Epoxy resins

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. Chemical companies, as my ICIS colleague Kevin Swift and I write in today’s blog, need “to write their own story”. This can only come from a much more rigorous approach to scenario planning from the C-Suite level down that needs to then permeate to every decision at every level of an organisation, from long-term investment planning right down to even month-by-month pricing and production- volume decisions. And key to building proper scenarios, now that the Chemicals Supercycle, is understanding demographics as demographics are chemicals demand destiny. Chemicals demand is of course the number of people multiplied by per capita consumption. Because of the increasing uncertainty about the rate at which most of the world’s population is going to age and shrink, one set of scenarios on future population levels makes no sense at all. Front and centre of the global demographics crisis is China given that in 2024, ICIS expects China to drive 40% of the world’s polymers demand from just 18% of the global population. There is a huge variance in estimates of China’s population decline that you simply must factor in. For example, China’s population may decline to 767 million by 2100 or just 373 million! Kevin’s scenario modelling on China’s demographics and its polymers demand is an important starting point for your boardroom discussions: Under the ICIS Base Case, major resins demand rises from 103.1 million tonnes in 2020 and starts to mature in the 2030s, reaching 188.6 million tonnes in 2050. After 2050, a falling population and evolving market/economic dynamics adversely affect demand, which falls to 89.3 million tonnes in 2100. This is a level consistent with pre-2020 demand. With a more pessimistic outlook on population and reduced economic dynamism under the Dire Demographics scenario, major resins demand rises from 103.1 million tonnes in 2020 and starts to mature in the 2030s, reaching 116.2 million tonnes in 2050. With a falling population and adverse economic dynamics, demand falls to 38.7 million tonnes in 2100, a level consistent with pre-2010 demand. Equally important is consideration of what these demand outcomes could mean for China’s polymers trade flows: The Base Case suggests China remains a net importer of major resins, but its net import position falls from 27.4 million tonnes in 2020 to 4.7 million tonnes in 2050. We only focus on the period to 2050. Under the Dire Demographics scenario, production is more than sufficient and by early-2030s China attains self-sufficiency in these resins and emerges as a net exporter of 3.6 million tonnes in 2035, 7.1 million tonnes in 2040, 9.7 million tonnes in 2045 and 11.6 million tonnes in 2050. Please write your own story by conducting the right kind of planning for a far more nuanced and uncertain chemicals world. 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.

30-Aug-2024

CHARLOTTE, North Carolina (ICIS)–August started with reports of high weekly initial unemployment claims, a weak manufacturing PMI reading and a lackluster payroll report. Equity markets did not react well to this as evidenced by a three-day sell off. But the panic ended, a rebound ensued and we are back to where we were on 31 July as the underlying economic fundamentals of a late-phase business cycle remain. The economy is slowing, not falling off a cliff. Job creation continues, even after the softer showing in July and the unemployment rate ticking up to 4.3%, largely the result of Hurricane Beryl. In the latest JOLTS (Job Openings and Labor Turnover) report, there are 1.2 job openings per unemployed, which is down from a year ago. Overall labor market supply and demand relationships appear to be moving back towards pre-pandemic levels. With a still positive labor market, incomes are holding up for consumers and providing support for the US economy. The headline July Consumer Price Index (CPI) was up 2.9% year on year, the lowest comparison since March 2021. Progress on disinflation continues and inflation is heading back towards the Fed’s target. Economists expect inflation to average 3.1% this year, down from 4.1% in 2023 and 8.0% in 2022. This is still above the Fed’s target. Inflation should soften to 2.4% in 2025 and 2026. As a result, interest rate futures overwhelmingly expect the Fed to cut rates in September. Turning to the production side of the economy, the July ISM US Manufacturing Purchasing Managers' Index (PMI) registered 46.8, down 1.7 points from June and a reading that was below expectations. A March expansionary reading had ended 16 months of contraction in manufacturing, but since then the readings have been contractionary. Overall manufacturing production contraction deepened. New orders slipped further into contraction, and order backlogs and inventories contracted at a faster pace. Only five of the 18 industries expanded. The ISM Services PMI rebounded 2.6 points to 51.4, a slightly expansionary reading. The Manufacturing PMI for Canada remained in contraction (15 months and counting) during July while that for Mexico contracted slightly after nine months of expanding. Brazil’s manufacturing PMI expanded for a seventh month. Euro Area manufacturing has been in contraction for 24 months. The UK PMI, however, expanded for a third month. China’s manufacturing PMI retreated below breakeven levels, ending eight months of positive readings. This is indicative of a stalling recovery. Turning to the demand side of the economy, light vehicle sales rose in July and although inventories have moved up in recent months, they still remain low. We expect light vehicle sales of 15.7 million this year before improving to 16.2 million in 2025. We expect sales of 17.2 million in 2026. This would bring activity back to the last cyclical peak in 2018. Housing activity continues to be tepid amid affordability issues and low builder confidence. We expect that housing starts will average 1.39 million in 2024 and 1.45 million in 2025. We expect housing activity to improve to 1.50 million in 2026. Demographic factors will support housing activity during the next five or more years. There is significant pent-up demand for housing and a shortage of inventory. Affordability continues to be an issue. Retail sales have been lackluster so far this year, but the July results were positive, aiding to the strength in equity markets. Sales at food services and drinking places remain positive. Consumers are taking on more debt. Overall consumer spending may be slowing but remains positive. Business fixed investment, led by a need to boost productivity and reshoring initiatives, will take over from consumer spending as a driver of the US economy. This is typical of a late-stage business cycle. Taking all of these demand and supply considerations together, it appears that downstream activity is improving and that the severe destocking cycle is ending. A restocking cycle for major resins is emerging. US real 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 H1 2024 has been strong but is likely to slow, and when it is all said and done, 2024 growth will likely be another 2.5% gain. This pace is well above long-term growth potential. The slowdown in quarterly economic activity suggests that in 2025, the economy should rise 1.8% over average 2024 levels, followed by a modest 2.0% gain in 2026. The US is once again outpacing the other advanced nations. Led by the UK and the Mediterranean nations, Europe’s economic prospects appear to be improving. China struggles with soft economic activity and appears to be exporting its way out of its stalled recovery.

26-Aug-2024

MUMBAI (ICIS)–India will continue imposing antidumping duties (ADDs) on chlorinated polyvinyl chloride (CPVC) imports originating from China and South Korea. The ADDs apply to CPVC resins as well as compounds, with rates ranging from $593/tonne to $792/tonne, depending on origin and producer, according to India's Ministry of Finance. They are set for five years and can be revoked or amended, if necessary. S.No Country of origin Country of export Producer Type Amount in ($/tonne) 1 China Any country including China Any CPVC resin 790 2 China Any country including China Any CPVC compound 605 3 Any country other than China and Korea China Any CPVC resin 790 4 Any country other than China and Korea China Any CPVC compound 605 5 Korea Any country including Korea Hanwha Solutions Corp CPVC resin 593 6 Korea Any country including Korea Hanwha Solutions Corporation CPVC compound 792 7 Korea Any country including Korea Any producer other than mentioned above CPVC resin 593 8 Korea Any country including Korea Any producer other than mentioned above CPVC compound 792 9 Any country other than China and Korea Korea Any CPVC resin 593 10 Any country other than China and Korea Korea Any CPVC compound 792 Source: India Ministry of Finance India’s anti-dumping duties on CPVC imports from China and South Korea were initially imposed on 26 August 2019 for a period of five years. These measures have been extended following recommendations by the designated authority to protect the domestic industry. It was determined that dumping and injury to Indian manufacturers were likely if the existing measures were not extended.

26-Aug-2024

TORONTO (ICIS)–As the unprecedented work stoppage at both of Canada’s freight railroads began on Thursday at 00:01 Eastern Time, it remains unclear how or when it may end as the government is reluctant to intervene. Long-awaited rail shutdown starts Government reluctant to intervene Industry warns of economic and public health impacts Following lockout and strike notices, more than 9,000 workers at railroads Canadian Pacific Kansas City (CPKC) and Canadian National (CN) were locked out at midnight, labor union Teamsters Canada Rail Conference (TCRC) and the rail companies confirmed. TCRC said that the parties were still far apart in their negotiations but added that it would remain at the bargaining table. CPKC called on the government for binding arbitration to end the dispute, but Canada’s federal labor minister last week already rejected a similar call by CN. Speaking to Canadian public broadcaster CBC/RDI a few hours before the rail shutdown began, minister Steven MacKinnon said that the government would rely on the collective bargaining process to resolve the dispute, which is about wages, benefits, work scheduling and safety issues. Collective bargaining was “a tried-and-true method” that helped create prosperity for Canadian companies and workers and build the country over decades, he said. “It works when people put the work in that is required to get a deal, to make those compromises at the table, and those are the most enduring results, and that’s our plan, that’s the only plan,” the minister said. Asked about using “back-to-work legislation” to end the dispute, he noted that Parliament is currently not sitting. However, the government was "always prepared for any eventuality”, he indicated but did not provide details. INDUSTRY SAYS GOVERNMENT MUST ACT NOW Canadian and US trade groups, including the US Chamber of Commerce, have called on the Canadian government to step in and end the dispute, potentially through binding arbitration, or if need be, back-to-work legislation. The two railroads each day ship goods worth more than Canadian dollar (C$) 1 billion (US$735 million), and the shutdown threatens to shut down the country's entire economy and harm trade with the US, the groups said. Bob Masterson, president of trade group Chemistry Industry Association of Canada (CIAC), said that the rail disruption was no longer an ordinary labor dispute that could be resolved through bargaining between two parties, with the government standing on the sidelines, but rather involved important public safety and health issues. One of the railroads stopped accepting critical chemicals, in particular chlorine and derivatives for use in drinking water, already on 12 August, as it began winding down operations ahead of the work stoppage, and the other railroad stopped accepting those products shortly afterwards, he said. With about 95% of the population relying on treated drinking water, as of 12 August the rail dispute therefore became “the interest of every Canadian across the country”, Masterson said. Due to its dangerous nature, under law chlorine can only be moved by rail, he noted. The country was “on the road to a public health crisis” and municipalities may soon need to issue water boil advisories, “if you don’t interrupt this now and return service on the railways,” he said. “The train towards a crisis is moving, it gets faster and harder to stop every day, and the time to stop it is now, and the only people that have the responsibility and the tools and authority to do so are the government of Canada,” he said. The chemical industry was at the front end of this supply squeeze, “and we want all elected officials to be focused on that”, he added. HARM TO THE ECONOMY In a separate statement to ICIS, trade group CIAC reminded of the impacts of the rail disruption on the overall Canadian economy, the chemical industry, and chemical trade with the US. In Canada, about 80% of chemical production goes into export, with about 80% of those exports going to the US, according to CIAC. At the same time, Canada-based chemical producers rely on rail to ship more than 70% of their products, with some exclusively using rail. US-Canada chemical trade, 2023: Canadian exports of industrial chemicals to the US: Canadian dollar C$18.9 billion, according to CIAC data. Canadian imports of industrial chemicals from the US: C$17.5 billion. More than C$76 million of industrial chemical products move on Canada’s rail network daily, which comes to about C$28 billion a year. Industrial chemicals include basic chemicals, synthetic resins, rubbers and synthetic fibers. Chemicals account for nearly 10% of total Canadian freight rail traffic. Furthermore, the chemical industry’s customers in the automobile, forest products, construction, minerals and other industries rely on rail to ship their products. According to estimates by the Conference Board of Canada, a two-week rail shutdown would result in a C$3 billion loss in nominal GDP this year. A four-week shutdown could lower GDP by nearly C$10 billion in 2024 and result in nearly 50,000 job losses, the board said. The lost income would be felt by households, businesses and government, the board said. Canada’s trucking industry was not a viable alternative to rail as it does not have the required capacity or enough drivers, the board noted. Industry commentators said that the government could not allow the rail stoppage to last more than 7-10 days, after which it would likely need to use back-to-work legislation or binding arbitration to end the dispute. However, binding arbitration takes time, and even with Parliament sitting and working at an expedited pace, it would take a couple of days for back-to-work legislation to become law. In another complication, Prime Minister Justin Trudeau’s Liberal-led minority government relies on support from the left-leaning New Democratic Party (NDP) to keep it in power. The NDP, however, is close to labor unions and has warned Trudeau against imposing binding arbitration or back-to-work legislation. While the work stoppage started on 22 August, its negative impacts for chemical producers and other industries kicked in earlier as they needed to rearrange logistics and prepare for potential plant shutdowns. In the chemical industry, it can be costly to ramp down and restart large petrochemical plants as they are in continuous operation and require a reliable, uninterrupted rail service. Depending on how long a rail disruption lasts, it can take weeks, if not months, for the chemical producers to get production rate back to normal. The following table by the American Association of Railroads (AAR) shows Canadian freight rail traffic, including chemicals, for the week ended 17 August and the first 33 weeks of 2024: (US$1 = C$1.36) Thumbnail photo source: CN Focus article by Stefan Baumgarten

22-Aug-2024

TORONTO (ICIS)–Canada’s federal government needs to exercise its authority and act quickly on the complete freight rail stoppage, set to start midnight at 00:01 Eastern Time, trade group Chemistry Industry Association of Canada (CIAC) said. The simultaneous rail disruption at both of the country’s freight railroads, Canadian National (CN) and Canadian Pacific Kansas City (CPKC), has been looming over the chemical and other industries for months. It was apparent that the rail labor dispute could not be resolved through collective bargaining, CIAC told ICIS in an update on Wednesday. The government therefore should impose binding arbitration, with a prohibition on the right to strike/lockout, the group said. Failing that, parliamentarians could be recalled to pass back-to-work legislation, CIAC said. “We believe it is important for the government to act sooner rather than later to mitigate any impacts to the Canadian economy and the workers who support it, and our trading relationships,” it said. It was government’s and parliament’s role to protect the public interest, from both a public safety perspective and in terms of protecting Canadian workers and businesses broadly from the economic harm that was already being caused by the pending rail stoppage, the group said. As for public safety, CIAC noted in particular the continued rail supply of chlorine to municipalities to ensure safe drinking water. LEARNING FROM THE US Compared with Canada, the US under its Railway Labor Act (RLA), 1926, was more adept at ensuring that railways keep operating during labor disputes, CIAC said. The RLA nearly eliminates the risk of shutdowns while allowing for business and labor to negotiate, the group said. In fact, there have been very few rail labor disruptions in the US over the past 100 years, CIAC said, adding: “Just one, lasting one day.” CIAC is advocating that Canada follow the US approach in order to avoid the near-annual disruptions of Canada’s rail and port infrastructure, it said. CHEMICALS AND RAIL In Canada, about 80% of chemical production goes into export, with about 80% of those exports going to the US, according to CIAC. At the same time, Canada-based chemical producers rely on rail to ship more than 70% of their products, with some exclusively using rail. US-Canada chemical trade, 2023: Canadian exports of industrial chemicals to the US: Canadian dollar (C$)18.9 billion ($13.9 billion), according to CIAC data. Canadian imports of industrial chemicals from the US: C$17.5 billion in 2023. More than C$76 million of industrial chemical products move on Canada’s rail network daily, which comes to about C$28 billion a year. Industrial chemicals include basic chemicals, synthetic resins, rubbers and synthetic fibers. Chemicals account for nearly 10% of total Canadian freight rail traffic. CIAC members see reliable rail services as a key factor in deciding whether to locate a new facility or expand operations in Canada, the group said. Likewise, investors see rail service as essential when they are "looking to Canada to take advantage of our skilled labor and abundant and well-priced natural resources”, it added. CANADIAN POLITICSAlthough the chemical and other industries have repeatedly warned about the impacts simultaneous disruptions at both railroads could have on Canada's weakening economy and on trade with the US, the federal government under Prime Minister Justin Trudeau has yet to act decisively. While CIAC declined to speculate about the reasons for the government’s hesitation, political commentators noted that Trudeau’s Liberal-led minority government relies on the left-leaning New Democratic Party (NDP) to keep it in power. Earlier this week, the NDP, which is close to labor unions, warned Trudeau against imposing binding arbitration or back-to-work legislation, as this would undermine the rail workers’ right to bargain for collective agreements. If the NDP withdraws its support in parliament, the government would fall. In current opinion polls, the Liberals are well behind the opposition Conservatives. Map by Miguel Rodriguez Fernandez Rail labor union Teamsters Canada Rail Conference (TCRC) on Sunday served the required 72-hour strike notice on CPKC, following CPKC’s earlier lockout notice, and CN served a 72-hour lockout notice on TCRC. The railroads continued to wind down operations on Wednesday ahead of the start of the work stoppage on Thursday. Trudeau said in webcast remarks to media on Wednesday that the government was following the issue "extremely closely", adding that it was in the best interest of the railroads and the union to find a negotiated resolution. Federal labor minister Steven MacKinnon, who met with the railroads and TCRC on Tuesday, continues to press for a negotiated settlement of the labor dispute, which is about wages, benefits, work scheduling and safety issues. “Get a deal at the table. Workers, farmers, businesses and all Canadians are counting on it,” he said on social media. MacKinnon last week rejected CN’s call to refer the dispute to the Canadian Industrial Relations Board (CIRB) for binding arbitration. Industry commentators said that the government could not allow the rail stoppage to last more than 7-10 days, after which it would likely need to use back-to-work legislation or binding arbitration to end the dispute. The following table by the American Association of Railroads (AAR) shows Canadian freight rail traffic, including chemicals, for the week ended 17 August and the first 33 weeks of 2024: ($1=C$1.36) Thumbnail photo source: CPKC

21-Aug-2024

SINGAPORE (ICIS)–ICIS is introducing a new monthly domestic polypropylene (PP) block copolymer price index for South Korea starting from 16 August. This spot assessment on a delivered (DEL) basis is ICIS' first monthly index dedicated to the South Korean market. The new quote will track locally traded PP block copolymer resins with melt index (MI) between 30 to 60 that are mainly used for automotive applications. The launch of the quote is motivated by calls for more information and greater clarity on the domestic market conditions from South Korea's automotive industry as local prices deviate from export values. Previously, market participants have been using CFR (cost & freight) CMP (China Main Port) and prices of upstream chemicals like naphtha's, as reference points for domestic discussions. “ICIS has developed an index that is relevant for the South Korean domestic market,” ICIS Asia managing editor Peh Soo Hwee said. “This is in line with changing industry developments as taking direction from overseas markets such as China is no longer fit-for-purpose given the very different dynamics in Korea,” she said.

15-Aug-2024

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. The ICIS data continue to tell us that we are facing the biggest shake-up in the modern history of the petrochemicals industry. Let’s today use high-density polyethylene (HDPE) China accounted for just 6% of global HDPE demand in 1992 although it had a 22% share of the global population. By the end of 2024, we expect China to generate 33% of global demand from an 18% share of the population. For far too long, our industry overlooked the warning signs: China’s rapidly ageing population, its real estate bubble and the geopolitical split with the West. It was only a question of when rather than whether the Chinese economy would enter a more challenging phase. We can see from the ICIS data on spreads and margins that the “when” arrived in late 2021 – the Evergrande Moment. CFR China HDPE injection grade price spreads over CFR Japan naphtha costs have averaged just $212/tonne since the end of Petrochemicals Supercycle – from January 2022 onwards. This compares with the $487/tonne average during the Supercycle – 1992 until 2021. So, spreads need to rebound by 130% to get back to where they were during the Supercycle. This year, as we can see from the chart in today’s post, they have fallen to a new record low. Global capacity was added largely on the assumption that China’s HDPE demand growth would be higher than is going to be the case. My highly unscientific “wisdom of crowds” approach, which involved talking to lots of people, suggests that the consensus view was that China’s petrochemicals demand growth in general would be at 6-8% over the long term. Low single digit growth now seems more likely. Global HDPE operating rates were very healthy during the Petrochemicals Supercycle. Including two years after the end of the Supercycle (the 1992-2023 period), we estimate they averaged 88%. We forecast a global operating rate of just 75% in 2024-2030. Global capacity would have to grow by just 173,000 tonnes a year versus our base case assumption of 2.6m tonnes a year if 2024-2030 were instead to reach 88%. Rationalisation of capacity in disadvantaged regions such as Europe and Asia ex-China seems likely as China, the Middle East and the US carry on building. So much for what we know. What about the “unknown unknowns”? Here are just two of them: What will be the size of China’s population by the end of the century and therefore its HDPE and other resins demand? Estimates range from 633m to 525m or even less. Can China fully maintain its role as the Workshop of the World? Or will reshoring and trade tensions eventually lead to a major decline in Chinese exports? Facts, or rather data, are sacred. So should be rigorous scenario planning as “one size fits all” views of the future won’t get us anywhere. Neither will a repeat of the conventional thinking that got us into this mess in the first place. 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.

14-Aug-2024

HOUSTON (ICIS)–Avient has raised its 2024 guidance for adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) following stronger-than-expected Q2 results: New 2024 guidance Previous 2024 guidance 2023 Adjusted EBITDA $515-540 million $510-535 million $501.8 million In the second quarter, Avient saw broad-based 5% organic sales growth in both of its segments: Color, Additive & Inks (CAI), and Specialty Engineered Materials (SEM). Both segments gained market share and benefited from inventory restocking in certain end-markets, CEO Ashish Khandpur and CFO Jamie Beggs told analysts during Avient’s Q2 earnings call on Tuesday. Tight cost control and raw material price deflation helped expand the adjusted EBITDA margin by 100 basis points year on year to 16.9% in the second quarter, they said. The better-than-expected performance was led by CAI, which saw improved demand and favorable raw material costs. MARKETS In terms of end-markets, growing sales into two of Avient’s largest markets, packaging (+8%) and consumer (+10%), had the greatest impact in the second quarter, said Khandpur. Both markets benefited from “some restocking”, particularly in Europe, he added. Sales growth in buildings and construction and healthcare was also strong. Although the macroeconomic indicators for building and construction remained weak, both the SEM and CAI segments gained market share and won new business in the US and Canada, Khandpur said. Meanwhile, destocking in the healthcare market has finally run its course, with Avient’s sales into that market up 10% year on year in the second quarter. Sales into the defense end-market continued to be driven by the global conflicts and certain NATO programs, with full-year sales growth expected in the low double digits, he said. The telecommunications and energy markets, which together account for about 7% of Avient’s total sales, however, remained “challenged”, with sales down in the double digits in the second quarter as customers reduced inventories. Telecommunications should improve in the second half as demand in the US has started to improve more recently, Khandpur said. In energy, Avient is seeing improving trends in the third quarter, in particular for applications designed to improve the reliability of the electrical transmission grid, he said. Artificial intelligence (AI) was raising electricity consumption, driving demand for electricity generation and distribution, with positive derivative effects on the materials Avient supplies to energy markets, he noted. Electric mobility and electrification are happening, and Avient aims to “become part of those fast-growing markets”, he added. LATIN AMERICA OPPORTUNITY Avient’s sales in Latin America grew by 19% year on year in the second quarter, driven by sales into the region's packaging market. That market saw strong demand in food & beverage and cleaning applications on the back of the recent floods in Brazil, as well as high temperatures and drought conditions in Mexico. Latin America currently accounts for only about 6% of the company’s total sales. However, going forward, Avient expects its Latin American packaging business to benefit from the near-shoring trend. The company’s position in the region is “strategic”, allowing it to serve original equipment manufacturers (OEMs) and brand owners who are looking to near-shore production and supply chains in light of global trade conflicts and political uncertainties, Beggs noted. RAW MATERIALS Avient realized about $35 million in raw material price deflation in the first half of 2024, Beggs said. However, the company does not expect this benefit to be repeated in the second half as it has started to see “modest levels of inflation” across the majority of its raw materials, including polyethylene (PE) and polypropylene (PP), as well as pigments and certain performance additives, she said. Primary raw materials used in Avient’s manufacturing operations include polyolefin and other thermoplastic resins, titanium oxide (TiO2), inorganic and organic pigments, specialty additives and ethylene. The executives did not comment on the current stock market turmoil and analysts on Tuesday’s call did not ask about this. Thumbnail photo of Avient CEO and president Ashish Khandpur; photo source: Avient

06-Aug-2024

LONDON (ICIS)–Maritime security issues along the Red Sea and geopolitics-led macroeconomic challenges dominated supply-demand dynamics within the European acrylonitrile-butadiene-styrene (ABS) and acrylonitrile (ACN) markets in the first half of 2024. In this latest podcast, Europe ABS report editor Stephanie Wix and her counterpart on the Europe ACN report, Nazif Nazmul, share the latest developments and expectations for what lies ahead. Macroeconomic challenges continue to constrain ABS and ACN demand Europe-origin ABS partly supported by imports suffering from logistical issues Cautious optimism surrounds 2025 demand outlook despite geopolitical uncertainty ABS is the largest-volume engineering thermoplastic resin and is used in automobiles, electronics and recreational products. ACN is used in the production of synthetic fibres for clothing and home furnishings, engineering plastics and elastomers. Click here to open in a new window

02-Aug-2024

HOUSTON (ICIS)–Although the broader US recycled plastics market has yet to see the full recovery as hoped by this time, there still remain opportunities and challenges through year end. Market dynamics remain mixed across specific grades of recycled resins, with some witnessing strong order pipelines into 2025, and others sustaining business month to month, pending the broader economic recovery. US recycled polyethylene terephthalate (R-PET) players must now balance global trade with local demand, while US recycled polyethylene (R-PE) markets see split trends based on material color, as natural recycled resin prices continue to climb and mixed colored material softens. US R-PET shielded from imports pending ocean freight rates US natural R-HDPE prices stuck in cyclic pattern on tight supply Mixed action of brand companies towards 2025 voluntary, regulatory targets US R-PET Market Outlook Now that the US is experiencing peak summer season, traditionally this would entail growing supply of polyethylene terephthalate (PET) bottles due to the fact that more bottled beverages are consumed, and thus more bottles are collected in recycling streams. That being said, June supply remained uncharacteristically tight, potentially attributed to lower bottled beverage consumption due to the high inflationary pressure on consumers. Supply is now growing, paired with higher temperatures experienced across the country, but it remains to be seen if increased volumes are enough to sway market prices. Though as domestic supply grows, imported supply of R-PET flake and pellet has shrunk, as US customers limit future orders due to high ocean freight prices, making imports no longer as competitive to domestic pricing. The US market has seen a barrage of import activity throughout the last 18 months, and though imports are subdued at present, any change to ocean freight rates could reopen the arbitrage opportunity. But, even if imports do return, the local demand landscape is likely to have changed. Though broader economic conditions may improve through the end of the year, peak season for PET will have already passed. For some players, particularly on the West Coast or for smaller players, demand is expected to soften as downstream thermoforming and beverage sectors ramp down from peak season. Demand outlooks remain robust for some larger players, who have found success with brand companies committed to domestic supply and attempting to increase recycled content use by 2025. Moreover, as some companies strive to increase recycled content, demand is expected to grow through the end of the year to increase the annual average recycled content percentage. If brands are in the process of ramping up recycled content, higher percentages are needed towards the end of the year, in some cases more than the initial goal, to balance out the lower percentages from earlier in the year. US R-PE Market Outlook The demand outlook for R-PE is slightly more mixed, with some sustainability-driven grades likely to see robust demand from consumer goods companies through the end of the year, but cost-sensitive grades will continue to battle weak demand on virgin substitution. Cost-sensitive grades of R-PE are constituted of both mixed-colored or post-industrial material, which do not have the sustainability appeal and are typically used in non-consumer facing applications such as automotive, construction or secondary packaging. As these end-markets adjust to new 2H2024 economic outlooks, several buyers expect continued flatness in market conditions. Though many note orders are stronger this year in comparison to 2023, overall demand remains softer than expectations. On the other end of the spectrum, sustainability-driven grades of R-PE – such as natural post-consumer recycled high density polyethylene (R-HDPE) – continue to experience strong demand. Over the last several months, natural post-consumer R-HDPE pellet prices had been rising on high bale feedstock costs due to systemically short collection rates, paired with growing demand. The cyclic pattern of the natural R-HDPE market is expected to continue, until once again, the cost premium is unsustainable by the end customer, thus forcing a drop in demand which then crashes bale prices. The market has seen two crashes in the last 3 years. The State of Brand Commitments on Recycled Plastics Several major brands in the plastics industry have set significant targets for 2025 to reduce plastic waste and promote a circular economy, though some have extended the timeline to 2030 and refocused priorities, a few of note below. PepsiCo initially committed to achieving 100% of packaging being recyclable, compostable, biodegradable, or reusable by 2025 but recently announced they estimate to fall just short of that deliverable. Unilever reported successfully using 25% of recycled material in all packaging by 2025 but is not likely to meet the goal of 50% reduction of virgin material and 100% of packaging to be recyclable, compostable or reusable by 2025. Coca-Cola has successfully designed all primary packaging to be recyclable but is less than halfway to their 2025 goal of utilizing 25% recycled PET in their bottles which is supported by their new goal to collect and recycle one bottle for each bottle sold by 2030. Mars has targeted for 100% of packaging to be recyclable by 2025 but currently reports that 44% of their packaging portfolio is designed for circularity and they have expanded efforts on innovating towards reusability and composability. Moreover, the U.S. Plastics Pact conducted revisions to their Road Map to 2025 strategic plan after many deliverables were underachieved by members. Continuing targets such as eliminating problematic materials, designing all packaging to be able to contribute to circularity, effectively recycling half of all packaging, and increasing post-consumer recycled content to an average of 30%, a significant revision was created to focus on identifying scalable systems for reusable packaging to coincide with a goal of reducing the use of virgin plastic by 30% across the market. Despite the fact that voluntary commitments have yielded mixed success, with many companies increasing the amount of recycled content in their products and packaging, but falling short of their ambitious targets, regulation has, and will continue to be a driver of these markets. Regulation Intensity Grows at US and Global Level On the world stage, the Global Treaty on Plastic Pollution aims to create legally binding frameworks for international participants to address plastic pollution across the product lifecycle from production to disposal. Anticipating finalizing the treaty, the fifth session of the Intergovernmental Negotiating Committee in Busan in November 2024 will yield several critical outcomes such as advancing the draft text, setting reduction targets for primary plastics polymers, and establishing legal soundness to ensure effective implementation. At the state level, California’s  AB 793 currently has a 15% minimum postconsumer recycled (PCR) content mandate on plastic beverage bottles, which is set to increase to 25% in 2025. Similarly, Washington’s SB 5022 will activate  a 15% PCR mandate on plastic household cleaning and personal care containers in 2025. Pivoting to extended producer responsibility (EPR), Minnesota was the fifth state to sign a packaging EPR scheme into law on 21 May 2024. This signing comes at a time when two states—Oregon and Colorado—are set for their packaging management programs to go into effect in 2025, to be run by the Producer Responsibility Organization (PRO). Both states have chosen the Circular Action Alliance (CAA) as their PRO. Capacity Expansions Remain Strong Despite Economic Environment Though announcements for future facilities have slowed, current progress on existing expansions or new plants continues to grow the US recycling footprint. Total recycling capacity in 2024, encompassing both mechanical and chemical processes, reaches approximately 8.4 million tonnes per year. Mechanical recycling currently dominates, constituting 95% of this total capacity, with anticipated annual growth rates of 3-5%. In contrast, chemical recycling capacity is poised for substantial expansion, projected to grow significantly, surpassing mechanical recycling growth rates. By 2028, chemical recycling is forecasted to experience at least a 400% increase. The market landscape remains dynamic and evolving. Here are the latest significant announcements from recyclers: Mechanical recycling: Blue Polymers: Blue Polymers is a joint venture between Republic Services and Ravago, leading an innovative approach by establishing a complex that incorporates a Republic Services Polymer Center adjacent to a Blue Polymers recycling facility. This integrated setup facilitates customizable sorting capabilities aimed at producing high-quality recycled resins tailored for consumer packaging and various applications. Following the successful launch of a comparable complex in Las Vegas, they are preparing to inaugurate another facility in Indianapolis, Indiana by late 2024 which will process both R-PET flake and R-PE and recycled polypropylene (R-PP) pellet. KW Plastics: KW Plastics is expanding its recycling capacities with a sixth line set to add 45,000 tonnes/year, operational in Q3 2024. This expansion underscores their commitment to long-term recycling growth. Circularix: A joint venture of Macquarie Group and HPC Industries, Circularix has established their first recycling plant in Pennsylvania, but have delayed plans for four additional 25,000 tonnes/year plants, the tentative locations being Arizona, Florida, Texas, and the Pacific Northwest. LyondellBasell (LYB)/PreZero: LYB has acquired a mechanical recycling facility in Jurupa Valley, California, which has a recycling capacity of 23,000 tonnes per year. The company has also procured recycling lines from PreZero and secured a lease on the processing facility. This acquisition aligns with LYB’s strategy to enhance the circular economy for plastics and strengthen its commitment to sustainable recycling practices. NOVA Chemicals: NOVA Chemicals has announced a major expansion of its Circular Solutions business with a new mechanical recycling facility in Connersville, Indiana. Scheduled to begin operations by 2025, this facility will process post-consumer plastic films at a commercial scale, aiming to supply over 45,000 tonnes of rPE to the market by 2026. This investment is a critical step toward NOVA Chemicals’ 2030 goal of incorporating 30 percent recycled content into its total polyethylene sales. Chemical Recycling: Encina On April 18, 2024, Encina confirmed its decision to cancel plans to build what would have been one of the largest chemical recycling plants in the United States, initially slated for Point Township, Pennsylvania. However, following strong opposition from local residents and environmental concerns about toxic emissions and the efficacy of chemical recycling in reducing plastic waste, Encina has opted not to proceed with the project. Despite the setback, Encina remains committed to advancing its recycling technologies in other regions. FreePoint Eco-Systems: FreePoint announced plans to commission two ISCC Plus-certified chemical recycling plants in the United States. The Ohio facility is scheduled to open by end of 2024, followed by a joint venture with Dow in Arizona by mid-2026. These plants will focus on converting local end-of-life plastic waste, with the Arizona facility aiming to produce virgin-like plastics from plastic-waste derived pyrolysis oil. ExxonMobil: ExxonMobil plans to expand its existing advanced recycling plant in Baytown, Texas, with a second unit expected to commence operations in 2025. This expansion is part of ExxonMobil's strategy to process more than 450,000 tonnes of plastic waste annually, advancing their commitment to sustainability and circular economy initiatives. LyondellBasell (LYB): LyondellBasell has announced potential plans for its first industrial-scale catalytic advanced recycling plant in Houston, Texas, with FID expected in 2025. Using MoReTec technology, the facility will convert post-consumer plastic waste into new plastic materials, with an annual capacity of 100,000 tonnes, marking a significant step towards sustainable plastic manufacturing. As the US recycled plastics market continues to develop, especially as the landmark year, 2025, approaches, both supply and demand remain top of mind for existing players and new entrants. Though this growth journey has not been as swift as some expected, many would agree these markets have transformed substantially in the last several years. Insight article by Emily Friedman, Andrea Bassetti, Corbin Olson and Joshua Dill.

30-Jul-2024