Polypropylene (PP)

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

03-Jul-2024

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

02-Jul-2024

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

18-Jun-2024

SAO PAULO (ICIS)–Here are some of the stories from ICIS Latin America for the week ended on 14 June. NEWS  INSIGHT: Brazil, Mexico currencies take a hit, energy policy under Sheinbaum remains in spotlight The Mexican peso continued sliding this week as the new President Elect Claudia Sheinbaum’s Morena party achieved the "super-majority" investors feared, which could open the door to one-party constitutional reforms, while her energy policy remains on the spotlight. Argentina’s inflation down to 276% in May, first fall in 10 months Argentina’s annual rate of inflation fell in May to 276.4%, down from April’s 289.4%, the country’s statistical office, Indec said, the first fall since July 2023 and six months after President Javier Milei took office. Higher import tariffs one leg of wider plan to save Brazil’s besieged chemicals producers – Abiquim Proposals to sharply increase chemicals import tariffs are only one of the three aspects Brazil’s chemicals producers have proposed to the government to save their "besieged” operations, according to the CEO at trade group Abiquim. Mexico’s petchems supply flowing despite Altamira disruption, but industry crisis could continue The drought affecting the Altamira petrochemicals hub in Mexico’s state of Tamaulipas is not yet affecting the supply of chemicals, but the water restrictions for industrial players could continue, sources said this week. Brazilian pulp producer Suzano to acquire 15% stake in Austria’s Lenzing Brazilian pulp producer Suzano has agreed to acquire a 15% stake in Austrian cellulosic fibres company Lenzing for €230 million, paying €39.70/share, officials said on Wednesday. Brazil fertilizers interactive trade flow map January-May 2024 The Ministry of Development, Industry and Foreign Trade for Brazil has released fertilizer trade figures for January-May 2024. Future disruption to Panama Canal will depend on El Nino intensity – expert Despite arrangements put in place to make the Panama Canal fit for a changing climate, future disruption at the Americas key shipping route will depend on a variable no-one can predict: the intensity of future El Niño weather phenomenon, according to an expert at maritime services provider CB Fenton on Tuesday. Mexico’s chemicals output up 7.2% in April, manufacturing up nearly 4.0% Mexico’s chemicals output rose by 7.2% in April, year on year, well above the 3.8% increase in overall manufacturing activity, the country’s statistical office Inegi said on Tuesday. Chemical tanker prices rise as much as 75% since 2020 on lack of liquidity – expert Chemicals tanker prices have risen globally 30-75% in the past four years on a lack of liquidity, an expert at Chile-headquartered chemicals bulk operator Ultratank said on Tuesday. Brazil’s inflation up to 3.93% in May; prices rise sharply in floods-hit state Brazil’s annual rate of inflation rose in May to 3.93%, up from 3.69% in April, with notable price rises registered in food products, especially in the floods-hit state of Rio Grande do Sul, the country’s statistical office IBGE said on Tuesday. Closures of high-cost assets to accelerate in Europe, northeast Asia – ICIS Announcements of closures for high-cost assets, especially in Europe and northeast Asia, are likely to accelerate in coming quarters as the global petrochemicals industry is forced to rationalize, according to an ICIS analyst on Tuesday. Venezuela’s Pequiven, Turkey’s Yildirim mull petchems, ammonia facilities Venezuelan state-owned petrochemicals producer Pequiven has signed an agreement with Turkey’s conglomerate Yildirim to consider building petrochemicals and ammonia facilities in the country, according to the Venezuelan Ministry of Economy. Chile’s Petroquim navigating better than peers pressure from Asian material – exec Polypropylene (PP) producer Petroquim is also facing pressure from lower-priced material sent from Asia, but the company’s “dedicated” service to customers has kept its sales spared from a larger hit, according to the commercial manager at the Chilean company. PRICINGLatAm PP international prices steady to higher on squeezed margins, higher freight rates International polypropylene (PP) prices were assessed as stable to higher across Latin American countries because of higher freight costs and squeezed margins. LatAm PE international prices steady to up on higher offers from abroad International polyethylene (PE) prices were assessed as steady to higher across the region on the back of higher offers from abroad. Plant status: Alpek Polyester’s Altamira plants ceases operations due to water scarcity in Mexico Mexico’s chemicals producer Alpek has declared force majeure for purified terephthalate acid (PTA) out of its 1 million tonnes/year facilities in Altamira, state of Tamaulipas, on the back of the severe drought which has restricted water supplies to industrial companies. Stable PET prices in Mexico prevail amid supply challenges Throughout this week, polyethylene terephthalate (PET) prices have remained stable in Mexico, as per market observations. However, industry participants believe that this stability might not last long.

17-Jun-2024

HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 14 June. Higher import tariffs one leg of wider plan to save Brazil’s besieged chemicals producers – Abiquim Proposals to sharply increase chemicals import tariffs are only one of the three aspects Brazil’s chemicals producers have proposed to the government to save their "besieged” operations, according to the CEO at trade group Abiquim. INSIGHT: Chem M&A outlook brightens amid surge of deal announcements 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). Mexico’s petchems supply flowing despite Altamira disruption, but industry crisis could continue The drought affecting the Altamira petrochemicals hub in Mexico’s state of Tamaulipas is not yet affecting the supply of chemicals, but the water restrictions for industrial players could continue, sources said this week. US Fed expects only one cut in 2024, keeps rates steady The Federal Reserve lowered its forecast for rate cuts in 2024 to just one from three as it voted on Wednesday to keep its benchmark interest rate steady at 5.25-5.5%. Canada rail labor union to hold new strike ballot Canadian rail labor union Teamsters Canada Rail Conference (TCRC) will hold a new strike vote because an earlier mandate for industrial action will expire on 30 June, it said in an update. Styrolution to permanently shut Sarnia styrene plant in Canada INEOS Styrolution will close its 445,000 tonnes/year styrene production plant in Sarnia, Ontario, Canada, by June 2026, the company announced Tuesday. IPEX: Global spot index edges down on lower values across all regions The global spot ICIS Petrochemical Index (IPEX) fell by 0.7% in the week ending 7 June on losses across all regions, not least northwest Europe. Chile’s Petroquim navigating better than peers pressure from Asian material – exec Polypropylene (PP) producer Petroquim is also facing pressure from lower-priced material sent from Asia, but the company’s “dedicated” service to customers has kept its sales spared from a larger hit, according to the commercial manager at the Chilean company.

17-Jun-2024

HOUSTON (ICIS)–Rates for shipping containers continue to surge as carriers are implementing peak season surcharges while capacity remains tight from Red Sea diversions, but some shipping analysts think there are signs that the dramatic rate of growth may be slowing, which leads off this week’s logistics roundup. CONTAINERS Shipping container rates continued to rise this week, but the rate of increase slowed, according to data from supply chain advisors Drewry and as shown in the following chart. Ocean freight rates analytics firm Xeneta said its data indicates spot rates on major trades out of Asia will increase again on 15 June, but to a less dramatic extent than witnessed in May and early June. Average spot rates from Asia to US West Coast are set to increase by 4.8% on 15 June to stand at $6,178/FEU (40-foot equivalent unit). However, on 1 June, rates on this trade increased by 20%. From Asia into the US East Coast, rates are set to increase by 3.9% on 15 June to stand at $7,114/FEU. Again, this is a far less dramatic jump than when rates increased by 15% on 1 June. Rates from north China to the US Gulf are at the highest this year but leveled off this week, as shown in the following chart. “Any sign of a slowing in the growth of spot rates will be welcomed by shippers, but this is an extremely challenging situation, and it is likely to remain so,” Xeneta chief analyst Peter Sand said. “The market is still rising, and some shippers are still facing the prospect of not being able to ship containers on existing long-term contracts and having their cargo rolled.” Container ships and costs for shipping containers are relevant to the chemical industry because while most chemicals are liquids and are shipped in tankers, container ships transport polymers, such as polyethylene (PE) and polypropylene (PP), are shipped in pellets. They also transport liquid chemicals in isotanks. LIQUID TANKER RATESUS chemical tanker freight rates assessed by ICIS were mostly unchanged. However, rates were lower from the US Gulf (USG) to India and unchanged from the USG to the Caribbean. From the USG to Asia, the market has gone overall quiet after a few busy weeks in the month of May. The spot market faces headwinds as activity has been slow, causing spot space to pile up for July, placing downward pressure on spot rates. Recent force majeures in the USG have caused some COA vessels to look for additional cargoes, adding pressure to rates. Market participants are optimistic that freight rates for larger parcels will stabilize in the near term. US PORT OPERATIONS Operations at US ports are stable even as import volumes are at the highest since 2022, and railroad performance has improved over the past month, according to analysts at freight forwarder Flexport. Nathan Strang, director of ocean freight, US Southwest for Flexport, said that apart from the Port of Charleston, South Carolina, volumes are moving really well through the East Coast ports with rail dwell averaging about two days. Charleston is undergoing an infrastructure project on its Wando Welch Terminal to expand the docks. Dock construction at Wando Welch terminal started on 11 March, reducing berth space from three to two berths for one year, with berths given on first come, first serve basis. Strang said some vessels are discharging at the Port of Savannah, Georgia, and then moving material to Wando Welch via trucks, or using other terminals within the Port of Charleston as space becomes available. Overall port omissions from all carriers are starting to reduce the extent of the delays, with six to nine days delay expected in week 24, according to a port update from Hapag-Lloyd. RAILROADS Strang said Flexport customers are seeing lower dwell times for rail cars at ports over the past month. “I have been talking about how rail performance to and through the West Coast has been suffering a little bit,” Strang said, describing his point of view in past webinars. “I will say that we have seen real improvement.” Strang said West Coast port operations have remained stable, with local pick-up dwell at six days for Los Angeles/Long Beach, at five days in Seattle/Tacoma (SeaTac) and at four days in Oakland. For the first 23 weeks of 2024, ended 8 June, North American chemical railcar loadings rose 3.8% to 1,082,614 – with the US up 3.9% to 745,780. In the US, chemical railcar loadings represent about 20% of chemical transportation by tonnage, with trucks, barges and pipelines carrying the rest. PORT OF BALTIMORE OPENS The Fort McHenry Federal Channel – the entrance to the Port of Baltimore – is fully reopened just 11 weeks after a container ship lost power and struck the Francis Scott Key Bridge, causing its collapse and essentially shutting the port. The Unified Command (UC) said salvage crews successfully removed the final large steel truss segment blocking the 700-foot-wide Fort McHenry Federal Channel on 3-4 June. Deep-draft commercial vessels have been able to transit the port since 20 May when the UC cleared the channel to a width of 400ft and depth of 50ft. Following the removal of wreckage at the 50-foot mud-line, the UC performed a survey of the channel on 10 June, certifying the riverbed as safe for transit. The closing of the port did not have a significant impact on the chemicals industry as chemicals make up only about 4% of total tonnage that moves through the port, according to data from the American Chemistry Council (ACC). PANAMA CANAL The Panama Canal Authority (PCA) is offering an additional booking slot for the Neopanamax locks as of 11 June, increasing the total number of daily canal transits to 33, and is also raising the maximum authorized draft based on the current and projected level of Gatun Lake. The PCA will open an additional slot on 8 July, which will bring the total number of daily transits to 34. Because of the improved water levels now that the rainy season has arrived, the PCA is also increasing the maximum authorized draft for vessels to 14.02 meters (46.0 feet). This is the second increase in draft restrictions over the past few weeks. Wait times for non-booked southbound vessels ready for transit have been relatively steady at less than two days, according to the PCA vessel tracker. The tracker is only for non-booked vessels in the queue and shippers should consider two additional days as a minimum to estimate transit times for unscheduled vessels, the PCA said. Focus article by Adam Yanelli Additional reporting by Kevin Callahan

14-Jun-2024

SINGAPORE (ICIS)–China has slammed EU’s proposal to impose provisional tariffs on imports of Chinese electric vehicles (EVs), denouncing it as a "blatant act of protectionism”, raising concerns that a trade war between Asia’s biggest economy and a new western front is brewing. EU tariffs on Chinese EVs to rise to 27-48% Retaliatory measures from China likely EU imports of China cars surge sevenfold over three years "The European side has disregarded facts and WTO [World Trade Organization] rules, ignored China's repeated strong opposition, and ignored the appeals and dissuasion of multiple EU member state governments and industries," China’s Ministry of Commerce said in a statement issued late on 12 June. The European Commission on 12 June notified Chinese automakers, including EV giant BYD, Geely, and state-owned SAIC Motor Corp, that it will impose additional provisional tariffs of 17% to 38% on imported Chinese EVs from around 4 July. These will be applied to existing 10% tariffs imposed on all Chinese EVs, with the final rate determined by each carmaker's level of cooperation with EU's anti-subsidy investigation launched in September last year. NEW FRONT FOR TIT-FOR-TAT TRADE WAR China’s commerce ministry has urged the EU to "immediately correct its wrong practices" and "properly handle trade frictions through dialogue and consultation". The ministry said it will "resolutely take all necessary measures to firmly defend the legitimate rights and interests of Chinese companies". "This move by the European side not only harms the legitimate rights and interests of the Chinese electric vehicle industry but will also disrupt and distort the global automotive industry chain and supply chain, including the EU," it said. The EU's move follows the US' tariff hikes announced last month on Chinese imports of EVs, batteries and other materials, starting 1 August. In 2018, then US President Donald Trump initiated a trade war with China by imposing tariffs on Chinese imports to address alleged trade imbalances, intellectual property theft, and unfair trade practices. China retaliated with tariffs on US goods, escalating tensions between the two biggest economies in the world. While reviews by the US and EU on Chinese goods were under way, Beijing launched in May an anti-dumping investigation into imported polyoxymethylene (POM) copolymer, also known as polyformaldehyde copolymer – a key material in electronics and automotive manufacturing. China's commerce ministry alleged that the plastic is being sold below market value, harming domestic producers. The probe, targeting imports from the US, EU, Taiwan, and Japan, could last up to 18 months and is seen as a direct response to their recent trade barriers against Chinese goods. In the case of Taiwan, China has also suspended tariff concessions on 134 more products from the island, including base oil, chemicals, and chemical products, citing Taiwan’s supposed violations of the Cross-Strait Economic Cooperation Framework Agreement (ECFA) with the mainland. Meanwhile, Japan’s tightened export controls on 23 types of semiconductor manufacturing equipment that took effect on July 2023 was deemed in line with restrictions imposed by the US and the Netherlands, potentially hindering China's access to advanced chipmaking technology. China may issue further retaliatory measures, potentially impacting global supply chains and escalating trade tensions with major economies in the west. The automotive industry is a major global consumer of petrochemicals that contributes more than one-third of the raw material costs of an average vehicle. The automotive sector drives demand for chemicals such as polypropylene (PP), along with nylon, polystyrene (PS), styrene butadiene rubber (SBR), polyurethane (PU), methyl methacrylate (MMA) and polymethyl methacrylate (PMMA). CHINA 2023 CAR EXPORTS TO EU SURGE China’s exports of automobiles to the EU have surged over the past year, particularly in the battery electric vehicle (BEV) segment, according to Nomura Global Markets Research. Cars produced in China accounted for 20% of all BEV registrations in the EU during the first two months of 2024, it said, citing data from automotive business intelligence firm JATO Dynamics. An analysis of January-April 2024 sales figures from China’s top three EV manufacturers in the EU, however, suggests that their overall presence in the region is still nascent, Nomura noted. In 2023, EU’s imports of Chinese EVs surged to $11.5 billion, more than sevenfold increase from $1.6 billion in 2020, according to think thank Rhodium Group. China accounted for 37% of EU’s total EV imports last year, it said. In the first quarter of 2024, about 40% of China’s EV exports or 145,002 units went to Europe, according to official customs data. Focus article by Nurluqman Suratman Thumbnail image: An electric car at a charging station near the European Commission building in Brussels, Belgium. (Xinhua/Shutterstock)

13-Jun-2024

LONDON (ICIS)–Germany’s auto industry is opposed to tariffs on electric vehicles (EVs) from China, trade group German Association of the Automotive Industry said on Wednesday. The group, known as VDA in its German acronym, was reacting to a European Commission proposal of tariffs on battery electric vehicles (BEVs) from China after an investigation concluded they benefited from unfair subsidies. VDA said the proposed tariffs were not the right tool to strengthen the competitiveness of Europe’s auto industry. Instead, the tariffs would further escalate the risk of trade conflicts, to the detriment of Germany’s automakers, it said. “The fact is that we need China to solve global problems,” in particularly in dealing with the climate crisis, it said. China played a crucial role in a successful transformation towards electromobility and digitalization, and a trade conflict would jeopardize this transformation, the group said. However, VDA added that the extent of the subsidies China grants EV makers was “a challenge” for Europe and it called on China to make “constructive proposals” to settle the dispute. Germany ranks first in Europe and second after China globally in terms of EV production, and the bulk of German EV production goes into export, according to VDA data released this week. Industry observers have noted that Germany-based EV production relies on imports of materials and batteries from China. The US last month announced tariff hikes on Chinese imports of EVs, batteries and other materials, starting 1 August. In related news, the business climate in Germany’s automotive industry deteriorated in May amid fears about impacts on German automakers from the conflict with China, according to a recent survey by Munich-based ifo research. The automotive industry is a major global consumer of petrochemicals that contributes more than one-third of the raw material costs of an average vehicle. The automotive sector drives demand for chemicals such as polypropylene (PP), along with nylon, polystyrene (PS), styrene butadiene rubber (SBR), polyurethane (PU), methyl methacrylate (MMA) and polymethyl methacrylate (PMMA). Additional reporting by Graeme Paterson Please also visit the ICIS topic page Automotive: Impact on chemicals Thumbnail photo shows a Volkswagen EV; photo source: Volkswagen

12-Jun-2024

MUMBAI (ICIS)–State-owned GAIL (India) Ltd plans to invest Indian rupee (Rs) 600 billion ($7.2 billion) to build an ethane cracker and its derivative plants in Madhya Pradesh. The cracker will have a 1.5 million tonne/year capacity and will be set up at Ashta in the Sehore district of the state in central India, GAIL said in a regulatory disclosure to the Bombay Stock Exchange (BSE) on 10 June. GAIL did not provide product or capacity details of the ethylene derivatives it plans to produce at the complex. “Around 800 hectares of land shall be provided by the MP [Madhya Pradesh] Industrial Development Corporation, for which the state government has already initiated the process,” GAIL said. Project construction is expected to begin by February 2025, with commercial production likely in the financial year ending March 2031, it added. Investment on the project is still pending approval from GAIL management board, and the mode of financing yet to be decided. The Madhya Pradesh state government has approved the project and land will be allotted soon, state chief minister Mohan Yadav had said in a statement on 7 June. He said that “petrochemicals like linear low density polyethylene (LLDPE), high density polyethylene (HDPE), mono ethylene glycol (MEG) and propylene will be produced” at the site. The new project is part of GAIL’s initiative to enhance its petrochemical portfolio, a company source said. “The demand for petrochemicals is increasing in the country, led by expanding industrial, construction and manufacturing,” he said, citing an 8-9% annual growth rate in India’s polymer demand. In March 2024, GAIL had signed a tripartite agreement with Oil and Natural Gas Corp (ONGC) and Shell Energy India to explore opportunities for the import of ethane and other hydrocarbons at Shell Energy Terminal in Hazira in the western Gujarat state. Separately, the company recently announced plans to set up liquid pipeline for ethylene (C2), propylene (C3) from Vijaipur to Aurai in the northern Uttar Pradesh state. At Pata in the same state, GAIL will begin operations at the 60,000 tonne/year PP plant by December 2024. At Usar in the western Maharashtra state, GAIL expects to begin operations at its 500,000 tonne/year propane dehydrogenation unit (PDH) and 500,000 tonnes/year polypropylene (PP) line by April 2025; and its 50,000 tonne/year isopropylene project by December 2025. In the southern Karnataka state, the company expects to bring on line its 1.25m tonne/year purified terephthalic acid (PTA) plant in Mangalore by March 2025. GAIL had acquired JBF Petrochemicals in June 2023 which allowed it to add PTA to its existing petrochemical portfolio. ($1 = Rs83.49) Focus article by Priya Jestin

11-Jun-2024

SANTIAGO (ICIS)–Polypropylene (PP) producer Petroquim is also facing pressure from lower-priced material sent from Asia, but the company’s “dedicated” service to customers has kept its sales spared from a larger hit, according to the commercial manager at the Chilean company. Veronica Masjuan said that, as the sole PP producer in Chile, Petroquim will always be able to have a pool of potential customers larger than its actual production, a key element allowing the company to protect its “small market share” in a country where PP imports have always played a key role to supply the market. Founded in 1998, Petroquim operates a PP plant in Talcahuano, near the city of Concepcion, 500 kilometers south of Santiago. It has the capacity to produce 120,000 tonnes/year, according to the ICIS Supply & Demand database, although in 2023 it produced 61,000 tonnes. ASIAN PRESSUREAcross Latin America, producers of polymers have in the past two years been under intense pressure from lower-priced Asian material, especially Chinese material, which has been sent, on occasion, at below cost-of-production prices. Masjuan said it was not for her to say if China’s exports constituted an example of dumping – “that would be for policymakers to do” – but said that lower prices in the past two years had indeed put pressure on Petroquim’s margins. “The truth is that their [China’s] prices are very economical compared to the global PP prices, when you add the costs associated with production or delivery, for instance,” said Masjuan. “Given that our market share is small, we have managed to protect it quite well: my sales capacity is much larger than what I produce, so to speak. But it is true that lower international prices have also affected our margins.” However, Masjuan said Petroquim has always managed to return a profit, even in 2023, which is considered the hardest year amid the downcycle the global petrochemicals sector is going through. RECYCLINGMasjuan said that Chile is more ahead than other countries in Latin America in tackling the plastic waste issue, as regulations in that regard started decades ago. Asked whether a true circular economy in which everything is 100% recycled could put polymers producers such as Petroquim out of business, she said that is unlikely because total circularity would be very difficult to achieve. “Chile was one of the first countries to adopt mandates about plastic carrier bags, for instance. We have some experience on this front, and at Petroquim we have a person exclusively dedicated to circularity issues,” said Masjuan. “Who is to blame for the plastic waste pollution? I think that first and foremost the responsibility falls with the consumer, the user of the final plastic product. Meanwhile, I do agree that producers, for sure, need to be in constant search for new methods to make the products more recyclable. “But, overall, I believe not 100% of all polymers will be recycled, ever, and especially those for food contact. For instance, in the EU, one of the most advanced regions in that regard, they don’t allow 100% recycled content for food contact either.” Front page picture: Petroquim’s PP plant in Talcahuano Source: Petroquim  Additional reporting by Bruno Menini and Thais Matsuda

10-Jun-2024