Pricing

HOUSTON (ICIS)–The US Department of Agriculture (USDA) is expecting increases in corn utilized for ethanol, larger exports, and lower ending stocks, while soybean supply and use projections are unchanged, according to the December World Agricultural Supply and Demand Estimate (WASDE) report. In the monthly update, the USDA said corn used to produce ethanol is raised by 50 million bushels to 5.5 billion bushels. This lift is based on the most recent data from the Grain Crushings and Co-Products Production report and weekly ethanol production data for the month of November. The agency said this data implies that corn used for ethanol during the September to November quarter was the highest since 2017. The December WASDE shows corn exports raised by 150 million bushels to 2.5 billion bushels, which the USDA said reflects the pace of sales and shipments to date. With no other use changes, corn ending stocks are reduced 200 million bushels to 1.7 billion. The season-average corn price received by producers continues to be unchanged at $4.10 per bushel. For soybeans, the supply and use projections are unchanged but the monthly update has lifted soybean oil production to 131.2 million tons, with the USDA saying it is up slightly due to an increase for cottonseed. With higher soybean oil supplies and strong export commitments to date, exports are raised 500 million pounds to 1.1 billion pounds. The December WASDE said the season-average soybean price is being forecasted at $10.20 per bushel, down $0.60 from last month. The first WASDE report of 2025 will be released on 10 January.

11-Dec-2024

HOUSTON (ICIS)–A new gas pipeline set to be built by Energy Transfer should provide support for natural gas and ethane prices in the Permian producing basin, lowering the likelihood that US chemical producers see another period of ultra-low costs for the main feedstock used to make ethylene. Energy Transfer's new Hugh Brinson pipeline, previously known as Warrior, will ship natural gas from the Waha Hub in West Texas, to Maypearl, Texas, which is south of Dallas. The first phase of the project will ship 1.5 billion cubic feet/day of natural gas. Operations should start by the end of 2026. Depending on demand, Energy Transfer could concurrently start construction on a second phase that will increase the pipeline's capacity to 2.2 billion cubic feet/day. Energy Transfer's pipeline is the second major one announced in the past six months. Earlier, a new joint venture announced Blackcomb, a pipeline that can ship up 2.5 billion cubic feet/day of natural gas from the Permian basin to the Agua Dulce area in south Texas. Blackcomb will be developed by joint venture made up of Targa and WPC, itself a joint venture made up of WhiteWater, MPLX and Enbridge. NEW PIPELINES TO SUPPORT ETHANE BY REDUCING LIKELIHOOD OF NEGATIVE WAHA PRICESThe two new pipelines should provide West Texas with sufficient capacity to take away natural gas from the Waha Hub and prevent regional prices from falling below zero. The Waha Hub is the main pricing point for the natural gas produced by the oil wells in the Permian basin. Prices at the hub spent much of 2024 below zero because existing pipeline capacity was insufficient to take away excess supplies, which were growing because of rising oil production and gas-to-oil ratios across the basin. When gas prices at Waha fall below zero, it creates a powerful incentive for processing plants to recover as much ethane as possible from the gas stream. Any ethane that remains in the gas stream is sold for its fuel value. When gas prices are negative, producers are unable to capture any value for the ethane left behind. By maximizing ethane recovery, processing plants also free up existing pipeline space, allowing more natural gas to be taken out of West Texas. The surge in ethane recovery increased the amount of the feedstock available to the market. At one point in 2024, ethane prices fell below 12 cents/gal, a low not seen since the COVID pandemic. Since that low, the start up of the Matterhorn Express pipeline has increased takeaway capacity in the Permian, which caused Waha gas prices to rise above zero. Colder temperatures also supported prices for natural gas by increasing demand. Ethane prices are now trading above 20 cents/gal. LNG, ETHANE TERMINALS ALSO INFLUENCE COST FOR CHEM FEEDSPricing at the Waha Hub is one of the many factors that can influence the cost of ethane for chemical producers. Maintenance on one or more of the pipelines that takes away gas from the Permian basin can also depress Waha prices and, potentially, those for ethane. The proliferation of liquefied natural gas (LNG) terminals on the Gulf Coast is playing an increasing role in natural gas and ethane prices. These terminals are vulnerable to disruptions caused by hurricanes and tropical storms that pass through the Gulf of Mexico. These storms can disrupt LNG operations and temporarily shut down a large source of gas demand in the US. If the outage lasts long enough, it can cause a meaningful increase in US supplies of natural gas. That can lower prices for gas as well as the recovery cost for ethane. Midstream companies are increasing their capacity to export ethane overseas, which should support prices for the feedstock. Enterprise is adding 120,000 bbl/day of capacity via the first phase of the Neches River Terminal project, scheduled to come online in mid-2025. A second phase, due online in the first half of 2026, will add up to another 180,000 bbl/day of ethane export capacity. Enterprise and Navigator are adding ethane export capabilities as part of the expansion projects at their existing ethylene terminal in Morgan's Point. Energy Transfer is also adding 250,000 barrels/day of flexible export capacity, which is scheduled to start up during the second half of next year. Similarly, new crackers will increase demand for ethane. The only confirmed new US cracker is a joint-venture cracker that Chevron Phillips Chemical and QatarEnergy should start up in late 2026 in Texas. Shintech could build a cracker in Louisiana, but the company has yet to announce a final investment decision (FID). Insight article by Al Greenwood Thumbnail shows natural gas. Image by Hollandse Hoogte/Shutterstock

11-Dec-2024

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson: It is that time of the year again when analysts need to put their reputations on the line and make forecasts for the following year. So, see below five forecasts for 2025 with detailed descriptions as follows: There will be enough new capacity coming onstream next year to push China closer to self-sufficiency in some chemicals and polymers such as polypropylene (PP). The boat has already sailed on products such as purified terephthalic acid (PTA) and styrene where China has, in recent years, swung into net export positions. What will further bolster China’s self-sufficiency will be China’s long-term decline in demand growth. China’s operating rates will be higher than sometimes assumed, as it will prioritize self-sufficiency, and potentially more exports (see point 3) over individual plant economics. We are seeing a long-term shift in global growth momentum to the much more populous and much more youthful mega region of the Developing World ex-China. Part of this process involves relocation of manufacturing capacity from China to countries such as Turkey, Mexico, Vietnam and India for cost and geopolitical reasons, and this will continue in 2025. Deals will be done by the Trump administration on tariffs as competitively priced imports will have to come from somewhere – and because of the intricate and complex integration of manufacturing supply chains. Since 2021 and the Evergrande Turning Point, China had doubled down on exports up and down manufacturing chains, reducing the room for competitors in low, medium and high-value industries. This includes its switch to net export positions in products such as PTA and styrene, and the potential for this to happen in products such as PP,  acrylonitrile butadiene styrene (ABS) and polycarbonate (PC). I, therefore, believe that antidumping, tariff and other protectionist measures against China will accelerate in 2025. China will respond in kind. First came the pandemic-related disruptions to global container shipping and, since February of this year, we’ve had to contend with the Houthi attacks on shipping that have disrupted access to the Suez Canal via the Red Sea. Access to cost-efficient and prompt logistics will remain a key competitive advantage in 2025 for chemicals companies as global trade flows will remain disrupted for whatever reasons. The ICIS numbers tell us that because of disappointing Chinese demand, and the scale of global capacity closures required to bring markets back into balance, a new upcycle in 2025 is a very remote possibility. Expect no upswing for at least the next three years because of the scale of the shutdowns necessary. I could be wrong, of course. I’ve been advised not to keep saying this, but I disagree as nobody likes somebody who never concedes when they are wrong, moves on from the history of where and when they have been wrong, and assumes that they will always be right in the future. 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.

11-Dec-2024

SINGAPORE (ICIS)–China is expected to implement a “more proactive fiscal policy” and a “moderately loose” monetary policy for next year, according to the country’s top officials, amid economic headwinds and looming heavy tariffs from the US. Central bank likely to cut key interest rates, banks’ reserve requirements China 2025 GDP growth forecast to slow to 4.3% in 2025 – UOB New US-China trade war in the offing The policy shift was announced following a meeting by the Political Bureau of the Communist Party of China (Politburo) and was meant to boost overall consumption in the world’s second-biggest economy. The change in monetary policy stance was the first since 2011 amid flagging economic growth and the prospect of high tariffs that will be imposed on Chinese goods by the US next year, with Donald Trump coming back to assume control of the White House for the next four years from 20 January 2025. The policy shift was announced ahead of the annual Central Economic Work Conference (CEWC), which kicked off on Wednesday. China’s growth targets and stimulus plans for 2025 will be hammered out at the meeting which will then be released at the National People's Congress (NPC) in March 2025. “The Politburo signalled that China’s growth target of ‘around 5%’ this year will be met and the ‘main objectives and tasks for the year's economic and social development will be successfully accomplished’,” UOB Global Economics & Markets Research economists said in a note on 10 December. “We think the focus will be on releasing long-term liquidity via reserve requirement ratio (RRR) reductions,” said the economists. MORE STIMULUS REQUIRED China had set a target of 5.0% GDP growth for 2024 but has struggled to hit that benchmark all year as high youth unemployment and weaker demand hit production levels. Fiscal stimulus measures were introduced around end-September, but were deemed insufficient for China to achieve its GDP growth target of around 5% in 2024. “Stimulus directed at promoting consumption would likely have a larger impact than investments or big infrastructure projects,” the UOB note added. November economic data suggest a slow recovery in demand, but it appears unlikely that it will recover sufficiently to achieve the growth target next year if additional US tariffs were imposed in 2025. Official data showed that China’s consumer price index (CPI) increased by 0.2% year on year, a five-month low. Meanwhile, China's exports in November grew at a slower year-on-year rate of 6.7% to $312.3 billion, while imports fell 3.9% year on year on weaker domestic demand. Amid flagging Chinese demand, Saudi Arabia, the world’s largest crude exporter, cut its January Official Selling Price (OSP) for its benchmark Arab Light crude to the lowest level in four years. The January OSP for Arab Light was cut by 80 cents/barrel to Oman/Dubai average plus 90 cents/barrel, the lowest level for buyers in Asia since January 2021. US-CHINA TRADE WAR 2.0 LOOMS As China struggles to turn its economic fortunes around, it faces a difficult 2025 and a hostile US administration under Trump. Trump’s first term as US president in 2017-2021 was characterized by a trade war launched against China. UOB Global Economics & Markets Research economists are projecting China’s GDP growth to slow to 4.3% in 2025 from 4.9% this year, “with potentially more punitive US tariffs posing downside risks next year”. A consequential weakness of the Chinese yuan from a looser monetary policy, meanwhile, makes the country’s exports more competitive. Like most Asian economies, China is export-oriented and counts the US as a major market. For the first 11 months of 2024, China’s total exports increased by 5.4% year on year to $3.2 trillion amid a global economic slowdown, while imports rose at a slower pace of 1.2% over the same period to $2.4 trillion. China remains a major importer of petrochemicals, but heavy capacity expansions accompanied with weak domestic demand in recent years has turned it into a net exporter of selected products, including purified terephthalic acid (PTA). Focus article by Jonathan Yee

11-Dec-2024

SAO PAULO (ICIS)–Brazil’s central bank is likely to increase interest rates this week as the annual inflation rate continued ticking up in November to nearly 5%, analysts said on Tuesday. Some analysts think rising prices and a healthy economy lay the ground for Brazil’s central bank to hike rates this week by as much as three quarters of a point to 12.0%. Brazil’s annual rate in the price consumer index (IPCA in its Portuguese acronym) stood November at 4.87%, up from 4.76% in October, according to the country’s statistics office IBGE on Tuesday. Monthly inflation, however, eased with the IPCA up 0.39% in November, month on month. In October, monthly price rises stood at 0.56%. Prices continued reeling in November from the severe drought that affected much of Brazil in August-October. In November, the drought’s lingering effects showed in food prices, with a monthly price increase of 1.55%. In October, the drought effects had showed in the electricity bills due to lower hydroelectric energy production during that month. UP AND UPNovember’s uptick in inflation is likely to prompt the Banco Central do Brasil (BCB) monetary policy committee, called Copom, to hike the main interest rate benchmark, the Selic, for the third time since August as they meet for the last time in 2024 on Wednesday (13 December). Far from continuing the monetary policy easing being implemented in most major economies, Copom members went the other way in August as inflation started increasing, bucking the trend in the rest of Latin America. The Selic was hiked to 11.25% at Copom’s November meeting. A depreciating real – making dollar-denominated imports more expensive, and a healthy economy – pushing up consumption – are propping up inflation. Investors’ concerns about the government’s fiscal policy have further depreciated the real, in turns feeding back into inflation. “The further rise in Brazil’s inflation rate in November alongside the weakness in the real and strong economic growth mean that Copom is nailed on to step up the pace of monetary tightening, probably with a 75bps [basis points] hike to 12.00% tomorrow,” said Capital Economics. “Further tightening is on the cards in early 2025 and the risks to our Selic forecast are skewed to the upside, particularly if the government fails to better address investors’ fears about the state of the public finances … Our current forecast is for a peak in the Selic of 13.00% [in 2025] but the risks are firmly skewed towards rates being raised even higher.” BRAZIL ANNUAL RATE OF INFLATION Change in % Grey columns: forecast Source: IBGE via Trading Economics BRAZIL INTEREST RATES Change in % Source: BCB via Trading Economics

10-Dec-2024

HOUSTON (ICIS)–Fertilizer producer Yara announced it has started production of the first renewable ammonia in Brazil at its Cubatao Production Complex. The company said it has achieved a 75% reduction in carbon footprint, compared to the same fossil energy product, because it uses biomethane, a purified biogas that without additional effort replaces the use of natural gas. Biomethane is produced from vinasse, a sugarcane residue in the manufacture of ethanol, and filter cake, a residue from sugar production and is made available in the gas distribution network. As the main producer of ammonia in the country, Yara said its industrial complex is currently the largest consumer of natural gas in the state of Sao Paulo. “This is the result of Yara's knowledge, innovation and technology applied with a focus on decarbonization, and represents a great milestone for the national industry and, especially, for the Cubatao hub, which in addition to being a global symbol of environmental recovery, now has the potential to lead the energy transition that Brazil needs," says Daniel Hubner, Yara International vice president of industrial solutions. Yara said this is a significant step forward in building value chains based on renewable energy with nitrogen used in numerous industries but for agribusiness, the impact is enormous. “By combining this new generation of fertilizers with a lower carbon footprint with our agronomic knowledge we will bring even more value to the farmer, opening new markets and sources of revenue,” said Marcelo Altieri, Yara Brasil president. “In the coffee chain, for example, the expectation is for a reduction of up to 40% in the carbon footprint of the harvested bean.” The producer has stated its goal is to achieve carbon neutrality by 2050.

09-Dec-2024

HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 6 December. US Manufacturing PMI for November improves but remains in contraction The ISM US Manufacturing Purchasing Managers’ Index (PMI) improved to 48.4 in November – up 1.9 points from 46.5 in October, but remains in contraction (below 50) for the eighth consecutive month, and 24 out of the last 25 months. INSIGHT: Brazil chems producers upbeat as cabinet on side, but serious competitive woes remain The mood this week at Brazil’s chemicals producers trade group Abiquim’s annual meeting was notably more upbeat than a year ago, when imports into Brazil were increasingly eating into their market share. US Nov auto sales rise but could face headwinds from tariffs US November sales of new light vehicles ticked higher from the previous month and rose compared with the same month a year ago, but proposed tariffs on Mexican and Canadian imports by President-elect Donald Trump could create further headwinds for the industry. INSIGHT: 2024’s relative stability in key commodity pricing a contrast to previous US election years Heading into 2025, there are a plethora of factors which chemical markets players are tracking to see what could impact pricing and fundamentals, but key among them is the arrival of a new US President. Braskem’s new CEO appoints a leaner board as Novonor’s stake could be closer to sale Braskem’s new CEO Roberto Prisco has reshuffled the company’s board, including the CFO position, and has made it leaner with nine members, down from 12, the Brazilian polymers major said late on Wednesday. INSIGHT: Global plastics plan pushed down the road, production remains in the spotlight With the idea of a global binding accord on how to handle plastics waste kicked back into the long grass for now, negotiations have progressed but the key points of disagreement still seem fairly intractable. SHIPPING: Asia-US container rates fall, but average global rates rise as possible port strike nears Rates for shipping containers from east Asia and China to the US were flat to softer this week while global average rates rose by 6%, but the looming strike at US Gulf and East Coast ports could put upward pressure on rates in the coming week.

09-Dec-2024

SAO PAULO (ICIS)–EU and Mercosur chemicals will greatly benefit from trade without barriers as per their free trade agreement (FTA) which will also encourage much-needed research and development (R&D) in new technologies for greener chemicals, Brazil’s chemicals producers’ trade group Abiquim said. In a written response to ICIS, Abiquim welcomed the agreement announced last week by the EU and Mercosur for a free trade deal which would cover more than 700 million consumers in 32 countries (27 states in the EU, five in Mercosur). After 25 years in the making, the two blocs finalized a deal on 6 December. The EU-wide chemicals trade group Cefic also welcomed the FTA, which still must be ratified by EU member states as well as some EU bodies. The deal’s implementation is not 100% guaranteed, given the many scars the FTA’s text has left in some EU countries. Opposition in France is rife and is coming from all political sides, as the major agricultural producer in the European bloc fears its farmers will be hit hard by their Mercosur’s peers more competitive production. “The conclusion of the partnership agreement between the EU and Mercosur is excellent news for Brazil and the chemical industry. After many back-and-forths, the final text reaches a balanced agreement in terms of market access and modernity, incorporating concepts of sustainability, phytosanitary standards, or intellectual property, among others,” said the trade group. Abiquim added the current Brazilian government of Luiz Inacio Lula da Silva had been able to turn the “aspects of sustainable development as an advantage” for the country’s negotiating position, compared with other EU countries, a factor which it said would open the door to investment opportunities in the green economy. Lula’s cabinet, in office since January 2023, has been able to reduce deforestation rates, which increased sharply under the leadership of former President Jair Bolsonaro. Lula, in his first and second terms as president (2003-2011) also reduced deforestation. This factor often came up in the final stretches of the EU-Mercosur agreement, with Lula arguing it was Brazil who was ahead in sustainability. NEW MATERIALS, NEW CHEMICALSAbiquim’s director general, Andre Passos, said the deal would not only ease trade between the two blocks by eliminating or sharply reducing import tariffs and other trade barriers, but would also prop up R&D in greener raw materials to produce chemicals. “Of special interest to the chemical sector is the focus sustainable development aiming to foster the integration of production chains towards the decarbonization of the economy. This will pave the way for R&D in new production technologies and the implementation of low-carbon productive investments,” said Passos. “[This will be] In addition to encouraging the granting of favorable treatment for foreign trade of sustainable Brazilian products in accessing the EU’s single market.” Thumbnail photo: Flags flying during European Commission talks on the Mercosur deal (Source: Wiktor Dabkowski/ZUMA Press Wire/Shutterstock)

09-Dec-2024

SAO PAULO (ICIS)–Brazil's petrochemical industry needs to implement a deep restructuring if it wants to regain global competitiveness, and it can do this by shifting to renewable raw materials and increased use of natural gas, according to the CEO of Bahia state public company Bahiainveste. Paulo Guimaraes was appointed CEO of Bahiainveste and is tasked with attracting investment to Bahia state – home to Camacari, one of the country's biggest chemical production hubs. Bahiainveste, which was founded in 2015, falls under the umbrella of Bahia’s Secretariat for Economic Development, and functions as a public company with its own assets and revenues, as well as budgetary and financial autonomy. Guimaraes spoke to ICIS on the sidelines of the annual summit of the chemicals trade group Abiquim earlier in December. Although the mood at the gathering was more positive than in 2023, Guimaraes said it was best not to be complacent despite recent successes for chemicals producers in Brazil. The most significant of these has been higher import tariffs. In effect since October, they will help domestic producers increase market share. However, Brazil’s lack of competitiveness in the sector run deeper, and it should address them immediately rather than rest on its laurels, Guimaraes added. Although it may sound like an impossible task, Guimaraes said Brazil can and should compete against the US, the Middle East and China, who have sharply  increased their exports to Brazil during the last two years, hitting domestic producers’ market share. RENEWABLE FEEDSTOCKSTo turn the situation around, Guimaraes said a chemical transformation is necessary for Bahia, where the sector has faced falling competitiveness and job losses over the past two decades due to outdated facilities and a lack of modernization. "We need to look at the possibility of renewable raw materials. Within the next three years, Bahia will become an exporter of ethanol, so we will have the capacity to supply the industry with this type of raw material, for example,” said Guimaraes. The executive highlighted how Brazil's chemical industry has historically underinvested in technological innovation, focusing instead on basic petrochemicals. This strategy has left the sector vulnerable to international competition, particularly from Asia, and in the case of ethanol this is telling, he noted. "Brazil was the one who created ethanol as an automotive fuel in the late 1970s and early 1980s, but today we are producing ethanol using a technology imported from the US, because we did not understand that we needed to continue to develop the technology," he said. “This is a recurrent Brazilian feature, and we need to change it.” DOMINANT PLAYERGuimaraes went on to reflect on the dominance of polymers major Braskem, which emerged from a consolidation of several companies in the early 2000s and is in part owned by Petrobras, the state-owned energy major. These factors have resulted in Braskem – Brazil and Latin America’s largest chemical company – to be key in shaping industry development. The company's virtual monopoly in basic petrochemicals has influenced investment patterns across the sector, said Guimaraes. The US and Brazil are the Americas’ two largest chemicals producers. In the former, a significant shift occurred in 2004 when chemicals producers began utilizing shale gas, making natural gas-based chemistry more competitive than traditional crude oil-derived, naphtha-based processes. Brazil failed to adapt its industrial strategy accordingly. Moreover, the Brazilian chemical sector's challenges are further complicated by the country's energy policies. Following an energy crisis in 2001, the government implemented an emergency thermoelectric program that prioritized gas use for electricity generation over industrial applications. "Natural gas began to rise in price because Petrobras began to see it as just another product that needed to be as profitable as oil. And it stopped being used as a lever for the country's growth," said Guimaraes. DUMPING CONCERNSGuimaraes said growing protectionist moves around the world will only increase further over the coming years as countries face significant concerns about dumping practices which have affected their manufacturing sectors, chemicals included. Guimaraes said the tire industry was a good example. "Today, the tires that are entering Brazil are entering at a price lower than the price of the raw material. And the raw material is a commodity," he said. He noted that domestic Brazilian tire production has fallen between 40-60%, and this occurred even though Brazilian manufacturers use 70% clean energy in their production processes, which in theory should have given them an edge in a world increasingly worried about climate change. The threat of climate change could also give way to opportunities of a new, green industry. Looking ahead, Guimaraes said he can envisage significant opportunities in green hydrogen and sustainable aviation fuel (SAF) production in Brazil. However, once again, he advocated for domestic value addition rather than raw material exports. "Producing hydrogen and exporting hydrogen is like exporting water, wind and sun. Brazil should instead focus on manufacturing finished products using those resources. For instance, rather than exporting hydrogen and iron ore separately, we could produce green steel domestically instead,” said Guimaraes. “We have the advantages of a country where renewable energy production is easy, and we have plenty of available land for non-food crops: we would be able to plant crops to produce chemical feedstocks without competing with food production. “For example: I plant corn, and from the corn I produce ethanol and animal feed. What is the energy I use for this? CO2 or the biomass that the cattle generate. So, the animal feed would feed the cattle that would feed this energy." Front page picture: Bahia’s Camacari petrochemicals hub Picture source: Camacari Town Hall (Camara Municipal de Camacari) Interview article by Jonathan Lopez

09-Dec-2024

LONDON (ICIS)–Click here to see the latest blog post on Chemicals & The Economy by Paul Hodges, which looks at the political turmoil developing in the EU’s key economies, Germany and France. 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. Paul Hodges is the chairman of consultants New Normal Consulting.

09-Dec-2024