Xylenes

LONDON (ICIS)–Here are some of the top stories from ICIS Europe for the week ended 20 December. Stagnant manufacturing, overcapacity, looming trade war weigh on Europe chems in 2025 Europe’s petrochemical sector will be under even more pressure in 2025 as demand from the region’s manufacturing sector remains in contraction, global overcapacity gets worse and amid the possibility of increased exports from China and the US. Europe melamine December contracts roll over, Q4 contracts rise on margin pressure European December melamine contracts were assessed steady, in line with market feedback. Europe paraxylene December contract price up €5/tonne The Europe paraxylene (PX) December contract reference price rose €5/tonne from November's levels. German business sentiment weakest since May 2020 German business sentiment dropped to its lowest point since May 2020 in December, according to the latest data from the Ifo Institute on Tuesday. Eurozone private sector closes out 2024 in contraction as manufacturing slows The eurozone private sector ended the year on a bearish note as output contracted driven by a weakening manufacturing sector, which offset a return to growth for services.

23-Dec-2024

SINGAPORE (ICIS)–Here are the top stories from ICIS News Asia and the Middle East for the week ended 20 December. Study on Oman’s Duqm petrochemical complex to be completed in 2025 By Jonathan Yee 16-Dec-24 15:09 SINGAPORE (ICIS)–A feasibility study for a joint venture petrochemical complex in the Duqm Special Economic Zone (SEZ) in Oman will be completed in 2025, an official from Oman’s national oil and gas company OQ told ICIS. UPDATE: South Korea bourse closes lower, won softer after Yoon’s impeachment By Jonathan Yee 16-Dec-24 16:52 SINGAPORE (ICIS)–South Korea’s benchmark stock market index was closed lower on Monday, snapping four straight days of gains, after the country’s parliament impeached President Yoon Suk Yeol over the weekend for imposing a short-lived martial law on 3 December. UPDATE: ChemOne's Malaysia $5.3bn complex start-up delayed to Q4 2028 By Nurluqman Suratman 16-Dec-24 21:21 SINGAPORE (ICIS)–ChemOne Group has delayed the start-up of its $5.3 billion Pengerang Energy Complex (PEC) in Johor, Malaysia to Q4 2028, after facing "complex financing" issues, the CEO of the project's operator said on Monday. Malaysia Lotte Chemical Titan to shut some PE, PP units in line with cracker shutdown By Izham Ahmad 17-Dec-24 12:30 SINGAPORE (ICIS)–Malaysia’s Lotte Chemical Titan will shut some of its downstream polyethylene (PE) and polypropylene (PP) plants to account for a reduction in feedstock after it shuts down one of its crackers in Pasir Gudang, according to market sources. INSIGHT: China economy ends 2024 on mixed note amid Trump 2.0 concerns By Nurluqman Suratman 18-Dec-24 13:07 SINGAPORE (ICIS)–China's economic data in November were mixed, with weaker retail sales growth offset by some signs of stability in property prices and a slightly quicker industrial output growth, as policymakers brace for more US trade tariffs once President-elect Donald Trump takes office for a second time. INSIGHT: China oil demand to peak in 2026 as transportation fuel drags By Fanny Zhang 19-Dec-24 14:00 SINGAPORE (ICIS)–China is expected to see its overall oil demand peaking in 2026 amid ongoing changes in the key transportation market, analysts said. Oil prices fall on stronger US dollar, looming US government shutdown By Jonathan Yee 20-Dec-24 11:55 SINGAPORE (ICIS)–Oil prices fell sharply on Friday on a stronger US dollar and amid a looming US government shutdown over the failure to pass a budget bill in the House of Representatives. Asia BD imports stay supported by China domestic market bull run By Ai Teng Lim 20-Dec-24 14:31 SINGAPORE (ICIS)–Sentiment is buoyant in Asia’s butadiene (BD) import market as sellers chase higher selling targets, emboldened by what they perceive as strong buying power in China. Bank of Japan maintains interest rates as Nov core inflation surges By Jonathan Yee 20-Dec-24 14:50 SINGAPORE (ICIS)–The Bank of Japan (BOJ) has kept its interest rates unchanged as inflation levels rose to 2.7% year on year in November, raising analyst expectations of a rate hike in Q1 2025.

23-Dec-2024

SINGAPORE (ICIS)–China's economic data in November were mixed, with weaker retail sales growth offset by some signs of stability in property prices and a slightly quicker industrial output growth, as policymakers brace for more US trade tariffs once President-elect Donald Trump takes office for a second time. Policy support to ramp up in coming months ahead Retail sales unexpectedly slowed in November Trump 2.0 adds significant risk to trade China's November property market data showed signs of stabilization, with rates of declines for both new home and used home prices easing from the previous month to 0.2% and 0.35%, respectively. These were the smallest rates of decline recorded since June 2023 for new home prices and in May 2023 for used home prices, data from China's National Bureau of Statistics (NBS) showed on 16 December. The numbers suggest the market may be bottoming out, with 21 of 70 cities reporting steady or rising new home prices, the highest proportion this year. Property investment in the country, however, continued to contract at double-digit rates in November, falling by 10.4% year on year, with new residential starts and completions contracting by 23.1% and 26.0%, respectively. "Real estate investment still likely faces some hurdles before it is no longer a headwind on growth – prices have not yet stabilized, but property inventories are still relatively elevated at this stage, and property developer sentiment remains cautious," Dutch banking and financial services firm ING said in a note. "A second consecutive month of improving price data is a positive signal for the property market bottoming out, and we expect a trough to be established in 2025 and the start of an L-shaped recovery to take effect." RETAIL SALES GROWTH SLOWS Meanwhile, China's November retail sales growth surprisingly slowed to 3.0% year on year, down from October's stronger-than-expected 4.8%. Trade-in policies continued to boost specific sectors in November, with household appliances posting a robust 22.2% year-on-year growth, albeit slower than previous months’ increase. Meanwhile, November automobile sales on a year-on-year basis surged to a nine-month high of 6.6%, coming from a 3.7% expansion in October. In contrast, petroleum and related products struggled, recording a 7.1% year-on-year contraction, as the transition to electric vehicles gains momentum. Household confidence clearly remains soft and it remains to be seen if the "vigorous support" for consumption promised next year will be effective in stimulating a recovery, according to ING. "We expect the rollout of supportive policies could take some time, but overall retail sales growth should recover in 2025." INDUSTRIAL PRODUCTION EDGES HIGHER China's industrial output showed a modest improvement in November, with the headline growth edging up to 5.4% year on year from 5.3% in October. "Export demand has been a contributor to solid industrial production growth in 2024, but this factor is expected to weaken somewhat in 2025 as tariffs set in," ING said. The auto sector was a key driver, with output growth accelerating to 15.2% year on year in November, up from 4.8% in October. This uptick was mirrored in November passenger car output, which surged 14.1% year on year, nearly double the 7.7% growth seen in October, according to data from the China Passenger Car Association (CPCA). POLICY SUPPORT TO RAMP UP IN 2025 "Despite data coming in a little softer than expectations, with only one month of data still to come, China will likely manage to complete its ‘around 5%’ growth objective for 2024," ING said. At the Central Economic Work Conference (CEWC) held on 11-12 December, China's top leadership pledged to implement robust policy support measures in 2025. Heading into the conference, much of the attention centered on the scale of stimulus needed to bolster China's growth. While the CEWC affirmed the need for more robust support measures, it remained tight-lipped on specifics. Detailed economic and social targets will be unveiled at the National People's Congress (NPC) in March 2025, with concrete policy measures likely to follow. China's fiscal deficit target and the special government bond issuance targets were both raised at the CEWC, which along with November's Chinese yuan (CNY) 10 trillion debt package should create more room for fiscal stimulus in 2025, according to ING. "The speed and scale of domestic stimulus will likely play the biggest role in determining whether or not China's economy will be able to maintain stable growth," it said. "The eventual growth target setting at next year's Two Sessions meetings in March will give a better indication of how confident policymakers are in terms of growth stabilization." The Two Sessions are the annual gatherings of China's top legislative and advisory bodies, the National People's Congress (NPC) and the Chinese People's Political Consultative Conference (CPPCC), during which key policies, laws, and leadership appointments are discussed and approved. To achieve this, the government is likely to expand its successful equipment upgrading and consumer goods trade-in program beyond automobiles and home appliances, Ho Woei Chen, an economist at Singapore-based UOB Global Economics & Markets Research, said in a note on 13 December. Future initiatives may encompass a broader range of categories, including services such as tourism and entertainment, as well as emerging areas such as digital and green consumption, Ho said. Additionally, investments in technological innovation, industrial upgrading, and domestic infrastructure – including transportation, energy, and urban renewal projects – are expected to receive a significant boost, she added. "We do expect Beijing to ramp up fiscal deficit and fiscal spending in 2025, but we believe how to spend might be even more relevant than how much will be spent, because this is not a typical downcycle for China," Japan's Nomura Global Markets Research said in a note. "Due to the property meltdown, fiscal issues and worsening tensions with the US, China’s economy is not in a normal downcycle, so it may take much more than the recent ‘bazooka’ stimulus package to truly reboot the economy." A meaningful recovery in China in 2025 will likely require Beijing to tackle several key challenges, including clearing the property market backlog, reforming the fiscal system, strengthening the social welfare system, and easing geopolitical tensions, Nomura noted. "We remain cautious on Beijing’s resolution in clearing the property sector, which has been contracting for almost four years, as the CEWC mentioned little new measures to clear property markets. The CEWC memo did mention reforming the fiscal system, but no details were provided." THE NEW CHALLENGE IN 2025: TRUMP 2.0 Trump's victory, coupled with a Republican sweep in the US sets the stage for significant trade policy shifts in 2025 for the world’s biggest economy, as concerns rise over the potential imposition of 60% tariffs on Chinese goods. Nomura expects tariffs to be introduced in a phased manner throughout 2025, mirroring the gradual rollout seen during Trump's first term. "We assume the actual implementation that would directly impact China’s exports to the US will occur from around mid-2025 and will be mostly concentrated in H2 2025, with some front-loading in H1 2025," it said. "There is a possibility that the incoming Trump administration may take action to tackle the issue of Chinese export rerouting to the US via third countries, and we believe such a threat is a real risk to China’s export growth over the next couple of years." Nomura predicts China's export growth will experience a temporary surge, rising to 8.5% year over year in Q4 2024, up from 6.0% in Q3 2024. This increase is attributed to frontloading, as Chinese exporters rush to avoid the US tariffs in 2025. However, Nomura expects export growth to slow significantly in 2025 due to the anticipated trade headwinds and the frontloading that occurred in Q4 2024. Insight article by Nurluqman Suratman Thumbnail photo: A commercial housing building under construction in Nanjing, China. (Source: Costfoto/NurPhoto/Shutterstock)

18-Dec-2024

SINGAPORE (ICIS)–South Korea’s benchmark stock market index was closed lower on Monday, snapping four straight days of gains, after the country’s parliament impeached President Yoon Suk Yeol over the weekend for imposing a short-lived martial law on 3 December. The KOSPI composite index slipped 0.22% to settle at 2,488.97, with shares of major petrochemical companies closing mixed. The Korean won (W) eased against the US dollar at W1,437.68 as of 08:00 GMT, weaker than the previous session’s closing of W1,435.45. The won had plunged to an almost two-year low of above W1,440 to the US dollar when Yoon declared martial law late on 3 December which lasted about six hours. South Korea’s National Assembly on 14 December voted 204-85 to impeach Yoon for imposing martial law, which plunged the country into political instability and economic uncertainty. A two-thirds majority was required to approve the motion, which was the second one filed after the first motion on 7 December failed. Yoon’s political duties have been suspended pending a Constitutional Court decision, which is expected in 180 days, on whether to re-instate or remove him from office. Prime Minister Han Duck-soo became the acting President upon Yoon’s impeachment, stating that his mission is to “swiftly stabilize the confusion in state affairs” during a Cabinet meeting. Han talked to outgoing US President Joe Biden by phone on 15 December, reassuring him that "South Korea will carry out its foreign and security policies without disruption", according to a statement from Han's office. EYES ON 2025 Separately, finance minister Choi Sang-mok on Monday said he has written a letter to financial institutions and world leaders to explain the government’s response to the recent political situation and to request their trust and support in the South Korean economy. During an emergency ministerial meeting on 15 December, strategies were heard for economic stabilization and growth in the short- and long-term. For one, the finance ministry will announce its economic policy direction for 2025 by the end of the year, along with a mid- to long-term strategy to be released in January 2025. Meanwhile, the Ministry of Trade, Industry and Energy (MOTIE) is also drafting support measures for the petrochemical industry in preparation for the Trump-led US government in January 2025, which is threatening to impose tariffs on all imported goods. The US, along with China, is a major trading partner of South Korea. South Korea’s measures are expected to take effect in Q1 2025. The country – which is a major exporter of ethylene and aromatics, such as benzene, toluene and styrene monomer (SM) – is reeling from a combination of weak external demand and overcapacity in China. (updates closing levels for index, share prices; adds details throughout) Thumbnail image: South Korean Prime Minister Han Duck-soo, who assumed office as acting president after the parliamentary impeachment of President Yoon Suk-yeol, speaks to reporters at the government complex in central Seoul, South Korea, 15 December 2024. (YONHAP/EPA-EFE/Shutterstock)

16-Dec-2024

HOUSTON (ICIS)–As consumer concern for product sustainability continues to spur both regulatory and voluntary action within the recycled plastics space, recycled polypropylene (R-PP) resin has risen in interest. US recycled plastics markets continue to develop new grades of R-PP in response to converter and brand company demand in the packaging and durables space. Despite the desire to incorporate higher percentages of R-PP into existing products, the unique challenges with polypropylene (PP) collection infrastructure and limitations on the mechanical recycling processes have hindered widespread or rapid adoption. For example, those seeking R-PP tend to request post-consumer based material with food-contact approval, as well as natural or transparent color so that products can be modified to maintain prior brand design. Supply of these types of feedstocks are extremely limited, largely due to the fragmented PP collection landscape and mixed application of PP in existing consumer packaging. Moreover, only a handful of recyclers have received Letters of Non-Objection (LNOs) from the US Food and Drug Administration (FDA). As of the latest update, slightly more than 20 individual companies have received one or more LNOs. As such, a natural, food-grade R-PP resin is priced at roughly two times the price of virgin PP. Prices for white or light gray R-PP are slightly lower than natural but are limited to various design applications and in some cases still hold a premium against virgin. Similarly, black and dark gray materials are typically not as sought after due to their design limitations and thus trade at a much lower price on weaker demand. Regardless of the aesthetic or regulatory hurdles, an additional barrier to adoption for post-consumer R-PP resin continues to be mechanical properties and performance. Based on the mix of incoming feedstock items from curbside bales, such as cups, tubs and lids of various colors, sizes and applications, the blended properties of the final resin typically range from 12-20 Melt Flow Index (MFI, also referred to as melt) and 1.2-1.7 Izod. Thus, packaging and product converters with specific manufacturing and performance requirements must then compound material to achieve the final resin material, inherently limiting the percentage of post-consumer recycled (PCR) content. As such, recyclers note there has been increased quoting activity for their R-PP portfolio, but still limited conversion to substantial order volumes. In addition, pricing continues to show wide ranges based on a myriad of factors, including material quality, color, volume, production capability and buyer/supplier market knowledge. Overall demand for PP PCR remains strong from end markets such as food and beverage and personal care, which are driven by both regulatory and voluntary recycled content targets. Other end markets such as horticulture, durables, automotive and construction are slower to adopt, and instead have historically pursued post-industrial or low cost virgin material due to cost-effectiveness. ICIS is currently prototyping US R-PP market coverage. Prototype reports target those involved in the processing and purchasing of PP bales as well as mechanically recycled post-consumer and post-industrial PP resin within the US. These reports have market discussion on pricing, supply, demand and current news, split by post-consumer vs post-industrial market categories. If you are interested in learning more about this coverage and or receiving these prototype reports, please reach out to Emily.Friedman@icis.com.

13-Dec-2024

LONDON (ICIS)–While countries around the world bet on battery technology, Germany has taken a step back with plans to cut funding for battery research – to the dismay of its chemicals and other industries. Battery research key to energy transformation Trying to catch up with China New government may reverse cuts after election With the cuts in the federal government’s 2025 draft budget, the German federal research and education ministry could stop funding new battery research projects as soon as next year. The cuts would also include a reduction in so-called “commitment appropriations” (Verpflichtungsermachtigungen) of more than €100 million for spending on battery research in future years, according to the opposition Christian Democrats. Chemical producers’ trade group VCI said that the cuts would lead to “a loss of added value” and raised the risk of Germany becoming more dependent for batteries on other countries or regions. Germany needed strong research funding in this field in order to catch up with other countries, said Ulrike Zimmer, head of science, technology and environment at VCI. “This is the only way Germany can maintain its chances in competition with the US and China, and also train the urgently needed skilled workers,” she said. The planned funding cuts have already created uncertainties at academic and research institutes, VCI warned in a joint statement this week with trade groups from the machinery, electronics and digital sectors. As it stands, employment contracts could currently not be extended and new contracts could not be signed, the groups said. Research institutions were losing scientists due to the lack of prospects in the battery field, and the technology transfer via collaborations and start-up companies was coming to a standstill, they said. They said the cuts would have far-reaching consequences as they affected all industries involved in the battery value chain: chemical companies, mechanical and plant engineering, cell manufacturers and all industries whose products are based on the performance, price and availability of batteries. Affected sectors included electric vehicles (EVs), stationary storage systems, drones, power tools and robots, among others, they said. TRYING TO CATCH UP WITH CHINA Peter Lamp, head of battery technology at automaker BMW, told a parliamentary committee on Wednesday, 4 December that without powerful batteries, the transformation to a carbon dioxide (CO2)-neutral energy and transport industry was not possible. The availability of modern battery technologies was crucial to successfully implementing the energy transition, he said. Lamp criticized Germany's current dependence on Asian battery cell suppliers. Germany and the EU needed “technological sovereignty” in this area, he said, adding that the planned reduction in funding was therefore “incomprehensible”. Auto industry trade group VDA said that funding for battery research was of “central significance” for the future of the German automotive industry. The country’s Fraunhofer research institute said in a submission to the committee that government support for battery research was “an essential prerequisite” for the success of Germany’s energy and mobility transition. Battery research played a key role in the development of electrochemical energy storage solutions, as well as battery and production development, it said. China and other Asian countries were far ahead in developing and producing batteries, the institute noted. “In order to counter the dominance of Asian players in battery technology and the associated supply chains, Germany and Europe must constantly build up skills and technologies for large-volume battery cell production for all applications, also as insurance against geopolitical dependency,” it said. NEW GOVERNMENT Government officials have said that the cuts were necessary because the country’s supreme court ruled last year that Berlin needed to trim spending in order to comply with the “debt-brake” (Schuldenbremse), which is a constitutionally enshrined provision to keep public deficits low and limit debt. However, there is a chance that the cuts may be reversed in the event of a change in government in Berlin. Following the collapse last month of Chancellor Olaf Scholz’s coalition government, early elections will likely be held in February. The Christian Democrats, which are ahead of Scholz’s Social Democrats in opinion polls on the election, have said that the cuts to battery research, as well as the abolition last year of an incentive for the purchase of EVs, were “short-sighted”. The party has introduced a motion in parliament calling for “strong battery research in Germany”, which prompted Wednesday’s parliamentary committee hearing. Countries such as China, the US, Japan, and South Korea had nearly tripled public spending on battery research over the past four years while Germany risked falling behind internationally in this important area, it said. The cuts would also jeopardize the support the government already committed for investments in construction for battery plants, the party said, and noted the support the government has granted to a project by Sweden’s Northvolt at the Heide chemicals and refining site northwest of Hamburg. Spending a lot of money on battery factories and significantly less on research and training was “highly risky”, it said. The Northvolt project may not be realized, however. The company last month filed for Chapter 11 protection and reorganization in the US, raising questions about its future and the prospects of the German project. BATTERIES, EVs AND CHEMICALS Batteries and the EVs they power are important market opportunities for the chemical industry. An EV contains more plastics and polymer composites and more synthetic rubber and elastomers than a conventional vehicle powered by the internal combustion engine. However, BASF said earlier this year that market dynamics in the EV sector were slowing, and the company would therefore pause or may not make certain investments connected to the industry. One project on which BASF paused work is a proposed commercial-scale EV battery recycling metal refinery at its chemicals production complex in Tarragona, Spain. GERMANY AUTO INDUSTRY SENTIMENT IN DECLINE Meanwhile, the sentiment in Germany’s automotive industry continued to deteriorate in November, according to the latest survey by Munich-based research group ifo this week. Demand was weak and the industry remained stuck in a “mix of far-reaching transformation, intense competition, and a weak economy”, ifo said. Also, thousands of Volkswagen workers went on a short strike on Monday, 2 December to protest against potential job cuts and plant closures in Germany, and their union, IG Metall, has announced another strike for Monday, 9 December. 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). Additional reporting by Tom Brown Please also visit the ICIS topic page Automotive: Impact on chemicals Thumbnail photo source: BASF Focus by Stefan Baumgarten

06-Dec-2024

Romanian MP calls on EU to work closely with member states to cut back on red tape Incoming Romanian government must address bureaucracy, high taxation, introduce market reform Romania can establish itself as viable regional alternative to Austrian gas hub LONDON (ICIS)–The incoming European Commission should simplify procedures to access funds for energy projects and strengthen the dialogue with member states particularly in Eastern Europe amid growing popular discontent, a Romanian parliamentarian told ICIS. Speaking to ICIS, Cristina Pruna, vice-president of the industries and services committee in the Romanian parliament said the Romanian energy sector played a major role not only in the EU but also in supporting neighbouring countries such as Moldova and Ukraine. She warned previous delays in allowing Romania to join key agreements such as the EU’s Schengen area, which abolishes border controls, or bureaucratic procedures complicating efforts to tap funds had created major frustrations, which may be partially responsible for gains made by far-right parties in recent polls. REFORM She conceded the incoming Romanian government, which will be formed following parliamentary elections on December 1, will also have to address multiple internal challenges. These include encouraging local and foreign investments in the gas and renewable sectors, cutting back on red tape, reducing taxes and preparing the market for deregulation. She said her party, Uniunea Salvati Romania (USR), which is currently in talks to form the incoming coalition government, had proposed to establish a one-stop-shop at the regulator ANRE to help investors navigate the bureaucratic process to access EU funds for renewable projects. Furthermore, she said Romania should establish power and gas markets where prices are set by demand and supply and insisted there should be a predictable legal framework in place to support vulnerable consumers as well as industrial consumers. One of her party’s proposals is to introduce an automatic mechanism to guarantee tax credits for industrial consumers, which would allow them to deduct from taxes part of rising energy costs. Market participants have complained caps on electricity and gas prices introduced following the 2022 energy crisis had led to burdensome taxation and market distortions. Pruna agreed caps should be lifted but insisted consumers should be prepared for market deregulation expected in 2025. TAXATION Although the ruling Partidul Social Democrat (PSD) won the latest polls with a narrow lead, their policies to date have led to a high taxation regime that has throttled investments and led to nosediving liquidity on Romania’s forward electricity and gas markets. As a result of policies spearheaded by PSD and the liberal party, PNL, in the outgoing coalition government, up to 87% of the money made from gas/oil sales is paid in royalties, windfall taxes and contributions to various funds. Their policies have also led to regulatory unpredictability, deterring large-scale investments. Meanwhile, there are fears that the three far-right populist parties which won seats in parliament –  Alliance for the Union of Romanians (AUR), Partidul Oamenilor Tineri (POT) and S.O.S. Romania – could push for policies that would exacerbate an already visible nationalist streak which has underpinned Romania’s energy regulations in recent years. AUR calls into question the privatisation and sale of Romania’s oil and gas assets to OMV Petrom in the early 2000s. Meanwhile, the front-running presidential candidate Calin Georgescu who will face the USR candidate Elena Lasconi in a run-off on December 8, claimed Romanians are ‘suffocated by taxes’ but neither he nor his newly established party POT has proposed concrete measures to scrap them. ENERGY MIX Although USR advocates scaled up nuclear and solar as well as onshore and offshore wind production, Pruna is keen to point out that Romania should capitalise on its gas reserves. “Offshore Black Sea gas production is due to come onstream in 2027 during the mandate of the incoming 2025-2028 government. We need to ensure that Romania establishes itself as a viable regional market and an alternative to the Austrian gas hub,” she said. She also noted the importance of working closely with Moldova and Ukraine to increase border capacity for electricity and gas flows.

06-Dec-2024

PARIS (ICIS)–Global specialty chemicals producer Arkema aims to supercharge growth in key targeted markets by leveraging proprietary chemistries to develop new products with clear sustainability and performance benefits. From France-based Arkema’s spinoff from energy giant Total (now TotalEnergies) in 2006, the company has undergone a major transformation from a diversified chemical company with a mixed bag of commodity, intermediates and specialty businesses, to nearly a pure play specialty and materials business today. “We had to revisit the strategy of the company in-depth, and we had a strong belief at that time that there was an exponential growth [opportunity] in innovative and high performance materials,” said Thierry Le Henaff, chairman and CEO of Arkema, in a video interview with ICIS. “So our strategy was to focus on specialty materials around three segments – adhesives, coatings solutions, and also high performance additives and polymers in order to make Arkema a pure specialty player,” he added. Le Henaff is the 2024 ICIS CEO of the Year, having been selected in a vote among his peers – the CEOs and senior executives in the ICIS Top 40 Power Players. M&A STRATEGY AND LATEST DEALSThe latest move in the company’s transformation is the acquisition of Dow’s flexible packaging laminating adhesives business for $150 million which just closed on 2 December. The deal adds about $250 million in sales to Arkema’s Bostik adhesives business, and Le Henaff calls it a “step change” for Bostik in the flexible packaging adhesives market, giving it a unique opportunity to be a key partner for customers across the packaging industry. Arkema will spend around $50 million in implementation costs or capex related to the acquisition and is targeting about $30 million in annual cost and development synergies after five years. “We are going to continue to invest in… cost optimization, but at the same time continue to change the portfolio, which means to invest in M&A,” said Le Henaff. The Dow deal comes on top of major acquisitions such as a 54% stake in South Korea-based PI Advanced Materials (polyimide films for mobile devices and electric vehicles) in December 2023 and US-based Ashland’s performance adhesives business (pressure-sensitive adhesives for auto and buildings) in February 2022. While the company will now focus more on organic growth, bolt-on acquisitions will be an important part of Arkema’s strategy in the coming years, he noted. One such smaller bolt-on deal was the April 2024 acquisition of a 78% stake in Austria-based Proionic, a start-up company for the development of ionic liquids, a key component for the next generation of EV batteries. HYPER GROWTH SUBMARKETSSpeaking of organic growth, the Arkema CEO has an ambitious goal of growing sales in certain parts of its specialty businesses at a rate triple that of its overall business through 2028. These high growth areas are green energy and electric mobility; advanced electronics; efficient buildings and homes; sustainable lifestyle; and water filtration, medical devices and crop nutrition. “It is really with this combination of our technologies [in] these submarkets… where we want to multiply by three, the average growth of Arkema. This means that in this market, we could deliver 12% organic growth while for the average of Arkema it would be 4%,” said Le Henaff. Arkema aims to grow these businesses from around 15% of sales in 2023, to 25% of total sales, which are projected to be around €12 billion, by 2028. These high growth areas with three times higher sales than the group average will account for 50% of the company’s R&D budget. “We have about 15 technologies, superior technologies, where we can really differentiate ourselves. Our strategy is really to take advantage of this sustainability trend,” said Le Henaff. “In fact, the answer to climate change is through the solutions we can develop for customers. This is really the core of our strategy,” he added. Within electric mobility, in addition to the acquisition of a majority stake in Proionic, Arkema in January 2024 took a stake in Tiamat, a pioneer in sodium-ion battery technology – a potential alternative to lithium-ion batteries. RENEWABLE RAW MATERIALS AND DECARBONIZATIONArkema is also undertaking organic growth projects in these hyper growth submarkets. One key project is in bio-based polyamide 11, used in bicycle helmets, consumer goods, wire and cable and medical equipment. “We are adding more and more renewable raw materials in the product range we are offering to our customers. One good example and very emblematic [of our strategy] is this polyamide 11 made from castor oil, which is a fully sustainable, renewable, bio-sourced, high performance polymer,” said Le Henaff. “We are very proud of it, and we have just invested in a plant in Singapore to accelerate the growth of this polymer,” he added. Its Rilsan bio-based PA 11 has an 80% lower carbon footprint versus traditional polyamide resins using fossil-based raw materials and conventional energy sources, according to the company. Arkema also recently launched more sustainable adhesive solutions, including its Kizen LIME range of packaging adhesives made with a minimum of 80% renewable ingredients, and Bostik Fast Glue Ultra+ for do-it-yourself (DIY) applications with 60% bio-based materials. Along with helping its customers decarbonize, the company is also decarbonizing its own operations, targeting a 48.5% reduction in Scope 1 and 2 emissions, and a 54% reduction in Scope 3 emissions by 2030 versus a 2019 base. One major project is to decarbonize its acrylics production in Carling, France by installing new purification technology. The €130 million project should result in a 20% reduction in CO2 emissions at the site by 2026. GLOBAL FOOTPRINTAlong with its transformation into pure play specialties, Arkema has also diversified its global footprint, with more exposure in North America than Europe. Today Arkema is a global player with close to 40% of sales in North America, 25% in Asia and around a third in Europe, versus Europe at about 60% of sales when it was spun off in 2006, the CEO pointed out. “I still believe in Europe, but it's clear that we have a gap in competitiveness and also in demand. The pace of demand is slower for Europe than it is for the rest of the world,” said Le Henaff. “It's very important that our governments and the European Commission understand that the cost of doing business in Europe is too high compared to what it is in the rest of the world because of legislation, because of the cost of energy, because of the cost of raw materials,” he added. There is much work to do on this front to get Europe back to competitiveness and growth, especially for chemicals, he said. DEMONSTRATING RESILIENCEArkema’s geographic diversification and specialties focus has made it more resilient to challenging macroeconomic markets. In Q3, sales rose 2.9% year on year to €2.39 billion and adjusted earnings before interest, tax, depreciation and amortization (EBITDA) increased 5.4% to €407 million, the latter driven by 9.0% growth in specialty materials, offsetting a 7.3% decline in intermediates segment. Its overall EBITDA margin expanded to 17.0% versus 16.6% a year ago. A strong focus on efficiency and a healthy balance sheet has served it well. “Arkema over 20 years has doubled in size and we have a set number of headcount. This means that competitiveness and productivity is very important for Arkema, even if we are less vocal than other companies on this topic,” said Le Henaff. On the balance sheet side, net debt of around €3.11 billion is “tightly controlled” at a conservative two times last 12 months EBITDA. TRANSFORMATION NEVER OVERKey to success for Arkema is to continuously evolve, be nimble and be open to growth opportunities. “It’s never over. The status quo in this world is not possible, because the world is changing all the time, because of demography, because of geopolitics, for plenty of reasons, so we have to move forward,” said Le Henaff. “There are plenty of opportunities, but the opportunities of today won't be the opportunities of tomorrow. So we really need to have a company which is structured to be able to catch these new opportunities which arise all the time,” he added. Meanwhile, on the macro-outlook for 2025, he is cautiously optimistic. “We are all cautious because we thought 2023 would be the year of the rebound and also 2024, so we have to be cautious for 2025. But I'm cautiously optimistic,” said Le Henaff. “I still think that we should have some kind of rebound for 2025. We'll see if I'm right or not, but in the meantime, I would say the most important thing is we need to continue [evolving]. We are very glad to be in a unique position because at the end of 2024, we will have nearly fully financed billions of euros of projects, including external growth and organic growth,” he added. PEOPLE AND CULTUREKey to any ongoing transformation is of course the people involved. Arkema deems it critical to keep its people engaged with the mission. “I think, in a world which is quite volatile, quite changing, it's very important to have fixed points,” said Le Henaff. First, the long-term strategy and vision has to be attractive. But equally as important is having a corporate culture with clear and simple values. These five values for Arkema are: Solidarity, Performance, Simplicity, Empowerment and Inclusion. It is the culture that amplifies the inherent strengths in an organization, including technology, and smooths the path for continued successful transformation in an uncertain world, he said. Interview article by Joseph Chang Watch the exclusive Q&A video interview with Arkema CEO Thierry Le Henaff on the 2024 ICIS CEO of the Year landing page.

05-Dec-2024

HOUSTON (ICIS)–Announced this week, beverage giant The Coca-Cola Company has updated many of their 2030 sustainability goals, in some cases delaying and minimizing targets, in other cases removing tangible goals all together. All goals have now been extended to a 2035 timeline. In support of this move, the company notes that they have assessed progress and identified challenges to achieving their original 2030 goals. This comes as companies grapple with the premium often associated with sought after food-grade, clear recycled resins, especially amid a weaker global macroeconomic environment. "These challenges are complex and require us to drive more effective and efficient resource allocation and work collaboratively with partners to deliver lasting positive impact," noted Bea Perez, Executive Vice President and Global Chief Communications, Sustainability & Strategic Partnerships Officer at The Coca‑Cola Company. This comes as the company has faced rocky unit case sales volumes in the North American market over the last several quarters. Most recently, the company posted flat quarter on quarter results, an improvement over negative volumes the prior quarter. In relation to packaging, the original goal of 50% recycled content by 2030 has been downgraded to a target of 35-40% recycled content in primary packaging. Specifically, they aim to reach 30-35% recycled content in their plastic packaging, which makes up nearly 50% of their packaging mix by number of units. In 2023, the company noted 27% of their primary packaging material by weight came from recycled content, 17% of which was recycled plastic. This now leaves a 10-year runway to achieve an additional increase of just 8% to reach their new recycled content target and 13% to reach their recycled plastic target. Additionally, the company has reduced their beverage container collection target from 100% by 2030 to 70-75% by 2035. As of 2023, the company noted 62% of the equivalent bottles and cans introduced into the market were collected for recycling or reuse. When looking at packaging design, the company noted they had converted more than 95% of their packaging to recyclable formats, nearing the 100% by 2025 goal. As many other converters and brand companies have also reckoned with, it can be very difficult to convert the final items, ones which typically require a complete re-design or additional cost to comply with recycling requirements. The company has now removed a virgin resin reduction goal, amid a poor result in 2023, where virgin plastic use actually increased due to business related growth. The prior reuse and refill goal was also removed. Coca-Cola now joins several other brand companies, such as Unilever, PepsiCo who have delayed or reduced their original ambitious goals amid bottom line pressure. It is uncertain how brand companies will demonstrate their commitment to packaging circularity sustainability in the long term, especially as leaders around the globe continue negotiating towards a global treaty on plastic pollution. While voluntary goals have boosted demand for recycled plastics markets, many recyclers and suppliers note that actual procurement efforts have been inconsistent. Many believe regulatory requirements are the only solution to securing long term demand for these materials.

05-Dec-2024

President Yoon Suk Yeol faces backlash over martial law Yoon a strong advocate for nuclear power at home, abroad Legislators are calling for resignation, impeachment SINGAPORE (ICIS)– South Korea President Yoon Suk Yeol’s short-lived martial law declaration on the midnight of 4 December shocked the country, raising concerns on whether he can finish the term set to end in 2027 without being impeached, and putting uncertainty on Korea’s energy policies, should the office change hands, including strong support for LNG as a transition fuel and phasing out coal. The opposition Korea Democratic Party already filed motions to impeach Yoon on the afternoon of 4 December. If the impeachment passes via the National Assembly, it would need to go through a judicial review and then a new election would be called in 60 days if upheld. Yoon and his People Power Party are a minority in the legislature and have faced opposition roadblocks to ambitious energy policies that were a sharp change from predecessor Moon Jae In. NUCLEAR Yoon, who was elected in 2022, is a supporter of a growing nuclear power footprint at home and exports of nuclear plants, including recent efforts with the Czech republic, and vowed to increase the share of nuclear in the energy mix to above 30% by 2030. Moon had declared that nuclear would be completely phased out since his term in 2017. On 12 September 2024, Korea’s Nuclear Safety and Security Commission (NSSC) granted the construction permit for Shin-Hanul 3 and 4 reactors. This means four nuclear plants are underway by 2038. Korea would further export 10 nuclear plants by 2030 under his envision, to potential buyers all over the world. “The Democratic Party is not pro-nuclear, if they are elected after Yoon’s impeachment they might not start new projects but also not likely to kill the ongoing projects and export efforts due to NDC (National Determined Contribution) concerns”, a Korean academic familiar with the matter told ICIS. “Nuclear is quite essential to achieve Korea’s carbon neutral goals”, he added. The country has a 2050 net-zero carbon target. LNG DEMAND South Korea relies heavily on fossil fuels for power generation. Imported LNG powers over a quarter of the Korean economy. This number is projected to decrease due to rising share of nuclear and renewables. South Korea’s Ministry of Trade, Industry and Energy MOTIE on 19 November said it has formed a “Coal-Fired Power Generation Transition Council” among five companies for an updated roadmap on phasing out coal plants due by the first quarter of 2025. But the country’s LNG import grew by 7.5% from 39.34mtpa in 2023 (January-November), to 42.31mtpa in the same period of 2024, ICIS data shows. “Short-term LNG demand will indeed be lower because of new coal power plants and renewables, but LNG need won’t be diminishing in the next ten years, because electricity consumption will grow due to data centers, semi-conductor industry and more abnormal temperatures,” the Korean scholar said. South Korea is the world’s third largest LNG importer and has extensive power infrastructure to feed high-end manufacturing. As well, South Korean shipyards have completed 500 LNG tankers for export since 1994, according to the Ministry of Trade, Industry, and Energy (MOTIE) in April 2024. Also in November, MOTIE announced pilot bidding for an LNG capacity market. The newly introduced liquefied natural gas (LNG) capacity market is a competitive bidding process for new and new collective energy sources using LNG as the main fuel. The country has also worked closely with Qatar on LNG supply agreements and on shipping – as well as on US projects via private companies. EAST SEA DRILLING In June, the president announced exploratory drilling for fossil fuels off its eastern shore, which could supply the country with oil and gas from four to 29 years, according to estimates. The first drilling will begin in the later half of this month, and the initial results will be released in H1 2025, according to Korean media. It remains unclear what results the exploitation will deliver by then, and whether a change of power will put an end to the project. At the same time, Yoon’s latest poll rating slid to 25%, Korean media reported. The Korean won weakened to just above 1,400 to the US dollar on 4 December from levels just above 1,300 won at the end of October, making imports more expensive at least in the short term, as the country’s main labor union called for a general strike and Yoon’s resignation. The Bank of Korea and South Korea’s Finance Ministry pledged steps for stability, including 10 trillion won ($7.07 billion) in stock market stabilisation funds if needed via the financial regulator. (Roman Kazmin contributed to this article)

04-Dec-2024