% pace in the previous month, data from Enterprise Singapore showed. NODX to seven out of Singapore’s top 10 markets increased in April, while shipments to China, Hong Kong and South Korea declined. Non-electronic NODX, which includes petrochemicals and pharmaceuticals, rose by 4.6% year on year to S$13.1bn in April, decelerating from the 6.8% increase in March this year. ($1 = S$1.39) Thumbnail photo: Container vessels at the Singapore Port on 25 August 2021. (By Joseph Nair/NurPhoto/Shutterstock) 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.

LONDON (ICIS)–The European Commission on Monday cut its 2022 GDP growth forecast for the EU from 4% to 2.7%, with the Russia-Ukraine war exacerbating existing economic headwinds that had been expected to subside. A strong economic rebound from economies shifting back to a normal footing in the wake of easing COVID-19 restrictions has been dampened by surging inflation and commodity pricing, with the onset of the Ukraine conflict likely to prolong those drags on growth, the Commission said. “By exerting further upward pressures on commodity prices, causing renewed supply disruptions and increasing uncertainty, the war is exacerbating pre-existing headwinds to growth, which were previously expected to subside,” the European Commission said in its spring economic outlook. Eurozone GDP growth is now expected to be 2.7% this year compared to earlier projections of 2.8%, with inflation for the bloc expected to average 6.1% for 2022 as a whole, based on Commission expectations that levels will peak at 6.9% in the second quarter. German economic growth is expected to stand among the weakest in the bloc this year at 1.6%, with Portugal and the Republic of Ireland expected to be the strongest performers at 5.8% and 5.4% respectively. Commodity pricing, which has surged since the fourth quarter of 2021 and only jumped further since the onset of the crisis, is the key driver of economic pressure in Europe, with supply chain disruption also pushing prices of goods such as food up. Many chemicals firms have been passing through double-digit percentage price increases each quarter on the back of higher raw materials costs, with the impact of renewed COVID-19 lockdown measures in China also weighing on demand and industrial production, the Commission said. Energy pricing has stabilised in recent weeks but the onset of the summer travel season is expected to push fuel costs higher, while any sudden abatement of Russian natural gas flows to Europe could see energy pricing skyrocket once more. Many producers have warned of production cuts and shutdowns in the event of substantial gas supply disruptions. “The overwhelming negative factor is the surge in energy prices, driving inflation to record highs and putting a strain on European businesses and households,” said European Commission executive vice-president Valdis Dombrovskis. “While growth will continue this year and next, it will be much more subdued than previously expected. Uncertainty and risks to the outlook will remain high as long as Russia’s aggression continues,” he added. Higher energy pricing has also deepened European trade deficits, according to data released on Monday, with the EU and eurozone both suffering under the largest deficits in several decades, at €27.7bn and €16.4bn respectively in March. The eurozone had boasted a trade surplus of €22.5bn during the same month a year earlier. The current forecasts do not incorporate the longterm impact of an economic decoupling between Europe and Russia, which has been the perennial key source of energy to the continent. “Beyond these immediate risks, Russia’s invasion of Ukraine is leading to an economic decoupling of the EU from Russia, with consequences that are difficult to fully apprehend at this stage,” the Commission added. Thumbnail picture: The Ukrainian flag projected onto the European Council HQ in Brussels, Belgium (Source: The European Commission)

HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 13 May. INSIGHT: Tight US refined products markets through summer, likely weighing on base oils supply US refiners expect strong product demand to outpace available supply at least through peak driving season, which is likely to keep US base oil supplies tight. Shell plans to boost bio-based alcohol and ethoxylates capacity at Norco – exec Shell plans to increase capacity for the use of bio-based feedstocks to produce alcohol and alcohol ethoxylates capacity at its Norco, Louisiana, site, an executive said on Tuesday. INTERVIEW: No signs of demand destruction amid rising TiO2 prices – Chemours exec Amid rising titanium dioxide (TiO2) prices, there are no signs of demand destruction with inventories low across the value chain and consumers still seeking supply that continues to be constrained, a senior executive at Chemours said on Tuesday. INSIGHT: Can US, global economies avoid recession amid a whirlwind of headwinds? Can the US and major economies around the world avoid a recession in the face of what can only be called a whirlwind of headwinds? High inflation to dent demand; supply chain costs increase by up to 60% in Q1 – SABIC CEO SABIC is facing “numerous challenges” related to supply chain woes as well as higher production costs while high inflation could end up denting end demand, the CEO at the Saudi petrochemicals major said on Thursday. INSIGHT: US TSCA missing deadlines for chem reviews – ACC The US TSCA programme, which reviews the safety of chemicals, is missing deadlines, a development that is preventing the introduction of new materials and threatening manufacturing and supply chains, the American Chemistry Council (ACC) said in a recent report. US PVC gets inquiries from Ukraine after two months of silence US suppliers of polyvinyl chloride (PVC) are getting inquiries from plastics processors in Ukraine, a surprise development in a war-torn market that has been almost completely silent in recent weeks.