News and analysis

SAO PAULO (ICIS)–Amid Europe’s industrial crisis, green shots have started to appear in eastern countries, giving hopes the downturn in the region has bottomed out, the CEO at US paints and coatings major PPG said on Friday. Tim Knavish added after PPG announced it was seeking to divest its US and Canada architectural operations, it has recorded more interest from potential buyers than expected, but “no numbers have hit our desk yet". Late on Thursday, PPG said its sales fell in the first quarter as European demand continued to be in the doldrums, but its earnings surged as input costs had fallen considerably. The company expects an overall improvement in industrial production globally in the second half of 2024. “We just have to get through the second quarter,” the CEO said, speaking to reporters and chemical equity analysts on Friday. As a paints and coatings producer, PPG's operations are petrochemicals-intensive. Among many others, one of its key raw materials is titanium dioxide (TiO2). COMING OUT OF THE DOWNTURNWhile Europe’s industrial downturn has been the steepest as the region took the largest hit from sharply higher natural gas prices after the Russian invasion of Ukraine, the US performance has been lacklustre. Amid overall economic growth, manufacturing has been the sick man of the mix for many months. That may have started to turn in March, with official and private bodies’ statistics showing growth in US manufacturing at last, and manufacturers optimistic for the months ahead. “We expect our sales volumes to continue recovering for the remainder of 2024…. We are only 19 days into the month, that’s only a sixth of the second quarter, but we are comfortable with the order book and shipments so far this quarter,” said Knavish. “We have been speaking to our key end-users in the past weeks and they are all saying the same thing about Q1 and Q2, but we are all expecting a return to more normal growth rates in H2 – we just have to get through Q2.” In Europe, however, some key markets such as France and the Nordics have yet to start any meaningful recovery, with sales there slower than the company was expecting, the CEO said. Despite this, in the eastern economies – with more emerging markets characteristics than the European western economies – there has been a notable improvement. “We are seeing green shoots in the east, where we have a strong position, so that gives optimism. We are also seeing that the deco [decorating] segment in those hard-hit countries [in Europe] is also bouncing back from the bottom, so we don’t expect it to get worse,” said Knavish. “The recoveries in the east, they are not the largest individually but when you add them together, they are an important part of our portfolio, countries such as Poland, Romania, Hungary or Czechia: we do see some green shots there.” However, he added that they were not “naive enough” to believe there will be a V shape recovery in Europe. ARCHITECTURAL DIVESTMENTAt the end of February, PPG announced it was seeking alternatives for its US and Canada architectural coatings business, which has been a drag on profits and sales volumes. The company said at the time it would study whether the division could be divested, be set as a standalone entity, or be part of a joint venture. The CEO did not give much away on Friday, saying it was early on, but the company was positively surprised with the level of interest, adding there had been “minimal if any” disruption to the daily operations of the division since the announcement. “There is a lot of chatter [about this]. But we are engaging key customers, employees, and engaging our owners. We expected strong interest, because of the strength of the brands and assets … The interest has been even higher than what we expected. We feel good right now,” said Knavish. “Until the numbers start coming in, and we can look at what is best for shareholder value creation, it is difficult to say [what the likely outcome will be]. We’ll have a much better view in another quarter or so.” INDIA TAKING OFFKnavish ended with an interesting reflection about India. Indians are about to start what is famously the largest democratic process in the world, which will end in June. Current Prime Minister Narendra Modi is widely expected to win a resounding third term in the general election, despite many analysts warning about increasing tensions between Hindus and Muslims, who are India’s largest minority, with 175 million people. But the key to Modi’s expected victory may well be all about the economy. “I have been going to India for 25 years. There has always been the talk of higher civil engineering works, higher industrial production [but it never seemed to come to fruition],” said the CEO. “Now, all that is happening, and the development is very noticeable for someone who has been going there regularly.” Additional reporting by Deniz Koray

19-Apr-2024

LONDON (ICIS)–Senior editor for recycling Matt Tudball discusses the latest developments in the European recycled polyethylene terephthalate (R-PET) market, including: Food-grade pellet (FGP) prices edge up at low end May demand, price expectations unclear Growing conversations about impact of Single Use Plastics Directive

19-Apr-2024

LONDON (ICIS)–Europe stock markets shifted onto bearish footing in morning trading on Friday in the wake of explosions in Iran that escalated fears of ever-higher tensions in the Middle East. Oil prices settled after the initial shock. Explosions in Iran overnight sent crude pricing surging more than $3/barrel during the Asia trading window. Iran state media reported explosions near air bases close to the city of Isfahan, which also operates nuclear facilities. Watchdog the International Atomic Energy Agency (IAEA) stated that there has been no damage to any nuclear facility, but urged caution. “IAEA can confirm that there is no damage to Iran’s nuclear sites. Director General  Rafael Mariano Grossi continues to call for extreme restraint from everybody and reiterates that nuclear facilities should never be a target in military conflicts,” the agency said in a statement. Reports have also emerged in the media of explosions in Iraq and Syria. Speaking at a G7 briefing in Capri, Italy, this morning, US Secretary of State Anthony Blinken declined to comment on the developments beyond disavowing US involvement. “I’m not going to speak to that, except to say that the US has not been involved in any offensive operations,” he said. No parties have officially taken responsibility for the blasts, but the incident is the latest in a volatile week in the Middle East, which began in the wake of Iran’s drone strikes in Israel on 13 April, which the Israel Defence Force (IDF) confirmed had struck the Nevatim air base. Crude oil pricing has whipsawed in the face of the market unrest, breaching the psychological $90/barrel mark before receding, before surging close to that watermark again when news of the blasts in Iran broke. With no reprisals currently threatened, oil futures pricing quickly receded, dropping from $89.42/barrel for Brent at 3:17 BST to well under $87 in midday trading. A build in crude stocks also weighed on sentiment, while diminishing expectations for imminent central bank rate cuts in the face of stubborn inflation has also slowed the pulse of the global economy. Crude demand growth has been subdued this year but substantial downward shifts to supply could substantially tighten conditions, according to crude analysts at ING. "If these reports [of explosions] turn out to be true, fears over further escalation will only grow, as well as concerns that we are potentially moving closer towards a situation where oil supply risks lead to actual supply disruptions," the bank said in a note on Friday morning. European public markets were also subdued, with Germany’s CAC 40 and the UK’s FTSE 100 indices trading down 0.65% and 0.45% respectively as of 13:30 GMT. Europe chemicals stocks also weakened in early trading at a more modest level relative to general markets. The STOXX 600 chemicals index clumped 0.15% compared to Thursday’s close, with shares in seven of the 30 component companies down at least 1-2%. The weakest performer on Friday so far was Solvay, which saw shares shed 3.39% of their value as of 13:17 BST. Thumbnail photo: The city of Isfahan, Iran. Source: Morteza Nikoubazl/NurPhoto/Shutterstock

19-Apr-2024

DUBAI (ICIS)–Importers in the Middle East are being hit by surging costs of transporting goods by land through Saudi Arabia from the Jebel Ali port in the UAE a shipping crisis in the Red Sea to the west of the region. Increased demand meets truck shortage Polymer market activity slow to pick up after Eid holidays Logistics woes may spill into Strait of Hormuz as tensions escalate Buyers in Jordan, Syria and Israel have been relying more on this route to take cargoes coming in from elsewhere in the world. Most shipping companies avoid the Red Sea fearing attacks on commercial vessels by Yemen’s Houthi militants since late last year following the outbreak of the Israel-Hamas war. GCC suppliers are the main exporters of PP and PE to the East Mediterranean region and have been selling most of the material through truck via Saudi Arabia, with limited quantities sold via the CFR (cost & freight) Aqba route. The Red Sea, which has the Suez Canal in the north, offers the shortest route between Asia and Europe and shipping access to the East Mediterranean markets. From the Jebel Ali port in Dubai to Jordan, land freight has more than doubled in recent months, a Jordanian trader said. ”We’ve seen jumps from $60-70/tonne [trucking] cost from Jebel Ali, to Jordan, via Saudi Arabia, to … as high as $150/tonne when ordering non-prime material for both PP and PE  from a major UAE-based supplier,” the trader said. The Middle East observed the Muslim fasting month of Ramadan from 10 March, during which working hours were reduced, culminating with the Eid ul-Fitr holiday during the second week of April. “Now that we are back from Eid, the expectations are towards some decreases in the [land freight] costs,” the trader said. In March, the spike in freight cost was due shortage of trucks following a sharp spike in demand to transport essential goods by land for Israel from Jebel Ali via Saudi Arabia. This shortage was exacerbated by Saudi Arabia’s existing ban on trucks older than 20 years from transiting through its territories, which came into effect in 2023. Trucking demand for polymer cargoes from Oman and the UAE to Egypt via Saudi Arabia also increased, causing a sharp increase in freight cost. “The cost of [transporting] polymers by truck to Egypt was around $80-100/tonne before March, but it increased to $120-140/tonne ahead of Ramadan Season,” a regional trader said. Saudi Arabia’s own cost of transporting polymer cargoes, however, was not affected, market players said, despite a lot of trucks mobilized since the beginning of the year to transport material inland from plants located on the west coast to ports situated on the east coast, so be able to ship them to customers in Asia. Overall polymer market activity has yet to pick up as the Gulf Cooperation Council (GCC), East Mediterranean, and North African markets are just returning from the Eid holiday. Concerns are now shifting toward repercussions of a potential full-on war between Iran and Israel, which could further impact logistics in the region, specifically in the Strait of Hormuz, which could cause oil and feedstock prices to soar. Explosions in Iran, Syria and Iraq were reported early on Friday, causing oil prices to surge by more than $3/barrel in early trade, with Brent crude breaching $90/barrel before easing down. According to media reports, Israel was behind the explosions in Iran. The Strait of Hormuz, which connects the Gulf of Oman and the Persian Gulf, is bordered by Iran, Oman and the UAE. It is an important chokepoint for energy trades from the Middle East. On 13 April, Iran’s Revolutionary Guards seized Portuguese-flagged container ship MSC Aries in the key shipping lane which Tehran says is linked to Israel. On the same day, Iran had launched drones and missiles on Israel, which it blames for a fatal attack on an Iranian diplomatic facility in Damascus that killed a high-ranking member of Iran's Islamic Revolutionary Guards and eight other officers. Focus article by Nadim Salamoun and Pearl Bantillo Click here to read the ICIS LOGISTICS topic page, which examines the impact of shipping disruptions on oil, gas, fertilizer and chemical markets.

19-Apr-2024

SINGAPORE (ICIS)–Shares of petrochemical companies in Asia slumped on Friday, while oil prices surged amid escalating tensions in the Middle East following reported explosions in Iran, Syria and Iraq. Japan’s Nikkei 225 falls 2.66% at close of trade Brent crude briefly crosses $90/bbl; oil eases off highs Israel behind Iran explosions – reports At 07:24 GMT, Asahi Kasei Corp and Mitsui Chemicals were down by 1.31% and 1.98%, respectively, in Tokyo, as Japan’s benchmark Nikkei 225 shed 2.66% to close at 37,068.35. In Seoul, LG Chem fell 2.11% as South Korea's KOSPI composite fell by 1.63% to 2,591.86. Hong Kong's Hang Seng Index slipped by 0.98% to 16,226.07. In southeast Asia, PETRONAS Chemicals Group (PCG) slipped by 0.44% while Siam Cement Group (SCG) was down 2.69%. High oil prices will continue to squeeze margins of petrochemical producers, which are struggling with poor demand and overcapacity. Middle East markets in Saudi Arabia, Kuwait, Bahrain, and Qatar could mirror the movement in Asia when they open on 21 April. Regional bourses are closed on Fridays and Saturdays. Oil prices pared earlier gains in the afternoon trade in Asia after surging by more than $3/barrel earlier in the session, following reports by various media outlets in the Middle East of explosions in Iran, Syria, and Iraq. "If these reports turn out to be true, fears over further escalation will only grow, as well as concerns that we are potentially moving closer towards a situation where oil supply risks lead to actual supply disruptions," said Dutch banking and financial information services provider ING in a note on Friday. Overnight, oil prices settled mixed following a sell-off early in the week as financial markets discounted fears of a war between Israel and Iran that could disrupt crude supplies. Explosions were heard around the central city of Isfahan early on Friday, Iranian media reported, adding that three drones were destroyed after the country's air defense systems were activated. Isfahan houses a significant military airbase, and the province is host to numerous Iranian nuclear facilities, among them the city of Natanz, which is central to Iran's uranium enrichment efforts. Iran's state-run Press TV in a report said that "important facilities in the Isfahan province, especially nuclear facilities, are completely safe and no accidents have been reported". Iran initially closed its airports in Tehran, Shiraz and Isfahan after the attack but has since re-opened them. "Normal operations have resumed for flights at Iranian airports including Imam Khomeini International Airport and Mehrabad International Airport in Tehran after temporary delays," Press TV said, citing the Iran Airports and Air Navigation Co. Elsewhere, Iran’s official IRNA news agency said a series of explosions in Syria targeted military sites. In Iraq, meanwhile, explosions were reported in the al-Imam area of Babel. The reports have sparked worry that Israel has retaliated against Iran's drone attacks last week. Iran launched the strikes on 13 April in response to a suspected Israeli airstrike on Iran's consulate in Syria at the start of the month. Prior to the news of Friday's attacks, Iran's Foreign Minister Hossein Amir-Abdollahian issued a warning during an interview with US broadcaster CNN on Thursday that Iran would respond "immediately and with maximum intensity" to any Israeli aggression. Focus article by Nurluqman Suratman Additional reporting by Nadim Salamoun

19-Apr-2024

SINGAPORE (ICIS)–Oil prices surged by more than $3/barrel in Asian morning trade on Friday, with Brent crude crossing above $90/barrel before easing midday, amid heightened fears of supply disruption following unofficial reports of explosions in the Middle East. ($/barrel) Contract Low High Open Last (at 03:17 GMT) Previous Settlement Change High Change Brent June 86.85 90.75 87.04 89.42 87.11 2.31 3.64 WTI May 82.47 86.28 82.62 84.76 82.73 2.03 3.55 "If these reports turn out to be true, fears over further escalation will only grow, as well as concerns that we are potentially moving closer towards a situation where oil supply risks lead to actual supply disruptions," said Dutch banking and financial information services provider ING in a note on Friday. Overnight, oil prices settled mixed following a sell-off early in the week as financial markets discounted fears of a war between Israel and Iran that could disrupt crude supplies. On Friday, various media outlets in the Middle East reported explosions occurred in Iran, Syria, and Iraq. Israel has launched a missile attack against a site in Iran, according to US broadcaster ABC News, while Iran’s semi-official Fars news agency has reported explosions in Isfahan province with state television reporting flights in several cities have been suspended. Isfahan houses a significant military airbase, and the province is host to numerous Iranian nuclear facilities, among them the city of Natanz, which is central to Iran's uranium enrichment efforts. Iran’s official IRNA news agency said a series of explosions in Syria targeted military sites. In Iraq, meanwhile, explosions were reported in the al-Imam area of Babel. The reports have sparked worry that Israel has retaliated against Iran's drone attacks last week. Iran launched the strikes on 13 April in response to a suspected Israeli airstrike on Iran's consulate in Syria at the start of the month. Prior to the news of Friday's attacks, Iran's Foreign Minister Hossein Amir-Abdollahian issued a warning during a interview with US broadcaster CNN on Thursday that Iran would respond "immediately and with maximum intensity" to any Israeli aggression.

19-Apr-2024

SINGAPORE (ICIS)–Two US officials confirmed to BBC News and partner CBS News in the US that an Israeli missile hit Iran on 19 April. Benchmark Brent crude oil has jumped more than 3% to around $90.60 a barrel as reports filtered out of a strike. Iran or Israel have not reported any attacks via official websites. The official Iran FARS news agency in Iran said that air defence systems have been activated in response. Commercial flights in the Gulf region have been diverted and suspended for Emirates Airlines, according to notices, and over Iranian cities, including Isfahan where explosions this morning were reported by Iranian media.

19-Apr-2024

SAO PAULO (ICIS)–Petrobras is to restart its large-scale ANSA fertilizers plant in Araucaria, state of Parana, which has been idle since 2020, the Brazilian state-owned energy major said late on Wednesday. The company did not disclose the date it intends to restart production but said as soon as “next week” technicians would work at the site to establish what repair or upgrading work is necessary to restart the facilities. The facilities are called Araucaria Nitrogenados SA (ANSA), a wholly owned Petorbras subsidiary. They are located next to Petrobras’ Presidente Getulio Vargas Refinery (REPAR). Production capacities stand at 720,000 tonnes/year of urea, 475,000 tonnes/year of ammonia, and 450,000 cubic meters/year of the so-called ARLA urea, an additive added to diesel engines to reduce the emission of polluting gases. “In view of the review of the company's strategic guidelines approved last year, investment in fertilizers production is once again part of Petrobras' portfolio,” said the company. Petrobras new CEO, Jean Paul Prates, was appointed by President Luiz Inacio Lula da Silva in January 2023, when he started his term. Unlike the prior Administration, Lula wants Petrobras to play a more active role in the economy. Lula has repeatedly said Brazil needs to increase fertilizers production to lessen its dependence on imports – the country’s trade deficit in fertilizers is large as its agricultural output has become on of the largest in the world. Agriculture is now a quarter of Brazil's economy. Moreover, the significant producer of fertilizers in the country, Unigel, has paused production on two large-scale fertilizers plant due to high natural costs while it negotiates with its creditors a debt restructuring. The two plants were a 10-year lease from Petrobras signed in 2019. Meanwhile, Unigel and Petrobras have been involved in negotiations to help the former restart its plants, but an agreement signed in December is now under scrutiny. All in all, the two plants remain idle. This week, Petrobras said its “re-entry” into the fertilizers sector would first focus on “assets that already belong” to it. Front page picture: Petrobras' facilities in Aracaura, state of Parana  Source: Petrobras

18-Apr-2024

SINGAPORE (ICIS)–Buying activities in the Asia and Middle East polyethylene terephthalate (PET) markets remained relatively need-based, with factors like geopolitical tensions and uncertainties in freight rates clouding sentiment. Asian market sentiment mixed, PET tracks upstream closely Uncertainty around freight rates leads to need-based buying Mideast buyers’ inventories high, but some replenishment expected post-Eid break In this chemical podcast, ICIS editors Damini Dabholkar and Zachary Tia discuss recent market conditions with an outlook ahead in Asia and the Middle East. ICIS will be at the Chinaplas conference in Shanghai from 23-26 April. Please get in touch with our team there for more discussion on the PET market.

18-Apr-2024

SINGAPORE (ICIS)–Oil prices rose on Thursday, reversing sharp losses in the previous session, after the US re-instated oil sanctions on Venezuela, and amid discussions by the EU about implementing new restrictions on Iran. EU leaders mull fresh sanctions against Iran at Brussels summit Market uncertainty tied to potential Israeli response to Iran Poor economic data from China cap crude gains Product ($/barrel) Latest (at 04:27 GMT) Previous Change Brent June 87.57 87.29 0.28 WTI May 82.87 82.69 0.18 Both crude benchmarks fell overnight by nearly $3/barrel on demand concerns, with the US showing a higher-than-expected build in crude inventories. The US on 17 April announced it would not renew a license expiring on Thursday which had previously eased sanctions on Venezuelan oil, opting to re-instate punitive measures due to President Nicolas Maduro's failure to fulfill his election commitments. The US’ six-month sanctions relief for Venezuela took effect on 18 October 2023. Meanwhile, EU leaders are in Brussels, Belgium for a two-day summit (17-18 April) to discuss intensifying sanctions against Iran following Tehran's missile and drone attack on Israel on 13 April, an incident that prompted global powers to attempt averting a broader Middle Eastern conflict. "We have to adjust, to expand them [the sanctions] on Iran," French President Emmanuel Macron said in Brussels ahead of the summit. "We are in favor of sanctions that can also target all those who help manufacture drones and missiles that were used in the attacks last Saturday and Sunday [13-14 April]." Israel has indicated its intention to retaliate, although it has not specified the means of response. Iran and Venezuela, which are among the founding members of oil cartel OPEC, have substantial oil reserves, with Iran having the world’s fourth-largest proven oil reserves and Venezuela holding the largest. Despite their influence on global oil prices, international sanctions have curtailed their production and export capabilities and market impact. "The lack of direction in the market reflects the significant uncertainty about Israel's possible response to Iran’s attack over the weekend," Dutch banking and financial information services provider ING said in a note. "However, for oil, sanctions are already in place, the issue is that they have not been strictly enforced for the last couple of years. And the big question is whether they will be enforced more rigorously now," it said. Keeping a lid on prices was poor March economic data from China, the world’s second-biggest economy. Chinese exports in March fell by 7.5% year on year, the biggest fall since August last year. March retail sales and industrial output also missed expectations, heightening concerns of muted demand from the world’s largest crude importer. The US, on the other hand, showed improved in economic activity from late February to early April, with firms indicating expectations for steady inflation pressures, based on a Federal Reserve survey released on 17 April. The Federal Reserve is currently not considering interest rate cuts in the near term due to a combination of resilient economic activity and persistently high inflation. In March, US employers added more than 300,000 jobs – the most in nearly a year – and retail sales exceeded expectations after expanding by 0.7% month on month. Focus article by Nurluqman Suratman An oil tanker at the dock of the El Palito oil refinery at Puerto Cabello, Carabobo, Venezuela – 13 March 2022. (Juan Carlos Hernandez/ZUMA Press Wire/Shutterstock)

18-Apr-2024