Naphtha

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. To paraphrase William Shakespeare, I see last week’s fuss about China’s new economic stimulus as being full of sound and fury, signifying hardly anything. The hard reality is that China is undergoing a period of a much lower GDP and therefore chemicals demand growth. Nothing can change this trajectory, for reasons I discuss in detail in today’s post. During 2025, the problem will remain far too much global capacity chasing much weaker-than-expected demand up and down all the chemicals value chains because the consensus on China was wrong. So, to add to my five forecasts for 2025 which I published last week, here is a sixth: There will be no significant improvements during next year in China’s CFR polyethylene (PE) and polypropylene (PP) price spreads over CFR Japan naphtha costs. The 2024 final numbers are almost in. We can see that the downturn in spreads that followed the Evergrande Turning Point continues. Let’s start with PE where 2022-2024 average spread for the three grades was just $300/tonne. This compares with a spread in 1993-2021 – during the Chemicals Supercycle – that averaged $532/tonne. The average 2022-2024 PP spread was $240/tonne as against $562/tonne during the Supercycle. Please don’t be distracted by unhelpful noise. Instead, place all your focus on retooling your tactics and strategies to deal with the post-Supercycle chemicals world. Editor’s note: This blog post is an opinion piece. The views expressed are those of the author, and do not necessarily represent those of ICIS.

17-Dec-2024

SAO PAULO (ICIS)–Brazil's petrochemical industry needs to implement a deep restructuring if it wants to regain global competitiveness, and it can do this by shifting to renewable raw materials and increased use of natural gas, according to the CEO of Bahia state public company Bahiainveste. Paulo Guimaraes was appointed CEO of Bahiainveste and is tasked with attracting investment to Bahia state – home to Camacari, one of the country's biggest chemical production hubs. Bahiainveste, which was founded in 2015, falls under the umbrella of Bahia’s Secretariat for Economic Development, and functions as a public company with its own assets and revenues, as well as budgetary and financial autonomy. Guimaraes spoke to ICIS on the sidelines of the annual summit of the chemicals trade group Abiquim earlier in December. Although the mood at the gathering was more positive than in 2023, Guimaraes said it was best not to be complacent despite recent successes for chemicals producers in Brazil. The most significant of these has been higher import tariffs. In effect since October, they will help domestic producers increase market share. However, Brazil’s lack of competitiveness in the sector run deeper, and it should address them immediately rather than rest on its laurels, Guimaraes added. Although it may sound like an impossible task, Guimaraes said Brazil can and should compete against the US, the Middle East and China, who have sharply  increased their exports to Brazil during the last two years, hitting domestic producers’ market share. RENEWABLE FEEDSTOCKSTo turn the situation around, Guimaraes said a chemical transformation is necessary for Bahia, where the sector has faced falling competitiveness and job losses over the past two decades due to outdated facilities and a lack of modernization. "We need to look at the possibility of renewable raw materials. Within the next three years, Bahia will become an exporter of ethanol, so we will have the capacity to supply the industry with this type of raw material, for example,” said Guimaraes. The executive highlighted how Brazil's chemical industry has historically underinvested in technological innovation, focusing instead on basic petrochemicals. This strategy has left the sector vulnerable to international competition, particularly from Asia, and in the case of ethanol this is telling, he noted. "Brazil was the one who created ethanol as an automotive fuel in the late 1970s and early 1980s, but today we are producing ethanol using a technology imported from the US, because we did not understand that we needed to continue to develop the technology," he said. “This is a recurrent Brazilian feature, and we need to change it.” DOMINANT PLAYERGuimaraes went on to reflect on the dominance of polymers major Braskem, which emerged from a consolidation of several companies in the early 2000s and is in part owned by Petrobras, the state-owned energy major. These factors have resulted in Braskem – Brazil and Latin America’s largest chemical company – to be key in shaping industry development. The company's virtual monopoly in basic petrochemicals has influenced investment patterns across the sector, said Guimaraes. The US and Brazil are the Americas’ two largest chemicals producers. In the former, a significant shift occurred in 2004 when chemicals producers began utilizing shale gas, making natural gas-based chemistry more competitive than traditional crude oil-derived, naphtha-based processes. Brazil failed to adapt its industrial strategy accordingly. Moreover, the Brazilian chemical sector's challenges are further complicated by the country's energy policies. Following an energy crisis in 2001, the government implemented an emergency thermoelectric program that prioritized gas use for electricity generation over industrial applications. "Natural gas began to rise in price because Petrobras began to see it as just another product that needed to be as profitable as oil. And it stopped being used as a lever for the country's growth," said Guimaraes. DUMPING CONCERNSGuimaraes said growing protectionist moves around the world will only increase further over the coming years as countries face significant concerns about dumping practices which have affected their manufacturing sectors, chemicals included. Guimaraes said the tire industry was a good example. "Today, the tires that are entering Brazil are entering at a price lower than the price of the raw material. And the raw material is a commodity," he said. He noted that domestic Brazilian tire production has fallen between 40-60%, and this occurred even though Brazilian manufacturers use 70% clean energy in their production processes, which in theory should have given them an edge in a world increasingly worried about climate change. The threat of climate change could also give way to opportunities of a new, green industry. Looking ahead, Guimaraes said he can envisage significant opportunities in green hydrogen and sustainable aviation fuel (SAF) production in Brazil. However, once again, he advocated for domestic value addition rather than raw material exports. "Producing hydrogen and exporting hydrogen is like exporting water, wind and sun. Brazil should instead focus on manufacturing finished products using those resources. For instance, rather than exporting hydrogen and iron ore separately, we could produce green steel domestically instead,” said Guimaraes. “We have the advantages of a country where renewable energy production is easy, and we have plenty of available land for non-food crops: we would be able to plant crops to produce chemical feedstocks without competing with food production. “For example: I plant corn, and from the corn I produce ethanol and animal feed. What is the energy I use for this? CO2 or the biomass that the cattle generate. So, the animal feed would feed the cattle that would feed this energy." Front page picture: Bahia’s Camacari petrochemicals hub Picture source: Camacari Town Hall (Camara Municipal de Camacari) Interview article by Jonathan Lopez

09-Dec-2024

SINGAPORE (ICIS)–Here are the top stories from ICIS News Asia and the Middle East for the week ended 22 November. Bearish sentiment in Asian naphtha market likely short-lived By Li Peng Seng 18-Nov-24 11:46 SINGAPORE (ICIS)–Asia's naphtha market sentiment nosedived last week amid bearish pressures, but cracker expansion in South Korea and gasoline demand ahead of a festive season will likely buoy up demand. Thai PTTGC plans $840 million 5-year capex; focus on Allnex growth By Jonathan Yee 18-Nov-24 17:12 SINGAPORE (ICIS)–Thai chemicals producer PTT Global Chemical plans capital expenditure (capex) of $840 million in the next five years, more than 78% of which will be invested to grow its Germany-based specialty chemicals subsidiary Allnex. INSIGHT: Most Asia petrochemical markets to post Nov losses By Lina Xu 18-Nov-24 15:55 SINGAPORE (ICIS)–Most petrochemical markets in Asia are expected to register losses in November on slowing demand as the year draws to a close. China's PC market faces ongoing supply pressure By Li Peng Seng 19-Nov-24 11:42 SINGAPORE (ICIS)–China's polycarbonate (PC) import market is likely to remain under pressure due to persistent oversupply, trade conflicts and geopolitical uncertainties. Asia caustic soda unlikely to see immediate impact from China’s removal of aluminium export tax rebates By Jonathan Chou 20-Nov-24 12:30 SINGAPORE (ICIS)–China's announcement to end export tax rebates on aluminium effective on 1 December may have limited long-term changes in caustic soda’s demand and supply conditions in Asia. SE Asia bottlenecks disrupt regional chemical tanker operations By Hwee Hwee Tan 21-Nov-24 11:57 SINGAPORE (ICIS)–Persistent delays in tanker operations in southeast Asia are snowballing into wider vessel schedule disruptions across intra-Asia trade lanes. More stringent regulations to hamper Asia’s rPET exports By Arianne Perez 22-Nov-24 14:20 SINGAPORE (ICIS)–Major producers of high-value recycled polyethylene terephthalate (rPET) flakes and pellets from Asia continue to aim for a growing market share in premium markets including the Americas and Europe.

25-Nov-2024

SINGAPORE (ICIS)–South Korean refiner S-Oil's new petrochemical complex in Ulsan is now 42% complete as of end-October and is on track for completion in 2026. Shaheen accounts for about 87% of full-year 2024 capex Project progress slightly ahead of schedule S-Oil swung to Q3 net loss on poor refining, petrochemical margins Construction of the $7bn project called Shaheen – Arabic word for falcon – at the Onsan Industrial Complex of Ulsan City started in March 2023. Its mechanical completion is targeted by the first half of 2026. Total capital expenditure (capex) for the Shaheen project is projected at W2,716 billion ($1.95 billion) in 2024, up 85% year on year, and accounts for about 87% of S-Oil's overall capex this year. The company’s full-year capex at W3,136 billion, which includes costs of upgrade and maintenance works as well as marketing-related expenses, represents a 54% increase from 2023 levels. The Shaheen project will have a 1.8m tonne/year mixed-feed cracking facility; an 880,000 tonne/year linear low density polyethylene (LLDPE) unit; and a 440,000 tonne/year high density polyethylene (HDPE) plant. The site will have a thermal crude-to-chemical (TC2C) facility, which will convert crude directly into petrochemical feedstocks such as liquefied petroleum gas (LPG) and naphtha, and the cracker is expected to recycle waste heat for power generation in the refinery. Saudi Aramco, the world’s biggest crude exporter, owns more than 63% of S-Oil. The project update was included in S-Oil’s presentation slides on its Q3 financial results released on 4 November. The company swung to a Q3 net loss of W206 billion amid a sharp decline in refining and petrochemical earnings. in South Korean won (W) billion Q3 2024 Q3 2023 % Change Jan-Sept 2024 Jan-Sept 2023 % Change Revenue 8,841 9,000 -1.8 27,720 25,897 7.0 Operating income -415 859 200 1,411 -85.8 Net income -206 545 -61 788 The petrochemicals unit of S-OIL posted an operating income of W5.0 billion in the third quarter, an 89% year-on-year drop. Paraxylene (PX) and benzene markets weakened in Q3 due to increased supply amid reduced gasoline blending demand and restarts of production facilities after turnarounds. The company's PX spread to naphtha weakened to $271/tonne in Q3 from $425/tonne in the same period last year, while the benzene-naphtha spread rose to $315/tonne from $251/tonne in the same period a year earlier. In the downstream olefin market, polypropylene (PP) was bearish in the third quarter due to "abundant regional supply amid weak downstream demand". The refining unit posted an operating loss of W573.7 billion in the third quarter, swinging from the W666.2 billion profit in the same period a year earlier. The loss in the refining segment was mostly due to the one-off impact from the decline in oil prices and foreign exchange rates. On market conditions, the company said that the supply-demand environment and margins for refiners in Asia is expected to "gradually improve due to reduced operating rate from low margin condition and heavier maintenances year over year, amid continued stockpiling if winter heating oil". For Q4, the company expected the PX and benzene markets to be supported by fresh demand from new downstream capacities while gasoline demand stays slow. For downstream olefin markets, S-Oil said that PP and propylene oxide (PO) markets may show modest recovery "depending on the impact of China's economic stimulus measures amid ongoing capacity additions". Focus article by Nurluqman Suratman ($1 = W1,395)

18-Nov-2024

SINGAPORE (ICIS)–Shell expects the deal to sell its energy and chemicals park in Singapore to Chandra Asri and Glencore will be completed by the first quarter of 2025, a company spokesperson said on Thursday. Shell assets will be key to Chandra Asri’s growth strategy Chandra Asri plans for second petrochemical complex still unclear Closing of deal originally scheduled for end-2024 The energy major on 8 May announced the sale, which includes the physical assets and commercial contracts in Singapore, to CAPGC – a joint venture majority-owned by Chandra Asri with Glencore holding a minority stake – for an undisclosed fee. The transaction was initially scheduled to be completed by the end of 2024. “The divestment is subject to regulatory clearance and other customary closing conditions,” the spokesperson said. “Subject to regulatory approval, the transaction is expected to complete by the first quarter of next year.” Shell and CAPGC have also signed crude supply and product offtake agreements that will come into effect following completion. A new entity under CAPGC called Aster Chemicals and Energy will operate the facilities and handle its crude oil purchases and fuel sales, newswire agency Reuters said in a 13 November report, citing unnamed sources. The Shell Energy and Chemicals Park (SECP) in Singapore comprises its integrated refining and chemicals assets on Pulau Bukom and Jurong Island. The Pulau Bukom assets include a 237,000 barrel/day refinery and a 1.1 million tonne/year ethylene cracker. It was Singapore’s first refinery in 1961. SECP KEY TO CHANDRA ASRI'S GROWTH PLANSChandra Asri in a 4 October statement said that its move to acquire the SECP assets aligns with its growth strategy of “going global” as it seeks to expand in the energy, chemical and infrastructure sector not only in Indonesia but also abroad. “Through SECP, which is one of the largest oil refineries and trading hubs in the world, Chandra Asri Group will source petroleum products, including gasoline, jet fuel, gas oil, and bitumen to support various industries in Indonesia,” the company said. “Additionally, Chandra Asri Group will help fill gaps in the supply of chemical products, such as monoethylene glycol (MEG), polyols, and ethylene, propylene, and styrene monomers, to support manufacturing processes in the country,” it said. “This will ensure that the country’s energy supply is secured as well as reducing dependencies on foreign entities.” In a presentation to investors in early August, Chandra Asri said that it will establish offtake agreements for both fuel and chemical products, utilizing Glencore's extensive trading network to “secure beneficial arrangements”. Chandra Asri currently operates Indonesia's sole naphtha cracker in Cilegon, which can produce 900,000 tonnes/year of ethylene and 490,000 tonnes/year of propylene. The new assets in Singapore will boost Chandra Asri’s overall production capacity from around 4.2 million tonnes/year currently to more than 18 million tonnes/year by 2026. The company is also the sole domestic producer of styrene monomer, ethylene, butadiene (BD), MTBE, and butene-1, with a new world-scale chlor-alkali ethylene dichloride (EDC) plant development on the horizon. The company’s planned second petrochemical complex, dubbed CAP2, in Cilegon includes a chlor-alkali plant that is expected to produce 420,000 tonnes/year of caustic soda and 500,000 tonnes/year of EDC. The chlor-alkali plant is expected to be completed by the end of 2026 but Chandra Asri has not yet provided a firm timeline of the other proposed plants previously announced for CAP2. Focus article by Nurluqman Suratman Thumbnail image: Chandra Asri’s olefins plant in Cilegon, Banten province (Source: Chandra Asri official website)

14-Nov-2024

HOUSTON (ICIS)–European ethylene producers could be planning more cracker shutdowns, with the lost capacity being replaced by imports from the US. US ethylene export capacity is being expanded. Midstream companies are adding more US capacity to process the feedstock used to make ethylene. Outside of chemical feedstock, midstream companies see potential growth from energy demand from data centers. EUROPE MAY SHUT DOWN MORE CRACKERSUS-based midstream company and ethylene exporter Enterprise Products hinted that more shutdowns were possible beyond the ones announced this year by ExxonMobil, SABIC and Versalis. "We've heard from a lot of the chemical companies that they are doing strategic reviews of their European assets," said Christopher D'Anna, senior vice president, petrochemicals. He made his comments during an earnings conference call. "So, we expect to see some closures, and we expect that to lead to additional ethylene exports going that way," D'Anna said. Among the region's crackers that rely predominantly on naphtha, most produce less than 700,000 tonnes/year of ethylene, which prevents them from benefiting from economies of scale, according to ICIS data. Europe's elevated energy costs pile on the problems faced by these smaller naphtha crackers. US INCREASING ETHYLENE EXPORT CAPACITYUS ethylene exports surged in 2020 after Enterprise Products and Navigator Gas started shipping material out of their joint venture terminal at Morgan's Point, Texas. That terminal can export 1 million tonnes/year of ethylene. By the end of 2024, the two will complete an expansion project that can handle ethane or ethylene. If dedicated to ethylene, the expansion can export up to 500,000 tonnes/year of ethylene, bringing the total to 1.5 million tonnes/year. By the end of 2025, Enterprise and Navigator will complete another expansion at Morgan's Point, which will add even more flexible capacity. If dedicated to ethylene, this expansion could export up to 1.5 million tonnes/year of ethylene. In all, the Morgan's Point terminal could export up to 3 million tonnes/year of ethylene if it chooses to dedicate all of its flexible capacity to ethylene. As new Enterprise ethane capacity comes online during 2025 and 2026, additional flex train capacity can be utilized for ethylene. In addition, Navigator has ordered two carriers that can each carry 48,500 cubic meters of liquid ethylene, with delivery scheduled for March 2027 and July 2027. The carriers have the flexibility to carry ethane, ammonia or liquefied petroleum gas (LPG). EXPORTS AND US ETHYLENE BALANCEIf Enterprise and Navigator decide to maximize ethylene exports at its Morgan's Point terminal, it would likely tighten the US market, since the new crackers being proposed and built are integrated with downstream units. But D'Anna's comments raises an interesting scenario. Europe may be willing to import ethylene to preserve its downstream units and its manufacturing base. In the future, US chemical producers could add ethylene capacity to serve a global ethylene market. Growing supplies of low-cost feedstock ethane in the US could make such a global ethylene market possible. ETHANE SUPPLIES CONTINUE GROWING IN THE USEthane produced from natural gas processing plants should reach 2.74 million bbl/day in 2025, steady from 2024, according to the Short Term Energy Outlook from the Energy Information Administration (EIA). US oil and natural gas production should also continue increasing, with oil reaching 13.54 million bbl/day in 2025, and dry natural gas reaching 104.62 billion cubic feet/day, according to the EIA. As oil and natural gas production is set to rise steadily over the next two years, ethane output from processing plants is also projected to increase, according to Kojo Orgle, feedstock analyst for ICIS. Orgle monitors the US markets for ethane and other petrochemical feedstock. With limited growth in domestic ethane consumption as a petrochemical feedstock, additional supply will need to be directed toward exports. Consequently, the ethane market will rely heavily on expansions in US waterborne NGL export capacity. Ethane supplies hit record highs this year and may continue to grow if new outlets do not keep pace with production. OTHER MIDSTREAM DEVELOPMENTSEnterprise noted future demand for natural gas from data centers being built in Texas and from new power plants being developed under the recent Texas Energy Fund. Energy Transfer Partners is pursuing similar opportunities for power plants and data centers throughout its natural gas network, from Arizona to Florida and from Texas to Michigan. Energy Transfer received requests to connect to about 45 power plants in 11 states that could consume gas loads of up to 6 billion cubic feet/day. For data centers, Energy Transfer received requests from 40 that could consume gas loads of up to 10 billion cubic feet/day. EnLink Midstream said data centers could represent at least 7.5% of US electricity consumption by 2030, up from 2.5%. With rising natural gas demand from data centers and continued capital discipline among producers, natural gas prices are projected to rise in 2025 and in 2026, Orgle said. Such demand growth could provide support for natural gas prices, which could raise prices for ethane. If US ethane export capacity does not grow fast enough to drive substantial ethane disposition, increased ethane rejection may occur as higher natural gas prices boost ethane’s fuel value, Orgle said. MIDSTREAM PROJECTS The following table shows some of the midstream projects being developed in the US. Company Project Type Capacity Units Location Startup Brazos Midstream Sundance I Gas Plant 200 million cubic feet/day Martin County Oct-24 Brazos Midstream Unnamed Gas plant 300 million cubic feet/day – H2 2025 Delek Unnamed Gas Plant 110 million cubic feet/day Delaware H1 2025 Durango Midstream Kings Landing, Phase I Gas Plant 200 million cubic feet/day Eddy County, NM Q4 24 Durango Midstream Kings Landing, Phase II Gas Plant 200 million cubic feet/day Eddy County, NM na Energy Transfer Frac IX Fractionator 165,000 bbl/day Mont Belvieu Q4 26 Energy Transfer Badger Gas Plant 200 million cubic feet/day Delaware mid 25 Energy Transfer Permian processing expansions* Gas Plant 200 million cubic feet/day Permian Energy Transfer Expansion of Nederland NGL terminal Terminal Up to 250,000 bbl/day Nederland, Texas mid 25 Energy Transfer Expansion of Orla East Gas pPlant 50 million cubic feet/day Orla, Texas Q3 24 Entergy Transfer Lonestar Express Expansion Pipeline 90,000 bbl/day 2026 Enterprise Fractionator 14 Fractionator 195,000 bbl/day Mont Belvieu Q3 25 Enterprise Mentone West (Mentone 4) Gas Plant 300 million cubic feet/day Delaware Q3 25 Enterprise Mentone West 2 Gas Plant 300 million cubic feet/day Delaware h1 26 Enterprise Mentone 3 Gas Plant 300 million cubic feet/day Delaware in service Enterprise Leonidas Gas Plant 300 million cubic feet/day Midland In service Enterprise Bahia NGL pipeline Pipeline 600,000 bbl/day Q3 25 Enterprise Neches River Terminal (NRT), phase 1 Terminal 120,000 ethane, 900,000 refrigerated tank Q3 25 Enterprise Neches River Terminal (NRT), phase 2 Terminal add 60,000 ethane to raise total to 180,000, Propane 360,000 H1 26 Enterprise Ethylene Export Expansion* Terminal 550,000-2m tonnes/year Q4 24 & Q4 25 Enterprise Orion Gas Plant 300 million cubic feet/day Midland Q3 25 Enterprise Enterprise Hydrocarbons Terminal (EHT) LPG expansion Terminal 300,000 bl/day Houston Ship Channel end 2026 Gulf Coast Fractionators JV * GCF Fractionator Fractionator 135,000 bbl/day Mont Belvieu 24-Nov Moss Lake Hackberry NGL Project Terminal 315,000 bbl Calcesieu Ship Channel NA Moss Lake Hackberry NGL Project Fractionator 300,000 bbl Calcesieu Ship Channel NA MPLX Preakness II Gas Plant 200 million cubic feet/day Delaware started up MPLX Secretariat Gas Plant 200 million cubic feet/day Delaware H2 25 MPLX Harmon Creek II Gas Plant 200 million cubic feet/day Marcellus started up MPLX Harmon Creek III Gas plant 300 million cubic feet/day Marcellus H2 26 MPLX Harmon Creek III de-ethanizer 40,000 bbl/day Marcellus H2 26 MPLX BANGL pipeline** Pipeline expansion from 125,000 to 250,000 bbl/day Q1 25 ONEOK MB-6 Fractionator Fractionator 125,000 bbl/day Mont Belvieu year end 24 ONEOK West Texas NGL Pipeline Expansion Pipeline increase to 740,000 bbl/day year end 24 ONEOK Elk Creek Pipeline Expansion**** Pipeline increase to 435,000 bbl/day Q1 25 ONEOK Medford Fractionator rebuild Fractionator 210,000 bbl/day Medord, Oklahoma Q4 26, Q1 27 Targa Train 9 Fractionator Fractionator 120,000 bbl/day Mont Belvieu started up Targa Train 10 Fractionator Fractionator 120,000 bbl/day Mont Belvieu started up Targa Train 11 Fractionator Fractionator 150,000 bbl/day Mont Belvieu Q3 26 Targa Greenwood Gas Plant 275 million cubic feet/day Midland Q4 23 Targa Greenwood II Gas Plant 275 million cubic feet/day Midland started up Targa Wildcat II Gas Plant 275 million cubic feet/day Delaware Q2 24 Targa Roadrunner II Gas Plant 230 million cubic feet/day Delaware started up Targa Bull Moose Gas Plant 275 million cubic feet/day Delaware Q2 25 Targa Pembrook II Gas Plant 275 million cubic feet/day Midland Q4 25 Targa Daytona NGL Pipeline Pipeline 400,000 bbl/day Completed Targa LPG Export Expansion Terminal 1m bbl/month Q3 23 Targa Galena Park LPG terminal expansion Terminal 650,000 bbl/month H2 25 Targa Falcon II Gas Plant 275 million cubic feet/day Delaware Q2 26 Targa Bull Moose II Gas Plant 275 million cubic feet/day Delaware Q1 26 Targa East Pembrook Gas Plant 275 million cubic feet/day Midland Q2 26 Targa East Driver Gas Plant 275 million cubic feet/day Delaware Q3 26 Insight article by Al Greenwood Thumbnail photo: Polymer pellets (source: Shutterstock)

13-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

SINGAPORE (ICIS)–Saudi petrochemical giant SABIC has lowered its capital expenditure (capex) guidance for 2024 as it prioritizes investments in higher-margin opportunities to mitigate overcapacity in the face of poor global demand. Full-year capex cut to $3.3 billion to $3.9 billion Future capex to focus on China, low-carbon projects Margins to remain under pressure for rest of 2024 SABIC reduced its full-year capex by about 25% to between $3.3 billion and $3.9 billion, from $4 billion and $5 billion previously, it said in its third-quarter earnings report released on 4 November. The new capex projection comes after SABIC swung to net profit of Saudi riyal (SR) 1 billion ($267 million) in Q3, from a loss of SR2.88 billion in the same period of last year. This turnaround is primarily due to higher operating income, driven by improved gross profit margins and a divestment gain from the firm's functional forms business. Q3 losses from discontinued operations, mainly related to the Saudi Iron and Steel Co (Hadeed), decreased significantly from the same period last year. On a quarter-on-quarter basis, however, SABIC net profit fell by 54% mostly due to previous Q2 non-cash gains partly resulting from new regulations on Islamic tax. The reversal of zakat provision, which is a mandatory Islamic tax on wealth, resulted in a non-cash benefit of SR545 million in Q2 2024. SABIC registered a Q3 zakat expense of SR397 million. FOCUS ON CHINA Ratings firm Fitch in a note said that it expects SABIC's capex to grow to an average of SR17 billion ($4.5 billion) in 2024-2025 and around SR14 billion in 2026-2027. "In our view, investments will be driven by expansion of its low carbon product portfolio and a pipeline of opportunities in China and the Middle East," it said. This includes the recently sanctioned $6.4 billion joint venture petrochemical complex in Fujian, China, as well as the construction of the largest on-purpose single train methyl tertiary butyl ethe (MTBE) plant in the world in Saudi Arabia," Fitch said. SABIC is exploring options for a petrochemical complex in Oman and an oil-to-chemicals project in Ras Al-Khair in its home country, according to the ratings firm. Fitch also expects acceleration of "green capex" after 2025 as SABIC plans to earmark 10% of its annual expenditures on carbon-neutrality initiatives by 2030. "The key projects will be focused on improved energy efficiencies, increased use of renewable energy in operations, and carbon capture of up to a potential 2 million tonnes, leveraging Saudi Aramco's carbon capture and storage (CCS) hub in Jubail," Fitch said. SABIC, which is 70% owned by oil giant Aramco, had stated in August that its long-term focus would remain on optimizing its portfolio and restructuring underperforming assets. PORTFOLIO OPTIMIZATION AMID MARKET CHALLENGES SABIC CEO Abdulrahman Al-Fageeh said on 4 November that overcapacity continues to weigh on the petrochemicals market, with current utilization rates remaining below long-term averages. "Furthermore, PMI [manufacturing purchasing managers’ index] data indicated a decline in global economic conditions," he added. The company has initiated several portfolio-optimization measures, including discontinuing its naphtha cracker in the Netherlands and disposals of non-core assets such as its steel unit Hadeed in 2023 and a recently announced divestments of 20% shareholding in Aluminium Bahrain (Alba). SABIC's margins are expected to remain under pressure this year before they gradually recover to mid-cycle levels of around 20% by 2026 on market improvement and portfolio-optimization measures, according to Fitch. ($1 = SR3.75) Focus article by Nurluqman Suratman

05-Nov-2024

HOUSTON (ICIS)–LyondellBasell could make a final investment decision (FID) in 2026 on a second chemical recycling plant, which it may build in the US at its refinery site in Houston, the CEO said on Friday. "FID, for the final step, I would expect that to happen in 2026," said Peter Vanacker, LyondellBasell CEO. He made his comments during an earnings conference call. The chemical recycling plant would feature LyondellBasell's MoReTec process technology. The plant could produce 100,000 tonnes/year of cracker feedstock. If LyondellBasell moves ahead with the MoReTec plant, it could be part of a larger project that would convert the Houston refinery into a sustainability hub. The refinery's existing hydrotreaters would be retrofitted so they could upgrade the output from the MoReTec unit as well as from third-party recycling plants. Once upgraded, the feedstock could be shipped by pipeline to LyondellBasell's cracker operations in nearby Channelview, where it will be converted into olefins. Those olefins would be polymerized to produce circular polyolefins, which LyondellBasell would market under its CirculenRevive brand. LyondellBasell could also retrofit other units at the refinery that would convert renewable material into distillates and feedstock that the company could process in its crackers. LyondellBasell could market the resulting polymers under its CirculenRenew brand. LyondellBasell did not provide details about the source of these renewable feedstocks. However, one source could be a storage and logistics hub in Harvey, Louisiana, that is being developed by Kinder Morgan and Finnish refiner Neste. The hub collects used cooking oil and other renewable feedstock, and it could be expanded at Neste's option. Neste pioneered the production of naphtha from renewable feedstock, and the Houston refinery is a short distance by sea from Harvey. In the future, the hydrogen that LyondellBasell would need for upgrading recycled and renewable feedstock could come from nearby blue and green hydrogen projects. LyondellBasell, Air Liquide, Chevron and Uniper are part of a consortium that is evaluating sites for a hydrogen and ammonia project on the Gulf Coast. The Houston refinery is the top choice for the site. More hydrogen could come from the proposed Houston HyVelocity Hub. It is among the hubs participating in the Department of Energy's Regional Clean Hydrogen Hubs program. SHUTDOWN OF HOUSTON REFINERY IN Q1In January, LyondellBasell will start shutting down the first crude distillation unit and coker train at the refinery. In February, the company will begin shutting down the second crude distillation unit and coker train, the fluid catalytic cracking (FCC) unit and other ancillary units. The refinery does not have a catalytic reformer. CONSTRUCTION STARTS AT GERMAN RECYCLNG PLANTIn September, LyondellBasell started construction at its MoReTec 1 plant in Wesseling, Germany, which will have a capacity of 50,000 tonnes/year and which should start up in 2026. Vanacker said the plant has a plastic-to-plastic yield of more than 80%. It can use 100% renewable power. Thumbnail photo: Plastic which can be recycled. (By Allison Dinner/EPA-EFE/Shutterstock)

01-Nov-2024

SINGAPORE (ICIS)–Thailand’s Siam Cement Group (SCG) will invest $700 million to pave the way for Vietnam’s first integrated petrochemical complex to use US ethane as feedstock for production. Project completion slated in end-2027 Ethane to account for as much as two-thirds of LSP cracker feedstock Bulk of investments go toward handling/storage of ethane The project, which will mean increased feedstock diversification for its wholly owned Vietnamese subsidiary Long Son Petrochemicals (LSP), is expected to be completed by the end of 2027, SCG said in a bourse filing on 30 October. LSP is currently working with Vietnamese authorities to acquire necessary certificates and permits to build storage and supporting facilities at the complex in Bah Ria-Vung Tao province in southeastern Vietnam. The cracker at the site can produce 950,000 tonnes/year of ethylene, 400,000 tonnes/year of propylene, and 100,000 tonnes/year of butadiene (BD). Once the ethane enhancement project is completed, LSP will be able to utilize ethane for as much as two thirds of its total feedstock, in addition to propane and naphtha. By utilizing imported ethane from the US as raw material, “LSP can significantly enhance its competitiveness through lower feedstock cost and flexibility, while also lowering carbon emissions”, SCG said. Majority of the investment will go toward handling and storage of the ethane feedstock, which requires temperature as low as minus 90-degree Celsius, it said. LSP was completed at a cost of $5.2 billion whose commercial operations began on 30 September 2024 "following a comprehensive test period", SCG said. The Thai conglomerate first announced the plan to use US ethane as feedstock for LSP in September, noting that over the past three years, its average price has been lowered by around 40% compared with those of naphtha and propane. Most crackers in Asia use naphtha as feedstock whose prices track highly volatile upstream crude movement. “In light of the existing petrochemical trough with historical low margin, and current volatile global economic environment, LSP is closely monitoring the market situation and will adjust the run rate of its operation during this challenging period for petrochemical business,” SCG said. Focus article by Pearl Bantillo (adds details throughout) Initial reporting by Fanny Zhang Thumbnail image: Container cargo ships unload at a port in Hai Phong, Vietnam on 25 May 2015. (Minh Hoang/EPA/Shutterstock)

31-Oct-2024