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ICIS news

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US manufacturers ‘uniformly optimistic’ about 2024 activity – Fed Beige Book

SAO PAULO (ICIS)–US manufacturers were "uniformly optimistic" in March about the prospects for the next 12 months on expected higher sales, the country’s Federal Reserve (Fed) Beige Book said on Wednesday. The Beige Book is a summary of US economic activity during the past six weeks among the 12 districts, one of which is the Federal Reserve Bank of Dallas. That bank includes all of Texas and northern Louisiana, the home of many petrochemical plants and refineries. The Beige Book published on Wednesday contains survey responses collected in the six week to 8 April. US manufacturing activity was in the doldrums in 2023 and beginning of 2024, but the manufacturing PMI index for March showed activity expanding for the first time in 17 months. Earlier this week, official data from the Fed showed manufacturing output expanding 0.5% in March. Increased recent demand may have been one of the reasons for manufacturers to feel reasonably optimistic for the months ahead. “Contacts were uniformly optimistic for the remainder of 2024, projecting steady to moderately higher sales moving forward; in one case, however, that still meant that total sales in 2024 would fall short of their 2023 levels,” said the Fed. “The positive forecasts were based largely on firms’ own recent demand trends, although one contact cited the prospects of productivity gains from AI and expected cuts in the federal funds rate as additional sources of optimism.” For the six weeks covered in the report, overall US manufacturing revenues were practically unchanged, with half of respondents reporting moderate gains in sales over the cycle and the other half experiencing moderate losses. In the Dallas district – the 11th District in the Fed’s terminology – the economy expanded modestly, propped by services and housing. However, the district’s manufacturing output “declined slightly”, with job creation slowing. “Employment growth slowed as wages, input costs, and selling prices grew at a moderate pace. Overall, Texas firms noted an uptick in uncertainty,” said the Fed. OVERALL, STEADY The overall US economic continued expanding in the six weeks to 8 April, with 10 out of 12 districts experiencing “either slight or modest” economic growth, up from eight in the previous report. Some downside economic risks remain, however, with labor shortages still being mentioned, although with the expectation that over the course of the next 12 months a more balance labor market could emerge. “On balance, contacts expected that labor demand and supply would remain relatively stable, with modest further job gains and continued moderation of wage growth back to pre-pandemic levels,” said the Fed. Price increases were practically unchanged from the last report, with logistics disruptions in the Red Sea and the collapse of Baltimore’s Key Bridge not leading yet to a significant increase in costs, despite some shipping delays. “Another frequent comment was that firms’ ability to pass cost increases on to consumers had weakened considerably in recent months, resulting in smaller profit margins. Inflation also caused strain at nonprofit entities, resulting in service reductions in some cases,” concluded the Fed. “On balance, contacts expected that inflation would hold steady at a slow pace moving forward. At the same time, contacts in a few districts – mostly manufacturers – perceived upside risks to near-term inflation in both input prices and output prices.” Thumbnail image shows an ExxonMobil plant in Beaumont, Texas. Photo courtesy of ExxonMobil

17-Apr-2024

PODCAST: The recent US oil boom and the industry's future in a key election year

LONDON (ICIS)–Eloise Radley, Energy Market Reporter, and Ignacio Sotolongo, Senior Editor at ICIS, sit down to discuss how geopolitics have impacted US oil production in recent years and how things could change if we see a new administration in November.

17-Apr-2024

Braskem, Lummus to study e-cracking at Brazil facility

SAO PAULO (ICIS)–Polymers major Braskem and US petrochemicals engineering services provider Lummus are to carry out a joint study with US engineering services provider Lummus to electricity one of its steam crackers in Brazil. Financial details were not disclosed. The two companies did not disclose which facility Lummus’ proprietary technology for e-cracking will be tested. Lummus commercializes its proprietary technology under the branded name SRT-e. “The SRT-e electric cracking heater leverages Lummus’ proven Short Residence Time (SRT) technology modified to operate using electricity and incorporates a modular unit-cell design that can be replicated for plants to accommodate any commercial capacity,” said the two companies. “The technology uses all commercially demonstrated components, plus an optimum heat flux profile leading to a longer radiant coil life and longer run length. In addition, decoking can be carried out on a unit-cell basis so maintaining a spare heater is not required.” Steam cracking is one of the most energy-intensive activities within a petrochemical plant. The sheer amount of energy required has so far made crackers’ electrification elusive. Some petrochemicals majors are developing experimental e-cracking units. In 2022, Dow and Shell announced one test unit in the Netherlands. Also in 2022, Germany’s BASF and Saudi Arabia’s SABIC, together with industrial gases major Linde, announced another test unit at BASF’s flagship Ludwigshafen site.

17-Apr-2024

PODCAST: EU close to signing off most important packaging regulation in decades

BARCELONA (ICIS)–Europe is finalizing the Packaging and Packaging Waste Regulation (PPWR), with far-reaching implications for both virgin and recycled polymer producers. Most significant EU packaging legislation in decades Includes binding targets for recycling and recyclability PPWR will have huge impact on virgin and recycled packaging sectors Legislation in final stages but may not be passed before EU elections in June Working groups need to be set up across recycling value chains In this Think Tank podcast, Will Beacham interviews ICIS senior recycling editor Mark Victory, 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.

17-Apr-2024

PODCAST: Asia recycled polymers slow in 2023; legislation, waste management to shape future

SINGAPORE (ICIS)–Asia recycled polymers markets were sluggish for the most part in 2023. In early 2024 too, challenges that dim the short-term outlook persist. Some legislations surrounding recycling were also put in place in the region over the last few years, but the obstacles that limit the growth of this sector still remain. In this chemical podcast, ICIS senior editor Arianne Perez and analysts Joshua Tan and Chua Xin Nee share their insights on the topic.

17-Apr-2024

Singapore March petrochemical exports fall 3.6%; NODX slumps 20.7%

SINGAPORE (ICIS)–Singapore's petrochemical shipments in March fell by 3.6% year on year to Singapore dollar (S$) 1.16 billion ($853 million), extending the 2% contraction in the previous month and weighing on overall non-oil domestic exports (NODX), official data showed on Wednesday. March non-electronic NODX down 23.2% year on year March manufacturing PMIs show continued expansion Singapore economy forecast to grow 1.0-3.0% in 2024 Overall exports of chemicals and chemical products in March fell by 37% year on year to S$3.54 billion, reversing the 5.8% expansion in February, Enterprise Singapore said in a statement. The country's NODX for the month fell by 20.7% – a much steeper decline from February’s 0.2% contraction – to S$14 billion because of a high base a year ago, with shipments to most major trading partners posting declines. March non-electronic NODX, which includes petrochemicals and pharmaceuticals, fell by 23.2% year on year to S$11.2 billion. Overall NODX to seven out of Singapore's top 10 markets fell in March, but shipments to Hong Kong, Taiwan and China rose. Singapore is a major manufacturer and exporter of petrochemicals in southeast Asia. Its petrochemicals hub Jurong Island houses more than 100 global chemical firms, including energy majors ExxonMobil and Shell. In the first quarter, the country’s economy grew by 2.7% year on year in the first quarter, accelerating slightly from the 2.2% expansion in the preceding quarter, according to official advance estimates. On a quarter-on-quarter seasonally adjusted basis, Singapore’s economy expanded by 0.1%, extending the 1.2% expansion in Q4. The manufacturing sector in Q1 grew by 0.8% year on year, moderating from the 1.4% expansion in the previous quarter. "Within the sector, output expansions in the chemicals, precision engineering and transport engineering clusters more than offset output contractions in the electronics, biomedical manufacturing and general manufacturing clusters," the Ministry of Trade and Industry (MTI) said. For the whole of 2024, Singapore's economy is expected to expand by 1.0-3.0%, compared with actual GDP growth of 1.1% growth in 2023, the ministry said. Manufacturing activity in Singapore improved in March, with the Singapore Institute of Purchasing and Materials Management (SIPMM) purchasing managers' index (PMI) inching up to 50.7, marking the seventh straight month of expansion. In contrast, a separate survey of private manufacturers by financial information and services provider S&P Global showed Singapore’s March PMI eased to 55.7 from 56.8 in February. Focus article by Nurluqman Suratman Thumbnail image: Singapore harbour and the Marina Bay Sands Hotel, 16 March 2023. (Franz Neumeier/imageBROKER/Shutterstock) ($1 = S$1.36)

17-Apr-2024

Japan Mar chemical exports rise 3.9% as yen continues to weaken

SINGAPORE (ICIS)–Japan's chemical exports rose by 3.9% year on year to yen (Y) 1.03 trillion in March, supported by higher plastic materials shipments abroad, amid the continued weakness of the yen, official data showed on Wednesday. The country's exports of plastic materials rose by 19.3% year on year to Y297 billion in March, Ministry of Finance (MOF) data showed. By volume, exports of plastic materials rose by 7.6% year on year to 513,959 tonnes. Shipments of organic chemicals, meanwhile, slipped by 2.2% year on year to Y199.4 billion in March. Exports of motor vehicles rose by 15.8% year on year to Y1.5 trillion in March, while shipments of motor vehicle parts were up by 3.7% at Y349 billion. Japan's overall exports rose by 7.3% year on year to Y9.47 trillion in March, up for the fourth straight month, while imports were down by 4.9% at Y9.1 trillion. This resulted in a trade surplus of around Y366 billion, the first in three months and reversing the around Y378 billion deficit recorded in February this year. By destination, Japan's overall exports to the US rose by 8.5% year on year while those to China were up by 12.6%. WEAK YEN PROVIDES TAILWIND FOR EXPORTSThe March trade data follows the yen sinking hit 34-year lows to the dollar beyond 154 yen this week as hopes of quick US interest rates receded amid persistent inflation. US Federal Reserve Chair Jerome Powell, speaking at the Washington Forum on the Canadian Economy on 16 April, said the US economy has not seen inflation come back to the central bank’s goal, pointing to the further unlikelihood that interest rate cuts are in the offing anytime soon. At 01:33 GMT, the yen was trading at 154.62 to the dollar. The US dollar extended gains on 16 April, with the US Dollar Index (DXY) rising to highs of 106.51 before closing around 106.06. Higher interest rates in the US make dollar-denominated assets more attractive due to higher yields compared to Japanese assets. Japan's finance minister Shunichi Suzuki on 16 April said that he is closely monitoring the yen's depreciation and are ready to implement all necessary measures to address the situation if needed. Japanese authorities intervened in the currency market in 2022 to purchase the yen on three occasions. "Jawboning from officials appeared to be an everyday affair with markets largely ignoring them for now as the move higher appears to be in line with recent market developments – higher US treasury yields while the Bank of Japan is still perceived to normalise slowly," Singapore-based OCBC Global Markets Research said in a note. The Bank of Japan on 19 March ended eight years of negative rates, ending the country’s historic era of negative interest rates, but this has failed to stop the slide in the yen. In a statement announcing the policy change, the central bank said that the economy has “recovered moderately” and that it is “highly likely that wages will continue to increase steadily.” Focus article by Nurluqman Suratman

17-Apr-2024

LOGISTICS: Maersk to resume Panama Canal transits for OC1 service on 10 May

HOUSTON (ICIS)–Global container shipping major Maersk will resume Panama Canal transits for its OC1 service beginning 10 May, ending its “two-loop” setup it established in January because of transit restrictions brought on by a persistent drought. Maersk ceased transiting the canal in January for the service connecting Asia-Pacific and the US East Coast and instead transported containers across Panama using railroads. The company said it is taking the action because of the onset of the rainy season in the region and after the Panama Canal Authority (PCA) added three more daily slots based on the present and projected water levels in Gatun Lake. The PCA said it is optimistic that traffic through the canal could return to normal in 2025 as current forecasts indicate that steady rainfall will arrive later this month and continue during the rainy season. The PCA said all future plans remain contingent on how much rainfall comes and water levels in Gatun Lake. Peter Sand, chief analyst at ocean and freight rate analytics firm Xeneta, said he thinks there is still a long way to go before trade lanes via the Panama Canal become normal. “There may be projections for increased rainfall but at the moment they are just that – projections,” Sand said. “If water levels do not rise then it will be interesting to see how this plays out and whether Maersk can stick to this timeline.” Container ships and costs for shipping containers are relevant to the chemical industry because while most chemicals are liquids and are shipped in tankers, container ships transport polymers, such as polyethylene (PE) and polypropylene (PP), which are shipped in pellets. Some liquid chemicals are also shipped on container ships using isotanks. Please see the Logistics: Impact on chemicals and energy topic page

16-Apr-2024

VIDEO: European gas insight outlook week 16

LONDON (ICIS)–Gas in Focus deputy editor Marta Del Buono talks about key drivers for the current weeks affecting European gas market: Increasing geopolitical tensions support European gas prices ICIS technical analysis also indicates bullish sentiment across commodities Below average temperatures and below solar generation in Germany add support

16-Apr-2024

Argentina’s lower rates helping central bank shore up balance sheet at savers’ expense – economist

SAO PAULO (ICIS)–Argentina’s latest cut to interest rates had more to do with shoring up the central bank’s balance sheet, possible thanks to currency controls implemented by the prior Administration, than the actual control of price rises, according to the director at Buenos Aires-based Fundacion Capital. Carlos Perez said the so-called Cepo currency controls limiting the ability to buy or sell any foreign currency may be causing losses for savers getting returns on their deposits below the rate of inflation, but they are helping the central bank to kick off a much needed shoring up of its balance sheet. Effectively, savers who have their pesos in the Argentinian banking system are paying with their losses certain stabilization for the central bank's balance sheet. Stability is something the Banco Central de la Republica Argentina (BCRA) could do much with. First introduced by Cristina Fernandez de Kirchner’s cabinet in 2011, the restrictions became informally known as Cepo cambiario (Spanish for 'exchange clamp'). They were lifted by the center-right cabinet of Mauricio Macri in 2015 but implemented again by his successor Alberto Fernandez in 2020. Argentina’s new President Javier Milei blasted the Cepo controls during the electoral campaign and has promised to lift them in due course but, for now, some old regime tools are coming in handy to shore up the new regime. Last week, the BCRA lowered the main interest rate benchmark from 80% to 70%. One day after that, the country’s statistics body Indec said the annual rate of inflation had jumped to nearly 290% in March, although it noted a fourth consecutive slowdown in monthly price increases. See bottom graphs for monthly and annual inflation rates. Lowering rates amid rocketing inflation: just the opposite of what is meant to be done, as the global inflation crisis has just showed us. MAKING SENSE OF IRRATIONALSo, while trying to get Argentina back into the realm of "normal economic policy", according to Perez, some irrational measures are still being used. But, at least, the central bank is quickly consolidating its position and starting to resemble a normal central bank, the economist went on, and not just the printer of money, or lender of last resort, it had become under the prior Administration, who used it to finance its recurrent spending, fueling inflation along the way. Milei’s two more controversial proposals – dismantle the central bank and dollarize the economy – are now forgotten: Argentina was far from having the necessary dollars to dollarize, and the central bank, like in any economy, has in these four months proved a useful tool to start stabilizing runaway inflation. Perez said the current interest rates – nominally, monthly at around 5% – are well detached from the monthly rate of inflation, now at around 11%. Effectively, savers’ deposits are losing 6% of their value. But this sacrifice, added the economist, had to be seen considering the wider stabilization of the system. “In Argentina right now we have economic variables which are running at speed, like inflation; others which are walking, such as the interest rates; and others which are crawling, such as the peso's official exchange rate,” said Perez. “In this situation, Cepo controls take center stage. By law, most deposit holders have almost no way to dollarize their savings, for instance. Their money is imprisoned, so to speak. Thus, the central bank is effectively cleaning up its balance sheet by liquidizing little by little the liabilities it holds.” Financial institutions and banks will place their deposit holders’ savings within the central bank, like in any other economy; the Argentinian specific feature lies in that the bank itself is charging savers by keeping their returns well below inflation. Milei has hinted at lifting the Cepo controls by mid-2024 – but it remains to be seen whether more sacrifices from suffering savers will be required. It is worth noting that a lot of Argentinian money left Argentina years ago. Some estimates say Argentinians hold around $250 billion in assets abroad. “Therefore, the logic behind a real negative interest rates can only be found in the Cepo system. If the economy was free of those restrictions, we would be probably facing a massive capital flight, now contained by the law,” said Perez. “Will the government lift the Cepo system? It will be facing a dilemma. While Cepo is in place, a progressive clean-up of the central bank’s balance sheet can take place. Without restrictions, returns on deposits will have to match or surpass the inflation rate, if a large-scale capital flight is to be avoided.” INFLATION DOWNSo, asking savers to make sacrifices is one leg of the plan to stabilize the central bank’s balance sheet and, with it, the economy. To stabilize runaway inflation, a second leg has been stopping all issuance of bonds by the central bank to finance recurrent public spending, a vice the prior Administration became too addicted to. Printing money became virtually the sole financing method for the Administration as finding investors abroad willing to buy Argentinian debt became a rarity and the IMF’s bailout would only partly cover the spending needed in what was at the time one of the most subsidized economies. A third leg has come from the fiscal adjustment implemented by the government. Milei’s “chainsaw” which propelled him to fame when he was just a libertarian, media-prone economist, has started making its early rounds: subsidies have been severely curtailed and recurrent spending is on the cards with a plan to implement large-scale redundancies among civil servants. ECONOMIC RULEBOOK, AT LAST The recession is hitting hard the real economy, said Perez, but voters who overwhelmingly backed Milei seem, at least for the moment, be putting up with the pain. This time, Argentinian world-famous, violent-at-times, media-grabbing street protests have so far been absent. Global investors and the IMF alike also like the tune of what is being done. But no-one hides that the recession is hitting consumers hard, and poverty levels have jumped over 50%, according to official figures. With the hit to consumers' purchasing power comes the hit to the petrochemicals-intensive manufacturing sectors, which official figures confirm are registering hefty falls in output. Petrochemicals sources in Argentina have said to ICIS this week they are registering falls in demand between 30% and 50%; for now, stocks are still catering for depressed demand. Perez, ordinary voters struggling to make ends, and global investors alike are for now giving a vote of confidence to a cabinet which is playing by the book set out in the electoral campaign. Milei never shied away from the fact it had to be a "brutal" adjustment if past errors were to be mended. Perez said that, at least, the measures being implemented are all within the realm of ordinary economic policy, a terrain Argentina had left years ago, he added. “The first four months have been quite positive. From one day to the other, Argentina went from an irrational economic policy to a reasonable one,” he said. “The fiscal adjustment has been severe, relative prices are starting to adjust positively, the central bank is shoring up its reserves – albeit they are still in the red; the relationship with the IMF is good; and the cabinet is working hard to shore up its economic policy with political support in Parliament, where Milei’s party is in a minority.” Argentina’s fertilizers- and export-intensive agricultural sector should also register a positive harvest in the second quarter, which will continue propping up much-needed dollars reserves within the central bank. “Right now, the positive financial feelings contrast with how hard the recession is hitting the real economy. At Fundacion Capital we expect GDP to contract by around 6% in Q1, year on year. In Q2, output will also fall, but the hit will be lessened by agriculture,” said Perez. “The first half of 2024 will be very hard for ordinary Argentinians. And let’s not forget, the challenges for the government remain daunting: the fiscal adjustment still lacks sustainability, i.e. political support. And despite the improvements, the central bank’s reserves are still negative: a genuine, sustainable flow of dollars into Argentina is yet to take place.” ARGENTINA MONTHLY INFLATION RATE In % change Source: Indec ARGENTINA ANNUAL INFLATION RATEIn % change Source: Indec Front page picture source: Shutterstock Interview article by Jonathan Lopez

16-Apr-2024

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