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LONDON(ICIS)–The European Commission has approved state aid to the German chemical company BASF in the production of renewable (low carbon) hydrogen via the EU Hydrogen Strategy and the European Green Deal targets, the commission said in a press release 3 October. Under EU State Aid rules, a support package of €134mn to BASF “in the production of renewable hydrogen, with the aims of decarbonising its chemical production processes and of promoting hydrogen use in the transport sector.” The decision follows previous approvals back in July and September of the IPCEI Hy2Tech and IPCEI Hy2Use policies respectively, with BASF’s project having been selected by Germany. BASF’s low carbon hydrogen that the company produces will be mainly to replace fossil-based hydrogen in the company’s chemical production process, with excess low carbon hydrogen produced to be delivered for emerging hydrogen mobility applications such as hydrogen-powered trucks and buses. The support, which will take the form of a direct grant, will go into the Ludwigshafen site, which is due to have an annual production capacity of 54MW and produce 5,000 tonnes/year of hydrogen and 40,000 tonnes/year of oxygen, which is expected to be operational in 2025 and be operational for a 15-year period. The EC said that “the measure facilitates the development of an economic activity, in particular the production of renewable hydrogen. At the same time, it supports the objectives of key EU policy initiatives such as the European Green Deal, the EU Hydrogen Strategy and the REPowerEU Plan.”

HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 30 September. Europe faces supply gap in ’23-25 if Russia cuts gas supplies – study Europe will face a supply gap in 2023-2025 if Russia suspends gas shipments next year – but by the second half of the decade, liquefied natural gas (LNG) imports could meet demand, according to a study from the energy research firm Rystad Energy. INSIGHT: ‘King Dollar’ poses growing threat to US chems, global economy The relentless surge in the US dollar to record or multi-decade highs against European and Asian currencies will be a greater headwind for US-based chemical company earnings going forward. Corrected: Hurricane Ian damage could top $1.6tr as more than 7.2m homes could flood – CoreLogic 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. INTERVIEW: Firm advances on methanol-ammonia project in Canada Canadian company Northern Petrochemical Corp has secured land at a site in oil and gas-rich Alberta province for a planned “blue” methanol-ammonia project, CEO and president Geoff Bury told ICIS in an interview on Thursday. Urea short-term outlook weak as mixed signals lead to uncertainty Global urea prices are declining, with market activity expected to stay thin for next two to three weeks as buyers stay on the sidelines given the uncertainty surrounding future levels. US CSX limits S Carolina rail service ahead of Hurricane Ian CSX is limiting rail service in South Carolina in preparation for Hurricane Ian, which made landfall on Friday.

MUMBAI (ICIS)–India has decided to extend once again the deadline for import certification of various chemicals to March-April 2023, giving in to pressure from domestic end-user industries that rely on imported raw materials. The mandatory Bureau of India Standards (BIS) certification was expanded to cover more chemicals and petrochemical imports in 2019 as a non-tariff barrier against inferior imports. Enforcement of BIS certification for acrylonitrile butadiene styrene (ABS), ethylene dichloride (EDC) and vinyl chloride monomer (VCM) will be pushed back to 12 March 2023, the Ministry of Chemicals & Fertilizers announced on 2 September. Certification requirements for paraxylene (PX), polycarbonate, polyurethanes, meanwhile, will take effect on 19 March next year, it said. For ethylene vinyl acetate (EVA) copolymers, linear alkyl benzene (LAB), polyethylene (PE) material for moulding and extrusion, synthetic micro fibres and various types of polyesters, the BIS certification will come into force on 3 April 2023. For maleic anhydride (MA), styrene (vinyl benzene), acrylonitrile imports, accreditation will kick in on 24 April. PLASTICS PROCESSORS AGAINST THE MEASUREThe BIS certification deadlines had been previously postponed for a year amid strong lobbying from domestic players, noting that the mandatory certification could translate to higher cost and delays in deliveries of imports. In August 2022, India had extended the quality control standards accreditation for imported acetone to 13 March 2023, while BIS implementation for purified terephthalic acid (PTA) was extended from 22 June to 22 December 2022. The plastics processing industries have been strongly opposed to the mandatory BIS certification, which could have a heavy impact on the exports of finished goods. High raw material costs continue to plague operational costs for Indian exporters, Plastic Export Promotion Council (Plexconcil) chairman Arvind Goenka said. “The Indian governments mulling the idea of implementing BIS standards on raw material will probably be the final straw for our industry considering the import dependency on polymers and the high raw material prices as compared to China and other countries,” he added. “Such trade barriers will cut off the import flow of raw materials into the country,” Plexconcil  executive director Sribash Dasmohapatra said. “India is not self-sufficient in the manufacture of these products and the BIS certification will make the domestic industry suffer,” he said. PLASTICS EXPORTS CONTRACT In April-August 2022, the first five months of India’s fiscal year, its plastics exports have declined by 3.5% year on year to $5.44bn. For the month of August alone, the country’s exported plastics slipped 1.7% year on year to $1.04bn, official data showed. The statutory imposition of BIS standards will increase cost of production of polymers for Indian processors and will make the domestic plastic processors uncompetitive at a global level, Dasmohapatra said, adding that it could also lead to retaliatory measures. “Indian companies are exporting their products to over 200 countries while adhering to International Organisation for Standardization (ISO) standards. If India mandates BIS standards for imports, other countries may also impose retaliatory measures which could hamper the export of processed plastics,” he added. Plexconcil has been petitioning the government to first impose BIS standards on finished goods imports and other value-added plastics. “We want the government to implement BIS standards on value-added plastics and increase import duties on these goods which will give the Indian producers a level playing field in the domestic market,” Dasmohapatra said. Value-added plastic imports amounted to $7bn in the fiscal year ending March 2022 compared with $8bn of exports. Such imports will further rise with the imposition of the mandatory standards, he added. Plexconcil is in talks with other industry bodies and will continue to petition the government to withdraw the BIS notifications, Mohapatra said. “Until the domestic plastic processing industry can produce enough quantity to supply to the Indian market without fear of crippling cheap imports, we don’t want the government to impose BIS standards on the raw materials,” he added. Caustic soda was the first chemical to be covered under this certification in April 2018. Focus article by Priya Jestin

MADRID (ICIS)–The European chemicals industry is set to continue its trend towards specialisation as commodity-based materials are forced out of production due to high costs, but the current crisis also presents an opportunity. The EU’s Green Deal is demanding from manufacturing harsher reductions in emissions globally, and this should speed up electrification of the energy-intensive chemicals sector, freeing it from national grids highly dependent on natural gas for the production of electricity. However, the timeframe to be carbon neutral by 2050 is tight. For example, it is yet to be tested whether chemicals’ most energy-intensive activity, steam cracking, could be electrified, with majors BASF, SABIC, and Linde starting construction of a pilot plant in September. European petrochemicals players are set to discuss the many challenges weighing on the sector this week in Berlin, in their first in-person European Petrochemicals Association (EPCA) annual meeting since 2019. They were hoping this year would be celebratory, not least for having survived a pandemic. They could never have expected what reality had in store for them though: in recession or about to enter one, war economy-like national budgets being urgently passed, and inflation at the highest in most players’ careers. UNROARING TWENTIESWhen the pandemic hit in 2020, the hope was that after the health emergency receded a prosperous era would kick off, emulating the Roaring Twenties that followed the Spanish flu and the horrors of war during the 1920s. It did not go according to plan. The effects of the Ukraine war in Europe, with hundreds of state billions already committed to lessen the impact of multi-decade high inflation, is likely to linger at least until the middle of the decade. A recession in many EU countries this winter is a given – its depth and the decisions by policymakers to deal with it will mark the 27-country bloc’s citizens living standards for the rest of the decade. Chemicals will be in the eye of the storm. Sky-rocketing high production costs via the electricity bill this winter could be a make-or-break moment for some chemicals subsectors, according to the global chemicals lead at consultancy Accenture, Bernd Elser. “The current crisis will speed up the electrification of the chemicals industry as well as the migration to net zero. Many business cases [for electrification] that were not attractive when natural gas prices were lower, suddenly become attractive because energy costs are so high,” said Elser in an interview with ICIS on 27 September. “The restructuring and the investments in alternative products – specialties versus energy-intensive commodities – is set to continue. Recycling will play a part [in decades to come] as well, and the necessary electrification of steam crackers clearly needs to be accelerated.” That restructuring, shifting away from commodity chemicals, has been happening for the past two decades. Highly polluting production of some chemicals has increasingly shifted to other jurisdictions where environmental standards are lower. In May, Accenture published a report arguing the cost to decarbonise the chemicals industry in the EU could come to the tune of €1tr – a tall order for a sector which already suffers high costs on most fronts compared with competitors such the US and China. In the report, Accenture specified eight chemicals which are responsible for 75% of the industry’s greenhouse gas (GHG) emissions:  ammonia, ethylene, propylene, nitric acid, carbon black, caprolactam, soda ash, and fluorochemicals. WINTER OF DISCONTENT In the short term, Elser said he is optimistic about the wider picture for Europe’s energy supply during the winter, with power cuts affecting the chemicals industry unlikely, he said. “I don’t think the outlook’s entirely negative when it comes to natural gas in Europe. Undoubtedly, there will be individual plants which will be mothballed, but that will be a minor piece of the chemicals industry,” he said. “The big, integrated facilities will continue to run, and they will be able to produce and ship their products – I am convinced of that. One thing is certain though: customers will have to absorb some of the increase in costs.” His optimism is not shared by the industry’s representatives. Last week, Europe-wide trade group Cefic and another 12 trade groups – including Fertilizers Europe – said the EU must take “more immediate and efficient measures” to help energy-intensive manufacturing sectors with their “unbearable” production costs. VCI, the chemicals trade group in the EU’s largest producer Germany, said last week it welcomed the withdrawal of a planned tax on natural gas which was set to kick off on 1 October and a planned cap on electricity prices. The trade group added, however, the electricity price cap would only provide some “breathing space” which should be used to “create the structures that will get us through the difficult” next two winters. Germany also passed a whopping €200bn spending package to lessen the impact of high prices for consumers and businesses. SHIFTING PARADIGMSIn the interview with ICIS, Accenture’s Elser said several times that old paradigms are being recalibrated on the back of the pandemic and the war in Ukraine, both inside the chemicals industry and in the wider economy. Only time will tell what the economic system emerging from these troubled years will look like, but the past months may be showing the beginning of a new era in economic policy. The EU’s complicated electricity price calculation system, where the most expensive feedstock last entering the system sets the final price, benefited no-one but utility companies. The rule was an immobile truth. Until it was not. Spain and Portugal, due to their peninsular nature and lack of connections to northwest Europe’s electricity grid, won a hard-fought exemption in June. Now, the EU itself is mulling to decouple natural gas prices from electricity production as Russia’s disconnection from Europe is set to keep prices high. Intervention in the markets is back in fashion; unsuspecting players are demanding price caps. Within chemicals, Cefic has asked the EU to implement a cap on natural gas prices. In the UK, with an electricity price system similar that of the EU, calls for a change are also on the rise. Another potential shift in paradigm could be the announcement by the European Commission – the EU’s executive body – to implement a €140bn windfall tax on utility companies that are enjoying high profits. The Commission’s president, German conservative politician Ursula Von der Leyen, said it was wrong that companies were making record profits “benefiting from war”, something the EU’s “social market economy” had to tackle. A BENIGN RECESSION?Another shifting paradigm, and a positive development amid the predominant doom and gloom, would be the type of recession itself, according to Accenture’s Elser. Recessions have always caused unemployment to spike, feeding the downturn cycle as consumers’ purchasing power falls. This recession looks set to be different, with labour shortages still reported by many companies in the EU. Even now, unemployment has not risen in most sectors, albeit the pace of hiring has slowed down. “In discussions we are having with [Accenture’s] clients, they stress that this recession is not the typical recession as employment levels remain high, for example,” said Elser. “The usual paradigms are being recalibrated. Some of Europe’s economies are already in recession, yet employment rates are very high, which means there is more purchasing power, compared with other recessions in the past.” The EPCA annual meeting runs on 4-6 October. Focus article by Jonathan Lopez

LONDON (ICIS)–Click here to see the latest blog post on Chemicals & The Economy by Paul Hodges, which looks at how interest rates have broken out of their 40-year downtrend. 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. Paul Hodges is the chairman of consultants New Normal Consulting.

BERLIN (ICIS)–Weaker market conditions, narrower margins and easing supply chain issues could open Europe up to cheaper imports, forcing more producers to cut operating rates, according to the president of the European Petrochemicals Association (EPCA). With institutions such the IMF, the OECD and the European Commission itself all continuing to slash GDP growth expectations in an economic environment that is deteriorating faster and more deeply than expected, many chemicals markets are expected to remain long into next year, according to EPCA’s president Hartwig Michels, who is also the president of BASF’s petrochemicals division. The economic chill currently taking root in Europe and beyond is likely to offset the normalisation of supply for petrochemicals players after the outages seen in the first half of the year, according to Michels. “I expect a supply normalisation during the second half of 2022 following the end of planned and unplanned outages we have seen during the first half of the year. On the other hand, consumer confidence in the eurozone has fallen to a record low,” he said. “Markets are turning long during the second half of 2022 and, consequently, extending into 2023, resulting in reduced margins in comparison to the healthy levels reached in the first half of this year. Depending on how pronounced and fast the demand reduction will materialise, producers may be forced to reduce operating rates,” he added. There has already been a spate of shutdowns in the European chemical and fertilizer sectors as a result of surging energy prices rendering production of some materials uneconomic. European players have also benefited to an extent from supply chain issues representing a shield as well as a hurdle, insulating producers from lower-cost competition elsewhere. “The extreme shortage in interregional transport capacities did limit arbitrage business from Asia and the US into Europe, allowing European producers to pass on rising raw material cost nearly fully. This is changing now. More imported volumes of lower cost products into Europe put substantial pressure on prices,” Michels said. “Like no other region, Europe is depending on access to feedstocks from other regions and access to markets globally. Nevertheless, we do see and will see in some cases homeshoring of value generation taking place – especially for key intermediates which are important for domestic value chains,” he added. Despite the shutdowns, the increasingly bearish macroeconomic environment is keeping markets for building block chemicals such as naphtha and olefins long as end market demand continues to weaken in an inflationary, high cost-of-living environment. European policymakers have moved to build up gas stocks ahead of the winter, with the success of those steps underlined by the lack of market impact from alleged sabotage arresting the flow of gas once more along the Nord Stream 1 pipeline from Russia to Europe in late September. Nevertheless, a cold winter could push gas reserves to dangerous lows, meaning the prospect of rationing has not yet been eliminated, with a lot also riding on the alternative supplies that governments have sourced all being delivered. For example, BASF has set out plans to cut production of lower-margin, energy-intensive chemicals such as ammonia if gas supplies are limited. The need to build up gas reserves has also seen some countries, including Germany, revive mothballed coal-fired power plants, which has resulted in some erosion of the gains chemicals firms have made on reducing carbon dioxide (CO2) emissions. Levels for the industry have increased this year, according to Moody’s, and could stand to increase in 2023, which has prompted concerns about progress on publicly stated emissions reduction targets. Policymakers have set out set durations for those plants to be used, and increased CO2 emissions at present are unlikely to represent a long-term threat to progress, according to Michels. “Granted, there will be the need to include more coal in a countries energy mix, but this will be a temporary measure to cover the energy gap for a few years perhaps, which will not result a serious departure from the EU’s climate path with a fixed ETS [emissions trading system] emissions cap,” he said. With no end in sight to the Russia-Ukraine war and little prospect of Europe returning to pre-invasion gas flows from Russia, a more systemic issue with the energy transition is the prospect of prices staying higher well into the future. The focus at present is on securing sufficient reserves to keep houses heated and industry producing during the winter, but none of the current issues are likely to have gone away when spring 2023 comes into view. This makes the political calculus of how to address the sustainability challenge even more delicate, Michels said, considering the potential for energy costs to make up a more substantial portion of European household budgets for years into the future. “We need to consider that this is an energy crisis of global scale. Affordable energy will be a key challenge to prevent social unrest. The sustainability transformation will require gigantic investments in a relatively short period of time,” said Michels. “And it will result in higher costs, which at the end of the day will have to be borne by the consumer. So, the fact that we are currently entering a period of a weakening economy, higher inflation, and geopolitical tensions will make this transition even more challenging,” he added. Some governments such as the UK have moved to introduce ceilings on how much of the energy cost rises will be borne by households and businesses – albeit with a far shorter timeline for companies than consumers – but, with the cost of those measures running into hundreds of billions across Europe, it is unlikely that those measures will last forever. “We have to take the people along on this transformation journey. However, we will realize that we cannot compensate all negative impacts on rising living cost via state subsidies,” Michels said. The second part of ICIS’ conversation with Michels, covering the role of fossil fuels and EU chemicals legislation, will be published on 4 October. The annual EPCA general assembly runs 4-6 October in Berlin. Thumbnail image source: Shutterstock Interview article by Tom Brown

LONDON (ICIS)–Here are some of the top stories from ICIS Europe for the week ended 30 September. Germany slipping towards recession as sentiment falls further in September German economic sentiment continued deteriorating in September, hitting the lowest value since May 2020 according to the latest data from the Ifo Institute on Monday. Strike action begins at TotalEnergies sites in France Union workers at several TotalEnergies sites across France initiated industrial action on Tuesday, with a company spokesperson stating that the firm is attempting to continue to supply its customers and service station network. Europe base oils export prices drop on bearish sentiment European base oils export prices slipped this week as limited demand compels players to adopt a bearish sentiment. EU chemicals, energy-intensive sectors call for measures to tackle ‘unbearable’ gas costs 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. Germany scraps natgas levy, agrees €200bn package ‘to brake’ rising prices Germany’s coalition government on Thursday agreed not to go through with a controversial levy or surcharge on natural gas consumption, which it was estimated would have cost the country’s chemical industry alone about €4bn/year. Urea outlook weak in short term as mixed signals lead to uncertainty Global urea prices are declining, with market activity expected to stay thin for next two to three weeks as buyers stay on the sidelines given the uncertainty surrounding future levels.

SINGAPORE (ICIS)–Finland’s Neste, Japan’s Idemitsu Kosan and Mitsubishi Corp, and Taiwan’s CHIMEI Corp have agreed to build a renewable plastic supply chain using bio-based hydrocarbons (Neste RE) to produce styrene momomer (SM) and its renewable plastics derivatives. “The bio-SM production in Japan and the renewable plastics production in Taiwan will mark the first of such production in each country, and they are planned to take place in the first half of 2023,” the firms said in a joint statement on Monday. Under the collaboration, Neste RE – which is produced from 100% bio-based raw materials such as waste and residues – will be provided to Idemitsu Kosan, which is the biggest SM producer in Japan. Idemitsu Kosan’s bio-based SM output will then be supplied to CHIMEI, which produces downstream acrylonitrile butadiene styrene (ABS). Mitsubishi Corp is tasked with coordinating the collaboration between the value chain partners and develop renewable product’s market. “With this, the companies are contributing to the plastics industry GHG (greenhouse gas) emission reduction targets and the transition towards a low-carbon emission society,” they said.

MUMBAI (ICIS)–India has extended its antidumping duty (ADD) on imports of toluene di-isocyanate (TDI) from China, Japan and South Korea for another five years,  starting 21 September. The ADD rates range from $0.15/kilogram (kg) to $0.44/kg, unchanged from previous levels. India TDI antidumping duty rates Company Country ADD rate ($/kg)  Covestro Polymers Ltd China 0.26 Wanhua Chemical Group China 0.26 Other producers China 0.26 Hanwha Solutions Corp South Korea 0.22 BASF Company Ltd South Korea 0.31 Any other producer South Korea 0.44 Any producer Japan 0.15 It was determined that the “domestic industry had suffered injury due to the dumped imports of the product from the subject countries and the imports are likely to enter the Indian market at dumped prices in the event of cessation of duty”, according to the Department of Revenue of India’s Ministry of Finance. Following a sunset review of existing ADDs, the Directorate General of Trade Remedies (DGTR) had recommended on 24 June the continuation of the measure on TDI imports form the three northeast Asian countries. India had earlier imposed a five-year ADD on TDI imports from the three countries on 23 January 2018. In June 2022, the ADD was extended up to 27 September. Gujarat Narmada Valley Fertilizers & Chemicals (GNVFC), the sole domestic producer had filed the petition to initiate the probe on TDI imports. The period of investigation was for the fiscal year ending March 2021. For the purpose of injury investigation, the period also covered three fiscal years from 2017-20. In the near term, the ADD extension is not expected to have a significant impact on India’s overall TDI imports, as buyers remain cautious amid a strengthening US dollar and rising inflation, market players said. Additional reporting by Shannen Ng

SINGAPORE (ICIS)–Oil prices jumped more than $2/bbl on Monday, fueled by expectations that oil cartel OPEC and its allies (OPEC+) would introduce a hefty production cut to bolster the market. At 02:20 GMT ($/bbl) Contract Low High Open Last Previous Change High Change Brent Dec 86.35 88.00 86.35 87.64 85.14 2.50 2.86 WTI Nov 80.87 82.16 81.02 81.89 79.49 2.40 2.67 Several news agencies, citing unnamed sources, reported over the weekend that OPEC and its allies including Russia, collectively known as OPEC+ will consider an oil output cut of more than a 1m bbl/day at their 5 October meeting. “If this comes to pass, it will be the biggest move yet since the COVID-19 pandemic,” Singapore-based UOB Global Economics & Markets Research said in a note. OPEC+ in early September agreed to modestly cut production by 100,000 bbl/day. Russia had proposed last week a 1m bbl/day supply cut but there have been no suggestions from other members on the potential size of any output cuts, according to Dutch banking and financial services firm ING. “In August, OPEC+ production was estimated at around 3.37m bbl/day below target production levels. So in reality, any cut in supply will likely be smaller than whatever figure the group announces,” it said. Oil prices have continued to fall sharply since June this year because of global economic growth concerns, a stronger US dollar and worries over continued lockdowns in China amid the country’s zero-COVID policy. In the third quarter, Brent crude plunged by 23% while US WTI shed by 25% during the period. Brent crude touched a nine-month low of $83.65 a barrel on 26 September. Focus article by Nurluqman Suratman Thumbnail image: At a petrol station in Beijing, China, 29 October 2021. (By WU HONG/EPA-EFE/Shutterstock) Click here to view the ICIS Coronavirus, oil price crash – impact on chemicals topic page. Click here to read the Ukraine topic page, which examines the impact of the conflict on oil, gas, fertilizer and chemical markets.