ICIS Supply and Demand Database

HOUSTON (ICIS)–With the suspension of the strike at US Gulf and East Coast ports until 15 January, carriers are urging customers to use extended gate times being offered by some ports to collect or deliver any urgent containers to terminals. The International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) reached a tentative agreement on wages late Thursday and will extend the current contract while they continue to negotiate other outstanding issues. Analysts at freight forwarder Flexport said the relatively short duration of the ILA strike means that the impact on the broader US economy has been limited. “If the strike had continued into next week, the ripple effects could have been massive,” Flexport said. “While the broader economic impact has been averted, the strike has made an immediate impact on the ocean and air markets.” The company said that during the strike, bookings to the US East Coast remained open, and they expect them to stay open. The only limitations were rail routings to the East Coast via Los Angeles, but Flexport expects they will soon resume operations as well. “Early reports indicated that each day of the strike would have added five to 10 days of port congestion,” Flexport said. “If you have urgent cargo, routing via the West Coast on rail or transloading in Los Angeles remains your best option to avoid potential congestion on the East Coast.” CONTAINER RATES FALL FURTHER, PACE SLOWS Global average rates for shipping containers fell by 5% this week, according to supply chain advisors Drewry and as shown in the following chart. But rates from east Asia and China to the US fell at a slower rate, as shown in the following chart. Rates to the West Coast fell by 4.23% while rates to the East Coast fell by 1.76%. Drewry was anticipating rates to the US would because of the strike. But with the strike paused, and because peak season demand was largely pulled forward, it is likely that rates will continue to see downward pressure. 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), are shipped in pellets. They also transport liquid chemicals in isotanks. LIQUID CHEM RATES STABLE TO SOFTER The US chemical tanker market was largely stable week over week, with slight decreases seen from the US Gulf to Asia for smaller parcels. Most market participants were preparing to attend the European Petrochemical Association (EPCA) conference in Berlin, so the market was quiet. According to a ship owner that will be attending the conference, the market is weak across all trade lanes and will remain soft for the short term. The ship owner said that the current trend will not change anytime soon as the heightened tension in the Middle East provides a lot of uncertainty. USG-Asia rates were also pressured lower by the increasing availability of space from outside tonnage entering the market to move larger cargoes. The trade lane is expected to remain weak through November. Rates on the USG/ARA trade lane have been driven largely by a weaker CPP market which allows that available tonnage capable of offering on the chemical market, thus adding to the availability of spot tonnage. Additional reporting by Kevin Callahan Thumbnail shows a containership. Image by Noushad Thekkayil/EPA/Shutterstock

04-Oct-2024

LONDON (ICIS)–Global Service International (GSI) CEO Francesco Zanchi discusses polyethylene terephthalate (PET) industry challenges and opportunities with ICIS PET editor Caroline Murray. Europe will combat overcapacity and rising imports with trade barriers Buyers delay switch to recycled PET (R-PET) due to price delta with virgin PET Supply and demand trends favor buyers Caroline interviewed Francesco on the sidelines of the GSI customer day PET Day at Artimino, Italy. Video interview by Caroline Murray Edited by Will Beacham

04-Oct-2024

LONDON (ICIS)–Senior Editor for Recycling, Matt Tudball, discusses the latest developments in the European recycled polyethylene terephthalate (R-PET) market, including: Italian monthly bales prices drop in latest auctions Colourless flake prices fall in Italy in October Cheaper PET puts pressure on R-PET sellers No signs of demand improvement in October

04-Oct-2024

SINGAPORE (ICIS)–Manufacturing output of China’s small to medium enterprises went back to into contraction mode in September, underscoring continued and widespread weakness in the world’s second-biggest economy. Caixin’s China Sept PMI falls to 49.3 from 50.4 in August More fiscal measures may be required Three big cities ease home-buying restrictions amid property slump No immediate turnaround of the country’s weak economic conditions can be expected notwithstanding the slew of economic measures recently announced. China’s manufacturing purchasing managers’ index (PMI) last month declined to 49.3, from 50.4 in August, according to a private survey conducted by Chinese private media group Caixin. A PMI number below 50 indicates contraction. The Caixin PMI surveys small and medium-sized enterprises (SMEs) and export-oriented enterprises located in eastern coastal regions, while the official PMI is tilted toward larger state-owned enterprises (SOEs). The small and medium manufacturers are worse off since Caixin’s September PMI reading was below the official number of 49.8, which was an improvement from August’s 49.1. In Caixin’s survey, the China's September PMI reversed the expansion recorded in August. For two months in the third quarter, factory output shrank, after managing to stay in expansionary mode since November 2023. Production at big factories, on the other hand, has been indicating contraction for five straight months, based on official PMI reading. “The market [in September] was characterized by diminished demand coupled with fierce competition,” Caixin Insight Group senior economist Wang Zhe said. Delays in supplier logistics, low demand for manufacturer purchases, and increased inventories of both raw materials and finished goods affected overall production in September, Wang said. “Across the board, the latest macroeconomic data have fallen short of market expectations,” the Caixin economist said. Falling underlying demand, heightening competition and subdued market conditions were cited as reasons for the decline in incoming new orders for Chinese manufactured goods, according to Caixin. “Softening economic conditions” overseas also negatively affected export orders, it added. A good number of petrochemical producers and their downstream end-users fall under the SME category. Reeling from continued demand weakness, some of these producers which have already been running at reduced capacity may have to cut output further. Pre-holiday restocking turned out weaker than expected, with market outlook post-holiday remaining largely bearish. Poor demand has kept China’s overall producers’ price index (PPI) in deflation territory for nearly two years STIMULUS MEASURES BOOST SENTIMENT Days before China went into a week-long National Day celebration, the People’s Bank of China (PBoC) announced a raft of measures, including lowering of interest rates on existing mortgages, to boost consumption. On 26 September, the Politburo of the Communist Party of China pledged fiscal measures to complement the effective monetary policy easing by the central bank amid growing concerns that the country will fail to achieve its 5% GDP growth target this year. The International Monetary Fund (IMF) revised up its growth forecast for the country in line with the government’s target in May, from 4.6% previously. It, however, warned of slower growth ahead considering China’s ageing population and slowed productivity expansion. Although the financial and commodities markets in China surged after the measures were announced, consumer confidence is still weak, which will affect their spending power, analysts said. A stimulus program, even if seemingly large, could have “a limited impact on growth”, according to analysts at Japanese brokerage Nomura. More durable and impactful measures, including increased fiscal spending, are needed to boost China's growth and address weak consumer and business spending. Spending during the week-long holidays from 1 October will thus be a gauge as to how the economic measures will impact consumer spending, Singapore’s UOB Global Economics & Markets Research said in a note on 30 September. In the same period in 2023, domestic tourism revenues totaled yuan (CNY) 753 billion ($107 billion), according to state news agency Xinhua. PROPERTY MEASURES MAY BE INSUFFICIENT Three large Chinese cities – Guangzhou, Shenzhen and Shanghai – eased house-buying restrictions on 29 September, according to Xinhua. Guangzhou completely removed restrictions on home purchases, while non-Shanghai residents will be allowed to purchase suburban homes if they have paid social insurance or individual income tax in the city for at least a year, instead of three years. Shenzhen also announced reduction in downpayment ratio and optimized district-specific home purchase restrictions. China's government hopes to tackle its years-long housing crisis via the fresh measures. But China’s economic worries may not be solved with these measures alone, ICIS senior consultant John Richardson said. Long-term challenges such as the end of the real-estate bubble and an ageing population will not be easily fixed with economic stimulus, he said in a blog post on 30 September. “The extent to which [China] can maintain its dominant role in global exports is also in question because of a much more difficult geopolitical environment,” he said. Insight article by Jonathan Yee and Pearl Bantillo ($1 = CNY7.02) Thumbnail image: At a port in Lianyungang, Jiangsu Province, China, on 2 October 2024. (Costfoto/NurPhoto/Shutterstock)

04-Oct-2024

HOUSTON (ICIS)–In only its third day, a strike by dock workers at US Gulf and East Coast ports is leading to idled trucks and growing numbers of container ships queuing outside of the ports. TRUCKING A trucking trade group, the American Trucking Associations (ATA), said that the strike has stopped all activity at five of the nation’s top 10 container ports and estimates that more than 60 container ships carrying nearly 500,000 containers scheduled for October delivery are now stuck in limbo. The ATA said there are 30,000 truckers registered to work just at the port of New York and New Jersey, which sees about 12,000 truck visits in a typical day. “Tens of thousands of more up and down the coasts are now sidelined by this strike,” the ATA said. The ATA said that the trucking industry is made up of small businesses with more than 95% of carriers operating 10 trucks or fewer. Todd Spencer, president of the Owner-Operator Independent Drivers Association, said American consumers will suffer the longer the strike goes on, but that independent drivers will also feel the pain. "The longer this labor strike drags out, the more harm is done to American consumers who rely on the trucking industry to deliver the goods they depend on,” Spencer said. “We encourage a quick resolution to this latest dispute and emphasize the need for specific discussions about how supply chain deficiencies stifle driver compensation, increase loading and unloading delays, and hurt highway safety.” CONTAINER SHIPS BACKING UP Ships are also backing up outside of the affected ports, according to publicly available ship tracking services. For example, there were about 51 vessels outside the entrance to Port Houston on 2 October, and about 65 vessels in the same area on 3 October. Alan Murphy, CEO, Sea-Intelligence, said a prolonged strike will have an impact on global capacity as carriers currently have 62 deep sea services that call on East Coast and US Gulf ports. Those vessels will have to wait at anchorage at the first port of call on their discharge schedule, Murphy said. “In addition to that there are vessels which have already commenced their discharge rotation and will have to wait at their second, third, or even fourth port of call, depending on how much of their schedule they have already completed prior to the strike taking place,” Murphy said. If the strike were to last four weeks, Murphy said that almost 7% of the global fleet will be tied up along the US East Coast, and the overall impact on the supply and demand equation will be very significant. EXCESSIVE SURCHARGES A chemical industry trade group, the Alliance for Chemical Distribution (ACD), sent a letter to US President Joe Biden criticizing excessive surcharges imposed by the carriers. In the letter, ACD President and CEO Eric Byer highlighted the excessive surcharges imposed – and profits made – by ocean shippers who strangely had direct involvement in the failed negotiations. “Neither side negotiated in good faith, effectively inviting a strike to take place,” Byer said. “For the ocean carriers, this is not surprising given the extreme profits they have been able to collect over recent years, putting them in a position to contentedly wait out a strike while the American economy loses billions of dollars a day.” Byer said that the ocean carrier member companies of the United States Maritime Alliance (USMX) are levying a myriad of surcharges on shippers, ranging from hundreds of dollars to $3,000/container, citing labor disruptions as the cause. “Through these surcharges, the ocean carriers are profiting from a crisis they played a direct role in creating,” Byer said. STALLED NEGOTIATIONSMeanwhile, the two sides are not currently negotiating. The International Longshoremen's Association (ILA) is representing the dock workers, and USMX is representing the ports. USMX directors include representatives of major shipping lines, including Evergreen Shipping, Maersk, Hapag-Lloyd, Ocean Network Express, CMA/CGM, COSCO Shipping Lines, and Mediterranean Shipping Company (MSC). USMX said it continues to focus on ratifying a new master contract. “Reaching an agreement will require negotiating – and our full focus is on how to return to the table to further discuss these vital components, many of which are intertwined,” USMX said. “We cannot agree to preconditions to return to bargaining – but we remain committed to bargaining in good faith to address the ILA’s demands and USMX’s concerns.” IMPACTS TO CHEM MARKETS The strike is already affecting the US chemicals industry, with PE exports to Brazil being put on hold. The polyvinyl chloride (PVC) Industry is concerned as all US Gulf PVC exports move out of one of the impacted East Coast ports. In the polyethylene terephthalate (PET) market, imports of PET resins have already been diverted to the US West Coast in anticipation of the work stoppage. Focus story by Adam Yanelli Visit the ICIS Logistics – impact on chemicals and energy topic page

03-Oct-2024

HOUSTON (ICIS)–Negotiations have yet to resume between union dock workers and the US Gulf and East Coast ports as a costly strike enters its second day. The International Longshoremen's Association (ILA), representing dock workers at ports from Maine to Texas, and the United States Maritime Alliance (USMX), representing the ports, posted statements to their websites accusing each other of being unwilling to negotiate. “We have demonstrated a commitment to doing our part to end the completely avoidable ILA strike,” USMX said. “Our current offer of a nearly 50% wage increase exceeds every other recent union settlement, while addressing inflation, and recognizing the ILA’s hard work to keep the global economy running. We look forward to hearing from the union about how we can return to the table and actually bargain, which is the only way to reach a resolution.” The ILA responded by saying the USMX offer fails to address the demands of union labor. “They might claim a significant increase, but they conveniently omit that many of our members are operating multi-million-dollar container-handling equipment for a mere $20 an hour,” the ILA said. “In some states, the minimum wage is already $15. Furthermore, our members endure a grueling six-year wage progression before they can even reach the top wage tier, regardless of how many hours they work or the effort they put in.” One of the biggest sticking points remains the union’s steadfast stance against any kind of automation at the ports – full or semi – that would replace jobs or historical work functions. "We will not accept the loss of work and livelihood for our members due to automation,” the ILA said. “Our position is clear: the preservation of jobs and historical work functions is non-negotiable.” FMC OFFERS SERVICES With carriers already announcing congestion surcharges, the US Federal Maritime Commission (FMC) is offering assistance for enforcement and litigation services that individuals and companies could find helpful in seeking relief from current supply chain challenges. FMC regulations require that demurrage and detention fees serve as legitimate financial incentives to encourage cargo movement. Pursuant to these requirements, the FMC will scrutinize any demurrage and detention charges assessed during terminal closures. The FMC advised all regulated entities on 23 September that all statutes and regulations administered by the commission remain in effect during any terminal closures related to the strike. GOVERNMENT INTERVENTION REQUESTED Meanwhile, the American Chemistry Council (ACC) and the Alliance for Chemical Distribution (ACD) continue to request government intervention to end the work stoppage. “We urge the White House to do everything possible to prevent this major shockwave from rippling through the American supply chain and hurting US trade by working with both parties to resume contract negations,” Chris Jahn, ACC president and CEO, said. Jahn noted that about 90% of the waterborne chemical shipments that move in and out of the US flow through the East Coast and US Gulf Coast ports. Eric R Byer, president and CEO of the Alliance for Chemical Distribution (ACD) also urged President Joe Biden to act. “ACD urges the Biden Administration to swiftly intervene to resolve this strike by reopening the ports and getting both sides to reach an agreement to prevent further supply chain disruptions and avoid significant economic consequences,” Byer said. Biden, in a statement released last night, said he supports the collective bargaining process as the best way for workers to get the pay and benefits they deserve and urged USMX to return to the bargaining table with a fair offer. “Ocean carriers have made record profits since the pandemic and in some cases, profits grew in excess of 800% compared to their profits prior to the pandemic,” Biden said. “Executive compensation has grown in line with those profits and profits have been returned to shareholders at record rates. It is only fair that workers, who put themselves at risk during the pandemic to keep ports open, see a meaningful increase in their wages as well.” Biden also said his administration will be watching for any price gouging activity that benefits foreign ocean carriers, including those on the USMX board. IMPACTS TO CHEM MARKETS The strike is already affecting the US chemicals industry, with PE exports to Brazil being put on hold. The polyvinyl chloride (PVC) Industry is concerned as all US Gulf PVC exports move out of one of the impacted East Coast ports. In the polyethylene terephthalate (PET) market, imports of PET resins have already been diverted to the US West Coast in anticipation of the work stoppage. Focus story by Adam Yanelli Visit the ICIS Logistics – impact on chemicals and energy topic page Thumbnail image shows a container ship.

02-Oct-2024

LONDON (ICIS)–Underlying demand for European recycled agglomerates has increased throughout 2024, and is expected to rise sharply as pyrolysis-based chemical recycling scales. The majority of recycled polyolefin agglomerates are currently used by mechanical recyclers. Nevertheless, pyrolysis based chemical recyclers are increasingly targeting agglomerates as a feedstock. While chemical recycling can process waste types that it would be difficult or impossible for mechanical recyclers to use, though, it is a myth that there is no link between the input waste quality and output quality of chemical recyclers, and that chemical recyclers can use any form of waste. Take pyrolysis-based chemical recycling as an example. Pyrolysis-based plants targeting mixed plastic waste as feedstock – with a focus on polyolefins – currently account for ~60% of all operating chemical recycling capacity in Europe according to ICIS Recycling Supply Tracker – Chemical. Typically, pyrolysis-based processes aim to limit chlorine content in bales- due to corrosion risks –  polyethylene terephthalate (PET) content in bales – because it doesn’t pyrolyse and it creates oxygenation – nylon and flame retardants – which also oxygenates the process. They also typically aim to minimise moisture content, because loose water molecules in the reactor can cause changes to pressure values. The production of pyrolysis oil requires an inert atmosphere (i.e. heating in the absence of oxygen). The quality of input waste is one of the largest dictators of output quality across pyrolysis oil grades, dictating the type of impurities and boiling point. Boiling point, chlorine, sulphur, fluorine, nitrogen and oxygen contents are among the key determiners of pyrolysis oil prices – with an average spread of €1,150/tonne currently being seen between the lowest value (tyre-derived) and highest value (naphtha substitute) grades of pyrolysis oil that ICIS prices. Any sorting that needs to be done to remove the presence of these materials in the input bale adds additional cost and slows throughput. Pyrolysis oil can be – and often is – run through an upgrader or purifier to enhance its properties, but the quality of input waste has an impact both on yield and quality – and, therefore, profitability. This is one of the reasons the environmental impact of pyrolysis oil remains unclear and varies from producer to producer. While pyrolysis oil producers continue to test with a wide-range of waste input qualities, many producers are turning to agglomerations of polyolefins, and it is expected to become a leading feedstock for pyrolysis-based chemical recycling in the mid-term. This is in response to some of the challenges chemical recyclers have found with pre-treatment and sorting on site. This is particularly connected to the need to adapt processes continuously to account for continually shifting feedstock mixes. Pre-treating and sorting at waste manager level creates economies of scale and prevents the slowdown in throughput sometimes associated with chemical recyclers sorting on site. The use of agglomerates helps pyrolysis oil producers: Limit impurities such as sulphur, fluoride, oxygen, chlorine and nitrogen in finished pyrolysis oil – which typically results in a higher realizable price for that pyrolysis oil, and greater feasibility for use in a cracker Enable placing feedstock straight into the reactor and thereby save on capital expenditure Ensure a more consistent feedstock, with pre-treatment handled at waste managers which benefit from economies of scale and long-standing technical know-how Avoid slowing throughput and the expense of onsite sorting Avoid degradation and allow players to stockpile material ahead of plant scale-ups Target specific waste input mixed (although this can result in additional cost premiums) In response to the growing interest in recycled polyolefin agglomerates, ICIS has launched a new recycled agglomerates price index as part of its mixed plastic waste and pyrolysis oil (Europe) pricing service. The new index is for spot prices of agglomerated forms of mixed polyolefin material containing at least 95% polyolefin content and a maximum moisture content of 3%. It is assessed weekly on an ex-works Europe basis. The mixed plastic waste and pyrolysis oil (Europe) pricing service also offers pricing for mixed polyolefin bales, high plastic content refuse derived fuel (RDF) bales, reject unsorted plastic waste bales from municipal recover facilities (MRFs), and 3 spot price series for pyrolysis oil (tyre derived, non-upgraded, and naphtha substitute). For more information on these new series, or to share feedback, please contact Mark Victory at mark.victory@icis.com.

02-Oct-2024

SINGAPORE (ICIS)–South Korea’s overall export growth slowed in September, as petrochemical exports dipped 0.6% year on year to $3.84 billion, fueling expectations of a potential monetary policy easing next week. Total exports grew for 12th straight month in September Economists expect central bank to soon cut its benchmark interest rate Overall shipments to China, US surge in September The country’s headline export growth slowed to 7.5% year on year in September at $58.8 billion, down from 11.4% in August, data from the Ministry of Trade, Industry and Energy (MOTIE) showed on 1 October. This marks a full year of continuous growth for South Korean exports, fueled by record-high semiconductor sales and the strongest September performance ever for automobile exports. Exports of chemical, steel, and oil products weakened in September, with falling oil prices dragging down the export prices of those products, according to Japan’s Nomura Global Markets Research. The slowdown was mainly attributed to fewer working days due to a three-day public holiday on 16 September. South Korea’s automobile industry saw a resurgence in September, with auto export growth rebounding to 4.9% year on year after contracting by 4.3% in August. This positive shift followed three consecutive months of decline and was driven by a recovery in demand for environmentally friendly cars like hybrids and electric vehicles, according to Nomura. The return to growth also reflects a normalization of production schedules after disruptions caused by summer breaks and labor strikes, which had previously hampered the industry, it added. Meanwhile, South Korea’s import growth also decelerated to 2.2% year on year in September, down from 6.0% in August due to weaker energy imports. This resulted in a wider trade surplus of $6.7 billion, compared with August’s $3.83 billion. By region, exports to China reached their highest point this year at $11.7 billion, marking a 6.3% increase, driven by demand for semiconductors and wireless communication devices, according to MOTIE. This surge also led to a trade surplus of $0.5 billion with China, MOTIE data showed. Shipments to the US also hit a record high for September with $10.4 billion in exports, a 3.4% rise, and extended its 14-month growth streak. Exports to the EU climbed 5.1% to reach $6 billion, fueled by strong demand for IT goods. STRONG EXPORTS TO SUPPORT INTEREST RATE CUT IN OCTOBERWith solid exports easing recession concerns amid weak consumption, the Bank of Korea (BOK) is expected to deliver only a 25-basis point cut at the upcoming 11 October meeting to ease the household financial burden and aid consumption growth, according to Nomura. “However, although tighter macroprudential measures are having an impact in slowing housing price inflation and household debt growth, we expect the BOK to remain focused on controlling housing prices and market expectations about the number of rate cuts in this easing cycle.” Separately, data from Wednesday showed that South Korea’s consumer price index (CPI) slowed more than expected in September, rising 1.6% year-on-year, the weakest annual increase since February 2021. This brings the inflation rate below the BOK's 2% target, fueling further expectations of an interest rate cut. Core CPI, which excludes volatile food and energy items, rose by 2.0% year on year, slower than the 2.1% expansion the previous month and the weakest since November 2021. The BOK has held interest rates at a 16-year high of 3.50% since August, citing financial stability concerns amid a hot housing market. The BOK in July slashed its 2024 growth forecast to 2.4% from 2.5% previously, after Asia's fourth-largest economy unexpectedly contracted in the second quarter. South Korea’s economy posted a slower second-quarter annualized growth of 2.3%, compared with the 3.3% pace set in the preceding quarter amid sluggish domestic consumption. Focus article by Nurluqman Suratman

02-Oct-2024

Week-long heatwave in gas production states Hot summer may intensify export-domestic supply debate Darwin and Broome temperatures soar SINGAPORE (ICIS)–Australian Bureau of Meteorology (BOM) has issued warnings for a severe-to-extreme heatwave in parts of Northern Territory (NT) and Western Australia (WA) from 30 September, close to LNG production hubs in Darwin and at the Woodside-operated North West Shelf. The extreme heatwave will last for six days starting 2 October over parts of northern NT, with a larger range of the region and areas near North West Shelf experiencing the severe heatwave from 30 September to 8 October, according to the BOM forecast. The weather data monitor said Darwin had the “hottest September in more than 100 years”. High temperatures pose risks to cooling facilities at liquefaction plants, which may curb LNG output. This has not yet happened to LNG facilities in the areas, according to operators. “We do not expect a significant impact to Ichthys LNG production as the heatwave is expected to last approximately 1 week and peaking today/tomorrow,” an Inpex spokesperson told ICIS 2 October. The Chevron-operated Gorgon and Wheatstone gas facilities are “not subject to a current heatwave assessment” due to their distance from the heat center Broome, Chevron’s spokesperson told ICIS. A Woodside spokesperson said that, "we are not experiencing any unusual weather in Karratha, where our operations are located." SUPPLY TENSION Although the areas affected by the heatwave are not densely populated, hot weather ahead this upcoming southern hemisphere summer could lead to increased electricity use for air-conditioning and industrial cooling. Australia’s 2023/24 summer electricity demand was 776MW more than 2024 winter, according to Australian Energy Regulator data. Should the upcoming summer experience high temperatures, which is possible according to the BOM forecast, the summer-winter demand gap would further widen. Source: Australia Bureau of Meteorology Energy resource exports from Australia have been challenged because domestic electricity users pay premiums for local coal and gas. However, WA state recently eased an onshore gas export ban that had been in place since 2020. The government has been urging LNG exporters to secure domestic supplies in the context of growing demand in its east coast. Gas supply would fall short of domestic demand from 2027, the Australian Competition and Consumer Commission (ACCC) said in its latest report.

02-Oct-2024

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. We now have 32 months of trade and pricing data since the end of the 1992-2021 Chemicals Supercycle and so it is worth taking stock of what the numbers are telling us. And as we have 32 months of information to draw on since the end of the Supercycle, which is from January 2022 until August 2024, it is worth making like-for-like comparisons with the 32-month period immediately before the end of the Supercycle – May 2019 until December 2021. Focusing just on polypropylene (PP) with the story the same in many other products: South Korea and Taiwan saw declines in PP sales turnover in China of $1.1 billion and $694 million respectively when this two 3-month periods are compared. Despite its feedstock advantages, Saudi Arabia saw its turnover fall by $681m followed by Singapore at $633m and Thailand at $613 million . Losses across China’s top ten trading partners totalled $4.6bn. The only winner was, not surprisingly, the Russian Federation with a turnover gain of $102 million. Another symptom of a chronically oversupplied market has been a collapse in margins as another chart in today’s post illustrates: In May 2019-December, the average of both naphtha and PDH-based PP margins was $281/tonne, but this fell to just $12/tonne in January 2022-September 2024. And this latter period has involved many weeks of negative margins. A pivotal turning point in global chemicals markets, the most important since 1992, was the Evergrande Moment. And yet far are too few references to this essential context. China’s debts and its demographics told us from as early as 2011 that a steep fall in economic growth had to happen. We also knew from 2014 onwards, thanks to a shift in government policy, that much-greater chemicals self-sufficiency was on the way. This gave producers plenty of time to build strategies that reduced their dependence on China. But how many companies took note of what the demographic and debt trends were telling us? How many took note of the threat to China’s exports from 2018 onwards as the geopolitical environment deteriorated? My suspicion is that far too few companies were ready for the changes now well underway, which are reflected in the above demand, supply, sales turnover and margins data. This was because people chose to believe misleading nonsense about the “rise of China’s middle class” when the numbers on China’s per capita incomes, the country’s birthrate and the rise in its debts exposed the myth. The chemicals industry is science and data driven except, seemingly, in one critical area:  Macroeconomics. 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.

02-Oct-2024