Expandable polystyrene (EPS) and polystyrene (PS)

LONDON (ICIS)–IT issues that impacted energy trading systems on Friday morning were gradually being resolved, with market participants regaining access to critical applications. A flawed update of cybersecurity software CrowdStrike hit Windows operating systems, with IT outages affecting companies across many sectors. This included energy trading platform Trayport and several brokers, with trading operations impacted. Trayport said shortly after midday London time it had made “significant progress in implementing workarounds for the ongoing CrowdStrike-related outage”. It said its services were being restored, including risk-based trading, and that the group was working to bring the remaining services back online as quickly as possible. A German power trader told ICIS shortly after midday London time that “all was back to normal” and was able to access broker screens. “It has been very bad this morning. Now everything is working smoothly, but all connections were down for a while,” a gas trader added. A broker had told ICIS earlier in the morning that "hardly anything is working here, we are just waiting for systems to come back." LIQUIDITY Most traders contacted by ICIS reported issues affecting their usual trading activities as well as data used for analyzing market fundamentals. Some European gas and power traders said broker screens were not available and the issue was likely to affect liquidity throughout Friday’s trading session. Another added that they expected the number of transactions to go through at the end of the day to be down by about half. “I can chat and agree on deals, but I cannot put it in my system, meaning the P&L is not updated,” said one EU gas trader in the morning. "There's a lot of counterparties offline, and those that are online are reluctant to show prices this morning," said an LNG trader. Others reported fewer issues and said they could operate as usual. Intraday price movements highlighted that the global IT disruptions impacting energy trading activities on Friday did not have any significant impact on European gas and power prices, as highlighted by regional market commentaries published by ICIS. ENERGY EXCHANGES Commenting on the status of ICE’s derivatives markets, an ICE spokesperson told ICIS: “We are aware of the issue and markets are fully operational. We are in close dialogue with our customers on whether and how they’re impacted”. Earlier in the session, the European Energy Exchange (EEX) reported in a message to trading participants that customers using Trayport services were potentially facing technical problems. “Customers may observe problems to login or to trade via Trayport due to infrastructure issues with a third-party service provider,” EEX said. EEX also offered its assistance to customers for removing orders or trading on behalf. European power exchange EPEX SPOT, which is part of EEX, told ICIS that issues with the Spanish OMIE short-term trading platform, which caused a partial decoupling of markets on Friday morning, were not related to the global IT issues. It confirmed that all other European day-ahead power auctions were running to plan and order book closures were happening on time. Trading across the Nord Pool exchange was not impacted, a spokesman confirmed, and added that it was monitoring the situation closely. Spanish gas exchange MIBGAS also told ICIS it has not been affected by the outage. The electronic capacity trading platform RBP, owned by the Hungarian gas transmission system operator FGSZ Natural Gas Transmission, said it had not been impacted. IMPACT ON ENERGY COMPANIES Several energy companies contacted by ICIS did not report issues related to the global IT incident and were monitoring the situation. Spanish gas system operator Enagas told ICIS it “is not vulnerable because it does not have the impacted software installed, but an analysis is being carried out to foresee any eventual impact”. "As far as we're aware, everything has been fine here relating to the outages and we are not aware of any issues in the LNG shipping market making an impact," a UK-based shipbroker told ICIS. Other LNG shipping sources have also so far said they have noted no impact on terminals or shipping operations. Belgian gas system operator and LNG terminals operator Fluxys told ICIS “there have been some very minor issues without any real effect on flows”. The issues related to the “impact on the systems of our [external] partners.”, Fluxys' subsidiaries include Dunkerque LNG and Zeebrugge LNG. ICIS contacted other major European LNG operators and global energy companies but received no replies by the time of publishing.

19-Jul-2024

LONDON (ICIS)–IT issues that impacted energy trading systems on Friday morning were gradually being resolved, with market participants regaining access to critical applications. A flawed update of cybersecurity software CrowdStrike hit Windows operating systems, with IT outages affecting companies across many sectors. This included energy trading platform Trayport and several brokers, with trading operations impacted. Trayport said shortly after midday London time it had made “significant progress in implementing workarounds for the ongoing CrowdStrike-related outage”. It said its services were being restored, including risk-based trading, and that the group was working to bring the remaining services back online as quickly as possible. A German power trader told ICIS shortly after midday London time that “all was back to normal” and was able to access broker screens. “It has been very bad this morning. Now everything is working smoothly, but all connections were down for a while,” a gas trader added. A broker had told ICIS earlier in the morning that "hardly anything is working here, we are just waiting for systems to come back." LIQUIDITY Most traders contacted by ICIS reported issues affecting their usual trading activities as well as data used for analyzing market fundamentals. Some European gas and power traders said broker screens were not available and the issue was likely to affect liquidity throughout Friday’s trading session. Another added that they expected the number of transactions to go through at the end of the day to be down by about half. “I can chat and agree on deals, but I cannot put it in my system, meaning the P&L is not updated,” said one EU gas trader in the morning. "There's a lot of counterparties offline, and those that are online are reluctant to show prices this morning," said an LNG trader. Others reported fewer issues and said they could operate as usual. ENERGY EXCHANGES Commenting on the status of ICE’s derivatives markets, an ICE spokesperson told ICIS: “We are aware of the issue and markets are fully operational. We are in close dialogue with our customers on whether and how they’re impacted”. Earlier in the session, the European Energy Exchange (EEX) reported in a message to trading participants that customers using Trayport services were potentially facing technical problems. “Customers may observe problems to login or to trade via Trayport due to infrastructure issues with a third-party service provider,” EEX said. EEX also offered its assistance to customers for removing orders or trading on behalf. European power exchange EPEX SPOT, which is part of EEX, told ICIS that issues with the Spanish OMIE short-term trading platform, which caused a partial decoupling of markets on Friday morning, were not related to the global IT issues. It confirmed that all other European day-ahead power auctions were running to plan and order book closures were happening on time. Trading across the Nord Pool exchange was not impacted, a spokesman confirmed, and added that it was monitoring the situation closely. Spanish gas exchange MIBGAS also told ICIS it has not been affected by the outage. The electronic capacity trading platform RBP, owned by the Hungarian gas transmission system operator FGSZ Natural Gas Transmission, said it had not been impacted. IMPACT ON ENERGY COMPANIES Several energy companies contacted by ICIS did not report issues related to the global IT incident and were monitoring the situation. Spanish gas system operator Enagas told ICIS it “is not vulnerable because it does not have the impacted software installed, but an analysis is being carried out to foresee any eventual impact”. "As far as we're aware, everything has been fine here relating to the outages and we are not aware of any issues in the LNG shipping market making an impact," a UK-based shipbroker told ICIS. Other LNG shipping sources have also so far said they have noted no impact on terminals or shipping operations. Belgian gas system operator and LNG terminals operator Fluxys told ICIS “there have been some very minor issues without any real effect on flows”. The issues related to the “impact on the systems of our [external] partners.”, Fluxys' subsidiaries include Dunkerque LNG and Zeebrugge LNG. ICIS contacted other major European LNG operators and global energy companies but received no replies by the time of publishing.

19-Jul-2024

MADRID (ICIS)–Colombia’s single-use plastic ban, which affects a wide range of products, kicks off amid some industry reluctance after a hurried implementation, and with provisions to revise the legislation after a one year trial period. The law that came into force on 7 July implemented a ban on eight plastics: carrier bags for packing supermarket purchases; bags for fruits and vegetables; plastic packing for magazines and newspapers; bags for storing clothes coming out of the laundry; plastic holders for balloons; cotton swabs; straws; and stirrers. The regulation establishes that those plastic products must be replaced by sustainable alternatives, such as biodegradable and compostable materials or recycled materials, or reusable non-plastic materials. It is a wide-ranging ban approved in parliament in 2022, although the plastics industry has criticized that details about the implementation of the law were only published at the end of June, barely two weeks before the kick-off date. Environmental groups have welcomed the measure, hoping more countries in Latin America will implement similar legislation in a region where plastics are omnipresent. MORE TO COMEApart from the eight plastic products banned from 7 July, the ban has set a transition period ranging from two to eight years, depending on the type of plastic, to allow merchants time to adapt to the new regulations. By 2030, plastics to be eliminated or transformed into reusable materials include containers, packaging, and bags for non pre-packaged liquids; disposable plates, trays, and cutlery; confetti, tablecloths, and streamers; containers, packaging, and bags for deliveries; sheets for serving or packaging foods for immediate consumption; wrappers for fruits and vegetables; stickers for fruits; handles for dental floss; and straws for containers of up to three liters. The law establishes exceptions for single-use plastics in certain cases, including exceptions for plastics used for medical purposes; packaging of biological or chemical waste; food products of animal origin; and those made with 100% recycled plastic raw material sourced from national post-consumer material. The regulation also mandates that public entities cannot acquire prohibited single-use plastics if sustainable alternatives are available, and these entities must implement reduction campaigns. Colombia’s National Environmental Licensing Authority (ANLA in its Spanish acronym) will oversee and enforce these measures. Among the measures included in the law, there is a request from distributors of plastic bags to submit reports on the rational use and recycling of bags in their inventory and must submit an Environmental Management Plan for packaging waste by 31 December. The law clearly will put an administrative burden on companies, not least distributors and the role they have been assigned as guardians of the law. In an interview with ICIS, the CEO of QuimicoPlasticos, a chemicals distributor in Colombia, said he thinks many aspects of the law will have to be reversed, not least points such as the nationally sourced recycled plastics as substitutes, given that recycling is in its infancy in the country and there will not be enough supply for years. QuimicoPlastics is a family-run distributor founded in 1982 and employs 80 people. It imports raw materials which distributes to the plastic packaging sectors (rigid and flexible) with end markets such agriculture, construction, food, and hygiene. The company was founded by the father of the current CEO, Federico Londoño, who has been on the post for 12 years. He has got low opinions about the law. “The law goes much further than a country like Colombia can afford. Moreover, globally and here in Colombia there are investments companies have made which are researching alternatives to, say, trays made of EPS [expandable polystyrene], but with laws like this the burden on companies grows and incentives for investment diminish,” said Londoño. It is a criticism shared across Latin America. In an interview with ICIS in June, the head of Chile’s plastics trade group Asipla also said parliamentarians push for sustainability was at times detached from the country’s reality. Before QuimicoPlasticos’ Londoño, the head of Colombia’s plastics trade group Acoplasticos also showed skepticism in an interview with ICIS about the law banning such wide range of single-use plastics. Before the law on single-use plastics, Colombia had already approved a tax on plastics production, which was marred with confusion in its initial stages of implementation. The moves around plastics have been welcome by environmental groups, some of them with the support of major consumer goods producers such as Washington-based Ocean Conservancy; in its website, it says some of its partners include Coca-Cola, Ikea, or Garnier, among many others. “With over 11 million tonnes of plastics entering the ocean each year, this law [banning single-use plastics] is a huge win for Colombia and the ocean,” said in a statement Edith Cecchini, director of international plastics at Ocean Conservancy. “Single-use plastic bags, straws, and stirrers are among the top ten most commonly found items polluting beaches and waterways worldwide by Ocean Conservancy’s International Coastal Cleanup. Ocean Conservancy applauds Colombia for this important step to prevent plastic pollution and protect marine life, and we hope that other countries will follow suit.” EXPANDING PUBLIC SERVICESThe push for sustainability by the left-leaning cabinet presided over by Gustavo Petro goes hand in hand with plans to increase tax receipts to finance the expansion in the welfare state Petro campaigned for. The cabinet has been under pressure to put the public accounts in order after posting fiscal deficits for most of Petro’s term. In June, the government published its fiscal plan for the coming years, hoping to quell fears among investors. Most analysts argued that the cabinet’s plans are too optimistic. For instance, it forecasts crude oil prices at around $90/barrel on average for the coming years, as a big chunk of Colombia’s income comes from its state-owned oil major Ecopetrol. To reassure investors, Finance Minister Ricardo Bonilla announced spending cuts worth Colombian pesos (Ps) 20 trillion ($5.1 billion, equivalent to 1.2% of GDP) to meet the target set out by the new fiscal plan 2024. “Even so, there’s reason for concern. For one thing, the government made clear that there would be no cuts to social spending; instead, a lot of the adjustment (around one third) will come in the form of cuts to public investment,” said Capital Economics at the time. Manufacturing, meanwhile, has been in the doldrums for much of 2023 and 2024, except for a positive spell in the first quarter. According to QuimicoPlasticos’ CEO, the government’s economic policy is deterring investments and creating uncertainty. “The economy is not going well. Industrial companies are suffering a high degree of uncertainty, because the fiscal burden on them continues to increase. This is no surprise, of course, when some public official within the cabinet have publicly said companies ‘steal from the people’ and they should be taxed more,” said Londoño. “Treating industrial companies as cash cows is wrong: these are the companies which need large sums in capital investments, and increasing taxes on them only deters that. If we add to that, for example, that the cabinet wants to reduce the role of fossil fuels in the country’s exports due to environmental reasons, you get a worrying picture for the coming years.” ($1 = Ps3,946) Insight by Jonathan Lopez

16-Jul-2024

SAO PAULO (ICIS)–Here are some of the stories from ICIS Latin America for the week ended on 5 July. NEWS Mexico’s Altamira petrochemicals players breathe sigh of relief as Beryl weakens Fears that Hurricane Beryl could cause widespread disruption to petrochemicals production in the Altamira hub, in the Mexican state of Tamaulipas, have now subsided as the hurricane weakens on its path through the Caribbean. Brazil’s Braskem still facing logistical woes at Triunfo facilities Brazil’s polymers major Braskem is still facing some logistical challenges at its facilities in Triunfo, in the floods-hit state of Rio Grande do Sul, according to a letter to customers seen by ICIS. Brazil’s automotive 2024 output expected lower as ‘uncontrolled’ imports keep rising Brazil’s automotive trade group Anfavea this week downgraded its forecasts for production in 2024 due to ever-rising vehicle imports – mostly from China, with several producers signing a letter to the government asking for higher import tariffs on cars. US dominates base oils exports to Brazil with around 75% market share The US remains the largest exporter to the Brazilian base oils market, with the country’s lead widening in 2024, according to an expert on Tuesday. INSIGHT: Chem shipping to get break from Panama Canal, tariff front-loading The Panama Canal Authority (PCA) is allowing more traffic to pass through the waterway, while the rush to ship goods before the start of tariffs should end soon – all of which should give chemical shippers some relief from elevated freight costs. Brazil's manufacturing recovers but faces pressure on currency depreciation Sales growth in Brazil's manufacturing is being dented by challenging economic conditions, currency depreciation and order postponements after the floods crisis, analysts at S&P Global said on Monday. Mexico’s manufacturing expands in June but new export orders, job creation fall Mexico’s manufacturing expanded in June and remained practically stable from May on the back of factory orders rising, which kept production healthy, analysts at S&P Global said on Monday. Colombia's manufacturing remains in contraction in June Colombia’s manufacturing sectors remained in contraction territory in June as a further decline in new orders led to reduced output, analysts at S&P Global said on Tuesday. Colombia’s fiscal plans based on ‘rosy’ growth assumptions – analysts Plans presented by the Colombian government to reduce its fiscal deficit are based on “rosy” assumptions for growth and are likely to be missed, according to analysts. PRICING Higher hydrous ethanol prices reflect strong sales performance Hydrous ethanol prices rose this week, reflecting ongoing strong sales performance in the market. Surging PET prices in Brazil and Mexico for July Prices for PET in Brazil experienced an upward trend during the first week of July, driven by the ongoing rise in international freight rates. This increase reflects the continued influence of escalating global shipping costs on the local market for PET resin. Innova amends July PS price increase in Brazil Innova amended a price increase to Brazilian real (R) 1,200/tonne ($218/tonne), excluding local taxes, on all grades of polystyrene (PS) sold in Brazil, effective 4 July, up from previously announced R750, according to a customer letter.

08-Jul-2024

RIO DE JANEIRO (ICIS)–In just a few years, global automotive majors have switched their focus from an 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 targets 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 amounts 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. At the end of the day, they are an interested party which would lose out much if ICE engines – combustion engines – went 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 of 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, would be 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. Castanien 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,” he said. “[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

RIO DE JANEIRO (ICIS)–US manufacturing activity remained in contraction territory in June but output in the chemicals sector was healthy on the back of healthy new orders, the Institute of Supply Management’s (ISM's) purchasing managers’ index (PMI) survey showed on Monday. The PMI stood at 48.5% in June, down from 48.7 points in May. The contraction in June was the third consecutive monthly one, and the 19th in the last 20 months. Chemicals, however, posted healthy activity with one chemicals player reporting in the ISM survey “high volumes of customer orders”. In plastics and rubber, a respondent described increased orders on the back of seasonal restocking, but the sector overall remained in contraction territory. “Demand was weak again, output declined and inputs stayed accommodative. Demand slowing was reflected by the New Orders Index improving to marginal contraction, New Export Orders Index returning to contraction, Backlog of Orders Index dropping into stronger contraction territory and Customers’ Inventories Index moving into the low side of the ‘just right’ range, neutral for future production,” said Timothy R Fiore, chair of the ISM’s committee compiling the PMI index. “Output (measured by the Production and Employment indexes) declined compared to May, with a combined 3.5-percentage point downward impact on the Manufacturing PMI calculation. Panelists’ companies reduced production levels month over month as head count reductions continued in June.” According to ISM, eight manufacturing industries reported growth in June: printing and related support activities; petroleum and coal products; primary metals; furniture and related products; paper products; chemical products; miscellaneous manufacturing; and nonmetallic mineral products. Nine industries reported contraction: textile mills; machinery; fabricated metal products; wood products; transportation equipment; plastics and rubber products; food, beverage and tobacco products; electrical equipment, appliances and components; and computer and electronic Products. ICIS VIEWKevin Swift, economist at ICIS, highlighted how both new orders and order backlogs fell compared with May. “The reading came below expectations of improvement. The expansionary reading in March ended 16 months of contraction in manufacturing but since then, the trend has been soft. June marks a third contractionary reading and was disappointing… The chemical industry gained for the sixth month after 16 months of decline.” “New orders and order backlogs, when combined with the reading on inventories, are good indicators of future activity. Inventories contracted at faster pace as well. An uptick in orders could translate into higher production.” Earlier on Monday, analysts at S&P Global said manufacturing in Brazil – the Americas’ second largest economy – had recovered slightly from floods-hit May, although some economic challenges such as the depreciation of the Brazilian real were putting a cap on growth prospects, they added. US MANUFACTURING June 2024 Index Series Index Jun Series Index May Percentage Point Change Direction Rate of Change Trend* (Months) Manufacturing PMI 48.5 48.7 -0.2 Contracting Faster 3 New Orders 49.3 45.4 +3.9 Contracting Slower 3 Production 48.5 50.2 -1.7 Contracting From Growing 1 Employment 49.3 51.1 -1.8 Contracting From Growing 1 Supplier Deliveries 49.8 48.9 +0.9 Faster Slower 4 Inventories 45.4 47.9 -2.5 Contracting Faster 17 Customers’ Inventories 47.4 48.3 -0.9 Too Low Faster 7 Prices 52.1 57.0 -4.9 Increasing Slower 6 Backlog of Orders 41.7 42.4 -0.7 Contracting Faster 21 New Export Orders 48.8 50.6 -1.8 Contracting From Growing 1 Imports 48.5 51.1 -2.6 Contracting From Growing 1 Thumbnail shows an automobile manufacturing line. Image by Anna Szilagyi/EPA-EFE/Shutterstock)

01-Jul-2024

RIO DE JANEIRO (ICIS)–Sales growth in Brazil's manufacturing is being dented by challenging economic conditions, currency depreciation and order postponements after the floods crisis, analysts at S&P Global said on Monday. S&P Global’s manufacturing PMI Index for Brazil recovered nearly half a percentage point at 52.5 points, remaining in expansion territory. Any reading above 50.0 points shows expansion. Brazil manufacturing June May April March February January December 2023 November October September August July PMI index 52.5 52.1 55.9 53.6 54.1 52.8 48.4 49.4 48.6 49.0 50.1 47.8 Source: S&P Global REAL DEPRECIATION The Brazilian real has been weakening for weeks, and it was already mentioned by the PMI survey respondents as one key challenge they faced in June, via higher prices for imports. Crop losses resulting from the floods in the southernmost state of Rio Grande do Sul added to the issues. As a result, inflation rates for both input costs and output charges reached 23-month highs. “A sharper deterioration in suppliers' delivery times, which is inverted before entering the PMI calculation, also boosted the headline figure. The latest improvement in the health of the sector was solid by historic standards,” said S&P Global. “Underlying data showed that backlog clearing supported output growth in June, with some firms also noting better demand for certain goods. The rise in production was moderate, but this represented an improvement from the flood-related stagnation seen in May.” Manufacturers also faced rising cost pressures driven by real weakness and crop losses, with prices for several items including coffee, cotton, dairy, fabrics, oil, pulp, rice, steel, wheat and zinc higher. The overall inflation rate reached its highest in nearly two years. Factory gate charges similarly rose to the greatest extent since mid-2022, as firms passed additional costs onto their clients. Employment in the manufacturing sector continued to rise in June, attributed to investment in technology departments, new plant openings and efforts to increase production capacities. Despite the challenges, investment in additional equipment, new product releases and forecasts of better sales fueled business optimism in June. “The PMI survey showed that cost inflation, which ran at the highest since mid-2022, curbed growth of sales and production in June. Companies sought to protect margins by lifting selling prices to a substantial extent and tried to keep a lid on expenses by restricting input purchases and job creation,” said Pollyanna De Lima, economics associate director at S&P Global. "Although exchange rate depreciation could have bolstered exports, the increase in prices seems to have eroded international competitiveness. External orders still rose, but only marginally.”

01-Jul-2024

LONDON (ICIS)–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. The purchasing managers’ index (PMI) for the eurozone sector fell to 45.8 from 47.3 the previous month, representing the fastest rate of decline seen so far this year as demand weakened and new export orders saw a 28th consecutive monthly drop. Germany was the weakest-performing of the eight largest eurozone member state economies, with the manufacturing PMI sinking to 43.5, according to data from S&P Global. A PMI score of below 50.0 signifies decline. Despite the ongoing impact of Red Sea shipping disruption, manufacturers in the region reported further shortening of supplier delivery times. Despite steadily-falling order times, input costs for eurozone factories increased for the first time in 16 months, while the prices charged for finished items continued to fall in the face of the ongoing demand chill. Reported across much of the bloc, weaker demand resulted in manufacturers purchasing lower quantities of raw materials on the back of lower production requirements, with the drop in buying levels sharper than in May. “This decline comes after a record stretch of 25 consecutive months of falling demand, but a vague hope that things were improving in May when the respective index showed some increase,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, which helps to assemble the PMI data. “This means that any significant recovery will likely be postponed until at least the end of the summer or the beginning of fall,” he added. Output in Greece remained on growth footing despite its manufacturing PMI dropping to a six-month low, standing at 54.0, with activity in Spain and the Netherlands also growing despite a slowdown in the rate of expansion. Conditions in Ireland, France, Italy and Austria remained contractionary, despite manufacturing output in Italy firming to a two-month high at 45.7. Manufacturing activity in the UK continued firm during the month, with activity remaining near May levels at 50.9 as broad-based new order intake across sub-sectors continued to drive growth. Despite the strong demand across manufacturing sectors, that growth was largely confined to orders to large firms, with demand falling for smaller and mid-sized businesses. Two months of stronger activity has also driven an increase in cost inflation, modest overall but particularly pronounced for input prices. “The performance of the domestic market remains a real positive, providing a ripe source of new contract wins,” said S&P Global director Rob Dobson. “In contrast, the ongoing weak export performance is concerning, with manufacturers reporting difficulties in securing new business in several key markets including the US, China and mainland Europe,” he added. Stronger manufacturing conditions in the UK, as well as certain key markets, increase the hope that the decline seen in the eurozone in June may be short-lived, according to de la Rubia. “We are inclined to see this more as a temporary blip rather than a sign of a prolonged downturn,” he said. “Manufacturing growth was seen in other parts of the world in June, such as the United States, UK, and India, according to their respective Flash PMI. This global recovery provides a supportive backdrop for Eurozone manufacturers.” Focus article by Tom Brown. Thumbnail photo: A production line at BMW's factory in Munich, Germany (Source: Anna Szilagyi/EPA-EFE/Shutterstock)

01-Jul-2024

LONDON (ICIS)–Strong UK manufacturing activity growth in June was offset by slowing expansion in the services sector, according to the latest Purchasing Managers’ Index (PMI) data. Growth among goods producers, driven by improved order book intakes and strong business confidence, drove the manufacturing output and manufacturing indexes to 26- and 23-month highs respectively. Conversely, services activity grew at its softest pace for seven months, with survey feedback indicating the slowdown was partly driven by a pause in client spending decisions in the run up to the UK election on 4 July. UK PMI Indexes June May Composite output 51.7 53.0 Services Business Activity 51.2 52.9 Manufacturing Output 54.2 53.4 Manufacturing 51.4 51.2 A figure above 50 in the index indicates expansion, and below 50 contraction. UK firms also faced a quickening of input cost inflation in June as severe global shipping constraints led to higher transport costs, index compiler S&P Global said. This rise fed through to quicker increases in output charges for both manufacturing and services companies, with producers raising prices at the sharpest rate since May 2023. “The slowdown in part reflects uncertainty around the business environment in the lead up to the general election, with many firms seeing a hiatus in decision making pending clarity on various policies,” said S&P chief business economist Chris Williamson. The latest PMI data for the eurozone indicated a slowdown in economic recovery at the end of the second quarter. Both data sets were released on Friday 21 June.

24-Jun-2024

SINGAPORE (ICIS)–Malaysia's exports of chemicals and chemical products rose by 0.8% year on year to ringgit (M$) 6.31 billion in May amid signs that its overall trade weakness has bottomed out. Risks to trade outlook include geopolitical tensions and regional conflicts May export growth driven by manufactured and agriculture goods Demand for paper, petroleum, and palm oil drove exports to China Overall exports rose by 7.3% year on year to M$128.2 billion in May, while imports were up by 13.8% to $118.1 billion, data from the Department of Statistics Malaysia (DOSM) showed on 20 June. This resulted in a trade surplus of around M$10 billion, rebounding from the lowest level since May 2020 in the preceding month at M$7.7 billion, partly aided by a steeper slowdown in the growth of imports relative to exports. Economists at UOB Global Economics & Markets Research noted in a 20 June report that the two consecutive months of export growth indicate that Malaysia's trade performance may have reached its lowest point and is now on a path to recovery. The latest Malaysia S&P manufacturing Purchasing Mangers’ Index (PMI) also rose in May, suggesting improvement in manufacturing conditions on account of higher new orders, UOB said. "Exports of commodity products particularly mining goods remains subject to potential production shocks due to plant closures for maintenance while price effects are fading," it said. RISKS TO TRADE OUTLOOK "Malaysia’s external trade continues to recover at a gradual and bumpy pace in the near term," UOB said. However, given lingering logistical challenges, ongoing geopolitical tensions and regional conflicts that cast over the global trade outlook, Malaysia will not be spared should these downside risks escalate and trigger a wider adverse impact on the global economy, it said. The Red Sea crisis and ongoing conflict in the Middle East have already disrupted supply chains, causing delays and driving up shipping costs for certain sectors, UOB noted. Additionally, environmental concerns, such as the historically low water levels in the Panama Canal, a critical artery for global trade, pose further threats to the smooth flow of goods, it added. OPTIMISM FOR GROWTH DESPITE CHALLENGESUOB remains cautiously optimistic trade outlook for Malaysia with a projected export growth of 3.5% for this year. This forecast is slightly more conservative than Bank Negara Malaysia's estimate of 5.0% growth. In comparison, the country experienced a contraction of 8.0% in exports in 2023. "This is mainly supported by the ongoing improvement in E&E exports along with a global soft landing, a sustained recovery in China’s economy and expected global monetary policy loosening before year end," UOB said. "The Malaysian government’s bold and effective implementation of various national master plans including the Semiconductor Strategic Plan will be additional catalysts to the trade prospect in the short and medium term." While acknowledging potential slowdown risks in China due to "ongoing housing debacle and trade restrictions with the West," Malaysia's Hong Leong Bank in a note said that it anticipates sustained growth in the broader region to help mitigate these concerns. Barring unforeseen materialization of other downside risks, and supported by a "stable world economy," the bank remains optimistic about Malaysia's export outlook. Factors such as the uptick in the global tech cycle and still elevated commodity prices further bolster this positive outlook. Hong Leong Bank expects Malaysia's export growth to accelerate, potentially reaching double-digit figures in the second half of the year. However, the overall contribution to GDP growth may be moderated by a concurrent, or even stronger, recovery in imports, driven by the continued expansion of domestic demand. MAY EXPORTS GROWTH DRIVEN BY ELECTRONICS, PALM PRODUCTS May’s export growth was largely thanks to strong improvement in shipments of manufactured and agriculture goods. Exports of manufactured goods, which account for 86.2% of total exports, grew 8.3% year-on-year in May, following a 7.1% increase in April. This growth was fueled by robust demand for electrical and electronic (E&E) products, which saw a 7.6% increase in May compared to a 0.6% increase in April. Agriculture goods, comprising 7.1% of total exports, continued their upward trend with a 22.1% year on year increase in May, building on April's 13.8% growth. This was primarily driven by robust exports of palm oil and palm oil-based products, which rose 25.7% year on year in May thanks to increases in both volume and export prices. REGIONAL TRENDSExports to the US soared for the fifth consecutive month, recording a 17.4% year-on-year increase in May, closely following April's 17.3% growth. This surge was primarily attributed to higher shipments of E&E products. Exports to Singapore also experienced a significant boost, jumping 13.7% year on year in May after a 9.0% increase in April. This rise was also fueled by greater exports of E&E products. The robust growth in exports to Singapore, coupled with a fifth straight month of increased shipments to Vietnam, helped sustain a healthy 10.4% expansion in exports to the ASEAN region as a whole, slightly lower than April's 11.3%. While exports to the EU and China also grew, they recorded smaller gains of 7.2% and 1.6% respectively in May, compared to 11.3% and 2.1% in April. Resilient demand for palm oil & palm oil-based products, optical & scientific equipment, and chemicals & chemical products supported shipments to the EU. Meanwhile, exports to China were primarily driven by demand for paper & pulp products, refined petroleum products, and palm oil & palm oil-based agriculture goods. Thumbnail photo shows containers at a port in Butterworth, Malaysia. (Source: Vincent Thian/AP/Shutterstock) Focus article by Nurluqman Suratman

21-Jun-2024