Recycled polyolefins (R-PE, R-PP)

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. China’s petrochemical markets might well respond positively to any new economic stimulus measures announced during the delayed Third Plenum government meeting that takes place on 15-18 July. But the scale of economic reforms required are such that I believe the more likely outcome is China remaining stuck with lower growth than during the 1992-2021 Petrochemicals Supercycle. Sourabh Gupta – Senior Fellow at the Institute for China-America Studies in Washington, DC – wrote in an article for the East Asia Forum that reforms needed include: Progressively lifting Hukou restrictions to make public services more equitable. Building a unified and portable social security net more in line with advanced economies. A shift from indirect to direct taxes. Individual income tax revenues comprised 33% of total revenues in OECD countries compared to 9% in China. The tax base must expand as four out of five Chinese households do not pay personal income tax. He cautioned that reform would not be easy in a country that preferred top-down capital-intensive approaches and was disdainful of high welfare spending. China appears to have doubled-down on its capital-intensive approach since the end of the property bubble through investing in export-focused manufacturing. This raises the issue of geopolitical threats to its GDP growth, such as the US and the EU recently raising tariffs on Chinese electric vehicles and batteries. “If China is to maintain growth rates of 4-5% per year, it can only do so if the rest of the world agrees to reduce its own investment and manufacturing levels to less than half the Chinese level” wrote Michael Pettis, Professor of Finance at Peking University, in an article for the Carnegie Endowment for International Peace. The Economist reported that as reshoring accelerated, governments had adopted over 1,500 policies to promote specific industries in both 2021 and 2022. This compared with almost none in the early 2010s. But this latest Third Plenum could be as significant as the ones cited by Reuters in 1978 and 1993. The 1978 Plenum opened China up to foreign investment. In 1993, the Plenum liberalised trading in the Yuan and launched “socialist market” reforms following Deng Xiaoping’s Southern Tour a year earlier. How will we know the outcomes? If China’s polyethylene (PE) and polypropylene (PP) price spreads return to their Supercycle levels over the six-to-12-months.  If this doesn’t happen, more reforms will be needed as too much supply will continue to chase too little demand. Despite recent rebounds in spreads, China CFR high-density PE (HDPE) spreads over CFR Japan naphtha costs remain 116% lower than during the Supercycle with low-density (LDPE) spreads 46% lower and linear-low density (LLDPE) spreads 80% lower. The story is very similar in China PP spreads over naphtha. 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.

03-Jul-2024

HOUSTON (ICIS)–Hurricane Beryl continued to make its way west toward Mexico and the US Gulf on Tuesday afternoon, with landfall possible some time on Sunday. Meteorologists at the National Hurricane Center (NHC) said Beryl was about 125 miles (205 km) east southeast of Isla Beata, Dominican Republic, and moving west northwest at 22 miles/hour. Source: National Hurricane Center (NHC) The storm is going back and forth between a Category 4 and Category 5 hurricane as maximum sustained winds are at 155 miles/hour but had been at 165 mile/hour earlier in the day. According to the Saffir-Simpson Hurricane Winds Scale, a storm reaches Category 5 when maximum sustained winds reach 157 miles/hour. Saffir-Simpson Hurricane Wind Scale Category Wind speed 1 74-95 miles/hour 2 96-110 miles/hour 3 111-129 miles/hour 4 130-156 miles/hour 5 157+ miles/hour The most recent forecast indicates Beryl could miss southern Veracruz state in Mexico, where Braskem Idesa has its integrated polyethylene (PE) Ethylene XXI complex and where a lot of Mexico’s petchem capacity is located. Altamira is still in the projected path. The regions have been experiencing a drought and rainfall from Beryl could provide the area with much-needed rain but could also impact operations at the multitude of chemical facilities in the area. Another scenario would be if the storm swings to the north, which could threaten oil and gas production in the US Gulf as well as Gulf Coast petchem operations. A producer with capacity in the Corpus Christi area said it was still too early to decide on operations. ACTIVE HURRICANE SEASON The early activity in the Atlantic Ocean is in line with forecasts calling for a busier than usual hurricane season. The US National Oceanic and Atmospheric Administration (NOAA) is predicting the greatest number of hurricanes in the agency’s history. NOAA forecasters with the Climate Prediction Center said that the hurricane season – which started on 1 June and runs through 30 November – has an 85% chance to be above normal, a 10% chance of being near normal and only a 5% chance of being below normal. Damage from hurricanes can lead to increased demand for chemicals, but hurricanes and tropical storms can also disrupt the North American petrochemical industry because many of the nation's plants and refineries are along the US Gulf Coast in the states of Texas and Louisiana. In 2022, oil and natural gas production in the Gulf of Mexico accounted for about 15% of total US crude oil production and about 2% of total US dry natural gas production, according to the US Energy Information Administration (EIA). Even the threat of a major storm can disrupt oil and natural gas supplies because companies often evacuate US Gulf platforms as a precaution. Additional reporting by Mark Milam, Al Greenwood and Melissa Wheeler

02-Jul-2024

RIO DE JANEIRO (ICIS)–In just a few years, global automotive majors have switched their focus from a quick, all-electric production to a more hybrid model, an executive at US crude oil major Chevron said on Tuesday. Chris Castanien, global industry liaison at Chevron and lubricant additive expert, said that most automotive majors who had set up target to go all-electric or nearly all-electric by 2030 have dropped those plans as intake among consumers remains slow. This has happened even after authorities in North America or Europe have poured “tremendous amount of money in trying to force everyone” into the energy transition. Castanien was speaking to delegates at the 14th International Summit with the South American Market 2024 organized by specialized publication Lubes em Focus, which focuses on base oils. ICIS is a partner in the event. BILLIONS – BUT THE JUMP IS NOT HAPPENINGAnyone in the lubricants industry would be pleased to see the initially quick transition to electric mobility some authorities had planned is not happening – they are an interested party which would lose out much if ICE engines – combustion engines – ran on fuels would go out of the market. Therefore, Castanien was somehow pleased to list the many plans in the EU and the US which had planned for a quick electric vehicles (EVs) implementation, including the US’ $1 trillion New Green Deal in 2021 or the consequent $67 billion investments contemplated in the CHIPS Act or the $369 billion in the Inflation Reduction Act (IRA). “The US’ EPA [Environmental Protection Agency] had forced a ruling that by 2032 around two thirds of cars should be EVs; the EU issued a ban on ICE engines by 2035 – well, I think those targets will not happen,” said Catanien. “Moreover, now we are seeing a lot of protectionist tariffs against Chinese EVs: we want people to make and use EVs, but we don’t want the Chinese to make them.” The Chevron executive went on to say that the US is still a “long way” to meet its own targets on charging points, for instance, which added to the considerably higher cost of EVs is putting off consumers. And this consumers’ reluctance, he went on to say, is even happening when many jurisdictions are implementing fiscal incentives and rebates for EVs. “In the US, you even get the case of California, where HOVs [high occupancy vehicle lanes] are now allowing EVs even if it’s only the driver inside the car…” he said. Thus, the initial change planned by automotive majors – even with thousands of redundancies of ICE engines engineers – is giving way to a slower implementation of the EV push and mentioned the case of Germany’s major Mercedes. “Only a few years ago, Mercedes said they would be making all vehicles electric by 2030 – they don’t say that anymore. Their updated target is aiming to make 50% of its fleet electrical by that year,” said Castanien. “[US major] Ford has said it is losing $64,000 every time they sell an EV. Tesla was planning a gigafactory in Mexico: they have dropped those plans. The shift towards more hybrid vehicles and not purely EVs is happening – this is a big change.” The automotive industry is a major global consumer of petrochemicals, which make up more than one-third of the raw material costs of an average vehicle. The automotive sector drives demand for chemicals such as polypropylene (PP), along with nylon, polystyrene (PS), styrene butadiene rubber (SBR), polyurethane (PU), methyl methacrylate (MMA) and polymethyl methacrylate (PMMA). Base oils, also called lubricants, are used to produce finished lubes and greases for automobiles and other machinery. The 14th International Summit with the South American Market 2024 runs in Rio de Janeiro on 2-3 July.

02-Jul-2024

HOUSTON (ICIS)–Hurricane Beryl, already a major Category 4 storm, is making its way toward Mexico, but it remains too early to tell where it will ultimately make landfall. Beryl is now the earliest Category 4 storm on record in the Atlantic. The previous earliest was Hurricane Dennis on 8 July 2005. The US National Hurricane Center (NHC) said as of 1900 GMT Beryl was about 60 miles (100km) west northwest of Carriacou Island with maximum sustained winds of 150 miles/h and moving west-northwest at 20 miles/h. Source: National Hurricane Center (NHC) Late-cycle track guidance from the Tropical Cyclone Guidance Project (TCGP) shows the different tracks based on various models in the image below. Source: Tropical Cyclone Guidance Project (TCGP) If the storm continues to move to the west, it could threaten Mexican facilities in Veracruz state, which is in the south of the Bay of Campeche. Also in the region are the major port city of Coatzacoalcos and Braskem Idesa’s integrated polyethylene (PE) Ethylene XXI complex. Beryl could also make landfall near Altamira, which has been experiencing a drought and could provide the area with much-needed rain but could also impact operations at the multitude of chemical facilities in the area. Another scenario would be if the storm swings to the north, which could threaten oil and gas production in the US Gulf as well as Gulf Coast petchem operations. Beryl is expected to pass near Jamaica on Wednesday but the storm is unlikely to affect the chlor-alkali chain. Jamaica is home to a number of large alumina refineries that consume significant volumes of US caustic soda, used to refine alumina from bauxite, or aluminium ore. ACTIVE HURRICANE SEASON The early activity in the Atlantic Ocean is in line with forecasts calling for a busier-than-usual hurricane season. The US National Oceanic and Atmospheric Administration (NOAA) is predicting the greatest number of hurricanes in the agency’s history. NOAA forecasters with the Climate Prediction Center said that the hurricane season – which started on 1 June and runs through 30 November – has an 85% chance to be above normal, a 10% chance of being near normal and only a 5% chance of being below normal. The prediction of 17-25 named storms is the highest ever, topping the 14-23 predicted in 2010. A storm is named once it has sustained winds of 39 miles/h. Saffir-Simpson Hurricane Wind Scale Category Wind speed 1 74-95 miles/h 2 96-110 miles/h 3 111-129 miles/h 4 130-156 miles/h 5 157+ miles/h Damage from hurricanes can lead to increased demand for chemicals, but hurricanes and tropical storms can also disrupt the North American petrochemical industry because many of the nation's plants and refineries are along the US Gulf Coast in the states of Texas and Louisiana. In 2022, oil and natural gas production in the Gulf of Mexico accounted for about 15% of total US crude oil production and about 2% of total US dry natural gas production, according to the US Energy Information Administration (EIA). Even the threat of a major storm can disrupt oil and natural gas supplies because companies often evacuate US Gulf platforms as a precaution. Additional reporting by Al Greenwood, Kelly Coutu, Bill Bowen

01-Jul-2024

SAO PAULO (ICIS)–Here are some of the stories from ICIS Latin America for the week ended on 28 June. NEWS Brazil Unigel falls short of tolling deal for ammonia plants – Petrobras Petrobras has alleged that Unigel has failed to meet the terms of their tolling agreement for the production of ammonia at two idled plants, the Brazilian state-controlled energy producer said on Friday. Brazil’s Cibra inaugurates new plant in Matopiba Cibrafertil Companhia Brasileira de Fertilizantes (Cibra) has inaugurated a greenfield plant in Sao Luís, Maranhao, the Brazilian fertilizer company has announced. Saudi Arabia, South America offer promising opportunities for base oils Markets such as Saudi Arabia and countries in South America hold potential for growth in the years ahead, industry sources said on Friday. Mexico’s central bank keeps rates unchanged at 11% as inflation ticks up The Banco de Mexico kept on Thursday the main interest rate benchmark unchanged at 11% after the annual rate of inflation has increased since February. Argentina GDP down 5.1% in Q1 but sentiment rises again in May Argentina’s recession may have bottomed out in the first quarter, with a GDP fall of 5.1% year on year, as a leading indicator for economic activity rose in May for the third month. Plant status: Chemours resumes TiO2 production at Mexico plant US producer Chemours has resumed operations at its Altamira, Mexico titanium dioxide (TiO2) facility after it was forced to reduce them due to water shortages in the area. PRICING LatAm PE domestic prices lower in Argentina on weak demand Domestic polyethylene (PE) prices were assessed as lower in Argentina while being unchanged in other Latin American countries.

01-Jul-2024

LONDON (ICIS)–Senior Editor for Recycling, Matt Tudball, discusses the latest developments in the European recycled polyethylene terephthalate (R-PET) market, including: Colorless and blue bale prices rise in eastern Europe PRSE: Most see stable market over summer PRSE: Confusion and frustration around lack of SUPD clarity PRSE: SUPD impact on R-PET not until Q4 earliest

27-Jun-2024

SAO PAULO (ICIS)–Chile remains at the forefront of restrictive plastics regulations in Latin America as the whole political spectrum tries to capitalize in rules which resonate with public opinion, according to the CEO at the country’s trade group Asipla. Magdalena Balcells added that, however, the regulations have prompted a larger push for sustainability among companies in the plastics chain which, in turn, is making them fitter for the future. Chile was one of the first countries among a very small group in Latin America which introduced, for instance, mandates for carrier plastic bags to be charged in shops, sharply reducing their use. In countries such as Brazil, Latin America’s largest economy, plastic bags are omnipresent, given for free in shops. Their presence as waste in the streets of cities like Sao Paulo is equally omnipresent. A visitor to Chile’s capital Santiago can quickly note the absence of such a waste, among many other differences with other Latin American countries. Interestingly, Balcells also concedes the plastics industry could have done better in some aspects, not least waste – she said producers knew a long time ago the plastic pollution problem was becoming a serious human and environment health issue but were either late to talk about it and alert the authorities, or, in most cases, ignored it entirely. EUROPE-LIKE REGULATIONS – IN LATAMChile’s economic and social indicators tend to be indeed better than in most Latin American countries. According to Balcells, members of parliament (MPs) from all sides get confused about this and propose plastics regulations which are not fit for the country’s reality. But despite its healthier indicators, Chile remains an emerging economy and the infrastructure for collection and recycling of plastics is far from being like those in some European countries which started setting it up in the 1990s. Chile is also debating regulations on recycling targets and bans on certain plastics, following European and other developed countries’ examples. “For example, we had three companies producing plastic bags in Chile, a relatively small country with 30 million residents. Soon after the bags regulation was introduced in a hurry, two of those companies went down. That may not have been significant in the big scheme of things, but it was relevant and painful for some parts of the plastics chain,” she said. “Moreover, in the best Chilean way, municipalities – which were given the last say in the law’s implementation – all fought to be the first in the class, especially those in the south of the country where of course our natural resources are priceless, the Patagonia.” WHAT THE INDUSTRY CAN DO – OR DID NOT DOThe story about the social benefits of plastics – as producers put it – became old as the cons outweighed the pros. The planet is full of plastic waste – several studies have already showed how humans now also contain traces of plastics, which enter their stream from already-contaminated fish, for example. Hydrocarbons have given birth to the homo plastic – quite a fate for an industry which is just a few decades old. This correspondent has interviewed many plastics trade groups and producers in the past 10 years and has heard the mantra about how useful for society plastics are several times: no matter how many times repeated, the mantra is not resonating with public opinion. On that aspect, Balcells is ahead of peers in the plastics lobby. It may be part of Asipla’s lobbying strategy, or it may be actual conviction, but her recognition the plastics sector has benefited from selling a cheap material with decent margins for decades while ignoring the end of the chain – waste – gives her a certain edge. “In fact, when I was appointed head of Asipla six years ago I was blunt and told company members: we need to change course in our strategy, or we’ll be overtaken by regulations and that will be worse of your own survival as companies. Rightly or not, plastics have become the visible enfant terrible in the sustainability debate, and we need to fight that with more than words saying how good plastics are,” she said. “Of course, there was fierce resistance to the changes at first. I implemented not only changes in terms of our marketing, but also by exploring new avenues in the plastics debate which prompted a deeper debate about sustainability, as well as the consequent and necessary investments in research and development to improve plastics’ sustainability.” Front page picture: A recycling plant, archive image Source: JC Tardivon/SIPA/Shutterstock Interview article by Jonathan Lopez

21-Jun-2024

SAO PAULO (ICIS)–Despite Colombia’s Supreme Court ruling correcting some aspects of the tax on single-use plastics approved by Congress, the industry is still largely skeptical about the tax’s principle or about a smooth implementation, according to the president at plastics trade group Acoplasticos. Daniel Mitchell added that the regulations put a burden on companies’ finances and may, in the medium and long run, affect their ability to invest in new technologies and processes to make the circular economy a reality. Since President Gustavo Petro took office, Colombia has passed two significant regulations affecting the plastic chain: the tax on plastics, and the progressive elimination in the market of single-use plastics. The first law, the tax on plastics came into effect at the end of 2022 but legislators left some open questions as to who would pay the tax. So much so that Colombia’s Supreme Court ruled in November correcting some aspects of the law, although it did not question the principle of the tax. In August 2023, the head of chemicals at Colombia’s industrial trade group Andi, Daniela Sotello, had already said in an interview with ICIS that the tax’s implementation had proved troublesome and explained how, at the time, many players in the chain were still uncertain of who would pay the tax. SUPREME COURT RULINGIt is good there is more clarity now, not least because the first phase of the tax on single-use plastics is coming into force on 7 July, as planned in the original regulation’s text. A second phase in the mid-2022s will start implementing recycling targets and the regulation should be fully implemented by 2030. “Thankfully, there is more clarity now on who should pay the tax, with the Supreme Court ruling it must be absorbed by producers and not users of the plastics. However, this brings yet another confusion to the table: is it the producers of plastics, the polymers producers, or the producers of the products packed in those plastics?” said Mitchell. “We lived with the initial confusion [producers paying or users paying] for 11 months, until November 2023 ruling. The first payment of the tax was done at the end of the fiscal year in February 2024, as planned.” In the end, players managed to muddle through the confusion and managed to pay the tax, although Mitchell says it did cause a slight uptick in prices which, he concedes, is obviously the purpose of the tax so consumption is reduced. But then, some particularities in the Colombian law are striking. For instance, the prices of soft drinks in plastic bottles are not included in the tax: according to the law, Coca-Cola and others are included in the so-called "basic family basket". According to Acoplasticos, prices for the final products with plastics which were included in the regulation have increased between 0.5% and 4% due to the plastic tax. “In sophisticated packaging, cosmetics and the likes, prices of the final product have risen around 4%, although in that chain the impact can go up to 6% in some cases. In most cases, the increases in prices have been between 1% and 2%,” said Mitchell. “For the consumers, the price rises have not been as noticeable as some feared. To give you an idea, the tax collected in its first year Colombian pesos (Ps) 70 billion ($17m). I imagine that amount, when divided by the 45 million Colombian consumers, was not that noticeable in their pockets, but the tax has put a burden on plastics producers and its customers, not least for the chaotic implementation.” THE PLASTIC PROBLEMClarified the first hurdles, the more meaningful debate. A trade group representing plastics producers will invariably oppose a tax on their operations, but the plastics industry remains on the eye of the storm in the debate about sustainability. Plastics producers have for decades operated with healthy profits most years. Meanwhile, plastics pollution has grown in little more than half a century into a problem which is causing most humans, according to several studies, to carry plastics in them: homo plastic so to speak. While no producer will accept direct responsibility in the pollution problem, some sources within the chain in Latin America say the industry could have at least done one thing better. According to the CEO of Chile’s plastics trade group Asipla, Magdalena Balcells, producers knew a long time ago the plastic pollution problem was becoming serious, and either were late to talk about it and alert the authorities, or ignored it completely. “Obviously, a company producing plastics has no competencies about the plastic waste, which falls on the authorities. Plastics have a big demand and are indispensable in so many applications. The debate has really taken off, rightly so, in the past 15 years – before that, the talk was mostly about how plastics were so useful and almost a win-win for all elements in the chain,” said Mitchell. “Things have changed, and I really think the circular economy is taking off. This is due to a combination of regulation, private sector initiatives, and more engagement from consumers. We need to reach a system where there is not waste, full stop.” – But in such a scenario, plastic producers of today would effectively run out of a business? If everything is recycled, there would not be a need to produce virgin material? – You will always have a small number of applications in which, at least for now, you cannot use recycled materials. Also, I think that while we may aim to recycle all plastics, the demand for plastics will always be larger than that supply of recyclable material. ($1 = Ps4,172) Interview article by Jonathan Lopez Front page picture: Plastic bottles and plastic rubbish are shredded and pressed; archive image Source Jochen Tack/imageBROKER/Shutterstock

19-Jun-2024

SINGAPORE (ICIS)–Thailand's SCG Chemicals (SCGC) has obtained government approval for its 200,000 tonne/year joint venture bio-ethylene plant in Map Ta Phut, paving the way for the company to reach its target of producing 1m tonnes/year of green polymers by 2030. SCGC, Braskem joint venture firm eyes green downstream PE output Final investment decision on bio-ethylene project likely by Q4 SCGC focusing on increasing recycled plastic production and use The Thai baht (Bt) 19.3 billion ($526 million) bio-ethylene plant will use agricultural products such as sugarcane, cassava and corn as feedstock, the Thailand Board of Investment (BOI) in a statement issued on 14 June. The project will be operated by Braskem Siam Co, a 51:49 joint venture between Brazilian producer Braskem and SCGC. The plant, which will built in Rayong province, will enable production of bio-based polyethylene (PE) in Thailand which will be the first of its kind outside Brazil. SCGC’s parent firm Siam Cement Group (SCG), in a 11 June slide presentation posted on its website, said that it will likely make a final investment decision (FID) on the bio-ethylene project by the fourth quarter of this year, the company said in presentation slides posted on 11 June. The chemicals arm of the Thai conglomerate has set a target of production 1 million tonnes/year of green polymers by 2030, by leveraging strategic partnerships and innovative technologies to drive its expansion, it said. As of end-2023, the company was producing around 218,000 tonnes/year of environment-friendly plastics. SCGC Green Polymers Growth Plans Source: SCGC As part of its green polymer expansion plans, SCG in February this year announced a Bt173 million investment to hold a 3% stake in Netherlands-based renewable chemicals technology firm Avantium. Avantium‘s proprietary technology can be used to produce a variety of sustainable chemicals, including bio-based polyethylene (PE) and bio-based polyamide (PA). SCGC and Avantium last year agreed to develop polymers based on sustainable carbon feedstocks such as those from biomass or carbon from air, and scale up a pilot plant in the next two years to produce 10 tonnes/year of the material. On the recycling front, SCGC is aiming to increase its sales volumes of green polymers from odorless post-consumer recycled resin (PCR) high density polyethylene (HDPE) via its partnership with Portugal-based recycled plastic producer Sirplaste. The Thai producer owns 70% of Sirplaste. In September 2023, SCGC achieved a fivefold increase in production capacity for odorless HDPE PCR resin to 45,000 tonnes/year following installation of new machinery at Sirplaste's plant, based on SCG’s June 11 slides. SCGC has also invested in Kras, a Dutch company that specializes in managing waste materials, to develop a comprehensive recycled plastic production system that meets global demand, especially in Europe, "where the need for environmentally friendly packaging is continuously growing". In May, SCGC and Dow signed a Memorandum of Understanding (MOU) to transform 200,00 tonnes/year plastic waste into circular products by 2030. The initial phases of the partnership will concentrate on building a robust materials ecosystem in Southeast Asia. This will involve establishing partnerships with existing suppliers for PCR and developing advanced technological solutions for waste sorting, mechanical recycling (MR), and advanced recycling (AR) in Thailand. Separately, SCGC parent firm SCG has also received approval to invest Bt6 billion in a co-generation power plant within the Map Ta Phut Industrial Estate in Rayong province. This plant will have a production capacity of 130 megawatts (MW) of power and 160 tonnes of steam per hour and will primarily supply electricity to factories within the industrial estate. Focus article by Nurluqman Suratman ($1 = Bt36.72) Thumbnail image: At the Laem Chabang Port in Chonburi Province, Thailand, 24 January 2022. (Xinhua/Shutterstock)

19-Jun-2024

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. China's chemicals producers are said to be focusing on being “nimble and agile” in response to weaker demand growth, ample local supply of intermediate chemicals and increasingly sophisticated end-use markets. This involves producing everything up and down the value chains only when it makes economic sense and increasing the differentiation of grades for a broader range of more sophisticated applications. Local producers are reported to be tripling their range of polyethylene (PE), polypropylene (PP) and polyurethane (PU) grades as they broaden their licensing of technologies. A lot of this differentiation is aimed at supplying chemicals and polymers for higher-value downstream industries such as electric vehicles and batteries. There are said to be plenty of intermediate chemicals available locally that can compete with opportunistic imports. Local producers of intermediates are also reported to be able to make better domestic netbacks than selling overseas. Customers of the local intermediate producers increasingly value reliable suppliers who can provide a wider range of grades, technical services and local currency deals, I’ve been told. The ability of chemicals importers to compete on price alone seems to be under challenge as a sustainable business model. Future winners in China could be the Tier 1 suppliers. These suppliers would make all the grades necessary to serve ever-more sophisticated local end-use markets, which would require constantly successful R&D and good technical services. This points towards China becoming a vast continent-sized market that largely serves itself in speciality chemicals and composites, as well as commodity chemicals. I earlier discussed how self-sufficiency is increasing in commodity chemicals resulting in a pivot by “overseas-based” producers to specialities and composites. China could become just about entirely self-sufficient in commodity grades of PP, polyethylene (PE) and in paraxylene (PX) and ethylene glycols (EG) by 2030. The latter two chemicals are of course pure commodities. Note the above phrase “overseas-based” rather than overseas, as the foreign investors in China are in strong positions to take advantage of this vas and rapidly maturing market. For reasons discussed today, I don’t believe that the pivot by overseas-based producers to specialities and composites will work if it is based on exporting to China. What should the overseas-based producers do? Pretty much forget China as an opportunity as they focus on the rest of the world. And here's the link: https://www.icis.com/asian-chemical-connections/2024/06/chinas-ever-more-sophisticated-chemicals-markets-could-entirely-serve-itself/ 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.

18-Jun-2024