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SINGAPORE (ICIS)–The petrochemical markets in the Gulf Co-operation Council (GCC) have faced a growing number of challenges this year due to an unfavourable economic climate and the ongoing regional conflict. ICIS markets editor Damini Dabholkar and senior reporter Nurluqman Suratman examine the recent situation in the Gulf and outlook for 2024, ahead of the 17th Gulf Petrochemicals and Chemicals (GPCA) Forum in Doha, Qatar.

LONDON (ICIS)–Eurozone inflation continued to fall closer to the European Central Bank’s (ECB) target, according to flash data released by the EU’s statistics agency Eurostat on Thursday. Annual inflation for the single-currency region is expected to fall to 2.4% in November, down from 2.9% in October, with all segments falling, but only energy remaining in negative territory. Food, alcohol and tobacco is tipped to remain the largest component driving inflation, falling to 6.9% in November from 7.4% in October, followed by services at 4% down from 4.6% in the previous month. Non-industrial goods inflation is expected to settle at 2.9% from 3.5%, as energy is anticipated to fall further into negative territory, down to 11.5% in November from 11.2% a month prior. The ECB has maintained its target of 2% inflation for the eurozone, and levied a series of hikes to key interest rates in order to bring this down. Analysts at Oxford Economics anticipate that the expected reduction will prompt the ECB to stave off further increases for the time being. “We expect a cautious rhetoric about the start of the easing cycle, as the inflation path may still be uneven given the end of some government support programmes and potential repricing of contract renewals in January,” said Oxford Economics. “We expect disinflation will further gain traction in the coming months, leading to the first rate cut in April 2024, a view now also supported by markets, that have also added a full extra cut in 2024, getting closer to our forecast.” Click here to visit the ICIS Macroeconomics: Impact on Chemicals page Thumbnail picture: The ECB headquarters in Frnkfurt, Germany. Source: Florian Gaul/imageBROKER/Shutterstock

MUMBAI (ICIS)–India’s eastern state of Odisha has approved three separate projects that will produce environmentally friendly or “green” hydrogen, ammonia and methanol. These projects, which were cleared on 24 November, will help “Odisha state remain at the forefront in the Indian green hydrogen sector”, a local government official said. Details of the projects were disclosed by the Odisha government on 27 November but without specific construction timelines. Welspun New Energy Ltd plans to set up an Indian rupees (Rs) 138.6bn ($1.7bn) green ammonia plant in the Kendrapada district which will have a 700,000 tonne/year capacity. The company is a subsidiary of Indian multinational company Welspun Group, which operates textiles, pipes and infrastructure businesses, among others. Sembcorp Green Hydrogen India, a subsidiary of Singapore-based energy firm Sembcorp, has also received approval to build a 720,000 tonne/year green ammonia manufacturing unit at Gopalpur at a cost of Rs130bn. Meanwhile, ReNew E-Fuels Pvt Ltd (REFPL), a special purpose vehicle set up by renewable energy firm ReNew Power Pvt Ltd will set up two green hydrogen-based methanol plants in Odisha. The company will build a plant that will produce 100,000 tonnes/year of green hydrogen, which will be fed into a 500,000 tonne/year methanol facility at Malkangiri for around Rs100bn. A separate 60,000 tonne/year hydrogen plant is planned to be constructed at Rayagada, along with a 300,000 tonne/year methanol plant at a cost of Rs90bn. Separately, the Odisha government has also approved a Rs10bn ammonia storage tank project at Gopalpur by Aegis Vopak which will be able to store 80,000 tonnes of liquid ammonia. Aegis Vopak is a joint venture between two logistics companies – Dutch Royal Vopak and Indian Aegis Group. It operates a network of 11 terminals across five strategic ports along the east and west coast of India. ($1 = Rs83.37)

SINGAPORE (ICIS)–Japan’s Mitsui Chemicals is considering downsizing its domestic phenols business, as well as optimize domestic cracker and polyolefin operations, as part of its business restructuring, to transition into a specialty chemicals producer by the end of the decade. The company is “mulling domestic downsizing” of its phenol/acetone plants, citing a decision by Japanese producer Idemitsu Kosan to withdraw from the bisphenol A (BPA) business by October 2024 due to oversupply. Phenol and acetone are feedstocks for the production of BPA. Mitsui Chemicals operates a plant in Chiba which can produce 114,000 tonnes/year of acetone and 190,000 tonnes/year of phenol; and a unit in Sakai with a 120,000 tonne/year acetone and 200,000 tonne/year phenol capacities, according to the ICIS Supply & Demand Database. The company is stepping up efforts towards becoming a global specialty chemical firm by 2030, it said in a presentation to investors on 28 November. ” As well as stepping up the pace of business portfolio transformation, we will further aim to further reduce volatility by accelerating the second phase of [the] Basic & Green Materials business restructuring,” the company said in the presentation slides. “This will include an optimised production setup at our crackers, among other efforts.” Mitsui Chemicals’ two crackers have a combined ethylene capacity of around 1.1m tonnes/year. Mitsui Chemicals on 21 November said that intends to close its polyethylene terephthalate (PET) plant within the Iwakuni-Ohtake Works in October 2024 after it determined that “that it is no longer feasible to secure a profit from domestic PET resin production”. At the same site, the company’s 400,000 tonne/year purified terephthalic acid (PTA) plant was shut permanently this year, as it had announced in March 2022. For its polyolefins business, Mitsui Chemicals said that it will be mulling optimisation options via “multi-company collaborations” following the move by its subsidiary Prime Polymers to shut a 110,000 tonne/year polypropylene (PP) line at its Chiba site in March this year. Prime Polymers’ new 200,000 tonne/year PP plant – which is part of Mitsui Chemicals’ plan to restructure its existing production system under and “scrap-and-build-approach” – is expected to start up in 2024. CARBON-NEUTRAL CRACKERS Mitsui Chemicals is planning to come up with an “ideal state” plan for its crackers by the end of its 2025 fiscal year (year to March 2026), which could include capacity optimisation in line with demand fundamentals. The company operates naphtha-based crackers in Chiba and Sakai, Osaka. The Sakai cracker can produce 500,000 tonnes/year of ethylene (C2), while its Chiba unit has 612,000 tonnes/year of C2 capacity. The company, along with Maruzen Petrochemical, Toyo Engineering and Sojitz Machinery launched in 2022 a pilot project aimed at switching feedstock at crackers from conventional methane-based fuel to one in which ammonia is the principal component. In July 2023, Mitsui Chemical had announced its intention to become the first company in Japan to start producing and marketing chemical products and plastics derived from chemical recycling based on the mass balance approach. The mass balance in petrochemicals involves calculating the input, output, and accumulation of raw materials and products in a petrochemical process to ensure efficiency and to minimize waste. Pyrolysis oil made from plastic waste will be supplied by Japan’s CFP Corp and will be used by Mitsui Chemicals as feedstock for the cracker at the Osaka Works in January to March 2025. In the fiscal first half to September 2023, Mitsui Chemicals’ net profit declined by 53.4% year on year to Japanese yen (Y) 20.7bn ($141m), with sales down by 13.4% at Y823.7bn. Focus article by Nurluqman Suratman ($1 = Y147.1) Thumbnail image: At a container port in Tokyo, Japan, 19 October 2023. (By KIMIMASA MAYAMA/EPA-EFE/Shutterstock)

LONDON (ICIS)–The energy crisis brought about by the Russia-Ukraine war has driven a sharp increase in energy efficiency demand and policies, with growth in heat pump and electricity vehicle (EV) purchases helping to drive the improvements, according to the International Energy Agency (IEA). Energy crisis drives uptick in efficiency Rebound in petrochemicals, aviation, air conditioner demand offset improvements IEA calls for governments to target doubling annual efficiency improvements at COP28 Investments in energy efficiency have increased 45% since 2020, driven in part by a sharp move away from Russia-derived gas purchases from Europe the agency said in a report on the sector released on Wednesday in the run-up to the COP28 climate summit in Dubai. However, the pace of improvements to energy intensity slowed in 2023, driven by an increase in productivity for energy-intensive sectors such as petrochemicals, a rebound in demand for air travel and the increase in air conditioner purchases and usage on the back of record high temperatures. China is expected to account for 77% of the gains this year as its economy gradually bounces back after easing lockdown restrictions at the start of the year. GAS DEMAND Residential gas demand has peaked, and on a decline in 38 of the 74 countries that comprise half of global consumption, according to the IEA. In Europe, residential and commercial gas usage fell 15% in 2022, with a substantial portion of that a result of the milder winter that year, but the majority the result of gas-savings measures, demand destruction and efficiency gains. “Since the global energy crisis started, governments representing more than three quarters of the global economy have come up with new energy efficiency policies or made existing ones stronger,” said IEA executive director Fatih Birol, speaking at a press conference on Wednesday. The adoption in the US of the Inflation Reduction Act (IRA) and the substantial subsidy framework it sets out for clean energy investment is likely to drive a 4% reduction in energy intensity this year, hinting at a possible decoupling of energy consumption from economic growth in the country. FUEL DEMAND For fuel demand, the petrochemicals sector is expected to account for a growing portion of total consumption growth over the next five years globally, with  naphtha and LPG/ethane to increase from around 8% of total global growth apiece in 2022-23, to 36% and 42% respectively for 2023-28. The scale of that increase will be driven in part by a projected decline in road fuel demand growth amid a sharp rise in EVs, which now account for one in every five purchases. This has resulted in a forecast 22% decline in gasoline demand growth over the next half-decade, according to the IEA. Source: IEA POLICY BLACK SPOTS Air conditioners, which Birol referred to as one of the “black spots of policymaking”, have also seen a dramatic increase in usage and purchases in the face of escalating global temperatures, particularly in the developing world. Brian Motherway, chief author of the IEA’s energy efficiency report, estimates that for every one degree Celsius increase in temperatures in Texas, air conditioner usage increases 4%, and that on a very hot day in a hot region, cooling can represent 75% of total peak electricity demand. There have been improvements in the energy efficiency of air conditioners, but the increase and how widespread their usage has become, and the uptick in intensity of use, are factors offsetting gains elsewhere. This “highlights the very important point we try to make that air conditioners need to have the best efficiency standards in order to build less power plants,” Birol added. One of the IEA’s key hopes for the upcoming climate summit is for governments to agree to double levels of annual energy efficiency improvements, from 2% in 2022 to 4% going forward. “Tripling of renewable capacity and doubling [in] energy efficiency are two pillars for successful outcome from COP28,” he said. Focus article by Tom Brown. Thumbnail picture: A Bosh heat pump production line in Germany (Source: Ronald Wittek/EPA-EFE/Shutterstock)

BARCELONA (ICIS)–With COP28 pushing climate change up the news agenda, we untangle the mysteries of the EU’s Carbon Border Adjustment Mechanism (CBAM) and explain what it means for chemicals and fertilisers. CBAM puts price on carbon for imports to Europe Potential cost of €3.2bn for fertiliser importers, based on 2022 imports Covers iron, steel, aluminium, fertilizers, electricity and hydrogen Price will be same as existing European Trading System (ETS) Importers will pay for the cost of carbon Transitional reporting ends 2025, charging phased in 2026-2034 (2.5%-100%) Designed to ensure level playing field for imports and local production Chemicals currently get around 75% free allowances for CO2 This could fall to zero if chemicals added to CBAM likely after 2030 EU allowance currently €75-80/tonne European Commission aims for all imports to be covered by CBAM In this Think Tank podcast, Will Beacham interviews Lewis Unstead,  EU carbon and power market analyst for ICIS and Nigel Davis, ICIS Insight Editor. 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.

SINGAPORE (ICIS)–The ICIS forecast underlines that average prices of Asia oxo-alcohols are expected to decline by 25-28% in 2024, largely caused by new supply from the China capacity expansion plans in 2024. Demand recovery is expected to face some challenges because of the weak global economy and geopolitical instabilities. Tight import supply lends support to Asia, Panama Canal logistics issues compound snug supply Demand recovery for oxo-alcohols and plasticizers in 2024 to remain sluggish in Asia, Europe European contract discussions commence; market participants cautious In this podcast, ICIS editors Nicole Simpson and Julia Tan discuss the 2024 outlook for oxo-alcohols and plasticisers in Asia and Europe.

MUMBAI (ICIS)–India’s biggest carbon black maker PCBL Ltd plans to acquire specialty chemicals firm Aquapharm Chemicals Pvt Ltd (ACPL) for rupee (Rs) 38bn ($456m), to diversify its portfolio. PCBL’s board of directors approved the acquisition on 28 November, the company said in a filing with the Bombay Stock Exchange (BSE). The company was formerly known as Phillips Carbon Black Ltd. “This acquisition of ACPL marks the company’s foray into global specialty segments of water treatment chemicals and oil and gas chemicals and it is the first milestone in achieving the vision of creating a multi-platform global specialty chemical business portfolio,” PCBL said. ACPL is headquartered in Pune in the western Maharashtra state and has manufacturing facilities in India, the US and Saudi Arabia. “Aquapharm (ACPL) is a leading specialty chemicals company and is India’s largest phosphonate producer,” PCBL chairman Sanjiv Goenka said. ACPL produces specialty chemicals like phosphonates, biodegradable chelating agents, polymers, biocides, oil field chemicals which have application in water treatment, detergents, industrial cleaners, pulp and paper, pharmaceutical and agrochemicals among others. “The acquisition is value accretive and margin accretive and is in the space of fast-growing high margin chemicals,” Goenka added. A share purchase agreement was signed with ACPL on 28 November, with the acquisition to be financed through a mix of internal accruals and borrowings, PCBL said. The transaction is expected to be completed within two to three months once all necessary approvals are obtained, it added. ($1 = Rs83.33)

SINGAPORE (ICIS)–AkzoNobel and Japan’s Kansai Paint have mutually agreed not to proceed with the company’s intended acquisition of Kansai’s paints and coatings activities in Africa, the Dutch paints and coatings major said on Wednesday. “It’s disappointing that this intended acquisition cannot move forward, but we remain committed to our strong businesses and leading brands in Africa,” AkzoNobel CEO Greg Poux-Guillaume said in a statement. “As AkzoNobel’s performance rebound gathers pace, we’ll remain focused on our key priorities, including the strengthening of our balance sheet, which will be accelerated.” The two companies have agreed that no break-up fee will be involved. AkzoNobel first announced the proposed acquisition in June last year.

NEW YORK (ICIS)–US chemical volumes are poised to rebound modestly in 2024 as inventories are low and destocking is largely done across most value chains, said the chief economist of the American Chemistry Council (ACC). “We think [destocking] has pretty much played out but demand remains relatively weak. We are starting to see some green shoots of firming demand in certain areas but it’s early days,” said Martha Moore, chief economist of the ACC, at a press briefing. US chemical volumes are expected to rebound 1.5% in 2024 after falling an estimated 1.0% in 2023 with gains in all major categories – basic chemicals (+1.7%), specialties (+0.7%), agricultural chemicals (+1.0%) and consumer products (+1.7%), according to the trade group. This compares to expected global chemical volumes growth of 2.9% in 2024 after just 0.3% growth in 2023. “We expect modest growth across all segments in 2024 and further expansion in 2025. Capacity expansions in manufacturing will boost chemistry demand in the years ahead, and we also continue to have favorable energy dynamics here in the US,” said Moore. This manufacturing expansion will be driven by the big three US stimulus programs – the Inflation Reduction Act (IRA), the CHIPS and Science Act and the Infrastructure Investment and Jobs Act, she pointed out. By 2025, the economist sees US chemical volumes accelerating to 2.1%. SURGE IN MANUFACTURING CONSTRUCTION SPENDINGA bright spot is the surge in manufacturing construction spending which started in Q3 2021 and has accelerated since. This spending has rocketed 61.9% year on year to a seasonally adjusted annual rate of $199bn as of the latest September 2023 figures. “Back in 2018, 2019 we were talking about the chemical industry accounting for around half of all new manufacturing construction spending. That has since rotated to computer, electronics and electrical that’s semiconductors, batteries and electrical equipment for data warehouses, and there’s chemistry involved in all of that,” said Moore. “As this new capacity is being built, when that’s online, that will require chemistry to produce the products in those areas,” she added. US chemical exports are expected to rebound 3.1% to $170.7bn in 2024 after falling an estimated 7.5% in 2023. Likewise, US imports of chemicals are projected to jump 8.2% to $149.6bn after a 10.5% decline in 2023. CAPEX TO SLOWUS chemical industry capital spending (capex), after surging an estimated 4.3% in 2023, is projected to slow to 1.1% to around $27.5bn in 2024 before bouncing to 2.9% in 2025, according to the ACC. “We’ve got new investments in lower carbon technologies and that’s really going to propel more investment going forward,” said Moore. US AND GLOBAL ECONOMIC OUTLOOKMeanwhile, the economist expects a slowdown and potential soft landing for the US economy, with 2024 GDP growth slowing to 1.1% after expected growth of 2.3% in 2023. “We’re having a downturn [in the US] and whether that downturn turns into a recession as defined by the NBER (National Bureau of Economic Research) [is unclear]. We could achieve a soft landing – that’s a viable scenario – but a more likely scenario is that we have a small contraction in the first part of next year,” said Moore. For key chemical end-markets, US light vehicle sales are expected to be flat at 15.5m units in 2024 while housing starts are projected to decline about 3% to 1.35m. The global economy is likewise expected to slow but more modestly, with expected GDP growth of 2.3% in 2024 versus an estimated 2.7% in 2023, according to the ACC. Focus article by Joseph Chang