Energy

SINGAPORE (ICIS)–Here are the top stories from ICIS News Asia and the Middle East for the week ended 16 August 2024. China July industrial output growth slows; H2 outlook dims By Nurluqman Suratman 15-Aug-24 16:49 SINGAPORE (ICIS)–China's industrial output growth in July slowed to a four-month low of 5.1%, aggravating concerns about continued manufacturing slowdown, with a growing set of data suggesting the world's second-largest economy is struggling to gain momentum. Asia PBT market faces logistical challenges amid Q3 lull By Corey Chew 15-Aug-24 10:29 SINGAPORE (ICIS)–The Asia polybutylene terephthalate (PBT) market saw the Indian region being affected by logistical challenges to a larger extent compared to northeast Asia. Major S Korea producers withdraw ADD probe petition against China SM By Luffy Wu 14-Aug-24 18:45 SINGAPORE (ICIS)–South Korean producers Hanwha Total Energies and Yeochon NCC are withdrawing their request for an antidumping probe on styrene monomer (SM) imports from China, based on a petition they filed with the Korea Trade Commission on 12 August. Singapore’s 2024 key exports growth forecast trimmed on demand concerns By Nurluqman Suratman 13-Aug-24 15:30 SINGAPORE (ICIS)–Singapore's non-oil domestic exports (NODX) growth forecast for 2024 has been revised downward to 4-5%, Enterprise Singapore (EnterpriseSG) said on 13 August. China July petrochemical index falls as demand remains sluggish By Yvonne Shi 12-Aug-24 15:55 SINGAPORE (ICIS)–The ICIS China petrochemical index dropped by 3.07% month on month to 1,241.5 in July, with acetone experiencing the largest decline due to weak downstream demand.

19-Aug-2024

TORONTO (ICIS)–US and Canadian chemical distributors and other trade groups are warning about potentially “catastrophic” impacts of a rail disruption that could start in Canada next week. Railroads Canadian Pacific Kansas City (CPKC) and Canadian National (CN) said they may start to lock out workers starting Thursday, 22 August, if no progress is made on reaching new collective agreements. Ahead of the potential lockout, the railroads have already embargoed certain shipments. The US Alliance for Chemical Distribution (ACD) and Canadian group Responsible Distribution Canada (RDC) said the disruption would affect “a myriad of hazardous materials”, in particular chlorine for drinking water. Municipalities do not have weeks of chlorine stocks, meaning that a supply disruption will pose a risk to public health and safety, the groups said. ACD and RDC member companies serve as intermediaries for municipalities, receiving rail shipments of chlorine and other water treatment chemicals and then shipping them to end-users. The chemical distribution trade groups said Canada’s labor minister, Steven MacKinnon, needed to intervene. However, he rejected the call by CN to step in and refer the dispute to the Canada Industrial Relations Board (CIRB) for binding arbitration. Canada’s government believes in the collective bargaining process “and trusts that mutually beneficial agreements are within reach at the bargaining table," the minister said on Thursday. In a ruling last week, the CIRB held that no rail services, even for chlorine, needed to be maintained during a strike or lockout. Canada’s chemical and other industries had urged the CIRB to order that minimum rail services be maintained during any industrial action to ensure the delivery of chlorine to water-treatment facilities, as well as other essential goods and fuels. For chlorine, a chlor-alkali plant in North Vancouver supplies both Western Canada and the US West with liquid chlorine for use in drinking water. TRADE WITH US AT STAKE John Corey, president of the Freight Management Association of Canada, said a rail disruption would not only shut Canada’s economy down but it would also affect the US, given the high level of integration between the two countries. CN and CPKC are Canada’s only two freight railroads and industry has no alternative to rail to ship product into and out of the country, Corey said in a webcast media briefing. A rail disruption would further hurt Canada’s reputation in the US as a “legitimate trading partner”, he warned. “The Americans are looking up at us and saying, ‘What are you doing to fix this?’,” he added. The labor contracts at both CN and CPKC expired on 31 December 2023 – but the issue has yet to be resolved as Canada seems to be “sleep-walking”, he said. He reminded of the damage caused by last year’s 13-day strike at Canada's West Coast port strike and the 2022 blockade of the Ambassador Bridge from Windsor in Ontario to Detroit, Michigan – events from which Canada seems to have “learned very little”. If Canada continues to have this kind of disruptions and is unable to deliver product to its largest trading partner by far, the US would have to think of alternatives, he said. The current labor uncertainty has already impacted supply chains, he said. If the rail service shuts down on 22 August, ports will shut down within two days because no product is able to get into and out of ports, he said. For each day that the rail service is down it will take one week to get supply chains back to normal, meaning that a 10-day disruption could impact the supply chain until the end of the year, he noted. Canada’s government needs to take “some action” if the rail service is disrupted  next week. “Back-to-work legislation” was one option, but it was also an admission that the labor negotiation process is flawed, he said. Binding arbitration, which is used to settle labor disputes involving police or firefighters, would be a better option, but the government seems to have ruled that out, he said. CHEMICALS AND RAILThe bulk of Canada's chemical production is exported to the US and Canadian chemical producers rely on rail to ship more than 70% of their product, with some exclusively using rail. Without a rail service, chemical producers could be forced to shut down plants within a week, trade group Chemistry Industry Association of Canada (CIAC) has said. The Canadian chemical sector moves over 500 railcars/day and it requires over 1,500 road-based tanker trucks to carry the same load, according to the CIAC. However, the trucking industry does not have that kind of capacity. Furthermore, the movement of many chemical products is restricted to rail due to their hazardous nature. According to CIAC data, more than Canadian dollar (C$) 76 million (US$55 million) of industrial chemical products move on Canada’s rail network daily, or C$28 billion each year. Chemicals account for nearly 10% of all Canadian rail traffic. Furthermore, the chemical industry’s customers in the automobile, forest products, minerals and other industries ship most of their product by rail. Elsewhere, about 75% of all fertilizers produced and used in Canada is moved by rail. The following table by the American Association of Railroads (AAR) shows Canadian freight rail traffic, including chemicals, for the week ended 10 August and the first 32 weeks of 2024: In recent earnings calls, chemical company Chemtrade Logistics, midstream energy firms Pembina and Keyera, fertilizer major Nutrien and others have raised the rail disruption as a concern, and railroad CN reduced its 2024 earnings guidance citing the impact of the labor uncertainty. The rail disruption threat comes as Canada’s economy is facing a shallow downturn. (US$1 = C$1.37) With additional reporting by Adam Yanelli Thumbnail photo source: Canadian National

16-Aug-2024

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. The world as it stands today tells us that US doing extremely well in the key China HDPE import market. Using trade data and ICIS price benchmarks: In 2023 over 2022, US sales turnover in soared by $500m as its exports in tonnes to China also increased. In January-June 2024 over the same period last year, its turnover was up by another $106m. Meanwhile in 2023 over 2022 as their shipments to China dipped – and because of lower pricing – Iran’s turnover was down by $468m, Saudi Arabia by $449m, the UAE by $412m and South Korea by $176m. But the January-June 2024 data show the UAE and South Korea clawing back some ground. “In H1 2024, US [total] PE exports were 46.5% of total sales and operating rates above 90% – a far cry from 21% in 2017 when operating rates were also much lower in the mid-80% range,” wrote my colleague Joe Chang in a15 August ICIS news article. This suggests that the US, because of its feedstock advantages, gained sales turnover in markets other than just China in H1 2024 – and in the other grades of PE. The comprehensive nature of ICIS price benchmark and trade data means that it is possible to produce charts like the ones in today’s post for other countries and regions such as Europe, Latin America, Africa, Turkey and India. But this familiar world of trade flows driven by feedstock costs is rapidly changing. If the US-China geopolitical split continues, this raises the question of where China will in future source most of its chemicals import volumes. Demographics will also shape demand, and so trade flows, in China and elsewhere. A later blog post will discuss demographic analysis which suggests that China’s population in 2020 could have been 130-250m lower than the 1.42bn official number.  This would obviously have major implications for historic and future chemicals demand in China. But perhaps China’s cap on refinery capacity from 2028 onwards, due to the electrification of vehicles, will limit its capacity growth, thereby creating a bigger opportunity for exporters. Geopolitics, demographics, debts and sustainability will, I believe, be the new defining shapers of chemicals and polymers trade flows. The world as it stands today, represented by most of the analysis in today’s post, is coming to an end. 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.

16-Aug-2024

TORONTO (ICIS)–Chemtrade Logistics hopes that a freight rail disruption in Canada, should it occur, will be short, the top executives of the Toronto-based industrial chemicals producer said in a webcast earnings call on Thursday. Meanwhile, the country's federal labor minister rejected a call for binding arbitration to settle the rail labor dispute that has been looming over Canada's chemicals and other industries for months now. Canada’s two major railroads – Canadian Pacific Kansas City (CPKC) and Canadian National (CN) – have said that they may start to lock out workers on 22 August if no progress is made on reaching new collective agreements. Ahead of a potential lockout, the railroads already started to embargo certain shipments. While hoping that any rail disruption will be short, Chemtrade CEO Scott Rook and CFO Rohit Bhardwaj would not speculate how long a disruption may last or how long the company will be able to operate without rail services. CHLORINE Chemtrade is beginning to see impacts “even as of today” as poison inhalation hazards (PIH) materials are no longer moving on rail, Rook noted. The PIH issue, in particular chlorine for use in drinking water treatment, was being discussed at the highest level of governments this week in both Canada and the US, Rook said, adding that Chemtrade thinks that authorities will consider chlorine for drinking water as “essential”. Chemtrade’s North Vancouver chloralkali plant plays an important role in ensuring supplies of liquid chlorine for use in safe drinking water in both western Canada and the US West, Rook stressed. The plant produces more than 40% of all available liquid chlorine in Canada, and regionally it produces more than 70% of the liquid chlorine used to treat drinking water in Canada’s British Columbia and Alberta provinces, he said. A declaration of chlorine as essential, however, would contradict last week's ruling by  the Canada Industrial Relations Board (CIRB) that no essential freight rail activities needed to be maintained in case of a rail strike or lockout. Canada’s chemical and other industries had urged the tribunal to order that minimum rail services be maintained during industrial action to ensure the continued rail delivery of essential goods such as fuels, food or chlorine for water-treatment facilities. During the CIRB process the right to a legal strike or lockout was suspended. CUSTOMERS STOCKED UP AHEAD OF DISRUPTION The market has been expecting a rail disruption in Canada for several months and customers therefore raised their inventories in anticipation of a disruption, the executives said. The volumes customers brought forward contributed “a meaningful number” to Chemtrade’s stronger than expected Q2 results, CFO Bhardwaj said. The company raised its guidance for 2024 full-year adjusted earnings before interest, tax, depreciation and amortization (EBITDA) to Canadian dollar (C$) 430-460 million (US$314-336 million), from previous guidance of C$395-435 million. The new guidance assumes no rail disruption at its upper point but some disruption at the mid- and lower points, Bhardwaj said. Even if there is no strike or lockout, the looming industrial action is causing disruptions in supply chains as companies need to prepare, he added. Canadian chemical producers rely on rail to ship more than 70% of their product, with some exclusively using rail, while in the fertilizer industry about 75% of all fertilizers produced and used in Canada is moved by rail. The following table by the American Association of Railroads (AAR) shows Canadian freight rail traffic, including chemicals, for the week ended 10 August and the first 32 weeks of 2024: In recent earnings calls, midstream energy firms Pembina and Keyera, as well as fertilizer major Nutrien and others raised the looming rail disruption as a concern, and railroad CN reduced its 2024 earnings guidance, citing the impact of the labor uncertainty. MINISTER DECLINES TO INTERVENE Meanwhile, Canada’s Federal Labor Minister Steven MacKinnon said on Thursday that he will not accede to a request by CN to intervene and refer the dispute to the CIRB for binding arbitration. "The Government firmly believes in the collective bargaining process and trusts that mutually beneficial agreements are within reach at the bargaining table," the minister said. (US$1 = C$1.37) With additional reporting by Adam Yanelli Thumbnail photo source: Chemtrade Logistics

15-Aug-2024

HOUSTON (ICIS)–Prices for ethane, the predominant US feedstock used to make ethylene, have fallen this month to levels not seen since the pandemic, and they will likely remain depressed until colder weather arrives later in the year. Since falling below 12 cents/gal, ethane prices have risen by a few cents as some crackers have restarted. If another hurricane disrupts US exports of LNG, ethane prices could decline further with domestic natural gas prices. US ethane supplies should continue growing because of rising oil production. INEXPENSIVE ETHANE SUPPORTS ELEVATED PE MARGINSAt the least, low ethane costs will help US polyethylene (PE) producers maintain operating rates at profitable levels regardless of the strength of demand. US ethylene producers enjoy a cost advantage because they predominantly rely on ethane as a feedstock, and its price tends to rise and fall with that for natural gas. Much of the world relies on oil-based naphtha, which is usually more expensive. From a purely cost perspective, lower ethane costs allowed for integrated PE margins to increase in July, and margins may rise again in August on further reductions in integrated costs, said Harrison Jacoby, director of PE for ICIS. Because of the cost advantage of US producers, they have been able to maintain exports despite the global glut of PE. Recently, PE exports from the US need to make up 45% of total sales for domestic producers to maintain operating rates of 90%, as domestic demand has been essentially flat for many years,  Jacoby said. Inexpensive feedstock allows them to be competitive in virtually every market globally, supporting high operating rates. ANOTHER HURRICANE COULD LOWER ETHANE PRICESOne of the reasons why ethane prices fell so sharply is because Freeport LNG Development shut down its LNG operations in Freeport, Texas, because of Hurricane Beryl. The site is a key LNG export terminal in the US, and the shutdown of its operations back up natural gas supply, which depressed prices for domestic natural gas and ethane. The same scenario could repeat itself if another hurricane shuts down one of the LNG terminals on the coasts of Texas or Louisiana. Hurricane season does not peak until later in August and September, and meteorologists are expecting an active year. If a hurricane shuts down a cracker, that would reduce ethane demand, further depressing prices. WEST TEXAS GAS PRICES HOVER AROUND ZEROAnother factor depressing ethane prices is excess natural gas at the Waha hub in west Texas. The oil wells in west Texas also produce a lot of natural gas, and their output can overwhelm the pipeline capacity to ship it out of the region. Because of insufficient pipeline capacity, gas prices at the Waha hub have frequently fallen below zero. Ethane is extracted from raw natural gas. If any ethane remains in the gas stream, it is sold as fuel. If that happens at Waha, then producers would be paying a counterparty to market their supply. To avoid this, companies have been extracting as much ethane as possible. Ethane extraction also frees up space in the pipelines in west Texas, allowing them to take away more natural gas out of the region. ETHANE PRICES MAY RISE LATER IN THE YEARWaha prices will likely continue to hover around zero until the new Matterhorn Express pipeline starts up later this year. The Matterhorn pipeline will allow more natural gas to be shipped out of west Texas. This will allow gas prices at Waha to climb, which boosts ethane’s value to fuel in the region, a factor that could raise prices. As the year progresses, colder temperatures should increase demand for natural gas. That should raise gas prices, which would also push ethane prices higher. The ICIS forecast for ethane reflects this. It shows ethane prices rising as the year progresses. NEW PIPELINE TO TAKE AWAY MORE GAS FROM PERMIANThe midstream industry is already planning another pipeline to take away additional natural gas out of the west Texas. Targa, WhiteWater, MPLX and Enbridge have made a final investment decision (FID) to build the Blackcomb Pipeline, which will ship up to 2.5 billion cubic feet/day of natural gas from the Permian Basin in west Texas to the Agua Dulce area in south Texas. Operations should start in the second half of 2026. NEW MIDSTREAM PROJECTS TO RAISE ETHANE SUPPLIESThe new Blackcomb pipeline is the latest new project announced by midstream companies. They are continuing to build new natural gas processing plants. These plants remove impurities and natural gas liquids (NGLs) from raw natural gas. The processed gas is then ready to be burned as fuel or exported as LNG. The NGLs are sent to fractionators, which separate the individual components into purity products like ethane and propane. The following table shows fractionators that were started up or that are being developed. Company Project Type Capacity Units Location Startup Energy Transfer Frac IX Fractionator 165,000 bbl/day Mont Belvieu Q4 26 Enterprise Fractionator 14 Fractionator 195,000 bbl/day Mont Belvieu H2 2025 Gulf Coast Fractionators JV * GCF Fractionator Fractionator 135,000 bbl/day Mont Belvieu Q3 24 ONEOK MB-6 Fractionator Fractionator 125,000 bbl/day Mont Belvieu year end 24 Targa Train 9 Fractionator Fractionator 120,000 bbl/day Mont Belvieu in service Targa Train 10 Fractionator Fractionator 120,000 bbl/day Mont Belvieu Q1 25 Targa Train 11 Fractionator Fractionator 150,000 bbl/day Mont Belvieu Q3 26 * GCF is restarting after being idled in January 2021. The JV is made up of Targa, Phillips 66 and Devon Energy Source: corporate announcements The following table shows natural gas processing plants that were started up or that are being development. Company Project Type Capacity Units Location Startup Delek not available Gas Plant 110 million cubic feet/day Delaware H1 2025 Durango Midstream Kings Landing, Phase I Gas Plant 200 million cubic feet/day Eddy County, NM Q4 24 Durango Midstream Kings Landing, Phase II Gas Plant 200 million cubic feet/day Eddy County, NM not available Energy Transfer Badger Gas Plant 200 million cubic feet/day Delaware mid 25 Energy Transfer Permian processing expansions* Gas Plant 200 million cubic feet/day Permian Q4 24 to Q1 25 Enterprise Orion Gas Plant 300 million cubic feet/day Midland H2 25 Enterprise Mentone West Gas Plant 300 million cubic feet/day Delaware H2 25 Enterprise Mentone West 2 Gas Plant 300 million cubic feet/day Delaware H1 26 Enterprise Mentone 3 Gas Plant 300 million cubic feet/day Delaware in service Enterprise Leonidas Gas Plant 300 million cubic feet/day Midland In service MPLX Preakness II Gas Plant 200 million cubic feet/day Delaware in service MPLX Secretariat Gas Plant 200 million cubic feet/day Delaware H2 25 MPLX Harmon Creek II Gas Plant 200 million cubic feet/day Marcellus in service Targa Greenwood Gas Plant 275 million cubic feet/day Midland Q4 23 Targa Greenwood II Gas Plant 275 million cubic feet/day Midland Q4 24 Targa Wildcat II Gas Plant 275 million cubic feet/day Delaware Q2 24 Targa Roadrunner II Gas Plant 230 million cubic feet/day Delaware in service Targa Bull Moose Gas Plant 275 million cubic feet/day Delaware Q2 25 Targa Pembrook II Gas Plant 275 million cubic feet/day Midland Q4 25 Targa Bull Moose II Gas Plant 275 million cubic feet/day Delaware Q1 26 Targa East Pembrook Gas Plant 275 million cubic feet/day Midland Q3 26 * GCF is restarting after being idled in January 2021. The JV is made up of Targa, Phillips 66 and Devon Energy Source: corporate announcements Insight article by Al Greenwood Thumbnail shows PE pellets, which are made with ethylene. Image by ICIS

15-Aug-2024

SINGAPORE (ICIS)–South Korean producers Hanwha Total Energies and Yeochon NCC are withdrawing their request for an antidumping probe on styrene monomer (SM) imports from China, based on a petition they filed with the Korea Trade Commission on 12 August. The probe, which was initiated upon requests from Korean producers, has been ongoing since 9 April and was supposed to end on 8 September. This petition withdrawal by the two companies is likely to conclude the four-month ADD investigation which have triggered significant concerns of Asian market players on a potential change in intra-Asia SM trade landscape since South Korea is China’s biggest export market for SM. Expectations heightened in June that Korea will launch antidumping duties (ADDs) on China-origin SM after China extended its five-year ADDs on SM imports from three origins, including Korea. KTC had held discussions and hearings in June to determine whether Chinese SM imports are causing material damage to Korea’s domestic market. China is no longer a regular importer of Korean SM, but some market players were expecting China’s ADD extension could trigger retaliations by Korea as a political countermeasure. Korea’s probe on SM imports from China has faced strong opposition from local end-users in downstream acrylonitrile-butadiene-styrene (ABS) industry which rely on feedstock from China to run their plants. During the period of June 2023 to June 2024, South Korea accounted for around 74% of China's total SM exports, according to ICIS Supply and Demand Database. Although Chinese cargoes are no longer expected to be subject to Korean ADDs in near term, high logistics costs and elevated domestic spot prices in China could continue to hamper China-Korea SM talks. Some Chinese suppliers may also continue searching for alternative markets to diversify their sales portfolio. Focus article by Luffy Wu Thumbnail image: At Taicang Port in China on 12 January 2024.(Costfoto/NurPhoto/Shutterstock)

14-Aug-2024

SINGAPORE (ICIS)–South Korean producers Hanwha Total Energies and Yeochon NCC are withdrawing their request for an antidumping probe on styrene monomer (SM) imports from China, based on a petition they filed with the Korea Trade Commission on 12 August. The probe, which was initiated upon requests from Korean producers, has been ongoing since 9 April and was supposed to end on 8 September. Expectations heightened in June that Korea will launch antidumping duties (ADDs) on China-origin SM after China extended its five-year ADDs on SM imports from three origins, including Korea.

14-Aug-2024

HOUSTON (ICIS)–Belgium chemical distributor Manuchar announced it has reached an agreement to acquire a majority stake in Proquiel Quimicos. While financial terms were not disclosed, Manuchar said this acquisition fits their ambition to strengthen its distribution platform and broaden its product portfolio. Established in 1985, Proquiel Quimicos specializes in chemical distribution serving a wide range of industries with a comprehensive portfolio including solutions for mining, water treatment, fertilizer, aquaculture and industrial applications. The company has five strategic locations across Chile serving more than 1,000 active customers. Manuchar has been present in Chile since 2004, operating via its regional headquarters in Santiago and three additional offices and operational sites. The closing of the acquisition by Manuchar is expected to occur in Q4 2024, subject to approval by competition authorities. “Proquiel is a sophisticated and highly diversified business with exposures to attractive end markets. It is highly complementary to Manuchar’s growth strategy in areas such as human nutrition, animal nutrition and mining related to renewable energy,” said Philippe Huybrechs, Manuchar Group CEO. “Manuchar intends to take a leading role in the consolidation of the global chemical distribution landscape. We are happy to welcome Proquiel Quimicos into our Manuchar Group.”

13-Aug-2024

TORONTO (ICIS)–Freight railroads Canadian Pacific Kansas City (CPKC) and Canadian National (CN) may start to lock out workers on 22 August: CPKC will issue notice to labor union Teamsters Canada Rail Conference (TCRC) “of its plan to lock out employees at 00:01 ET on August 22 if union leadership and the company are unable to come to a negotiated settlement or agree to binding interest arbitration”, it said in a statement. CN will have “no choice" but to begin a phased and progressive shutdown of its network, starting with embargoes of hazardous goods, which would culminate in a lockout at 00:01 Eastern Time on August 22nd, “unless there is immediate and meaningful progress at the negotiating table or binding arbitration", it said. CN also requested the intervention of Canada's federal labor minister, it added. TCRC, for its part, said that it remains committed to negotiating new collective agreements. The railroads’ lockout warning comes after the Canada Industrial Relations Board (CIRB) on 9 August imposed a 13-day cooling-off period in the labor dispute about wages, benefits, work scheduling and safety. Canada’s chemicals, fertilizer and other industries have been facing the threat of a rail labor disruption for months now. In early May about 9,300 unionized conductors, train operators and engineers at CN and CPKC voted for a strike as early as 22 May, while the labor minister referred the matter to the CIRB for a decision about a strike’s impacts on public safety and health. With the referral, the minister suspended the right to strike as under law a legal strike or lockout could not occur until the board had made its decision. The minister asked the CIRB to examine whether certain rail deliveries such as fuel, food and chlorine for water-treatment facilities should be declared essential services, allowing shipments to continue during work stoppages. However, the CIRB ruled last Friday (9 August) that no rail activities needed to be maintained during a strike or lockout, thus clearing the way for industrial action after the expiry of the 13-day cooling off period. IMPACT ON CHEMICALS Trade group Chemistry Industry Association of Canada (CIAC) warned again of the impact of a freight rail disruption on Canada’s chemical industry and the overall economy. “Canada’s economy relies on rail to keep products and commodities moving,” the group’s CEO, Bob Masterson, said in a statement. Chemicals needed for water treatment and sewage treatment are shipped by rail, he said. Many CIAC members were “captive” to CPKC and/or CN, with no viable alternatives for shipments, he said. Companies producing highly regulated goods – about one-third of CIAC members – typically begin shutdown procedures before 72 hours’ notice of a strike or lockout is given, he said. Although plants at some CIAC member companies can only operate up to two days without rail service before having to be shut down, most will be shut down within a week, he said. The Canadian chemistry sector alone moves over 500 railcars/day, he said. It would require over 1,500 road-based tanker trucks to carry the same load,  he said. There was no “Plan B” because of a lack of availability of trucks and drivers and the additional cost of moving product over long distances, Masterson said. Furthermore, many chemical products are restricted to move by rail due to their hazardous nature, he added. According to CIAC, more than Canadian dollar (C$) 76 million (US$55 million) of industrial chemical products move on Canada’s rail network daily, or C$28 billion each year. Chemicals account for nearly 10% of all Canadian rail traffic, the group said. Furthermore, the chemical industry’s customers in the automobile, forest products, minerals and other industries ship most of their product by rail, it said. CIAC is urging a negotiated solution to the conflict, it said. However, should negotiations fail, Canada’s federal government “must be prepared to act quickly to order the parties to return to work and the negotiating table to protect Canadians, Canadian workers directly affected by the disruption, and the Canadian economy,” the group said. The group added that the CIRB’s decision not to impose requirements to ensure the rail shipment of essential products – such as fuel, food or chlorine for water treatment – during industrial action was “concerning”. FERTILIZERS In the fertilizer industry, trade group Fertilizer Canada said that the railroads on Monday, 12 August, issued embargoes immediately halting certain fertilizer shipments 10 days ahead of an expected labor disruption. The threat of a work stoppage has already begun to impact the movement of fertilizers, and the industry expects further embargoes and slowdowns in rail service, the group said. A work stoppage that prevents the transportation of fertilizer would have “potentially disastrous effects” on crop yields and food security, it added. Fertilizer Canada wants the government “to take immediate action to assist all parties” in reaching agreements, “including ordering a directive for binding arbitration that prohibits TCRC from undertaking strike action and CN and CPKC from lockout action,” it said. Furthermore, the group is asking the federal government to recognize fertilizers as an essential good critical to domestic and global food security that should continue to move during work stoppages, it said. Canada’s reputation has already been damaged by numerous supply chain disruptions in the recent past and the renewed labor uncertainty will give its international competitors an advantage, Karen Proud, CEO of Fertilizer Canada, added. Canadian chemical producers rely on rail to ship more than 70% of their product, with some exclusively using rail, while in the fertilizer industry about 75% of all fertilizers produced and used in Canada is moved by rail. The following table by the American Association of Railroads (AAR) shows Canadian freight rail traffic for the week ended 3 August  and the first 31 weeks of 2024: In their recent earnings calls, midstream energy firms Pembina and Keyera, as well as fertilizer major Nutrien and others raised the looming rail disruption as a concern, and CN reduced its 2024 earnings guidance, citing the impact of the labor uncertainty. Meanwhile, Canada continues to face the threat of new labor disruptions at its West Coast ports. However, as of Monday, neither the BC Maritime Employers Association (BCMEA) nor trade union and International Longshore and Warehouse Union Local 514 issued the required 72-hour notices before a legal strike or lockout can begin. (US$1=C$1.37) Additional reporting by Al Greenwood Thumbnail photo source: Keyera

13-Aug-2024

TORONTO (ICIS)–The Canada Industrial Relations Board (CIRB) on Friday ruled that no rail activities need to be maintained in case of a strike or lockout at rail carriers Canadian National (CN) and Canadian Pacific Kansas City (CPKC). However, the quasi-judicial tribunal ordered a 13-day cooling-off period before a legal rail strike or lockout can begin. The CIRB’s long-awaited ruling does not remove the rail strike threat that has been looming over Canada’s energy, chemicals and other industries for months. A strike by the more than 9,000 CN and CPKC unionized conductors, train operators and engineers could now start towards the end of the month if collective bargaining fails. The railroads and labor union Teamsters Canada Rail Conference (TCRC) resumed negotiations on Wednesday, 7 August. Federal labor minister Steve MacKinnon on Friday urged the parties to continue negotiating. MacKinnon became labor minister last month after his predecessor resigned suddenly. The former labor minister, Seamus O’Regan, in May referred the industrial dispute to the CIRB for a decision about a strike’s impacts on public safety and health after the rail workers voted for a strike as early as 22 May. The referral suspended the workers’ right to strike because under law a legal strike or lockout could not occur until the board made its decision. The ongoing uncertainties around rail disruptions have affected Canadian chemical, fertilizer and other manufacturers, as they need to make preparations. In recent earnings calls, midstream energy firms Pembina and Keyera, as well as fertilizer major Nutrien and others raised the looming rail strike as a concern, and CN reduced its 2024 earnings guidance, citing the impacts of the labor uncertainty. Canadian chemical producers rely on rail to ship more than 70% of their products, with some exclusively using rail, while in the fertilizer industry about 75% of all fertilizers produced and used in Canada is moved by rail. Thumbnail photo source: CN

09-Aug-2024