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MADRID (ICIS)–OPEC is confident a stronger US dollar resulting from interest rates hikes will not dent dollar-denominated crude demand as the global economy recovers from the pandemic, the crude producing cartel said on Tuesday. To contain rocketing inflation, the US’ central bank, the Federal Reserve (Fed), may increase interest rates for borrowing this year, which would in turn increase the value of the dollar. Most of the world’s crude oil trading is done in that currency, so importing countries would find their spending in the commodity rising, putting pressure on corporate and household finances. But OPEC said that, because the interest rates hikes are likely to be implemented in the second quarter, they would coincide with the run-up to the northern hemisphere’s driving season. That is why the crude cartel expects that any crude demand decrease due to a higher US dollar is to be offset by an increase in demand associated with the driving season. Earlier on Tuesday, crude oil prices reached a seven-year high in European afternoon trading after Yemen-based Houthi rebels carried a drone attack against key Middle East producer the UAE. “Historically, a strong dollar would cause non-US-dollar denominated net-importing economies to require more of their local currency to import crude oil. However, in the past, a gradually strengthening US dollar had a limiting effect on oil price,” said OPEC in its monthly report. “In summary, monetary actions are not expected to hinder underlying global economic growth momentum, but rather serve to recalibrate otherwise overheating economies.” DEMAND IN 2022 TO REACH PRE-PANDEMIC LEVELSOPEC confirmed in January’s crude oil report its forecasts for global demand in 2022, when it would surpass pre-pandemic levels. Demand in 2022 is expected to stand at 100.8m bbl/day, an increase of 4.2m bbl/day compared with 2021. In the groups of the most industrialised nations OECD, oil demand is forecast to grow in 2022 by 1.8m bbl/day, compared with 2021. In non-OECD countries, oil demand is projected to increase by 2.3m bbl/day. “While the impact of the Omicron variant is projected to be mild and short-lived, uncertainties remain regarding new variants and renewed mobility restrictions, amid an otherwise steady global economic recovery,” said OPEC. Some of those uncertainties may come, said OPEC, from continuing supply chain bottlenecks and ongoing trade disputes, which could impact industrial and transportation fuel requirements. “In terms of fuels, light distillates, mainly for the petrochemical industry, are expected to continue to drive oil demand, while gasoline and diesel, particularly for road transportation, are forecast to continue to recover and reach pre-pandemic levels during the year,” it said. “With regard to jet fuel, while the private travel sector has seen some considerable gains, business travel continues to lag and may not see a full recovery in 2022.”

HOUSTON (ICIS)–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. Full-year adjusted earnings before interest and tax (EBIT) are now expected $30m below the midpoint of the October guidance range of $645m-665m. Full-year sales are expected to have grown by 18.2%, compared with guidance of about 19% growth. Limitations in availability of certain raw materials resulted in substantial unfulfilled orders during Q4, it added. OUTLOOK However, given strong underlying demand conditions across Axalta’s end-markets, the company believes 2022 should be a year of recovery in volume and profit terms, it said. The majority of the recovery would be in H2, it said. “The company also remains focused on addressing persistent inflationary pressures with price increases,” it added. Axalta expects to offset 2021 inflation impacts during H1 2022. The company expects to see continued inflation during 2022 from most cost categories, which will require incremental price actions. However, the inflationary cost headwinds are expected to decrease sequentially during 2022 following Q1, when overall cost inflation is expected to remain fairly consistent with Q4 2021, it said. Axalta uses thousands of different raw materials, which fall into seven broad categories: liquid resins, powder resins, pigments, solvents, monomers, isocyanates and additives. On average, the company’s total raw material spend represents between 40% and 50% of cost of sales, according to its 2020 annual report. Axalta expects to announce its Q4 and full-year 2021 results on 31 January. Thumbnail shows automobiles, which represent a significant end market for Axalta. Photo by Ng Han Guan/AP/REX/Shutterstock

BARCELONA (ICIS)–Growth in China’s spending on chemicals research and innovation (R&I) has far outpaced Europe and the US, leaving chemical companies in the west facing a formidable challenge in the race to develop low carbon technologies. China R&I spend tripled from $4.3bn to $14bn between 2010-2020 Europe, US spend rose modestly over same period Europe, US chemicals may need to boost R&I spending to compete on low carbon technology China likely to boost R&I spending further under Common Prosperity philosophy Chinese property boom turbo-charged the economy Pressure to decarbonise, cut plastic waste in China China and global polypropylene (PP) markets may suffer as demand growth slows PP projects may have to be cancelled around the world In this Think Tank podcast, Will Beacham interviews ICIS Insight Editor Nigel Davis, ICIS Senior Consultant Asia John Richardson and Paul Hodges, chairman of New Normal Consulting. Editor’s note: This podcast is an opinion piece. The views expressed are those of the presenter and interviewees, and do not necessarily represent those of ICIS. ICIS is organising regular updates to help the industry understand current market trends. Register here . Read the latest issue of ICIS Chemical Business. Read Paul Hodges and John Richardson’s ICIS blogs.

MADRID (ICIS)–Spain’s draft legislation on the circular economy proposes that material produced by chemical recycling will not be subject to its €450/tonne tax on single-use plastic packaging. The proposed regulation is aiming to implement from 1 January 2023 a €0.45/kg tax on single-use plastic packaging which would affect only the non-recycled content included in a plastic. Moreover, the plastic’s sector has successfully lobbied for the tax’s burden to be shared across the value chain; in a previous draft, its costs would have had to be paid by producers or converters. The plastics industry in the 47m-strong country thus managed to score a goal with legislators including chemically recycled content as recycled, although the plastic industry’s strong lobbying against the plastic tax did not stop its approval. The Spanish upper house where the regions are represented, the Senate, is now considering the draft legislation but major changes are not expected before it returns to Congress – the lower chamber – for final approval. CHEMICAL RECYCLING: INChemical recycling is an umbrella term for a variety of methods that use different production routes to create new material from waste. Common chemical recycling methods include pyrolysis, gasification, glycolysis, hydrolysis, methanolysis, and enzymatic hydrolysis. Plastics producers across the EU are lobbying for the 27-country bloc’s legislation to grant chemical recycling the same legal status as mechanical recycling after technological improvements have made processes commercially feasible. The European Commission – the EU’s executive body – is yet to take a decision on this front. In an interview with ICIS in June, the president of Spain’s chemicals trade group Feique said the country could only meet its circular economy targets if chemical recycling was fecognised as one more technology to recycle materials. That way recycling rates could be increased from the current 45% to 80-90% by 2050, added Carles Navarro. The draft legislation (read it here, in Spanish) establishes that “the amount of recycled plastic, be it from chemical or mechanical recycling … will have to be certified by an accredited entity” in line with the EU’s certifications. The recognition by Spanish legislators that chemical recycling can play a role in the circular economy may come from their ambitious targets for plastics-use reduction. For single-use plastics, the draft legislation establishes a reduction of 60% by 2026, compared with 2022, and of 80% by 2030. ‘CHANGED PERCEPTION’ ON TAXThe director general at Spain’s chemicals trade group Feique celebrated the win on the chemical recycling front legal status and toned down the pessimistic forecasts by the Spanish plastics sector about the plastic tax. In a document published in November (read it here, in Spanish), the sector-specific trade group EsPlasticos argued that as many as 95% of plastics producers could go bankrupt if the tax was implemented, causing thousands of job losses. EsPlasticos’ biggest fear was, at the time, that the tax would fall entirely on plastics producers; the current draft legislation does establish how the costs would be shared across the value chain. Feique’s director general, Juan Labat, said “the perception” about the tax had now changed and its impact on the industry would be diluted along the value chain, so the plastics industry would avoid a large impact on its profitability. Moreover, the draft legislation does not establish a minimum percentage of recycled content necessary in the final product to be exempt from the tax. The legislators established that the company – producer or converters, mostly – issuing a bill for plastic materials will have to state in the bill the “amount of non-recycled plastic” contained in the final product. “In those cases where the bill does not state the amount of non-recycled plastic [the authorities] will presume, unless proven otherwise, that the material has been manufactured entirely with recycled plastic,” says the draft legislation. Asked whether this complicated system could lead to scams, Feique’s Labat said the EU-type certifications in place for the plastics industry would guarantee that does not happen. He was also pleased with legislators’ change of course in who would have to take on the hit from the plastic packaging tax. “Producers or converters will pay for the tax, but they will be allowed to pass on the costs to the packaging company when billing them. Packagers will then pass on the cost to the distributor, who at the same time will pass it on to the retail outlets who would pass it onto the end customers,” said Labat. “This is why the perception about the tax has now changed. In the previous draft legislation, producers/converters were obliged to pay for the tax but not able to pass on the costs – the burden will now be now shared across the value chain. Probably large packagers like food companies will be the ones hit hardest.” As for EsPlasticos’ alarming forecasts for the Spanish plastics industry when the tax comes into force, they have now been toned down. In a written response to ICIS, a spokesperson said the cost-sharing clauses under the current draft legislation could make the forecasts “somehow less negative” but maintained its negative view about the tax overall. “This new tax still represents a burden for a strategic sector of the Spanish economy,” the spokesperson concluded. Front page picture source: Feique Insight article by Jonathan Lopez Additional reporting by Mark Victory 

SINGAPORE (ICIS)–Watch ICIS editor Samuel Wong discuss latest developments in the Asian paraxylene (PX) market. Prices firmer on upstream rebound Demand recovery likely post-Lunar New Year Players cautious amid continued rise in COVID-19 infections Visit the ICIS Coronavirus topic page for analysis of the impact on chemical markets and links to latest news.

SINGAPORE (ICIS)–Benchmark crude prices rose more than $1/bbl on Tuesday following an attack on a Abu Dhabi National Oil Company (ADNOC) fuel depot in the UAE, fuelling concerns of an escalation of tensions in the Middle East which could impact supply conditions. Product Latest Previous Change Brent March 87.20 86.48 0.72 WTI February 84.87 83.82 1.05 At 03:49 GMT on Tuesday, Brent crude was 72 cents higher at $87.20/bbl. Brent futures earlier reached a session high of $87.55/bbl, up $1.07/bbl, their highest since 29 October 2014. US WTI rose by $1.05/bbl to $84.87/bbl after earlier reaching a session high of $85.19/bbl, a $1.37/bbl increase from the previous settlement price of $83.82 on 14 January. Trade was subdued in the US due to the Martin Luther King holiday. UAE state-owned oil firm ADNOC in a Twitter post on Tuesday said that it has activated business continuity plans to ensure continued supply of products to its local and international customers following an incident on its Mussafah fuel depot. The company said in an earlier statement that the incident at the fuel depot occurred at around 10:00 hours (06:00 GMT) on 17 January. The incident resulted in the outbreak of a fire and three workers were killed as a result, it said. “We are working closely with the relevant authorities to determine the exact cause and a detailed investigation has commenced,” ADNOC said. Yemen’s Houthi rebels have claimed responsibility for the attack, which involved ballistic missiles and deployed armed drones, according to local media reports. The attack also resulted in a fire at Abu Dhabi’s main international airport, they said. “We condemn the Houthi militia’s targeting of civilian areas and facilities on UAE soil today,” the UAE’s Ministry of Foreign Affairs and International Cooperation said in a statement. The UAE reserves the right to respond to “terrorist attacks and criminal escalation”, the ministry said. The Saudi Arabia-led coalition on Monday said it has launched air strikes aimed at Yemen’s Houti-held capital Sanaa following the attack in Abu Dhabi. “In response to the threat and [out of] military necessity, air strikes have begun in Sanaa,” the official Saudi Press Agency said in a post on Twitter late on Monday. News of the attack in Abu Dhabi comes at a time when there is already plenty of concern in the oil market over the potential impact of an escalation in tensions between Russia and Ukraine, said Dutch banking and financial services firm ING in a note. “These growing risks, combined with worries over OPEC spare capacity, have meant that sentiment in the oil market has remained bullish,” it said. “Technically, the oil market is well in overbought territory, whilst fundamentally we also believe that the market is being too complacent about demand risks around China and its zero-Covid policy,” ING added. Focus article by Nurluqman Suratman

SINGAPORE (ICIS)–The Abu Dhabi National Oil Company has activated business continuity plans to ensure continued supply of products to its local and international customers following an incident on its Mussafah fuel depot, the UAE state-owned oil firm said in a Twitter post on Tuesday. The company in an earlier statement that the incident at the fuel depot occurred at around 10:000 hours (06:00 GMT) on 17 January. The incident resulted in the outbreak of a fire and three workers were killed as a result, it said. “We are working closely with the relevant authorities to determine the exact cause and a detailed investigation has commenced,” ADNOC said. Yemen’s Houthi rebels have claimed responsibility for the attack, which involved ballistic missiles and deployed armed drones, according to local media reports. The attack also resulted in a fire at Abu Dhabi’s main international airport, they said. “We condemn the Houthi militia’s targeting of civilian areas and facilities on UAE soil today,” the UAE’s Ministry of Foreign Affairs and International Cooperation said in a statement. The UAE reserves the right to respond to these “terrorist attacks and criminal escalation”, the ministry said. News of the attack comes at a time when there is already plenty of concern in the oil market over the potential impact of an escalation in tensions between Russia and Ukraine, said Dutch banking and financial services firm ING in a note. “These growing risks, combined with worries over OPEC spare capacity, have meant that sentiment in the oil market has remained bullish,” it said. “Technically, the oil market is well in overbought territory, whilst fundamentally we also believe that the market is being too complacent about demand risks around China and its zero-Covid policy,” ING added.

LONDON (ICIS)–Eastman is to invest up to $1bn in a hard-to-recycle polyethylene terephthalate (PET) waste methanolysis-based chemical recycling facility in France, the US chemicals major said on Monday. The facility would use Eastman’s polyester renewal technology to chemically recycle up to 160,000 tonnes/year of hard-to-recycle PET waste via a methanolysis depolymerisation unit. The total output capacity of the facility was not stated. Eastman’s polyester renewal technology uses PET waste, such as soft drink bottles, carpet and polyester-based clothing, to convert back into their basic monomers, using either glycolysis or methanolysis. Alongside the depolymerisation unit, the multi-phase project includes units that would prepare mixed plastic waste for processing and polymer lines to create a variety of first-quality materials for specialty, packaging, and textile applications. Eastman also plans to establish an innovation centre for molecular recycling – a term used to describe chemical recycling – that would enable France to sustain a leadership role in the circular economy. The plant and innovation centre is expected to be operational by 2025. Eastman CEO Mark Costa said agreements related to securing the plastic waste that will be raw material supply, securing government incentives, and a decision on the location of the site will be made in the coming months. LVMH Beauty, The Estée Lauder Companies, Clarins, Procter & Gamble, L’Oréal and Danone are signing letters of intent for multiyear supply agreements from this facility. Front page picture: Eastman’s CEO meeting French President Emmanuel Macron in Paris Source: Michel Euler/POOL/EPA-EFE/Shutterstock Additional reporting by Mark Victory ICIS has launched a new mixed plastic waste pricing service covering European prices for mixed-polyolefins waste bales, reject refuse-derived fuel (RDF) bales and reject materials recovery facility (MRF) bales. Along with this, the new service covers emerging trends in the chemical and mechanical recycling markets, as well as the burn-for-energy sector. To subscribe to the new pricing service, or for further information, please contact clientsuccess@icis.com

MOSCOW (MRC)–Russia’s production of polyvinyl chloride (PVC) stood at slightly over 1m tonnes in 2021, up 3% year on year, according to a MRC’s ScanPlast report. Among the large producers, RusVinyl’s PVC output stood at 349,400 tonnes in 2021, up 4.8% year on year, while SayanskKhimPlast produced 309,300 tonnes, up 3.5% Baskhir Soda Company produced 268,200 tonnes of PVC in 2021, flat year on year, while Kaustik’s output stood at 80,300 tonnes, up by 5% year on year. MRC, a partner of ICIS, produces polymers news and pricing reports from Russia, Ukraine, Belarus, Uzbekistan and Kazakhstan.

MOSCOW (MRC)–European polyvinyl chloride (PVC) producers have rolled over December export prices for January shipments to the CIS countries due to stable ethylene, according to the ICIS-MRC Price report. The January contract price of ethylene was agreed at the previous month’s level, which pointed to steadiness of the net cost of PVC production. Strong demand for resin also remained in Europe, including from some export markets, and these conditions maintained high prices. Most producers rolled over December export PVC prices for January shipments, which virtually corresponded to the level of November. There was a shortage of PVC in Europe during the whole of 2021 because of scheduled and unscheduled maintenance shutdowns and lower imports. The supply of PVC has begun to gradually increase in the market for the past two months but it is far from being saturated. In addition, interruptions in the work of some producers remain. In January, European producers were in no hurry to adjust their export prices for the CIS countries and, in fact, maintained them in the range of €1,650-1,710/tonne FCA (free carrier), which mostly corresponded to the levels of November and December. At the same time, it should be noted that supply of PVC for shipments from the US has grown significantly since December. The key suppliers announced their offer prices for February shipments at $1,700/tonne CFR (cost and freight) and lower. (€1 = Rb87.12, $1 = Rb76.31) MRC, a partner of ICIS, produces polymers news and pricing reports from Russia, Ukraine, Belarus, Uzbekistan and Kazakhstan.