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Asia top stories – weekly summary

SINGAPORE (ICIS)–Here are the top stories from ICIS News Asia and the Middle East for the week ended 22 June 2024. Malaysia May chemical exports rise 0.8% as overall trade continues recovery By Nurluqman Suratman 21-Jun-24 13:47 SINGAPORE (ICIS)–Malaysia's exports of chemicals and chemical products rose by 0.8% year on year to ringgit (M$) 6.31 billion in May amid signs that its overall trade weakness has bottomed out. Asia ACN sees continuation of tight supply, weak demand By Corey Chew 20-Jun-24 11:52 SINGAPORE (ICIS)–The acrylonitrile (ACN) market recently saw a slight decrease in price for both the northeast Asia and India markets. Thai bio-ethylene plant key to growing SCG Chemicals' green plastics portfolio By Nurluqman Suratman 19-Jun-24 13:15 SINGAPORE (ICIS)–Thailand's SCG Chemicals (SCGC) has obtained government approval for its 200,000 tonne/year joint venture bio-ethylene plant in Map Ta Phut, paving the way for the company to reach its target of producing 1m tonnes/year of green polymers by 2030. INSIGHT: Mixed outlook for Asia chemical prices in June – ICIS analysts By Lina Xu 18-Jun-24 12:00 SINGAPORE (ICIS)–There is a mixed outlook for petrochemical prices in Asia in June. Upward support comes from unplanned shutdowns and policy implications. Downward pressure is largely results from seasonal factors. INSIGHT: Asia petrochemical markets grapple with surging shipping costs By Nurluqman Suratman 14-Jun-24 13:54 SINGAPORE (ICIS)–Spot prices of most petrochemicals in Asia have spiked on the back of surging freight and container costs, as logistics challenges which continue to dampen global commodities trades coincide with a seasonal uptick in demand. PODCAST: Propane import growth to remain strong despite bottled LPG replacement By Lillian Ren 20-Jun-24 12:08 SINGAPORE (ICIS)–China's propane import growth is expected to remain strong this year although local authorities have been encouraging food catering and residential end-users to switch from bottled liquefied petroleum gas (LPG) to piped natural gas (PNG).


Europe top stories: weekly summary

LONDON (ICIS)–Here are some of the top stories from ICIS Europe for the week ended 21 June. Indian phosphates buyers awaiting subsidies clarity from new government The bullish sentiment in the phosphates world continues, as supply in the Americas remains particularly tight, and demand firming. Europe naphtha, gasoline prices push higher despite weak fundamentals Europe naphtha market spot quotations appear to be torn between firming upstream Brent crude values and waning demand-side fundamentals, with weakness in gasoline particularly denting sentiment. New industrial deal needed to enable energy transition – Europe trade groups The EU needs a powerful industrial strategy to deliver the massive expansion in renewable energy required to power energy-intensive sectors which will provide locally made raw materials, according to a coalition of regional trade groups. Europe BDO heading into Q3 with hopes of stability rather than improvement Although the better-than-expected demand during the first half of 2024 would typically give rise to positivity for the European butanediol (BDO) market, players are tempering their predictions to hopes of stability. Downstream restructuring darkens Europe PX outlook despite shipping disruption uplift Paraxylene (PX) demand in Europe is likely to be relatively firm over the summer as seasonal buying appetite couples with stronger offtakes from downstream markets impacted by delayed imports and higher freight costs.


Tropical disturbance approaching US Georgia, Florida coasts not likely to disrupt chem ops

HOUSTON (ICIS)–A tropical disturbance moving towards the Georgia-Florida state lines is unlikely to disrupt any chemical plant operations in the region, and activity at the Port of Savannah was normal as of mid-afternoon on Friday. Source: National Hurricane Center (NHC) According to the National Hurricane Center (NHC), the disturbance, identified as AL92, is about 80 miles (129 km) east-southeast of Brunswick, Georgia, lacks the necessary organization to form a hurricane. Maximum sustained winds are at 35 miles/hour. The NHC said that even if the showers and thunderstorms become better organized, AL92 would be a “short-lived” tropical depression before making landfall, where it will immediately begin losing intensity. Operations at the Port of Savannah (Georgia) were normal as of mid-afternoon on Friday. The NHC is also watching an area of low pressure above the Bay of Campeche, where environmental conditions appear conducive for gradual development as it moves slowly to the west-northwest, and a tropical depression could form over the southwestern US Gulf this weekend. There is likely to be increased focus on US Gulf petchem production this summer as the US National Oceanic and Atmospheric Administration (NOAA) is predicting the greatest number of hurricanes in the agency’s history. NOAA forecasters with the Climate Prediction Center said that the hurricane season – which started on 1 June and runs through 30 November – has an 85% chance to be above normal, a 10% chance of being near normal and only a 5% chance of being below normal. The prediction of 17-25 named storms is the highest ever, topping the 14-23 predicted in 2010. Damage from hurricanes can lead to increased demand for chemicals, but hurricanes and tropical storms can also disrupt the North American petrochemical industry because many of the nation's plants and refineries are along the US Gulf Coast in the states of Texas and Louisiana. In 2022, oil and natural gas production in the Gulf of Mexico accounted for about 15% of total US crude oil production and about 2% of total US dry natural gas production, according to the US Energy Information Administration (EIA). Even the threat of a major storm can disrupt oil and natural gas supplies because companies often evacuate US Gulf platforms as a precaution.


Canada chemical industry flags concerns about ‘greenwashing’ amendment

TORONTO (ICIS)–Canada’s chemical industry is concerned about the impacts from a legislative amendment to address “greenwashing”, an industry executive said on Friday. The amendment to the Competition Act, contained in an omnibus bill (Bill C-59), seeks to address claims about the environmental benefits of products. Importantly, it also seeks to address claims about the environmental benefits of a business or a business activity that are “not based on adequate and proper substantiation in accordance with internationally recognized methodology”. “Our view is that the clause as drafted is overbroad and will have unintended consequences,” Isabelle Des Chenes, vice president, policy, at trade group the Chemistry Industry Association of Canada (CIAC), told ICIS in an emailed statement. The vagueness of the proposed amendment, combined with the threat of “strategic private actions” such as lawsuits, created  “substantial uncertainty about compliance standards and places the burden of proof on businesses for their claims”, she said. “This ambiguity and the threat of private actions may deter companies from making any environmental claims, which in turn will impact their ability to support the government’s climate goals and subsequently discourage responsible environmental action,” she said. She added that there is a lack of clarity about the meaning of "internationally recognized methodology". “It is well known that there are many different methodologies that have been recognized internationally for measuring environmental and ecological causes or effects of climate change,” she said. Given the diversity in methodologies, it is unclear how the Competition Bureau or the Competition Tribunal would apply this standard, she said. “This ambiguity could lead to ongoing compliance uncertainty and risk,” she said. Also, the lack of clarity would have important implications for environmental tools developed by the government, including the Clean Fuel Regulations Fuel Life Cycle Analysis model used to calculate carbon intensities or the National Pollution Release Inventory reporting tool, she said. “Industry relies on government tools to promote reduction and environmental benefits and at this time, industry is not sure these tools would meet ‘internationally recognized methodology’,”  Des Chenes said. On its website, the federal government cites a greenwashing example from the chemical industry: “For instance, a chemical company may brag about cleaning up its environmental damage in North America – but it remains silent about its new, polluting factories in India”. OIL INDUSTRY REACTS In Canada’s oil industry, ExxonMobil’s Canadian affiliate, Imperial Oil, said it fears the amendment may trigger “frivolous litigation”. A public disclosure standard “that is so vague as to lack meaning and that relies on undefined ‘internationally recognized methodology’ opens the door for frivolous litigation, particularly by private entities who will now be empowered to directly enforce this new provision of the Competition Act”, the company said. “This represents a serious threat to freedom of communication,” the company said. “The result of this legislation, which has been quickly put in place with little or no consultation, is to silence Canadian businesses taking climate action,” it added. Imperial, citing the amendment, also posted a “disclaimer” on its website with regard to its previous press releases and statements. Meanwhile, the Pathway Alliance – a coalition formed by six oil majors to reduce emissions in Canada’s oil sands industry through carbon capture and other methods – removed all content from its website and social media, citing uncertainty about how the amendment will be interpreted and applied. In Alberta province, which is home to most of Canada’s oil industry, the government said the amendment “would appear to be part of an agenda to create chaos and uncertainty for energy investors for the purpose of phasing out the energy industry altogether”. The Alberta government would explore legal options to challenge the amendment, it said. ENVIRONMENTAL GROUPS Environmental groups, however, welcomed the amendment, saying it was a response to concerns that greenwashing "is a systemic problem in Canada”. The new rules were not limited to any one industry and could have an impact across the Canadian economy as “controversial claims such as ‘net zero’, ‘carbon neutral’, and ‘sustainable’ will come under closer scrutiny”, the groups said in a joint statement. They also welcomed the fact that the amendment would make it possible for “ordinary consumers” to enforce the rules by taking complaints directly to the Competition Tribunal. Legislators in other countries have also worked to address greenwashing or claims about companies’ ESG (environment, social, governance) performance. Thumbnail photo source: International Energy Agency


ICIS Economic Summary: US growth easing along with labor market

CHARLOTTE, North Carolina (ICIS)–It is a choppy outlook for the US economy, but much of the data is pointing to a moderate slowdown in growth, as expected. Job creation continues at an above-trend pace and even after ticking up to 4.0% in May, the unemployment rate is still at low levels. US job openings fell by 296,000 to 8.059 million in April (latest figure). This is equivalent to 1.2 job openings per unemployed. This is off from a year ago when job openings totaled 9.904 million. Overall labor market supply and demand relationships appear to be moving back towards pre-COVID levels. With a still healthy labor market, incomes are holding up for consumers and providing support for the US economy. On the inflation front, the headline May Consumer Price Index (CPI) was up 3.3% year on year and core CPI (excluding food and energy) was up 3.4%. Progress on disinflation has stabilized. Economists expect CPI inflation to average 3.2% this year, down from 4.1% in 2023 and 8.0% in 2022 – still above the Fed’s target. Inflation is expected to soften to 2.4% in 2025 and 2026. As a result, interest rate futures are now for one or two cuts. A case can even be made for no cuts. Turning to the production side of the economy, the May ISM Manufacturing PMI registered 48.7, down 0.5 points from April and a reading that was below expectations. A March expansionary reading had ended 16 months of contraction in manufacturing but May marks a second contractionary reading. One step forward, two steps back. Overall manufacturing production fell back to a barely positive reading. New orders slipped further back into contraction and order backlogs and inventories contracted at a faster pace. Only seven of the 18 industries expanded. Demand was soft again and was elusive, output was stable, and inputs stayed accommodative. Meanwhile the ISM Services PMI rebounded 4.4 points to 53.8, a reading indicating a good pace of expansion. The Manufacturing PMI for Canada remained in contraction during May while that for Mexico expanded for the eighth month. Brazil’s manufacturing PMI expanded for a fifth month. Eurozone manufacturing has been in contraction for 23 months, but the region’s economy appears to be expanding again. China’s manufacturing PMI was above breakeven levels for the seventh month. Other Asian PMIs appear to be improving. Turning to the demand side of the economy, US light vehicle sales rose again in May and although inventories have moved up in recent months, they still remain low. We expect light vehicle sales of 15.8 million this year, before improving to 16.3 million in 2025. We are above consensus among economists and expect sales of 17.3 million in 2026. This would bring activity back to the last cyclical peak of 17.2 million in 2018. Housing activity peaked in Spring 2022 and into mid-2023 with housing reports since being mixed. We expect that housing starts will average 1.44 million in 2024 and 1.50 million in 2025 – also above consensus among economists. We expect housing starts to improve to 1.56 million in 2026. Demographic factors are supporting activity during this cycle. There is significant pent-up demand for housing and a shortage of inventory. Affordability continues to be an issue. Nominal retail sales were weak during May and prior months were revised downward, suggesting consumers are facing inflation fatigue and guarding their purchases. Sales gains were mixed across segments. Sales at restaurants and bars also weakened. Spending may be slowing. Our ICIS leading barometer of the US business cycle has providing signals that the “rolling recession" scenario in manufacturing and transportation may be ending. The services sectors continue to expand, but at a slower pace. Real US GDP rose 5.8% in 2021 and then slowed to a 2.5% gain in 2022. The much-anticipated recession failed to emerge for a variety of reasons and in 2023 the economy expanded 2.5% again. US economic growth in Q1 2024 slowed from the rapid pace of Q3 and Q4 2023, but those gains will aid 2024 performance of an expected 2.3% gain. The slowdown in quarterly economic activity suggests that in GDP growth should be 1.8% in 2025 and 1.9% in 2026. The US once again is serving the critical role of global economic growth engine. The recent rate cut by the European Central Bank (ECB) should provide a small lift to Europe’s economy. China is struggling with soft economic activity and appears to be exporting its way out of the mire. India and to a lesser extent Japan, are showing signs of resilience as the major players in the world economy diverge.


ICIS EXPLAINS: UK election impact on energy

UPDATED: On 21 June 2024, ICIS updated this analysis to include a breakdown of the impact of new gas licenses on British gas supply On 20 June 2024, ICIS updated this analysis to include the Scottish National Party's manifesto plans for energy. The manifesto table now includes these details Initial analysis published with detailed table reviewing energy policies from announced manifesto pledges, original analyses covering nuclear power and gas-fired power generation, a UK election special episode of the ICIS Hydrogen Insights podcast LONDON (ICIS) — On 4 July 2024 the UK public will elect a new government, but what do the different parties have in store for energy? The following analysis reflect core pledges from manifestos and reviews those pledges in detail using ICIS data and insights. This analysis of UK political pledges and announcements will be continuously updated by the ICIS energy editorial team. Lead authors include: UK power reporter Anna Coulson, British gas reporter Matthew Farmer. UKCS LICENSING – Added to analysis 21 June 2024 Several parties have committed to end the issuing of new licenses for extraction of oil and gas on the UK continental shelf (UKCS), however ICIS analysis shows the inclusion of new licenses may have a minimal impact in mitigating output decline. Gas production on the UKCS started declining in 2000, but held steady during the 2010s. It currently accounts for approximately 40% of Britain’s gas supply mix, with the bulk of remaining volumes coming through Norwegian imports and LNG. From the late 2020s, UKCS production is expected to decline by approximately 6% per year. Licenses on new discoveries would not reverse the decline in British production expected in coming years. However, they would have accounted for another 0.80 billion cubic meters (bcm) of British gas production in 2030, increasing to 1.5bcm in 2035. In contrast to the other parties, the Conservatives and Reform UK have committed to annual licensing rounds and “fast-track” licenses, respectively. Both have done so with a justification of maintaining British energy independence, citing the rising price of energy caused by the full-scale Russian invasion of Ukraine. GAS-FIRED POWER DEMAND LIKELY UNMOVED Both the Conservatives and the Labour party show support for the continued use of gas for power generation, bolstering a key area of demand for British gas market participants. However, of the two parties, the Conservatives presented a more bullish mentality by noting intensions for new gas plants, aligning with previous announcements to support new capacity. Labour meanwhile take a muted approach, noting the need for a strategic reserve of gas for power generation. Both Labour and the Conservatives have therefore presented policy that could reduce power-market price volatility as renewable capacity grows, with gas offering baseload generation at periods of low renewable output. Gas demand for power to remain From a gas-market perspective, the use of gas for power amounts to a large share of overall demand. In 2023, gas offtake for power accounted for 26% of total gas demand. The UK is heavily reliant on gas-fired power generation, with it contributing 26% of the UK’s electricity mix in the period 1 January to 31 May 2024, according to data from National Grid. Similarly, gas-fired generation provided an average 36.3% of the mix over the 2019-23 period, therefore making a significant contribution to the UK’s electricity stack. While the capacity of new gas generation is not mentioned in the Conservative party’s manifesto, ICIS analytics forecast data indicates that gas capacity is set to increase through to 2026, under a base case scenario. This would suggest that offtake for power generation could well remain a key share of overall gas demand under either a Conversative or a Labour government. Further, ICIS data shows that there will be 7.92GW of gas capacity in 2050 under a base case scenario, which itself raises uncertainty around the prospect of pledges to decarbonize power grids by around the 2030s. NUCLEAR Nuclear power represented a large focus for the Labour, Conservative and Reform UK parties, which each announced plans to increase nuclear capacity through a mix of measures, such as plant life extensions, new large-scale projects, or Small Modular Reactors (SMRs). Despite this, the overall pledges presented for the election suggests need for further capacity build-out in the run up to 2050 in order to meet the government's target. While the Conservative’s manifesto did not mention a specific nuclear capacity target, the current government has a target to reach 24GW of nuclear capacity by 2050. ICIS analytics forecasts that, under a base case scenario, nuclear capacity will be 12.76GW by 2050. Plant life extensions Although Labour’s manifesto did not provide details on which nuclear plants it intended to focus on for life extensions, or for how long, the intension is in line with former market announcements from EDF, which stated plans in January 2024 to extend the lives of five UK nuclear plants. EDF plans to invest an additional £1.3bn in these power stations over 2024-26, with the aim to maintain output from the four advanced gas-cooled reactors (AGR) for as long as possible, and for the Sizewell B plant to operate for an additional 20 years. The lifetimes of the four AGR stations would be reviewed by the end of 2024. New capacity From a new capacity perspective Labour pledged to get the 3.2GW Hinkley Point C project over the line and that new nuclear power stations, such as the 3.2GW Sizewell C project, will play a key role in helping the UK to achieve energy security and clean power. In January, the Conservatives announced plans for a new large-scale nuclear power plant, which would be as large as Hinkley Point C or Sizewell C, which are both 3.2GW in capacity. The current government announced in May that Wylfa would be the preferred site for this new plant however, a commissioning date is still to be confirmed. This aligns with the party’s manifesto pledge to deliver a new gigawatt power plant at the same location. The new plant in Wales could well boost UK nuclear capacity, but it would still present a capacity gap between the current ICIS forecast for 2050 and the government’s target of 24GW. Small modular reactors Labour, the Conservatives, and Reform UK all mention SMRs in their manifestos however, the Conservatives will approve two new fleets of SMRs within the first 100 days of the next parliament. This is likely through the competitive process that Great British Nuclear (GBN) launched in 2023 to select SMR technologies best placed to be operational by the mid-2030s. GBN plans to announce successful bidders for the competition by the end of 2024 and to take two SMR projects to a final investment decision by 2029. However, it must be noted that SMRs are a new technology, and none are commissioned yet in Europe.    HYDROGEN In this UK general election special, ICIS hydrogen editor speaks with Rob Dale, founder and director of UK consultancy Beyond2050, which aims at supporting market participants in achieving their energy and sustainability goals. Over the course of the episode, Jake and Rob review which parties have committed to hydrogen for the election and what makes this election the biggest for hydrogen so far.


Malaysia May chemical exports rise 0.8% as overall trade continues recovery

SINGAPORE (ICIS)–Malaysia's exports of chemicals and chemical products rose by 0.8% year on year to ringgit (M$) 6.31 billion in May amid signs that its overall trade weakness has bottomed out. Risks to trade outlook include geopolitical tensions and regional conflicts May export growth driven by manufactured and agriculture goods Demand for paper, petroleum, and palm oil drove exports to China Overall exports rose by 7.3% year on year to M$128.2 billion in May, while imports were up by 13.8% to $118.1 billion, data from the Department of Statistics Malaysia (DOSM) showed on 20 June. This resulted in a trade surplus of around M$10 billion, rebounding from the lowest level since May 2020 in the preceding month at M$7.7 billion, partly aided by a steeper slowdown in the growth of imports relative to exports. Economists at UOB Global Economics & Markets Research noted in a 20 June report that the two consecutive months of export growth indicate that Malaysia's trade performance may have reached its lowest point and is now on a path to recovery. The latest Malaysia S&P manufacturing Purchasing Mangers’ Index (PMI) also rose in May, suggesting improvement in manufacturing conditions on account of higher new orders, UOB said. "Exports of commodity products particularly mining goods remains subject to potential production shocks due to plant closures for maintenance while price effects are fading," it said. RISKS TO TRADE OUTLOOK "Malaysia’s external trade continues to recover at a gradual and bumpy pace in the near term," UOB said. However, given lingering logistical challenges, ongoing geopolitical tensions and regional conflicts that cast over the global trade outlook, Malaysia will not be spared should these downside risks escalate and trigger a wider adverse impact on the global economy, it said. The Red Sea crisis and ongoing conflict in the Middle East have already disrupted supply chains, causing delays and driving up shipping costs for certain sectors, UOB noted. Additionally, environmental concerns, such as the historically low water levels in the Panama Canal, a critical artery for global trade, pose further threats to the smooth flow of goods, it added. OPTIMISM FOR GROWTH DESPITE CHALLENGESUOB remains cautiously optimistic trade outlook for Malaysia with a projected export growth of 3.5% for this year. This forecast is slightly more conservative than Bank Negara Malaysia's estimate of 5.0% growth. In comparison, the country experienced a contraction of 8.0% in exports in 2023. "This is mainly supported by the ongoing improvement in E&E exports along with a global soft landing, a sustained recovery in China’s economy and expected global monetary policy loosening before year end," UOB said. "The Malaysian government’s bold and effective implementation of various national master plans including the Semiconductor Strategic Plan will be additional catalysts to the trade prospect in the short and medium term." While acknowledging potential slowdown risks in China due to "ongoing housing debacle and trade restrictions with the West," Malaysia's Hong Leong Bank in a note said that it anticipates sustained growth in the broader region to help mitigate these concerns. Barring unforeseen materialization of other downside risks, and supported by a "stable world economy," the bank remains optimistic about Malaysia's export outlook. Factors such as the uptick in the global tech cycle and still elevated commodity prices further bolster this positive outlook. Hong Leong Bank expects Malaysia's export growth to accelerate, potentially reaching double-digit figures in the second half of the year. However, the overall contribution to GDP growth may be moderated by a concurrent, or even stronger, recovery in imports, driven by the continued expansion of domestic demand. MAY EXPORTS GROWTH DRIVEN BY ELECTRONICS, PALM PRODUCTS May’s export growth was largely thanks to strong improvement in shipments of manufactured and agriculture goods. Exports of manufactured goods, which account for 86.2% of total exports, grew 8.3% year-on-year in May, following a 7.1% increase in April. This growth was fueled by robust demand for electrical and electronic (E&E) products, which saw a 7.6% increase in May compared to a 0.6% increase in April. Agriculture goods, comprising 7.1% of total exports, continued their upward trend with a 22.1% year on year increase in May, building on April's 13.8% growth. This was primarily driven by robust exports of palm oil and palm oil-based products, which rose 25.7% year on year in May thanks to increases in both volume and export prices. REGIONAL TRENDSExports to the US soared for the fifth consecutive month, recording a 17.4% year-on-year increase in May, closely following April's 17.3% growth. This surge was primarily attributed to higher shipments of E&E products. Exports to Singapore also experienced a significant boost, jumping 13.7% year on year in May after a 9.0% increase in April. This rise was also fueled by greater exports of E&E products. The robust growth in exports to Singapore, coupled with a fifth straight month of increased shipments to Vietnam, helped sustain a healthy 10.4% expansion in exports to the ASEAN region as a whole, slightly lower than April's 11.3%. While exports to the EU and China also grew, they recorded smaller gains of 7.2% and 1.6% respectively in May, compared to 11.3% and 2.1% in April. Resilient demand for palm oil & palm oil-based products, optical & scientific equipment, and chemicals & chemical products supported shipments to the EU. Meanwhile, exports to China were primarily driven by demand for paper & pulp products, refined petroleum products, and palm oil & palm oil-based agriculture goods. Thumbnail photo shows containers at a port in Butterworth, Malaysia. (Source: Vincent Thian/AP/Shutterstock) Focus article by Nurluqman Suratman


Brazil halts interest rates cuts after uptick in inflation, more easing not until 2025 – analysts

SAO PAULO (ICIS)–This week, Brazil entered its own higher-for-longer period for interest rates as an uptick in prices as of late prompted the central bank to pause monetary policy easing, leaving the Selic main benchmark at 10.50%. Just a few weeks ago, Brazilian businesses and households were hoping the pace of monetary easing would slow down to quarter-point cuts, instead of the initial half-point cuts, but late on Wednesday the central bank said the easing is over – for now. The central bank’s monetary policy committee (Copom) decided to keep the Selic unchanged in its June meeting, after falling more than three percentage points since August, when the Selic stood at 13.75%. Brazil’s annual rate of inflation in May stood at 3.93%, partly because of the floods in Rio Grande do Sul, up from April’s 3.69%. Brazil's central bank has the mandate to keep inflation at around 3%. The latest survey among economists published by the Banco Central do Brasil every week already showed sharply higher expectations for both inflation and rates. The market is hoping for the best after the flooding, but fearing the worst. The first signs were indeed worrying: manufacturing sharply slowed down from April in what had been a healthy start to 2024, while output in sectors such as automotive fell by 25% in May, month on month. Analysts have already warned growth in Q2 will be far from the healthy 0.8% GDP rise in Q1. Moreover, those who are lobbying for lower rates got a second jar of cold water: Copom’s decision to keep rates was unanimous. In past meetings, those members appointed by President Luiz Inacio Lula da Silva tended to favor the half percentage cuts, with their ears more prone to listen to industrial players – including the chemicals industry – who keep identifying rates as a burden for growth. Those Copom members appointed by the previous Jair Bolsonaro Administration tended to favor smaller rate cuts. However, a 10.50% official Selic rate can end up being much higher. The automotive industry’s trade group Anfavea has been one of the most vocal about this, arguing the final interest rates consumers can end up paying when purchasing a car can be around 20-30%. In a country where even the smaller purchases can be paid in several installments, with added interest rates, the Selic matters to everyone, not least those with low salaries who can only get by indebting themselves to pay for some of their daily spending. HALTING: FOR HOW LONG?…In its statement late on Wednesday, Copom also turned sour and painted a worrying global and domestic outlook. Public disagreements between the government and the central bank as of late may not have helped the cabinet in their pursuit for lower rates either. A few days ago, Lula even said the governor, Roberto Campos Neto, has a political side, effectively questioning his mandate as per the supposed sacrosanct central bank independence. Some press reports have said Campos may consider running in the future as a candidate from the center-right bloc. In Brazilian political life, everything is possible. Meanwhile, the Brazilian real (R) has depreciated considerably in the past two months. In the past two weeks, public and contradictory statements about the cabinet’s intentions on running – or not – a public deficit took its toll as investors always keep an eye on higher taxes if spending goes up. “The Committee emphasizes that risks to its scenarios remain in both directions. Among the upside risks for the inflationary scenario and inflation expectations, it should be emphasized a greater persistence of global inflationary pressures; and a stronger-than-expected resilience of services inflation due to a tighter output gap,” said Copom. “The current context, characterized by a stage in which the disinflationary process tends to be slower, further de-anchoring of inflation expectations, and a challenging global outlook, requires serenity and moderation in the conduct of monetary policy.” In summary, higher interest rates for longer may put yet more stones on Brazil’s manufacturing recovery after a 2023 to forget, just when it seemed to take off. Lula’s main constituency has very much in mind his promise to create more and better paid industrial jobs. …AT LEAST UNTIL 2025The expected rise in Brazil’s annual rate of inflation has prompted most analysts to say the remaining six months of 2024 will not see cuts at all. “We see no room for a resumption of the easing cycle this year … It’s clear that rising inflation and inflation expectations are worrying the central bank. Somewhat surprisingly, the decision was unanimous. We had thought some of the more dovish Copom members might have voted for another cut,” said analysts at Capital Economics on Thursday. “Policymakers might be trying to avoid a repeat of the market backlash fallout seen after the previous meeting when votes for a larger 50bp cut by Lula-appointed Copom members raised concerns about the politicization of monetary policy. But it may also signal that there’s a widespread agreement on Copom that the inflation outlook has worsened.” ICIS also expected inflation to tick up in coming months, to then slowdown in 2025 and stabilize at around the central bank’s target of around 3%. “Brazil’s inflation figures in May suggest that the progress on bringing down inflation isn't being as expected and higher for longer interest rates are in order,” said Kevin Swift, economist at ICIS. “In the other large Americas economy, the US has also experienced this slow pace of progress on disinflation, although the most recent reports were in the right direction. Further afield, progress on reaching inflation target of 2% has been met in the UK and the eurozone is getting close, at 2.6%. Both jurisdictions’ central banks have a mandate to keep inflation at around 2%. Source: ICIS Focus article by Jonathan Lopez


PODCAST: US petrochemical outlook with James Ray

BARCELONA (ICIS)–ICIS consultant James Ray describes how the shale gas revolution has benefitted the US economy and chemicals plus views on demand and the green transition. US shale gas revolution has helped entire economy Low energy costs key driver of economic growth Post-pandemic soaring demand, crimped supply pushed margins very high US chemicals margins have now normalised, companies profitable US construction market hurt by inflation, high interest rates US auto industry improving but inventory still high Companies, consumers less willing to pay green premium in tough times Economics, incentives drive US business decisions US incentives much more effective than Europe sanctions In this Think Tank podcast, Will Beacham interviews ICIS vice president of consulting James Ray,  ICIS Insight editor Nigel Davis, 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.


Tropical Storm Alberto floods beaches amid storm surge, high tide, but plant ops unaffected so far

HOUSTON (ICIS)–Tropical Storm Alberto, the first named storm of the 2024 Atlantic hurricane season, continues to push toward the Mexico coast and a combination of storm surge and high tides are already flooding some Texas coastal communities. But so far, ICIS has not heard of any instances of plants located along the US Gulf Coast ceasing operations. Alberto was about 295 miles (475 km) south southeast of Brownsville as of 18:00 GMT with maximum sustained winds of 40 miles/hour, as shown in the following image. Source: National Hurricane Center A tropical storm warning remains in effect for the Texas coast from San Luis Pass southward to the mouth of the Rio Grande River. Tropical storm warnings mean that tropical storm conditions are expected somewhere within the warning area. The highest rainfall totals on Wednesday were just more than an inch south of Houston, with a total of 1.36 inches in La Porte, Texas, and 1.23 inches in Galveston. Storm chasers shared videos of inundated coastal communities on social media, including Surfside Beach, that were created by the storm surge ahead of Alberto and coinciding with high tides. Tides will be at the lowest this evening and at the highest early on Thursday morning, as shown in the following chart. Source: Alberto is moving toward the west at 9 miles/hour. A westward motion with an increase in forward speed is expected through Thursday. The center of Alberto is forecast to reach the coast of northeastern Mexico early Thursday morning, as shown in the following map. Source: National Hurricane Center Some slight strengthening is forecast today or tonight before the center of Alberto reaches land. Rapid weakening is expected once the center moves inland, and Alberto is likely to dissipate over Mexico Thursday or Thursday night. Flash flood warnings are in effect for south and central Texas, as shown in the following map. Source: National Hurricane Center So far it does not appear that offshore oil and gas operations are being impacted. The Bureau of Safety and Environmental Enforcement (BSEE) provides daily updates when storms lead to the evacuation of offshore production platforms. There was no update on Wednesday from BSEE. Production platforms are the offshore structures from which oil and natural gas are produced. Unlike drilling rigs, which can be moved, production facilities remain in the same location throughout a project’s duration. Another disturbance in the southwest Atlantic has a 20% chance of becoming a cyclone in the next 48 hours, and only a 20% chance of formation in the next seven days. There is likely to be increased focus on US Gulf petchem production this summer as the US National Oceanic and Atmospheric Administration (NOAA) is predicting the greatest number of hurricanes in the agency’s history. NOAA forecasters with the Climate Prediction Center said that the hurricane season – which started on 1 June and runs through 30 November – has an 85% chance to be above normal, a 10% chance of being near normal and only a 5% chance of being below normal. The prediction of 17-25 named storms is the highest ever, topping the 14-23 predicted in 2010. A storm is named once it has sustained winds of 39 miles/hour. Damage from hurricanes can lead to increased demand for chemicals, but hurricanes and tropical storms can also disrupt the North American petrochemical industry because many of the nation's plants and refineries are along the US Gulf Coast in the states of Texas and Louisiana. In 2022, oil and natural gas production in the Gulf of Mexico accounted for about 15% of total US crude oil production and about 2% of total US dry natural gas production, according to the US Energy Information Administration (EIA). Even the threat of a major storm can disrupt oil and natural gas supplies because companies often evacuate US Gulf platforms as a precaution. Thumbnail image shows a map with Tropical Storm Alberto approaching the Mexico coast. Source: NHC


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