Phenol and acetone

LONDON (ICIS)–Here are some of the top stories from ICIS Europe for the week ended 5 July. Shell to post up to $2 billion in impairments in Q2 results Energy major Shell on Friday said that it expects to book $2 billion in post-tax impairments following the sale of its Singapore assets and the suspension of construction at its biofuels plant in the Netherlands. European Commission imposes China EV tariffs citing ‘unfair’ subsidies The European Commission is to move forward with proposed plans to impose tariffs of nearly 40% in some cases to China-manufactured battery electric vehicles (BEVs), citing a level of state subsidy it terms as “unfair”. Global phenol demand expected to rise, driven by downstream growth Global phenol demand is expected to increase by about 1.9% in 2024 after a weak 2023, supported by growth in the key downstream bisphenol A (BPA) market. Europe cracker margins down on firmer naphtha, LPG costs Europe cracker margins went down week on week on the back of firmer feedstock costs, ICIS margin analysis showed on Tuesday. Eurozone manufacturing momentum ebbs in June as demand deteriorates Eurozone manufacturing sector activity slipped further into contraction in June as demand slowed in most of the bloc’s largest economies, while conditions improved in the UK.

08-Jul-2024

LONDON(ICIS)–European downstream demand remains low due to inflation and high interest rates. Add logistics issues and a continuous flow of imports to that, and the doom of European petrochemical industry begins. But with the recent reduction in interest rates by ECB and increased tariffs on Asian EVs, there is hope that the acetone and phenol derivative chain might come back to its glory. Europe ICIS editors Jane Gibson (acetone and phenol), Heidi Finch (bisphenol A and epoxy resins), Meeta Ramnani (polycarbonate), Mathew Jolin-Beech (methyl methacrylate) and ICIS senior analyst Michele Bossi (aromatics and derivatives) discuss the latest development in imports, bans and interest rates that are likely to impact the acetone, phenol and derivatives markets. Acetone market balanced to tight on export demand, slim import volumes and curtailed op rates as phenol struggles to find demand Cut of interest rates by ECB and tariffs on Chinese EVs increases hope of recovery of demand Dependency increases on Asian imports for PC BPA and epoxy players keep close eye on upstream, logistics and regulatory factors Challenging global as well as regional logistics impact MMA supply in Europe Podcast edited by Meeta Ramnani

14-Jun-2024

SINGAPORE (ICIS)–A severe shortage of containers and vessel space as commercial ships take a much longer route to avoid the Red Sea has sent freight rates skyrocketing in recent weeks, artificially propping up petrochemical prices even as demand remained generally weak. Some sellers offer on free on board (FOB) basis but no takers Freight costs for Chinese exports more than double India may suffer near-term shortage of select petrochemicals Across markets in Asia in recent weeks, industry players’ lament boils down to this exasperated hyperbole: “The freight rates are killing us!” It takes the fun out of witnessing some initial signs of recovery in external demand for global manufacturing giant China. Whatever export competitiveness Asia gained from having weaker currencies against the US dollar is being undermined by the high cost of shipping out of the region. The Chinese yuan recently fell to a six-month low, while the Japanese yen continues to trade at multi-year lows against the US dollar, which is firmly supported by higher-for-longer interest rates. Overseas demand for Chinese products, including petrochemicals, seems to be improving, but actual trades are being hampered by logistics woes stemming from the Red Sea crisis in the Middle East. Attacks on commercial ships have continued in the key shipping lane that connects Asia to Europe, the latest being on an oil tanker bound for China. Rerouting of ships to the Cape of Good Hope meant longer voyage times and much slower turnover of vessels and containers, thereby, creating a strong pressure on freight rates, which may persist for most of the year. “The race for capacity appears to have started, with shippers showing strong demand due to shippers moving significant cargo in the first four months of 2024 to avoid potential Q3 constraints​​,” Richard Fattal, chief commercial officer of London-based freight forwarder Zencargo said in a note on 20 May. “Combined with an average of 5% ongoing blanked sailings, there is a looming future of tighter capacity, higher rates and sellers’ market swings ahead,” he said. “With capacity shrinking in the face of resurgent port congestion, driven by equipment shortages in China and longer routes around the Cape of Good Hope,” Fattal said. For Q2, Zencargo is projecting more than a 13% contraction shipping capacity on the Asia-Europe routes compared with Q3 2023, “with alliances cancelling 5% of sailings between weeks 20 and 24 [H2 May to H1 June]”. “The effective capacity to Northern Europe, based on actual vessel departures from Asia, has decreased by 5.1% compared to a year ago,” it said, citing “the longer route taken by the majority of vessels via the Cape of Good Hope, despite a 17.8% increase in vessel capacity on the Asia-North Europe route”. For the Asia-Mediterranean route, however, the overall capacity has “increased by 10.5%, even with the diversions via the Cape” due to a 49.1% increase in total deployed capacity on this route compared to a year ago”, Zencargo said. WEST BUILDING WALLS AGAINST CHINA TRADES The July-September period is the peak season for Chinese shipments to the west, ahead of the Christmas season in December, according to Wang Guowen, director at Shenzen Logistics and Supply Chain Management Research. Possibly driving up US’ overall demand for Chinese goods, which exerts upward pressure on shipping costs, is the impending tariff hike on imports of selected products from China, including electric vehicles (EVs) and battery materials. For Chinese EVs, the US import tariffs would quadruple to 100% from 1 August, which is tantamount to a ban. European countries appear to be considering similar protectionist measures against China, whose overcapacity is deemed to be killing domestic industries in the west. “Western countries' implementation of tariffs and tax structures on Chinese-manufactured automotive and EV exports is anticipated to significantly impact the shipping sector by potentially reducing vessel demand,” online container and leasing platform Container xChange said in a recent note. To bypass these trade barriers, Chinese automotive and EV makers “are accelerating efforts to internationalize their manufacturing, assembly, and distribution processes”, it said, adding that “immediate effects are already evident, as manufacturers are hastening to ship EVs to avoid impending tariffs and uncertainties”. In the global petrochemical scene, manufacturing facilities in the US and Europe, as well as in parts of northeast Asia are shutting down amid China’s overcapacity. Technically, reduced production elsewhere would open up new markets for China’s excess capacity, if not for the surging freight rates, which further deter trades while demand recovery remains fragile. China’s overall exports have remained soft, posting low single-digit annualised growths in three of the first four months of 2024, with one month in contraction. HEADACHE FOR INDIA PETROCHEMICAL IMPORTERS Petrochemical end-users in India are facing long waiting time to get their hands on imports from China. “Now, no shipping lines will confirm fresh Q2 shipment booking, even after dishing out quotes that are three to four times higher than Q1,” an India-based styrene butadiene rubber (SBR) importer said. A phenol trader said: “June vessel arrangements are more troublesome this year because of the Red Sea issues and also China's exports have been weak especially in the past two months, so fewer vessels are being arranged to China.” India is possibly facing a near-term shortage of purified terephthalic acid (PTA), since northeast/southeast Asian suppliers are struggling to export to the south Asian market. Freight rates from both Taiwan and Thailand to India nearly doubled from April, with voyage time for some shipments taking as long as 90 days, up from the usual 30-40 days. For polyethylene (PE) and polypropylene (PP), cargoes from the Middle East heading to the south Asian markets of India and Pakistan are also being delayed, amid congestion at the ports of Salalah in Oman, Dammam in Saudi Arabia and Jebel Ali in the UAE. For polymeric methylene diphenyl diisocyanate (PMDI) of northeast Asian origin, offers to India have spiked amid tightened regional supply, with delays in getting cargoes from South Korea. SURGING SHIPPING COSTS KILLING SPOT TRADESSpot petrochemical trades are being stalled by constantly changing freight rates on a weekly basis. In the polypropylene (PP) market, some Chinese suppliers have stopped offering on a cost, insurance and freight (CIF) basis, and will only offer on FOB basis because of the risks. For the China-to-Vietnam and the Vietnam-to-Indonesia routes, freight rates have nearly tripled, market players said. Buyers are less willing to discuss on an FOB basis, unwilling to shoulder an expected high cost since most of them do not have their own regular shipper. For soda ash, offers of Turkey-origin dense grade cargoes for 1,000-tonne lots to southeast Asia for Q3 shipments rose to around $300/tonne CFR, up by $20-30/tonne compared with May shipments. Importers of the material across Asia were largely staying on the side lines, with some of them experiencing delays in receiving Turkish cargoes. “Discussion levels are firming up due to freight costs,” said an end-user, adding that the “Red Sea issue is getting worse and lots of shipments from Europe and USA are stuck.” The same is true for the southeast Asian PE market given delays in arrivals of Middle East-origin cargoes and amid perceptions of shorter supply. In the oxo-alcohols markets, producers in Asia are under strong pressure to offload cargoes at lower prices given difficulty in moving volumes to their usual export outlets. Freight rates on chemical tankers are also on the rise amid the Red Sea crisis, sources from Asia’s monoethylene glycol market, resulting in postponing of cargo-loading by some producers. “The freight rates are quite high now, and we have to optimize our vessel availability,” a major MEG producer said. FURTHER FREIGHT SPIKES LIKELY IN JUNE H2 is typically “a busier, more competitive, and profitable season for the shipping industry”, with many container sellers are “currently holding onto their inventory” in anticipation of better demand, said Christian Roeloffs, co-founder and CEO of Container xChange, in a note in May. "In an environment of heightened market volatility and encouraging demand recovery for global trade, container traders are gearing up for the second half of 2024, where we expect a cyclical rise in demand,” he said. “This combination of heavier-than-expected demand for freight and anticipation of further demand surges in the second half of 2024 is driving up container trading prices in China,” Roeloffs added. In a recently conducted survey of container traders and leasing companies by Container xChange, it noted that a majority of the respondents reported “extremely high prices for 40 ft high cube containers in China”. On 21 May, the average one-way leasing rates quoted in the market rose to as high as $2,480 for 40 HC in China for US-bound shipments, more than double the rate at the start of the month at around $950, it said. With ceasefire between Israel and Palestinian militant Hamas in Gaza proving elusive and the threat of a wider Middle East conflict still hanging, it looks like high freight rates are here to stay for an extended period. Insight article by Pearl Bantillo With contributions from Nurluqman Suratman, Fanny Zhang, Nadim Salamoun, Judith Wang, Helen Lee, Ai Teng Lim, Samuel Wong, Julia Tan, Izham Ahmad, Jackie Wong, Shannen Ng, Helen Yan and Clive Ong

29-May-2024

SINGAPORE (ICIS)–Here are the top stories from ICIS News Asia and the Middle East for the week ended 24 May 2024. INSIGHT: Asia plasticisers producers brace for mounting selling pressure amid soaring freight rates By Julia Tan 24-May-24 12:00 SINGAPORE (ICIS)–Recently surging freight rates have led to a largely pessimistic outlook for the Asia plasticisers spot market, particularly for producers who rely heavily on export sales, as higher freight rates will continue to keep selling pressure high as sellers find it difficult to move product out of the region. SE Asia PE June offers firmer due to shipment delays, tight supply By Izham Ahmad 24-May-24 11:16 SINGAPORE (ICIS)–Initial spot import offers for June shipments of polyethylene (PE) in southeast Asia were announced mostly firmer so far in the week ending 24 May, with gains driven by tight supply, which is being aggravated by delays in cargo delivery from the Middle East. US tariff hikes on China EVs, batteries take effect 1 August By Fanny Zhang 23-May-24 13:37 SINGAPORE (ICIS)–Starting August, US tariffs on imports of electric vehicles (EVs) from China will quadruple to 100%, while those for battery materials will more than triple to 25%, the US Trade Representative (USTR) said. Freight rates on China exports soar amid Red Sea crisis By Fanny Zhang 22-May-24 11:56 SINGAPORE (ICIS)–Freight rates for China's exports, including petrochemicals, have been spiking in recent weeks and are expected to remain firm in the next three to six months on the back of improving overseas demand and amid continued logistics disruptions in the Middle East. INSIGHT: China's industrial activity gathers pace but lopsided April data clouds outlook By Nurluqman Suratman 21-May-24 12:00 SINGAPORE (ICIS)–China's industrial output grew by 6.7% year on year in April, signalling a further strengthening of its manufacturing sector, but weaker retail sales and bleak property data suggest that its overall growth momentum remains weak. INSIGHT: Asia MEG market continues to brace for headwinds By Judith Wang 20-May-24 20:17 SINGAPORE (ICIS)– Asia monoethylene glycol (MEG) market continues to face headwinds in the near term as it is grappling with the ample supply in China and soft global textile demand. Asia IPA supported by acetone strength; demand lagging By Joy Foo 20-May-24 14:13 SINGAPORE (ICIS)–After seeing a sharp increase in late April, tracking a surge in feedstock acetone cost, Asia’s isopropanol (IPA) spot prices have remained buoyant on cost support.

27-May-2024

SAO PAULO (ICIS)–Brazilian chemicals producers are lobbying hard for an increase in import tariffs for key polymers and petrochemicals from 12.6% to 20%, and higher in cases, hoping the hike could slow down the influx of cheap imports, which have put them against the wall. For some products, Brazil’s chemicals trade group Abiquim, which represents producers, has made official requests for the import tariffs to go up to a hefty 35%, from 9% in some cases. On Tuesday, Abiquim said several of its member companies “are already talking about hibernating plants” due to unprofitable economics. It did so after it published another set of somber statistics for the first quarter, when imports continued entering Brazil em masse. Brazil’s government Chamber of Foreign Commerce (Camex) is concluding on Tuesday a public consultation about this, with its decision expected in coming weeks. Abiquim has been busy with the public consultation: it has made as many as 66 proposals for import tariffs to be hiked for several petrochemicals and fertilizers, including widely used polymers such polypropylene (PP), polyethylene (PE), polyethylene terephthalate (PET), polystyrene (PS), or expandable PS (EPS), to mention just a few. Other chemicals trade groups, as well as companies, have also filed requests for import tariffs to be increased. In total, 110 import tariffs. HARD TO FIGHT OFFBrazil has always depended on imports to cover its internal chemicals demand, but the extraordinary low prices coming from competitors abroad has made Brazil’s chemicals plant to run with operating rates of 65% or lower. More and more, the country’s chemicals facilities are becoming white elephants which are far from their potential, as customers find in imported product more competitive pricing. Considering this dire situation and taking into account that the current government in Brasilia led by Luiz Inacio Lula da Silva may be more receptive to their demands, Abiquim has put a good fight in publica and private for measure which could shore up chemical producers’ competitiveness. This could come after the government already hiked import tariffs on several products in 2023 and re-introduced a tax break, called REIQ, for some chemicals which had been withdrawn by the previous Administration. While Brazil’s chemicals production competitiveness is mostly affected by higher input costs, with natural gas costs on average five times higher than in the US, the industry is hopeful a helping hand from the government in the form of higher import tariffs could slow down the flow of imports into Brazil. As a ‘price taker region’ given its dependence on imports, Latin American domestic producers have taken a hit in the past two years. In Brazil, polymers major Braskem is Abiquim’s commanding voice. Abiquim, obviously, has always been very outspoken – even apocalyptic – about the fate of its members as they try to compete with overseas countries, namely China who has been sending abroad product at below cost of production. The priorities in China’s dictatorial system are not related to the balance of markets, but to keep employment levels stable so its citizens find fewer excuses to protest against the regime which keeps them oppressed. Capitalist market dynamics are for the rest of the world to balance; in China’s dictatorial, controlled-economy regime the priority is to make people feel the regime’s legitimacy can come from never-ending economic growth. The results of such a policy for the rest of the world – not just in chemicals but in all industrial goods – is becoming clear: unprofitable industries which cannot really compete with heavily subsidized Chinese players. The results of such a policy in China are yet to be seen, but subsiding at all costs any industry which creates employment may have debt-related lasting consequences: as they mantra goes, “there is no such thing as a free lunch.” Abiquim’s executive president urged Lula’s cabinet to look north, to the US, where the government has imposed hefty tariffs on almost all China-produced industrial goods or raw materials for manufacturing production. “[The hikes in import tariffs] have improved the US’ scenario: despite the aggressive advance in exports by Asian countries, the drop in US [chemicals] production in 2023 was of 1%, while in Brazil the index for production fell nearly by 10%,” said Andre Passos. “The country adopted an increase in import taxes of over 30% to defend its market from unfair competition. The taxation for some inputs, such as phenol, resins and adipic [acid], for example, exceeds three digits. “Here, we are suggesting an increase in rates to 20% in most claims … We need to have this breathing space for the industry to recover,” he concluded. As such, the figures for the first quarter showed no sign of imports into Brazil slowing down. The country posted a trade deficit $9.9 billion during the January-March period; the 12-month accumulated (April 2023 to March 2024) deficit stood at $44.7 billion. A record high of 61.2 million tonnes of chemicals products entered Brazil in Q1; in turn, the country’s industry exported 14.6 million tonnes. Abiquim proposals for higher import tariffs Product Current import tariff Proposed tariff Expandable polystyrene, unfilled, in primary form 12.6% 20% Other polystyrenes in primary forms 12.6% 20% Carboxymethylcellulose with content > =75%, in primary forms 12.6% 20% Other polyurethanes in liquids and pastes 12.6% 20% Phthalic anhydride 10.8% 20%  Sodium hydrogen carbonate (bicarbonate) 9% 35% Copolymers of ethylene and alpha-olefin, with a density of less than 0.94 12.6% 20% Other orthophthalic acid esters 11% 20% Other styrene polymers, in primary forms 12.6% 20% Other silicon dioxides 0% 18% Other polyesters in liquids and pastes  12.6% 20% Commercial ammonium carbonates and other ammonium carbonates 9% 18% Other unsaturated polyethers, in primary forms 12.6% 20% Polyethylene terephthalate, with a viscosity index of 78 ml/g or more 12.6% 20% Phosphoric acid with an iron content of less than 750 ppm 9% 18% Dinonyl or didecyl orthophthalates 11% 20% Poly(vinyl chloride), not mixed with other substances, obtained by suspension process 12.6% 20% Poly(vinyl chloride), not mixed with other substances, obtained by emulsion process 12.6% 20% Methyl polymethacrylate, in primary form  12.6% 20% White mineral oils (vaseline or paraffin oils) 4% 35% Other polyetherpolyols, in primary forms 12.6% 20% Other unfilled epoxy resins in primary forms 12.6% 20% Silicon dioxide obtained by chemical precipitation 9% 18% Acrylonitrile-butadiene rubber in plates, sheets, etc 11% 35% Other organic anionic surface agents, whether or not put up for retail sale, not classified under previous codes 12.6% 23% Phenol (hydroxybenzene) and its salts 7% 20% Fumaric acid, its salts and esters 10 ,8% 20% Plasticizers and plastics 10 ,8% 20% Maleic anhydride 10 ,8% 20% Adipic acid salts and esters 10 ,8% 20% Propylene copolymers, in primary forms 12.6% 20% Adipic acid 9% 20% Unfilled polypropylene, in primary form 12.6% 20% Filled polypropylene, in primary form 12.6% 20% Methacrylic acid methyl esters 10 ,8% 20% Other ethylene polymers, in primary forms 12.6% 20% Acrylic acid 2-ethylhexyl esters 0% 20% 2-Ethylexanoic acid (2-ethylexoic acid) 10. 8% 20% Other copolymers of ethylene and vinyl acetate, in primary forms 12.6% 20% Other unfilled polyethylenes, density >= 0.94, in primary forms 12.6% 20% Polyethylene with a density of less than 0.94, unfilled 12.6% 20% Other saturated acyclic monoalcohol acetates, c atom <= 8 10. 8% 20% Polyethylene with a density of less than 0.94, with filler 12.6% 20% Triacetin 10. 8% 20% Sodium methylate in methanol 12.6% 20% Stearic alcohol (industrial fatty alcohol) 12.6% 20% N-butyl acetate                              11% 20% Stearic acid (industrial monocarboxylic fatty acid) 5% 35% Alkylbenzene mixtures 11% 20% Organic, non-ionic surface agents 12.6% 23% Ammonium nitrate, whether or not in aqueous solution 0.0% 15% Monoethanolamine and its salts 12.6% 20% Isobutyl alcohol (2-methyl-1-propanol) 10.8% 20% Butan-1-ol (n-butyl alcohol) 10.8% 20% Styrene-butadiene rubber (SBR), food grade as established by the Food Chemical Codex, in primary forms 10.8% 22% Styrene                                9% 18% Hexamethylenediamine and its salts 10.8% 20% Latex from other synthetic or artificial rubbers 10.8% 35% Propylene glycol (propane-1, 2-diol) 10.8% 20% Preparations 12.6% 20% Linear alkylbenzene sulfonic acids and their salts 12.6% 23% 4,4'-Isopropylidenediphenol (bisphenol A, diphenylolpropane) and its salts 10.8% 20% Dipropylene glycol 12.6% 20% Butanone (methyl ethyl ketone) 10.8% 20% Ethyl acetate                                 10.8% 20% Methyl-, ethyl- and propylcellulose, hydroxylated 0.0% 20% Front page picture: Chemical production facilities outside Sao Paulo  Source: Union of Chemical and Petrochemical industries in the state of Sao Paulo (Sinproquim) Focus article by Jonathan Lopez Additional information by Thais Matsuda and Bruno Menini

30-Apr-2024

HOUSTON (ICIS)–While Indorama Ventures reviews six sites for possible closure, it will consider signs that oil demand will continue growing in emerging Asia while peaking in Europe and North America – a trend that would alter the regional costs of a principal polyester feedstock, making it more attractive to import it from Asia than make it in the West. Benzene, toluene and mixed xylenes (MX) are produced in refineries, and they are among the fundamental building blocks for the chemical industry. If oil demand peaks in the West, that would discourage refiners from expanding capacity or making the expensive investments needed to maintain existing production levels. That would tighten supplies for these building blocks, affecting costs for chemicals as varies as phenol, styrene and paraxylene (PX). By contrast, oil demand has yet to peak among emerging economies in Asia. There, refiners will continue to increase capacity to meet growing demand for diesel and gasoline. Supplies of aromatics should continue growing in those regions. Indorama is taking the prospect of peak oil seriously because a key polyester feedstock, purified terephthalic acid (PTA), is made from PX, and PX is extracted from MX. If Western PTA prices become too expensive, then it would make more sense for Indorama to shut down its high-cost plants in the West and purchase the feedstock from producers in Asia that can sell material at a lower price. Indorama did not specify which plants it could close. PEAK OIL IN WEST SPELLS END OF NEW REFINERIESIndorama expects oil demand in the West will soon peak, perhaps in 2025 or 2026, said Aloke Lohia, Group CEO of Indorama. He made his comments in an interview with ICIS. His comments are backed by statistics from the Energy Information (EIA). Outside of the post-COVID rebound in 2021, gasoline demand in the US has been running below pre-pandemic levels. In 2023, it reached a summertime peak of nearly 9.60 million bbl/day. That is more in line with summer levels in 2015. Given the outlook for oil demand in the West, Indorama is betting that refiners will unlikely make the pricey investments necessary to increase capacity. "No one is looking to build a new refinery," Lohia said. Refiners could even shirk from making the investments needed to maintain existing capacity. "We believe there will be de-growth in refineries in the West and hence high cost for crude oil derivatives that has hurt our competitiveness, especially in Europe," Lohia said in prepared remarks. Actions by refiners are bearing this out. LyondellBasell plans to shut down its Houston refinery because it cannot justify the capital expenditures needed to keep the 100+ year old complex running. Although ExxonMobil recently expanded its refinery in Beaumont, Texas, the last time a refiner made a comparable investment was in 2012, when Motiva expanded its refinery in Port Arthur, Texas. Several refiners have converted existing units to process vegetable oils and similar feedstock to produce renewable diesel and sustainable aviation fuel (SAF). LyondellBasell could convert its Houston refinery into a sustainability hub. OIL DEMAND TO CONTINUE GROWING IN EMERGING ASIAUnlike the West, Indorama expects oil demand to continue growing in emerging Asia. Governments in this part of the world have less aggressive schedules for reducing carbon emissions, with net-zero goals further out in the future, Lohia said. Reducing carbon emissions boils down to renewable electricity. Instead of producing power by burning coal and natural gas, countries would do so with renewable sources such as solar panels, wind turbines and hydropower. Renewable electricity could also be used to generate heat. Emerging economies have limited power production, and they want to use that electricity to rapidly industrialize, according to Indorama. De-carbonization and industrialization will compete for limited power generation. That will place a limit on the expansion of charging stations needed for electric vehicles (EVs). Until emerging markets build out electrical infrastructure, they will still need petroleum-based fuels. Consequently, emerging markets are giving themselves more time to reduce carbon emissions. In China in particular, some companies could rush to complete new expansion projects before decarbonization deadlines take effect, Lohia said. China already has too much capacity, so this building spree will worsen the supply glut. As it stands, crude oil processing in China reached 14.8 million bbl/day in 2023, an all-time high, according to the EIA. Growing refining capacity should increase supplies of aromatics such as PX, the feedstock used to make purified terephthalic acid (PTA). That should depress PTA production costs. INDORAMA'S PLANGiven the global outlook for chemical feedstock produced at refineries, Indorama is considering a plan that would reduce consumption of these feedstocks at its Western operations. Instead of producing feedstock at high-cost plants, Indorama would import the material from Asia. Production lost from any closures would be offset by increasing utilization rates at Indorama's low-cost plants. The move would significantly increase Indorama's overall operating rates and lead to double-digit returns on capital employed (ROCE) for the two businesses most exposed to MX, Combined PET (CPET) and Fibers. US SHALE MAY SPARE DOMESTIC PLANTSThe calculus is less straightforward for Indorama's US operations. Critically, these operations include methyl tertiary butyl ether (MTBE), an octane-boosting gasoline blendstock that is made with methanol and isobutylene. In the US, both of these chemicals are made from shale-based feedstock, giving Indorama a substantial cost advantage. When gasoline prices rise, Indorama's MTBE operations can earn the company very attractive margins. Those fat MTBE margins would offset the higher costs involved with producing PTA from PX extracted from MX. MX is another octane-boosting blendstock, so its price tends to rise and fall with that for gasoline. In effect, MTBE provides Indorama with a hedge against higher MX costs for its US PET operations. MX is not the only feedstock used to make PET. The other is monoethylene glycol (MEG), a chemical made from ethylene. US ethylene producers predominantly on ethane as a feedstock, giving them a cost advantage. For Indorama's PET operations in the US, shale gas gives the company a cost advantage on the MEG side and a hedge on the PTA side. Thumbnail shows bottle made of PET. Image by monticello/imageBROKER/Shutterstock Insight article by Al Greenwood

05-Mar-2024

SINGAPORE (ICIS)–Asia's petrochemical markets will closely watch China's demand signals after the Lunar New Year holiday amid ongoing concerns about the country’s economic health. Asia markets eye China's post-holiday demand signals China's economic health remains central concern Prices likely to rise amid supply constraints Markets in Asia took a breather in the week of 12-16 February, with Lunar New Year holidays in China, Taiwan, Malaysia and Singapore, while countries such as South Korea, Japan and Indonesia observed public holidays as well. Market participants are cautious about the post-holiday market; while some downstream buyers will restock after the holidays, there is concern that existing inventory held by domestic China producers and distributors will largely satisfy demand until early March. PRICES LIKELY TO RISE AMID SUPPLY CONSTRAINTSPetrochemical prices in Asia are expected to continue to increase in February, supported by capacity losses from outages and run-rate reductions, according to ICIS analysts. Among the 31 major petrochemical commodities covered by the ICIS Asia Price Forecast, average February prices for at least 22 of these commodities are anticipated to increase. Ethylene (C2), butadiene (BD) and styrene butadiene rubber (SBR) are expected to lead in terms of gains. In Asia’s C2 market, end-users who have yet to settle March arrival cargo are expected to hit the ground running once most of players return to the market this week. In the southeast Asia C2 market, demand enquiries were largely heard from Thailand last week, while other end-users in Indonesia have begun to look towards the April window for spot cargo. "The Asia C2 industry is likely to be characterised by tight supply in the weeks to come," said Paolo Scafetta, ICIS senior olefins analyst. "February should see about 7% of total monthly nameplate capacity lost due to downtime unless unplanned events cause further technical hiccups." The upstream naphtha market in Asia should be influenced by a few bearish factors, Scafetta added. These include the shift from naphtha to liquefied petroleum gas (LPG) as an alternative cracking feedstock and an improvement in supply from March as naphtha cargoes are expected to increase as Middle East refineries return from their maintenance. Asia's naphtha market is likely to be plagued with volatility in the short term as tensions in the Red Sea will continue to disrupt supplies. In Asia’s propylene (C3) market, trade was largely subdued during the Lunar New Year break but picked up towards the close of the week with most market players, except China, returning from their holiday. Talks and discussions in Taiwan commenced at the end of the week after the holidays ended. However, the post-holiday buying sentiment weakened on the back of ample supply, leading sellers to progressively lower their offers and selling indications. With buyers in China largely away from the market, overall business activity during the week was muted. In southeast Asia, while demand was also heard in Malaysia and Indonesia, most buyers continued to hold back from purchases on the expectation that supply tightness might result in an easing in offers down the road. In Asia’s benzene market, post-holiday restocking is expected to pick up in the second half of February amid strong competition for April and May cargoes from global players. February and March benzene cargoes have been already sold out and April cargoes are in strong demand. Benzene buyers based in both Asia and the West had actively sought procurement since end-January, for pre-holiday and pre-summer stocking up respectively. Asia's acetone market looks poised to maintain its strength. This is due to the high prices of benzene, reduced production leading to tighter supply, and a resurgence in trading flows between Asia and the West. A significant increase in demand for Asia acetone from the US market is bolstering this trend. Limited supply in the US, a result of low phenol production and ongoing allocations, is driving this demand. Meanwhile, supply within Asia is also constrained as phenol/acetone producers scale back production in response to unprofitable margins and decreased demand for phenol in China. In the xylene markets, further support in the market will be dependent on downstream sectors after the Lunar New Year holidays, with eyes firmly on China. For paraxylene (PX), there remains optimism for gasoline-blending demand heading into the second quarter, with positive arbitrage window economics for exports to the West. Firm upstream naphtha prices have also provided some support for PX. Several market participants noted there had been pre-buying of mixed xylenes (MX) and toluene by gasoline blenders to the US. Demand and price developments in the downstream purified terephthalic acid (PTA) and polyester sectors will help provide clarity about whether high PX costs can be absorbed down the chain. Asia's butyl acetate (butac) and ethyl acetate (etac) markets are poised to stay afloat on anticipated post-holiday demand, albeit at a gradual pace. Sellers of butac in both China and the region largely maintained their spot offers for March loading prior to the Lunar New Year holiday. Spot butac prices were on a downtrend in the early part of the fourth quarter of 2023 and have climbed since December, in part driven by cost pressures upstream as suppliers worked towards mitigating compressed margins. Asia’s methylene chloride (MEC) market might be bullish after the Lunar New Year holiday, as rising demand is likely to shift the market to a more balanced state. Most buyers were in a wait-and-see mode, monitoring prices and observing what producers would offer after the Lunar New Year break, with market participants in southeast Asia eyeing a rebound in demand through Q2, around the Ramadan period. CHINA'S ECONOMIC HEALTH IN FOCUS ICIS analysts expect most of China's end-use consumption, including in industries such as agriculture and home appliances, to recover from March. The China government's Two Sessions policy meetings, widely seen as the most important political meeting of the year for the country, will be held on 4-11 March. ICIS analysts expect another series of policies to be introduced to stimulate economic growth. Further market and infrastructure investment can boost petrochemicals demand. Latest official data from China is pointing to some recovery from domestic tourism trips and revenues. Domestic tourism trips and revenues during the Lunar New Year holidays in China jumped by 34.3% and 47.3% year on year respectively, with their levels at 19.0% and 7.7% above pre-pandemic levels in 2019, data from the country’s Ministry of Culture and Tourism (MCT) shows. "Most official and private media channels have been reporting strong (or even exceptionally strong) Lunar New Year holiday consumption data, and markets risk getting caught up in the euphoria of the moment, under the supposition that China’s economy is suddenly bottoming out, driven by the Chinese people’s hidden passion for spending," research analysts from Japan's Nomura Global Markets Research said in a note. "Although we do see some strength in the data, we urge market participants to exercise caution," it said, adding that China's property sector continued its downward spiral, right before the Lunar New Year holiday, and there was no sign of a recovery during the holiday. "Despite the positive [Lunar New Year] data, we maintain our view that the ongoing economic dip is likely to worsen into the spring," Nomura said. With additional reporting by Josh Quah, Julia Tan, Seng Li Peng, Angeline Soh, Helen Lee, Keven Zhang, Melanie Wee and Samuel Wong Focus article by Nurluqman Suratman Thumbnail photo: Lunar New Year lanterns in Shenyang, northeast China's Liaoning Province, on 1 February 2021. Asia will closely watch China's demand signals after the Lunar New Year holiday amid concerns about the country’s economic health. (Source: Xinhua/Shutterstock)

19-Feb-2024

LONDON (ICIS)–Red Sea shipping issues have been the hot topic in Q1, with import delays opening up domestic demand opportunities and leading to a firmer price sentiment in some markets. There has been some increase in buying in January, but underlying demand is yet to recover in a shaky macro-economic climate. Europe ICIS editors Jane Gibson (acetone and phenol), Heidi Finch (bisphenol A and epoxy resins), Mathew Jolin-Beech (methyl methacrylate) and Meeta Ramnani (polycarbonate) discuss the impact of rising sea freight and feedstock costs in the acetone, phenol and derivatives markets. Phenol and acetone markets look to downstream demand pull for support Red Sea crisis set to continue impacting MMA supply for remainder of Q1 Europe epoxy and BPA markets exposed to Red Sea issues/import delays, tendency firmer European PC suppliers benefiting from the unavailability of Asian imports Podcast editing by Meeta Ramnani

09-Feb-2024

HOUSTON (ICIS)–Mitsubishi Chemical America could make a final investment decision (FID) on a new methyl methacrylate (MMA) plant in the US in the second quarter, with start-up possible in 2028, the company said on Thursday. The plant, called the MCA Geismar Site, is proposed to be built in Ascension Parish in Louisiana state, and it will produce 350,000 tonnes/year using the company’s Alpha process technology. The site will also include a carbon monoxide (CO) plant, a methanol plant and a formalin plant. This will be the third plant that features the Alpha process, which uses ethylene, methanol and CO to make MMA. If Mitsubishi Chemical decides to move forward on the project, then construction could start in the second half of 2024, the company said in a statement. It should end in 2028, with operations starting later that year. The project already has achieved some regulatory milestones. The Louisiana Department of Environmental Quality (LDEQ) had scheduled a public hearing for the project for 1 February. In 2023, the regulator made a preliminary determination to approve construction of the project. Mitsubishi Chemical expects the department to approve its air permit application in March or April 2024, it said in a statement. ETHYLENE-BASED MMA MAY UPEND MARKETMMA is typically made from acetone, which is a co-product of phenol production. Mitsubishi as well as Roehm are building MMA plants that use ethylene and methanol instead of acetone as a feedstock. Roehm calls its process technology LiMA, and it will be used in a 250,000 tonne/year plant it is building on the Gulf Coast. If these new technologies proliferate, then they would create a new end-use for ethylene, and they could slow down the growth for a traditional outlet for acetone. Not only could that have ramifications for acetone, but the new MMA technologies could affect phenol markets. Phenol and acetone are co-products and are ultimately derived from benzene and propylene via cumene. Thumbnail shows an item made of polymethyl methacrylate (PMMA), which is made from MMA. Image by Shutterstock.

08-Feb-2024

HOUSTON (ICIS)–A proposed methyl methacrylate (MMA) plant that Mitsubishi Chemical America plans to build in Louisiana has reached a couple of regulatory milestones, although the company has yet to announce a final investment decision (FID). The Louisiana Department of Environmental Quality (LDEQ) scheduled a public hearing for the project for 1 February. Earlier in 2023, the regulator made a preliminary determination to approve construction of the project. The plant, called the MCA Geismar Site, is proposed to be built in Ascension parish, and it will produce 350,000 tonnes/year using the company's Alpha process technology. The site will also include a carbon monoxide (CO) plant, a methanol plant and a formalin plant. This will be the third plant that features the Alpha process, which uses ethylene, methanol and CO to make MMA. ETHYLENE BASED MMA MAY UPEND MARKETMMA is typically made from acetone, which was a co-product of phenol production. Mitsubishi as well as Roehm are building MMA plants that use ethylene and methanol instead of acetone as a feedstock. Roehm calls its process technology LiMA, and it will be used in a 250,000 tonne/year plant it is building on the Gulf Coast. If these new technologies proliferate, then they would create a new end-use for ethylene, and they could slow down the growth for a traditional outlet for acetone. Not only could that have ramifications for acetone, but the new MMA technologies could also affect phenol markets. Phenol and acetone are both coproducts and are ultimately derived from benzene and propylene via cumene. Thumbnail shows polymethyl methacrylate (PMMA), which is made with MMA. Image by Shutterstock. 

06-Feb-2024