Pricing

HOUSTON (ICIS)–Following a better-than-expected 2024 first quarter, US compounder and formulator Avient raised its full-year guidance for adjusted earnings before interest, tax, depreciation and amortization (EBITDA) by $5 million at the low end. Sales into the defense market, along with raw material deflation, were the key earnings drivers in Q1 and Avent expects both to support earnings through 2024, CEO Ashish Khandpur and CFO Jamie Beggs told analysts during the company’s Q1 earnings call on Tuesday. New 2024 guidance Previous 2024 guidance Pro forma 2023 adjusted EBITDA $505 to $535 million $510 to $535 million $501.8 million SALES IMPROVING IN MOST END MARKETSAvient sees demand conditions “generally improving across all regions”, with improved momentum in consumer, packaging, healthcare, defense and industrial end markets, the executives said. After a 35% year-on-year increase in Q1, defense sales amid the ongoing geopolitical tensions, Avient expects those sales to continue growing through 2024, albeit not at the first quarter’s hot pace, they said. Avient’s Dyneema-brand fiber technology is used in the personal protection of soldiers and law enforcement and border control officers. While Avient’s utilization rates in defense are high, the company is able to meet forecast demand growth and expects no capacity limitations this year. However, it may add capacities in the future, depending on demand, which can be “lumpy” in that market, they said. Defense accounted for 7% of Avient’s total 2023 sales of $3.14 billion, with more than half of those sales in the US. Avient acquired the Dyneema business from DSM in 2022. Telecommunications and energy, however, are among the weaker end markets, with first-quarter sales down double-digit and weakness continuing into the second quarter. Destocking in the capital-intensive telecommunications market continued in Q1, with no meaningful rebound in that market expected until 2025, the executives said. Telecommunications accounted for 4% of Avient’s 2023 sales. BY REGION Regionally, Avient sees good momentum in the US in markets such as consumer packaging, defense, building and construction, industrial and infrastructure. “Destocking in those markets is over”, Khandpur said. With the exception of telecommunications and energy, overall demand in North America is “coming back quite well”, he said. However, persistent inflation is delaying the timing of interest rate cuts, which could weigh on sales in end markets such as building and construction, transportation and industrial, the executives said. In China, about 70% of Avient’s sales go into the local market, putting the company into a good position as that country’s economic policies transition to focus on the domestic market, the executives said. In Europe, demand in packaging and healthcare is improving, but Avient expects the region’s overall year-on-year sales growth to be soft. Consumer confidence in Europe is weak and eurozone manufacturing continues to signal contraction, they noted. Meanwhile, the stronger US dollar has become a headwind, they added. Sales by region in 2023: RAW MATERIAL DEFLATION Raw material deflation will continue to support margin expansion in the second quarter, albeit to a lesser extent than in the first quarter, the executives said. In the first quarter, Avient saw better-than-expected pricing for non hydrocarbon-based raw materials such as pigments and certain performance additives. Primary raw materials used in Avient’s manufacturing operations include polyolefin and other thermoplastic resins, titanium oxide (TiO2), inorganic and organic pigments, specialty additives and ethylene. Pricing, net of raw materials, should help drive year-on-year earnings growth in 2024, the executives said. Also, the company expects additional margin expansion due synergies and plant closures related to its acquisition of Clariant’s masterbatch business back in 2020, Beggs noted. M&A NOT A PRIORITY In the near-term, Avient will focus on organic growth and margin expansion whereas growth through mergers and acquisitions (M&A) is not a priority. While Avient is not ruling out M&A, any deals would be “small and bolt-on in nature”, in areas like healthcare, sustainable solutions or composites, with focus on Asia and Latin America, Khandpur said. “Premiums are pretty high” in M&A, he added. Thumbnail photo of Ashish Khandpur, who took over as Avient's CEO and president on 1 December 2023; photo source: Avient

07-May-2024

SINGAPORE (ICIS)–Asia's olefins brace for headwinds amid sustained weak demand in May, although some support is expected from curtailed supply in China. Lengthening supply from South Korea could continue to weigh on the market's outlook as it navigates upstream volatility amid tensions in the Middle East. Asia's olefins market to see increasing supply from South Korea in May Relatively low PDH run rates could lend support to NE Asia C3 Poor demand weighing on Asia C2 amid multiple supply options for June arrivals In this chemical podcast, ICIS editors Julia Tan and Josh Quah discuss recent market conditions with an outlook ahead in Asia.

07-May-2024

ORLANDO (ICIS)–SABIC is looking for further opportunities for growth in the Americas as part of its strategy to navigate an era of excess capacity around the world, one that has led it and other producers to shutter capacity in high-cost regions, an executive said. "We are actively looking at our growth opportunities throughout North America as well as South America," said Sami Al-Osaimi, executive vice president, polymers, SABIC. He made his comments during a presentation at this year’s NPE: The Plastics Show. Al-Osaimi said the Americas is a very key strategic market for SABIC. The company has seen good momentum in North America. "We are definitely going to really make sure that we leverage what exactly our customers require," he said. About two years ago, SABIC and ExxonMobil started operations at an integrated polyethylene (PE) and ethylene glycols (EG) complex in Corpus Christi, Texas, US, under the Gulf Coast Growth Ventures (GCGV) joint venture. The startup marks SABIC's first US-based ethylene and PE production, albeit through a joint venture. At the same time, Al-Osaimi acknowledged the challenges facing the industry. The market is contending with the consequences of a surge in new ethylene capacity that has started up in recent years. ICIS estimates that up to 20 million tonnes/year may need to shut down to keep operating rates at healthy levels. High-cost regions are bearing the brunt. Earlier in April, SABIC announced plans to shut down a cracker in Geleen, the Netherlands. ExxonMobil revealed plans to shut down its cracker in France during that same week. Al-Osaimi did not rule out further capacity rationalizations during a question-and-answer session that followed his presentation at NPE. "SABIC always is looking to its operations in Americas, globally, and how to become more efficient and effective to support our customers to really develop the right solutions," he said. "This is going to be an ongoing process." OPPORTUNITIES IN CHEM RECYCLING, E-CRACKINGSABIC is further improving chemical recycling technology to make it more effective and efficient, he said. SABIC and Plastic Energy are developing a chemical recycling plant under a joint venture in Geleen. Completion had been expected in the fourth quarter of 2023. There are still challenges with scaling up the technology, Al-Osaimi said. Still, SABIC is open to expansion, with possible sites including the US, Saudi Arabia and other regions. In addition, SABIC, BASF and Linde recently started up a demonstration unit of an electric cracker (e-cracker). As the group demonstrates the technology, it would explore expanding the site and potentially building new units, Al-Osaimi said. STRATEGY OF COLLABORATION, INNOVATIONIn prepared remarks, Al-Osaimi elaborated on how SABIC was navigating the challenges in the market by stressing its focus on innovation and collaboration with customers. The company is focusing on end markets such as advanced packaging, automotive, transportation, building and construction, consumer goods, electrical components and health and hygiene, he said. Electric vehicles (EVs) have material challenges, that present opportunities for SABIC. The company is developing polymers to prevent thermal runaway – part of its larger BLUEHERO initiative, Al-Osaimi said. Companies that build automobiles powered by internal combustion engines (ICEs) still want to lower their weight to improve their fuel efficiency and reduce their greenhouse gas emissions, he said. That is creating demand for lighter weigh materials. Produced by Plastics Industry Association (PLASTICS), NPE: The Plastics Show takes place 6-10 May in Orlando, Florida. Focus article by Al Greenwood Thumbnail image shows polyethylene (PE), which is used in plastics bags. (Photo by Elaine Thompson/AP/Shutterstock)

07-May-2024

SINGAPORE (ICIS)–Saudi Aramco's net income fell by 14.4% year on year to Saudi riyal (SR) 102.3 billion in the first quarter amid lower crude oil volumes and weakening downstream margins, the energy giant said on Tuesday. in SR billions Q1 2024 Q1 2023 % Change Sales 402.04 417.46 -3.7 Operational Profit 202.05 222.18 -9.1 Net profit 102.27 119.54 -14.4 Early this year, Saudi Arabia’s government ordered Aramco to halt its oil expansion plan and to target a maximum sustained production capacity of 12m barrels/day, 1m barrels/day below the target announced in 2020. In the first quarter, Aramco's downstream income before interest, income taxes and zakat (annual Islamic tax) slumped by 64% year on year to SR4.62 billion. The drop in downstream earnings reflects weakening refining and chemicals margins, partially offset by inventory valuation movement, it said. The drop in group earnings was partially offset by lower production royalties, an increase in crude oil prices compared to the same period last year and lower income taxes and zakat. Despite having a capacity of 12 million barrels/day, Saudi Arabia currently produces about 9 million barrels/day as part of production cuts initiated by OPEC and its allies in October 2022 and further voluntary cuts by Saudi Arabia and other OPEC+ members in April 2023, all designed to stabilize oil prices. Following an OPEC+ meeting in June 2023, Saudi Arabia – the world's top crude exporter – announced a further oil production cut of 1 million barrels/day. “Looking ahead, I expect our portfolio to continue to evolve as we aim to contribute to an energy transition that offers solutions to climate challenges, but at the same time recognizes the need for affordable, reliable, and flexible energy supplies," added Amin Nasser, Aramco's President and CEO. Aramco's chemicals arm SABIC and China's Fujian Energy and Petrochemical Group Co held a groundbreaking ceremony to mark the start of construction at the SABIC Fujian Petrochemical Complex in China's Fujian province during the first quarter. The project will include a mixed-feed steam cracker with up to 1.8m tonne/year ethylene (C2) capacity and various downstream units producing ethylene glycols (EG), polyethylene (PE), polypropylene (PP) and polycarbonate (PC), among other products. Thumbnail photo : One of Aramco's US offices (Source: Saudi Aramco)

07-May-2024

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. No matter which petrochemical or polymer you examine, the story is similar. To illustrate this point, let’s today look at polyvinyl chloride (PVC). As China’s economy boomed, largely thanks to the growth in its exports, so did its petrochemicals demand, increasing the gap between China’s consumption and that of the much more populous Developing World ex-China region. China’s 2008-2009 US$586bn economic stimulus package – which largely went into housing and infrastructure – seems to have had a much bigger effect on the country’s PVC demand than in some other products. Up until the Evergrande turning point in September 2021, China’s investment in housing and infrastructure continued at apace. It appears as if stimulus greatly increased the importance of Chinese PVC demand as a driver of global PVC demand: Between 1992 and 2008, China’s share of global demand averaged 17% per year; in 2009-2024, the ICIS Supply & Demand Database expects China’s share to reach 40%. China’s demand growth averaged 10% per annum between 1992 and 2023. But growth is forecast to decline to 3% per year in 2024-2030. This decline is in line with what ICIS expects in other products. Between 1992 (the start of what I see as the Petrochemicals Supercycle) and 2023, global PVC capacity exceeding demand was estimated by ICIS as averaging 8m tonnes a year. As with many other products, ICIS forecasts a big increase in global PVC capacity exceeding demand in 2024 -2030. During this period, capacity exceeding demand is expected to average 15m tonnes a year. In another parallel with other products, China’s self-sufficiency in PVC has reached the point where it has swung from being a major net importer to being a net exporter. Trade tensions between China and the West have been building since Mike Pence, the then US Vice President, made a landmark speech in October 2018. Could this translate to more protectionism in global PVC markets? It is a scenario worth considering as China seeks to increase its exports, challenging the US which accounts for the lion’s share of export trade. During the Petrochemicals Supercycle, the world was becoming ever-more globalised rather than what we are seeing today – the reverse. China was the tide that lifted all ships. Almost every year, its growth surprised on the upside, guaranteeing success for even the least-competitive plants. We didn't we have to worry about big increases in China’s self-sufficiency in PVC, polyethylene (PE) and polypropylene (PP). Now everything has changed, making big picture analysis of China’s economic problems and the global geopolitical landscape crucial. This kind of analysis has become as important if not more important than studying cost-per-tonne economics. 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.

07-May-2024

HOUSTON (ICIS)–US corn plantings are now 36% completed with soybeans at 25%, according to the latest US Department of Agriculture (USDA) weekly crop progress report. The progress on crop sowings comes despite many states experiencing rough weather conditions with more forecasted to come this week, especially within the central US. The current pace of the corn crop is behind the 42% rate achieved in 2023 and the five-year average of 39% completed. North Carolina is now the leading state with 86% of the crop done, followed by Texas at 76%. There is now 12% of the crop emerged, which is ahead of the 10% from 2023 and the five-year average of 9%. Soybeans are now at 25% completed, which trails the 30% level from last year, but it is above the five-year average of 21%. The top state for plantings is now Mississippi with 67% of their crop completed, with Arkansas close behind at 65%. There is 9% of the crop emerged, which is ahead of both the 7% from 2023 and the five-year average of 4%. For the other key crops, the USDA said cotton plantings have reached 24% completed, with sorghum at 23% and spring wheat now at 47%.

06-May-2024

ORLANDO (ICIS)–Headwinds for the plastics industry including higher cost of capital, weaker household spending momentum and capacity adjustments will likely persist through 2024, according to a presentation by Perc Pineda, Chief Economist at PLASTICS, at this year’s NPE show. The US Consumer Price Index (CPI) was up 3.5% year on year in March, with economists expecting inflation to average 3.1% this year, which is above the US Federal Reserve’s target of 2%. As a result, interest rate futures are now moving towards fewer cuts. Elevated interest rates continue to negatively impact the petrochemicals industry, including US polyethylene terephthalate (PET), as high interest rates continue to result in weaker household spending. Additionally, the US PET market continues to experience capacity adjustments. In March of 2023, Alpek Polyester announced it would be indefinitely shutting down its Cooper River, South Carolina, PET site. A few months later in September of 2023 the integrated polyester plant being built by Alpek, Indorama and Far Eastern New Century (FENC), under the joint venture Corpus Christi Polymers, announced it was pausing construction at its Corpus Christi, Texas, site because of inflation as well as high construction and labor costs. Globally, Indorama announced in March 2024 that it is eyeing multiple sites and it is aiming to shut down. Without interest rate cuts, headwinds in the US and global PET market will likely continue through 2024, despite an optimistic demand outlook for 2024 compared to 2023. Thumbnail image shows multicolored PET preforms for plastic bottles Produced by Plastics Industry Association (PLASTICS), NPE: The Plastics Show takes place 6-10 May in Orlando, Florida.

06-May-2024

HOUSTON (ICIS)–Heavy rainfall that caused flooding from rising rivers over the weekend was mainly to the north and east of the major petrochemical plants closer to the Gulf Coast, and has had little to no impact on operations. Rainfall totals over the past 48 hours were around 2 inches at the most, according to data from the Harris County Flood Control District. But the region was already waterlogged as rainfall totals for the previous seven days were as high as 13 inches, meaning the additional weekend rains had no avenue to drain and collected in low-lying areas. There are no significant chances of more rain in the near term, according to the latest forecast from the National Weather Service. The flooding did not affect power generation or delivery in the region. According to poweroutage.us, there were almost 5,000 customers in Texas without power on Monday morning, with none in Harris county.

06-May-2024

HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 3 May. Besieged by imports, Brazil’s chemicals put hopes on hefty import tariffs hike Brazilian chemicals producers are lobbying hard for an increase in import tariffs for key polymers and petrochemicals from 12.6% to 20%, and higher in cases, hoping the hike could slow down the influx of cheap imports, which have put them against the wall. US manufacturing falls back into contraction in April, prices rise Economic activity in US manufacturing contracted in April after expanding in March, according to the Institute of Supply Management’s (ISM) latest purchasing managers’ index (PMI) survey released on Wednesday. SABIC Q1 net income falls 62%, warns of industry overcapacity SABIC's net income fell by 62% year on year to Saudi Riyal (SR) 250 million in the first quarter amid a drop in prices and sales volumes, the chemicals major said late on Wednesday. US TiO2 producer Kronos to shut down production via sulfate process in Varennes, Canada Kronos Worldwide, a titanium dioxide (TiO2) producer headquartered in Dallas, Texas, US is planning to permanently shut down sulfate-based production at its location in Varennes, Quebec, Canada. US Huntsman assets in Europe spare from energy hit, but EU policies erratic – CEO Huntsman’s assets in Europe are not energy intensive and have been spared from the energy crisis, but more broadly, the 27-country EU is still lacking a comprehensive policy to address the issue, the CEO at US chemicals major Huntsman said on Friday.

06-May-2024

SAO PAULO (ICIS)–Here are some of the stories from ICIS Latin America for the week ended on 3 May. NEWS Besieged by imports, Brazil’s chemicals put hopes on hefty import tariffs hike Brazilian chemicals producers are lobbying hard for an increase in import tariffs for key polymers and petrochemicals from 12.6% to 20%, and higher in cases, hoping the hike could slow down the influx of cheap imports, which have put them against the wall. Mexico’s manufacturing slows on weaker exports, Chinese competition Mexico’s manufacturing sectors slowed down slightly in April on the back of tough competition, particularly from China, and weak demand from abroad, which caused a fall in output, analysts at S&P Global said on Thursday. Brazil’s manufacturing at nearly three-year high on booming demand Brazil's manufacturing sectors continued booming in April on the back of a sharp increase in new business intakes, which led to higher output and job creation, analysts at S&P Global said on Thursday. Mexico increases PET import tariff again in attempt to shield economy In the last week of April, Mexican President Andres Manuel Lopez Obrador introduced an amended version of the Tariff within the General Import and Export Duties Law to enforce import duties, or temporary duties, on products falling under 504 tariff items, including polyethylene terephthalate (PET) resin. These new duties will vary from 5% to 50%. Brazil's Braskem Q1 resin sales fall 5% yearly, on prioritizing sales with higher added value Braskem resin sales in its domestic Brazilian market dropped by 5% in Q1, year on year, on the back of prioritizing sales with higher added value in the period, the Brazilian petrochemicals major said on Friday in its quarterly production and sales report. INSIGHT: Six decades on, Brazil’s Unigel founder fights the ultimate battle The founder of Unigel, aged 87, is actively fighting the Brazilian chemicals and fertilizers producer’s most decisive battle, one for its survival, as it tries to restructure its debts, one step away from bankruptcy. PRICING Lat Am PE domestic prices fall in Argentina, Brazil on cheaper imports, soft demand Domestic polyethylene (PE) prices fell in Argentina and Brazil due to competition with cheaper imports and soft demand. In other Latin American countries, prices were unchanged. LatAm PP domestic prices fall in Argentina, Colombia, Mexico on lower feedstock costs, soft demand Domestic polypropylene (PP) prices fell in Argentina, Colombia and Mexico on the back of lower feedstock costs and soft demand.

06-May-2024