Melamine

HOUSTON (ICIS)–Under US President Donald Trump, US chemical companies will unlikely see the full-blown tariffs that he has proposed during his campaign, but they will operate under a faster growing economy with higher inflation and interest rates that will settle at an elevated rate, economists at Oxford Economics said on Monday. Oxford is forecasting what it calls a limited Trump scenario, under which his administration will not fully adopt the policies he proposed during his campaign. Tariffs will be limited, targeted and phased in, while Congress will limit growth in the government deficit by restraining some of his tax cuts and spending measures. Oxford's baseline scenario for 2025 does not change much because it is assuming that Trump will focus most of his first year in office on extending the tax cuts of his earlier administration, said Ryan Sweet, chief US economist for Oxford Economics. He made his comments during a presentation. The consultancy's forecast for 2025 GDP is a tenth of a point higher versus its estimate in October, he said. Inflation will rise by a tenth of a point in 2025. Trump is inheriting a strong economy, so there is little risk of recession. In these initial years, the biggest effect on the US economy will be tax cuts, and these should increase growth in GDP, said Bernard Yaros, lead US economist for Oxford. After 2026, Oxford assumes Trump will adopt some of his immigration restrictions, and it is expecting GDP growth to fall below its earlier forecast. Stricter immigration policies will reduce the supply of labor and slow down the consumption of goods and services. LIMITED TARIFFSOxford expects the Trump administration will not impose the widespread tariffs it proposed during its campaign, which included 60% duties on Chinese imports and baseline tariffs of 10-20% on all imports. Yaros said these campaign proposals were likely negotiating tactics. Sweet expects that Trump will require Congress to pass some of his tariffs, and legislators will not pass such high rates, Sweet said. In other cases, advisors and trade representatives will restrain Trump. For China, Trump will likely impose tariffs of 25% on major categories, such as machinery, electronics and chemicals, Yaros said. For the EU, Canada and Mexico, Trump will likely impose very targeted tariffs on steel, aluminum, base metals and motor vehicles, Yaros said. For Canada and Mexico in particular, Trump will unlikely adopt measures that will threaten the United States-Mexico-Canada Agreement (USMCA), the trade agreement that his administration signed during his first term. That trade deal was one of the signature achievements of Trump's administration, so he will not want to pursue policies that will threaten the upcoming renewal of that agreement, Yaros said. While the tariffs will be limited, they will still be a drag on the economy by nudging inflation higher, reducing real consumer income, tempering consumer spending and encouraging the misallocation of resources, Yaros said. LIMITED TARIFFS REDUCE RETALIATION RISK FOR CHEMSOxford's scenario will limit the risk of countries imposing retaliatory tariffs on US exports. US chemical producers were vulnerable to such tariffs because they purposely added capacity for export over the years, particularly for polyethylene (PE) and polyvinyl chloride (PVC). The magnitude of these exports and the existence of a global glut in plastics and chemicals would make US chemical exports a likely target for retaliatory tariffs. On the import side, the US does have deficits in key commodity chemicals, such as benzene. Targeted tariffs could carve out exceptions for benzene was well as other chemicals in which the US has a trade deficit, such as methyl ethyl ketone (MEK) and melamine. Targeted tariffs will likely rule out duties on imports of oil. US refineries rely on imports of heavier grades of oil to optimize the operations of some of their units. US shale oil makes up nearly all of the growth in the nation's crude production, and that oil is made up of light grades. Meanwhile, tariffs could shield some chemicals from competition, such as epoxy resins. CONGRESS MAY LIMIT GROWTH IN DEFICITOxford pointed out that some moderate Republicans could restrain some of Trump's tax and spending proposals to limit growth in the government deficit, Yaros said. Other economists have expressed concerns that the US will issue larger amounts of government debt to fund the growing deficit. That would lead to a cascade effect that could ultimately increase rates for US mortgages, which would slow down the housing market and the plastics and chemicals connected to that market. Still, all of Oxford's scenarios forecast a rise in the government deficit. SLOWER RATE CUTS BY FEDOxford expects Trump's policies will be inflationary, which will prompt the Federal Reserve to slow down the pace of cuts on their benchmark federal funds rate. It expects the federal funds rate will settle at 3.125%, versus its forecast of 2.75% that was made in October. TRUMP WILL PRESERVE MOST RENEWABLE TAX CREDITSTrump will likely preserve most of the tax credits in the Inflation Reduction Act (IRA) because most of them benefitted states controlled by his party, the Republicans, Yaros said. These include tax credits on renewable fuels, renewable power, hydrogen and carbon capture. The exception will include incentives for electric vehicles (EV), which Trump had singled out during his campaign, Yaros said. OXFORD'S FORECASTThe following chart shows Oxford's new baseline forecast and compares it with a scenario under which the policies of the previous administration are maintained. The following chart shows Oxford's forecast that assumes Trump will fully adopt all of his campaign proposals. This is not the consultancy's baseline forecast because it does not expect such a full-blown Trump scenario will happen. Thumbnail shows the US Capitol. Image by  photo by Lucky-photographer.

11-Nov-2024

HOUSTON (ICIS)–US President-Elect Donald Trump has pledged to impose more tariffs, lower corporate taxes and lighten companies' regulatory burden, a continuation of what US chemical producers saw during his first term of office in 2016-2020. More tariffs could leave chemical exports vulnerable to retaliation because of their magnitude and the size of the global supply glut. Trump pledged to reverse the surge in regulations that characterized term of President Joe Biden. Lower corporate taxes could benefit US chems, but longer term, rising government debt could keep interest rates elevated and prolong the slump in housing and durable goods. MORE TARIFFSTrump pledged to add more tariffs to the ones he introduced during his first term as president, as show below. Baseline tariffs of 10-20%, mentioned during an August 14 rally in Asheville, North Carolina. Tariffs of 60% on imports from China. A reciprocal trade act, under which the US would match tariffs imposed on its exports. WHY TRADE POLICY MATTERS FOR CHEMICALSTrade policy is important to the US chemical industry because producers purposely built excess capacity to take advantage of cheap feedstock and profitably export material abroad. Such large surpluses leave US chemical producers vulnerable to retaliatory tariffs. The danger is heightened because the world has excess capacity of several plastics and chemicals, and plants are running well below nameplate capacity. At the least, retaliatory tariffs would re-arrange supply chains, adding costs and reducing margins. At the worst, the retaliatory tariffs would reach levels that would make US exports uncompetitive in some markets. Countries with plants running below nameplate capacity could offset the decline in US exports by raising utilization rates. Baseline tariffs would hurt US chemical producers on the import side. The US has deficits in some key commodity chemicals, principally benzene, melamine and methyl ethyl ketone (MEK). In the case of benzene, companies will not build new refineries or naphtha crackers to produce more benzene. Buyers will face higher benzene costs, and those costs will trickle down to chemicals made from benzene. Tariffs on imports of oil would raise costs for US refiners because they rely on foreign shipments of heavier grades to optimize downstream units. The growth in US oil production is in lighter grades from its shale fields, and these lighter grades are inappropriate for some refining units. REGULATORY RELIEFUnder Trump, the US chemical industry should get a break from the surge in regulations that characterized the Biden administration. The flood led the Alliance for Chemical Distribution (ACD) to call the first half of 2024 the worst regulatory climate ever for the chemical industry. The American Chemistry Council (ACC) has warned about the dangers of excessive regulations and urged the Biden administration to create a committee to review the effects new proposals could have on existing policies. Trump said he would re-introduce his policy of removing two regulations for every new one created. Trump has a whole section of his website dedicated to what he called the "wasteful and job-killing regulatory onslaught". One plank of the platform of the Republican Party is to "cut costly and burdensome regulations". LOWER TAXES AT EXPENSE OF DEFICITTrump pledged to make nearly all of the 2017 Tax Cuts and Jobs Act (TCJA) permanent and add the following new tax cuts, according to the Tax Foundation, a policy think tank. Lower the corporate tax rate for domestic production to 15%. Eliminate green energy subsidies in the Inflation Reduction Act (IRA). Exempt tips, Social Security benefits and overtime pay from income taxes. At best, the resulting economic growth, the contributions from tariffs and cuts in government spending would offset the effects of the tax cuts. The danger is that the tariffs, the cuts and the growth growth are insufficient to offset the decline in revenue that results from the tax cuts. The Tax Foundation is forecasting the latter and expects that that the 10-year budget deficit will increase by $3 trillion. To fund the growing deficit, the US government will issue more debt, which will increase the supply of Treasury notes and cause their price to drop. Yields on debt are inversely related to prices, so rates will increase as prices drop. Economists have warned that a growing government deficit will maintain elevated rates for 10-year Treasury notes, US mortgages and other types of longer term debt. Higher rates have caused some selective defaults among chemical companies and led to a downturn in housing and durable goods, two key chemical end markets. If the US deficit continues to grow and if interest rates remain elevated, then more US chemical companies could default and producers could contend with a longer downturn in housing and durable goods. A second post-election insight piece, covering the future landscape for energy policy, will run on Thursday at 08:00 CST. Front page picture: The US Capitol in Washington  Source: Lucky-photographer Insight article by Al Greenwood

06-Nov-2024

HOUSTON (ICIS)–Higher interest rates and weaker demand have led to shutdowns, layoffs and a couple of distressed debt exchanges that were considered defaults by ratings agencies. Nylon producer Ascend Performance Materials is closing a plant and laying off workers at another site. Cornerstone and SI Group held distressed debt exchanges. Mid-2025 recovery could be delayed if US mortgage rates remain elevated due to growing government debt. ASCEND SUMS UP CHALLENGES FOR CHEMSAscend's nylon 6,6 business is contending with a troubling mix of rising supplies in polyamides and weak demand from its key end markets of consumer goods, automobiles and housing. ICIS keeps track of global capacity for nylon 6 and nylon 6,6. By 2027, capacity should be nearly 70% larger than levels in 2022. Nearly all of the new capacity is being built in northeast Asia, which includes China. Another company, US-based paints and coatings producer PPG, is planning possible shutdowns and layoffs, but these will be primarily in Europe and certain other global businesses. DISTRESSED DEBT EXCHANGES FROM SI GROUP, CORNERSTONESI Group is expected to complete what a ratings agency considers to be another distressed debt exchange, which would lead to the company's second restricted default this year. SI declined to comment when the ratings note was issued in September. SI Group is facing the same difficult business conditions as Ascend, according to Fitch Ratings. Sales fell amid new capacity in China. SI Group makes specialty chemicals used in coatings, adhesives, sealants and elastomers (CASE) as well as in lubricants, fuels, surfactants and polymers. Cornerstone, the sole melamine producer in the US, is trying to sell some of its assets to avoid a second default. The company also makes acrylonitrile (ACN). Demand fell for both products fell, leading to large operating losses in 2023. COMPANIES HOLD OUT FOR SECOND HALF RECOVERYThe chemical industry is hopeful that falling inflation and interest rates will lead to a recovery in demand in 2025. "It is only a question of when, not if," said Heidi Petz, CEO of Sherwin-Williams, a US-based paints and coatings producer. Polyurethane producers expect a recovery could start in mid-2025, coinciding with the start of the US construction season and the cumulative effects of what it expects to be subsequent declines in interest rates. Lower mortgage rates would make housing more affordable, which would increase sales of new and existing homes. That would increase demand for furniture and appliances as well as for chemicals used to make paints, coatings, sealants and insulation. Lower interest rates would also make automobiles more affordable. The industry is suffering from a temporary lull, with PPG noting that original equipment manufacturers (OEMs) started taking unscheduled and prolonged downtime in Q3. The decline in interest rates will depend, in part, on US inflation remaining on track to reach the central bank's target of 2%. The danger is that inflation remains stubborn or, if it does fall, the lower benchmark interest rate does not fully translate into declines in longer term rates like US home loans. US home loans typically rise and fall with yields on 10-year Treasury notes, and an economist has warned that yields could remain elevated because of the growing US debt. The International Monetary Fund (IMF) also warned about the consequences of growing government debt. If the link between longer term rates and government debt holds true, then that could limit or delay the recovery in demand expected by many chemical companies that sell materials used in durable goods. Insight by Al Greenwood

24-Oct-2024

LONDON (ICIS)–European Melamine Editor Melissa Hurley interviews Energy Market Reporter Lars Hoeylo Kjoellesdal, Senior Editor Sylvia Traganida, Deputy Managing Editor Deepika Thapliyal and Market Reporter Joy Foo. Ammonia, urea and gas market factors to consider for Q4 include: Volatile gas prices illustrate a finely balanced market Tight ammonia availability; some scheduled maintenances expected Unexpected gas-related shutdowns in Egypt short-lived; India urea tenders boost sentiment Certain factors support global urea market despite thin demand in Europe Demand in China showing signs of recovery before National Day holiday (1-7 October) China's average melamine operating rates hovering around 60%; market to track urea costs European melamine production cost pressure versus slow demand recovery Additional reporting from Energy Market Reporter Lars Hoeylo Kjoellesdal, Senior Editor Sylvia Traganida, Deputy Managing Editor Deepika Thapliyal and Market Reporter Joy Foo. Click here to listen in a separate window.

24-Sep-2024

SINGAPORE (ICIS)–Here are the top stories from ICIS News Asia and the Middle East for the week ended 28 June 2024. Asia melamine sees uptick on tighter supply; demand recovery uncertain By Joy Foo 28-Jun-24 12:54 SINGAPORE (ICIS)–Asia’s melamine spot market for China-origin product faced some pressure from early June due to lagging demand. China MEG market supported by limited import arrivals By Cindy Qiu 26-Jun-24 12:20 SINGAPORE (ICIS)–China’s monoethylene glycol (MEG) prices rose after falling in June, reflecting supply-demand dynamics, but the price growth may be capped by increasing domestic supply and curtailed downstream polyester production, despite limited import arrivals expected in July. India’s BPA import price surges; freight continues to exert pressure By Li Peng Seng 24-Jun-24 11:53 SINGAPORE (ICIS)–India’s bisphenol A (BPA) average import price hit its highest level in nearly 20 months recently due to firm ocean freight rates, a phenomenon that is expected to persist in the short term as vessel space is likely to stay tight. PODCAST: Asia base oils supply, demand to gradually rise in H2 By Damini Dabholkar 26-Jun-24 18:13 SINGAPORE (ICIS)–Asia’s base oils supply is expected to improve slightly in H2 2024, while a seasonal peak in overall demand is due to kick off in the later part of Q3. INSIGHT: Asia isocyanates H1 performance mixed, poor expectations for Q3 By Shannen Ng 26-Jun-24 14:30 SINGAPORE (ICIS)–Demand in Asia’s import markets for polymeric methylene diphenyl diisocyanate (PMDI) and toluene diisocyanate (TDI) is likely to remain limited in the upcoming summer months of July and August, and the outlook for late Q3 is uncertain. Chemanol to supply methanol to Saudi Amiral project over 20 years By Pearl Bantillo 25-Jun-24 12:52 SINGAPORE (ICIS)–Saudi Arabia's Methanol Chemicals Co (Chemanol) has signed a 20-year deal to supply methanol to the Amiral petrochemical project of Saudi Aramco Total Refining and Petrochemical Co (SATORP).

01-Jul-2024

HOUSTON (ICIS)–Chemical companies have started the first half of 2024 announcing potential sales and separations of several businesses, which could lead up to busy cycle for mergers and acquisitions (M&A). Sustainability continues to influence M&A decisions, although it will unlikely lead to any large acquisitions. Private equity firms could play a larger role in M&A despite higher interest rates because financial investors have plenty of money. Electronic materials could be another M&A trend because of government incentives for the semiconductor industry. CHEMS EXPECT MORE M&AMore than half of the chemical executives who participated in a survey expect M&A activity to increase in the next 12-18 months, according to Kearney, a consulting firm that conducts an annual report about deal-making in the industry. By contrast, 18% expect M&A activity to decrease, and 32% expect activity to be roughly stable. The sentiment is more positive than surveys from the past few years, said Andy Walberer, partner and global chemicals lead at global strategy and management consultancy Kearney. He made his comments while discussing Kearney's recent M&A report. Part of that optimism comes from the divestment plans and strategic reviews recently announced by chemical companies, he said. Also, executives at chemical companies are no longer contending with the COVID-19 pandemic and the subsequent supply-chain disruptions. They have the headspace to think about medium- and long-term strategy, he said. SUSTAINABILITY CONTINUES INFLUENCING DEALSSustainability will unlikely lead to high-dollar deals, but it will still be a noteworthy trend, Walberer said. Chemical companies are scrambling to secure supplies of recycled and renewable feedstock. Chemical executives and Kearney have noted the gap between supply and demand for sustainable feedstock. To secure feedstock, companies have been establishing partnerships or acquiring businesses. Walberer expects that trend to continue. In other cases, chemical companies are making sustainability M&A decisions in response to government incentives and regulations, Walberer said. Kearney has seen some companies divest sections of portfolios because of high carbon emissions, Walberer said. PRIVATE EQUITY HAS PLENTY OF DRY POWDERHigher interest rates have made M&A more challenging for private equity firms because of their traditional reliance on debt-financed acquisitions. That said, private equity firms have built up large stashes of dry powder. They could put that money to work without debt, which has become more expensive because of higher interest rates. At the same time, chemical valuations have fallen. "We see PE very active," Walberer said. Walberer noted that financial investors made up 26% of chemical deals in 2023, up from 7% in 2022 and above the historic range of 15-20%. In particular, private equity firms may acquire some of the infrastructure assets that chemical companies are eager to divest. Dow had expressed interest in selling more of its infrastructure after agreeing to divest its rail assets at six sites in mid-2020. Recent and upcoming carveouts could provide private equity firms with more M&A opportunities. In December 2023, Solvay carved out its specialty business, called Syensqo, from its mostly commodity business. DuPont expects to complete its breakup into three companies in the next 18-24 months. CHANGING OUTLOOK FOR EUROPEEuropean chemical M&A experienced a slowdown because of the spike in energy and feedstock costs that followed the start of the war in Ukraine, according to the Kearney report. It should continue declining in the next 12-18 months before a possible rebound. "Amid ongoing challenges, big chemical players are under stress, prompting them to review their business models and restructure," Kearney said in a report regarding Europe. In some cases, the owner of a business may decide to put it on the market after realizing it is no longer a core part of the company, Walberer said. The corporation concludes that it is no longer the best owner of the business and decides to divest it. "There are a lot of good examples of how new owners have been able to improve the performance of the business," he said. DuPont's performance coatings business would later flourish as Axalta Coatings Systems. which was initially sold to Carlyle for $4.9 billion before becoming a publicly traded company. Another example is Nouryon, the surfactants business that was spun off from AkzoNobel. In other cases, the business's performance has suffered because of structural reasons, such as high costs, Walberer said. GOVERNMENT SEMICONDUCTOR INCENTIVES MAY DRIVE M&AElectronic materials could become another M&A trend because of the incentives being lavished by government, Walberer said. The US, China, the EU, Japan, Germany and South Korea are among the countries that created semiconductor incentive programs worth billions of dollars. DuPont's electronics business is one of the three that will break out of the company. That business itself is the product of acquisitions made by DuPont. CHEM M&A ACTIVITY OVER THE YEARSTypically, the value of chemical M&A is $100 billion to $120 billion per year, a level it reached in 2022 and 2023, Walberer said. The COVID pandemic and its subsequent recovery distorted M&A in 2020 and 2021. Values in 2019 and 2016 spiked because of large deals such as the Dow and DuPont merger and Aramco acquiring a large stake in SABIC. ANNOUNCEMENTS IN 2024The following lists some of the major chemical M&A announcements made so far in 2024. February 26: PPG explores strategic alternatives for its architectural coatings business in the US and Canada. It could reach a decision by the end of the third quarter. March 4: Evonik agrees to sell its superabsorbents business to International Investors Group (ICIG). March 13: Trinseo seeks to sell its stake in Americas Styrenics. It later clarified that the entire joint venture is for sale. May 6: BASF plans to sell its idled ammonia, methanol and melamine units in Ludwigshafen, Germany. May 8: LyondellBasell starts strategic review of the bulk of its operations in Europe. May 8: Shell agrees to sell its refinery and petrochemical assets in Singapore to the CAPGC joint venture. May 22: DuPont plans to break up into three companies, including one focusing on electronics and another on water. Insight article by Al Greenwood Thumbnail image by ICIS.

13-Jun-2024

LONDON (ICIS)–Here are some of the top stories from ICIS Europe for the week ended Friday 31 May. Freight costs, chaos assures demand for Europe PTA, PET As shipping complexities intensify again, gone are the talks of weak demand holding back European sellers of purified terephthalic acid (PTA) and downstream polyethylene terephthalate (PET). Europe May melamine contract decline spells end to eight-month rally Europe melamine May contract prices were assessed at double-digit decreases, the first drop this year. Europe R-PET market enters stable period, but Italy remains a question mark June price talks in Europe's recycled polyethylene terephthalate (R-PET) markets have concluded at rollovers in the majority of cases, bringing to an end an upward trend in prices seen since December. European PET import costs, delays still causing headaches; could support local demand in June European polyethylene terephthalate (PET) logistical challenges surrounding imported material are still apparent which could drive more local demand in Europe. DATA WATCH: Europe chemicals export more at beginning of 2024 but importing remains an option Trade flows of chemicals both into and out of Europe have changed significantly this year, with the ongoing Red Sea disruptions and the subsequent lack of vessel space across different parts of the world being a key factor.

03-Jun-2024

SINGAPORE (ICIS)–Here are the top stories from ICIS News Asia and the Middle East for the week ended 17 May 2024. Asia melamine makers grapple with increased costs, slowing demand By Joy Foo 17-May-24 11:53 SINGAPORE (ICIS)–Asia’s melamine spot market for China-origin product was largely stable in the first half of May, even though feedstock urea prices continued to rise, but demand may weaken for the rest of the month. Singapore's April petrochemical exports rise 26.5%; NODX down 9.3% By Nurluqman Suratman 17-May-24 10:45 SINGAPORE (ICIS)–Singapore's petrochemical shipments rose by 26.5% year on year in April to Singapore dollar (S$) 1.34 billion, reversing the 3.6% decline in the previous month, official data showed on Friday. PODCAST: China PP exports to weigh on SE Asia on ample propylene supply By Damini Dabholkar 16-May-24 21:55 SINGAPORE (ICIS)–The ample supply of propylene in Asia and new polypropylene (PP) capacities in China are expected to weigh on discussions in southeast Asia over the coming months. Tanker incident triggers rate hike on South Korea-Japan trades By Hwee Hwee Tan 16-May-24 11:28 SINGAPORE (ICIS)–The intra northeast Asia tanker market is expected to remain stable despite recent volatility in South Korea-Japan chemical freight rates, following a fatal tanker incident off Japan’s west coast. US hikes tariffs on $18bn worth of China imports, including EVs By Nurluqman Suratma 15-May-24 12:20 SINGAPORE (ICIS)–US President Joe Biden is ramping up tariffs on $18 billion worth of imports from China, including electric vehicles (EVs), semiconductors, batteries and other goods, in a move that the White House said was a response to unfair trade practices and intended to protect US jobs. Asia polyester discussions stable amid reduced supply, lower feedstock prices By Judith Wang 14-May-24 14:55 SINGAPORE (ICIS)–Asia’s polyester export discussions were little changed as the pressure of reduced supply in China was balanced out by weaker feedstock prices.

20-May-2024

LONDON (ICIS)–Here are some of the top stories from ICIS Europe for the week ended 10 May. Europe propylene supply rebalancing on derivative restart, cracker issues Propylene spot supply is returning to a more balanced position with a key derivative unit now back on stream and a couple of cracker issues disrupting output. Europe businesses face tough market and regulatory hurdles in long term – LyondellBasell Market conditions in Europe are likely to remain challenging in the long term while changing regulations are increasing costs for businesses, LyondellBasell Industries said on Thursday, after announcing a strategic review for most of its operations in the region. LyondellBasell launches review of European assets LyondellBasell has launched a strategic review of the bulk of its operations in Europe, the producer said on Wednesday, based on its strategy to focus on assets perceived to have long-lasting competitive advantage Chandra Asri aspires to become regional player with Shell Singapore purchase Chandra Asri is looking to develop its presence in southeast Asia and become a key regional player with its purchase of Shell’s refining and petrochemicals assets in Singapore alongside commodities major Glencore, the Indonesia-based firm said on Wednesday. IPEX: April index rises for fourth month in a row on firmer pricing in northwest Europe, northeast Asia The ICIS Petrochemical Index (IPEX) was up 1.5% in April month on month as production constraints continue to push contract prices up across some commodities, mainly in northwest Europe and northeast Asia. BASF puts ammonia, methanol, melamine plants up for sale at Ludwigshafen BASF has engaged plant sale specialists International Process Plants (IPP) to sell idled ammonia, methanol and melamine units located at its loss-making Ludwigshafen site in Germany.

13-May-2024

LONDON (ICIS)–LyondellBasell has launched a strategic review of the bulk of its operations in Europe, the producer said on Wednesday, based on its strategy to focus on assets perceived to have long-lasting competitive advantage. The producer will conduct a review of its European olefins, polyolefins, intermediates and derivatives businesses, driven by its move announced last year to reinvest in its strongest performing operations. "At the 2023 Capital Markets Day, we stated our intent to concentrate our portfolio around businesses with long-lasting competitive advantage and to reinvest around those advantaged areas generating superior returns at meaningful scale. These criteria have not changed," said Lyondell CEO Peter Vanacker. The strategy announced at the 2023 investor day was based around three pillars: prioritizing growth spending on businesses where the company “has leading positions in expanding and well-positioned markets”, growing circular solutions earnings to $1 billion/year by 2030, and shifting from cost controls to a broader idea of value creation. Energy-intensive industries in Europe have been challenged by the sharp increase in gas prices seen since Russia’s invasion of Ukraine, which remain substantially above pre-war and pre-pandemic norms despite falling dramatically since the nadir of winter 2022. Described by former BASF chief Martin Brudermuller earlier this year as a “systemic” change to the European operating environment, the higher cost of operating Europe has prompted a number of reviews by large global players. BASF is looking to cut €1 billion off the annual operating costs of its Ludwigshafen, Germany, complex. The company tapped plant sale specialists International Process Plants this week to explore the sale of its Ludwigshafen ammonia, methanol and melamine units, idled in 2023 due to high production costs. Dow also announced plans to review underperforming and smaller assets. A significant proportion of any cuts had been expected to land in Europe, although the US major has not given an update on the process since it was announced in early 2023. Indorama Ventures is also currently reviewing six assets out of its "West" portfolio for potential shutdown. While global gas pricing has come down, the cost of shipping gas will always be higher than sending it through a dedicated pipeline, as was the case with the Russia-derived natural gas that made up around half of the EU’s energy consumption prior to the war. As part of its stated intent to continue developing its sustainable and circular business, investments in a commercial-scale MoReTec plant, LyondellBasell's proprietary technology to convert plastic waste into liquid raw materials, and the development of a circularity hub in the Cologne, Germany region, will continue as planned, the company said. “The company will prioritize its investments to align operations with our circularity and net zero ambitions," Vanacker added. "We understand that strategic assessments can create uncertainty for our employees and customers, but we are committed to operate our assets safely and reliably throughout this process." LyondellBasell European prodcution Product Capacity (kt) Ethylene 1,805 HDPE 1,260 LDPE 740 MTBE 810 Polypropylene 2,175 Propylene 990 Propylene Oxide 785 Styrene 680 TBA 970 Update re-leads, adds detail throughout Additional reporting by Graeme Paterson, infographics by Yashas Mudumbai

08-May-2024