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Ethylene18-Jul-2024
SINGAPORE (ICIS) — In this podcast, Asia
ethylene editor Josh Quah and analyst Aliena
Huang discuss the factors impacting arbitrage
flows of ethylene from the US to Asia.
Spot arbitrage window between US and Asia
closed but term arrivals for July remain
healthy
Storm Beryl, low affordability in Asia, may
keep spot arbitrage trades closed into Aug
Panama Canal traffic levels expected to
return to pre-congestion levels by Oct
Hydrogen18-Jul-2024
SINGAPORE (ICIS)–In this podcast, ICIS
analysts Patricia Tao, Lewis Unstead and Aliena
Huang delve into how the upcoming CBAM (Carbon
Border Adjustment Mechanism) will impact
China’s export-oriented manufacturing sectors
and hydrogen’s crucial role in its low-carbon
economy.
China’s national energy law draft includes
hydrogen, marks shift toward low-carbon
industry
Move comes ahead of EU’s CBAM
CBAM to affect global trade, particularly
for high-emission products
Crude Oil18-Jul-2024
SINGAPORE (ICIS)–SK Innovation, the parent
company of battery maker SK On and
petrochemicals producer SK Geo Centric, has
agreed to merge with its energy affiliate SK
E&S in an overhaul to improve its
profitability.
The two companies are merging in a proactive
effort to navigate the challenging external
business landscape, characterized by a
prolonged global economic downturn, increased
volatility in the energy and chemical
industries, and a slowdown in the electric
vehicle (EV) market, SK Innovation said in a
statement on 17 July.
“By integrating assets and capabilities across
both energy and electrification sectors, the
merged company will bolster its core
competitiveness and profitability,” it said.
Additionally, the merger aims to secure
competitiveness in future energy business
areas.
Upon merging, the combined entity will
transform into an energy firm with assets
totaling Korean won (W) 100 trillion ($72.4
billion) and revenues of W88 trillion,
“positioning itself as the largest private
energy company in the Asia-Pacific region”, SK
Innovation said.
The merged firm will also increase earnings
before interest, taxes, depreciation and
amortization (EBITDA) to W5.8 trillion, up from
pre-merger levels of W1.9 trillion, it said.
The two companies expect that by 2030, the
synergies from the integration alone will add
over W2.1 trillion to EBITDA, which is targeted
to hit W20 trillion by the end of the decade.
“Notably, the merged company will be able to
mitigate the high profit volatility of the
petrochemical business, which has served as a
reliable cash cow, with the stable profit
generation capabilities of the LNG [liquefied
natural gas], power, and city gas businesses,”
SK Innovation said.
The management boards of both SK Innovation and
SK E&S approved the proposed merger on 17
July, subject to shareholders’ approval on 27
August.
The merged corporation is expected to be
officially launched on 1 November.
“The merged company will develop a
comprehensive portfolio that spans all areas,
including energy sources (such as oil,
chemicals, LNG, city gas, power, renewable
energy, batteries, ESS [energy storage system]
hydrogen, SMR, ammonia, and immersion cooling),
energy carriers, and energy solutions,” SK
Innovation said.
“Currently, global oil majors are also
currently pursuing balanced portfolios across
the energy sector through various mergers and
acquisitions.”
SK Innovations’ business portfolio includes
petrochemicals, lubricants, and oil
exploration.
It is now diversifying into future energy
sectors such as electric vehicle batteries,
small modular reactors (SMR), ammonia, and
immersion cooling.
SK E&S was spun off from SK Innovation in
1999 as a city gas holding company and is
transitioning into a green portfolio that
organically integrates its four core businesses
– city gas, low-carbon LNG value chain,
renewable energy, and hydrogen and energy
solutions, to create synergies.
Separately, SK On’s board has approved a merger
with sister companies – crude oil and petroleum
products trading firm SK Trading International
and energy logistics firm SK Enterm to improve
raw material purchasing efficiency and expand
trading, helping improve SK On’s profit
structure.
“Through the merger of these three companies,
SK On will be able to further strengthen its
competitiveness in securing raw materials
($1 = W1,380)
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Speciality Chemicals17-Jul-2024
HOUSTON (ICIS)–Liquid chemical tanker rates
from the US Gulf to Asia are plunging this week
as plant shutdowns and delays in the aftermath of
Hurricane Beryl have led to “gaping large holes
of space”, shipping brokers said on Wednesday.
Hurricane Beryl made landfall in Texas on 8
July between Corpus Christi and Houston, which
is a key region for US petrochemical
production.
Some plants took precautionary measures and
shut down ahead of the storm, while others
sustained damage or lost power or other
utilities to their sites, leading to shutdowns
and force majeures.
A shipping broker said the outages and delays
left shipowners without contract cargoes that
are typically the base volumes for vessels.
“As a result, there are gaping large holes of
space available for prompt loading,” a broker
said.
The broker expects the trend to continue for
the next week or two.
A different broker said it is seeing part cargo
space for the rest of this month and into
August across MOL and Odfjell vessels.
Rates have also softened this week along the
USG-Brazil trade lane as some partial space has
opened.
Beryl has led to a “wait and see” sentiment for
players on this trade lane, a broker said.
PANAMA CANAL
A broker said that Stolt has joined MOL and
Odfjell in resuming transits through the Panama
Canal.
Restrictions have gradually eased at the canal
after the Panama Canal Authority (PCA) began
limiting transits in July of last year because
of low water levels at the freshwater lake that
feeds the locks because of an ongoing drought.
Water levels have improved because of the onset
of the rainy season and conservation efforts
enacted by the PCA to better use the freshwater
available to them.
The PCA will limit transits on 3-4 August for
planned maintenance at the Miraflores locks.
Visit the ICIS Logistics – impact on
chemicals and energy topic
page.
Visit the ICIS Hurricane
Beryl topic
page.
Thumbnail image shows a container ship
moving through the Panama Canal. Photo courtesy
of the PCA.
Power17-Jul-2024
UK government does not rule out increasing
budget for offshore wind in next auction
Capacity would need to average 16.60GW in
the next two auctions to procure the capacity
needed to reach revised 2030 target
But only 10.6GW of offshore projects have
the required development consent to enter the
auction
LONDON (ICIS)–The UK government has left the
door open to a possible budget increase for
offshore wind at an upcoming renewable capacity
auction under the Contracts for Difference
(CfD) scheme, after it said it intends to
quadruple installed capacity for the technology
by 2030.
But ICIS calculations show that, depending on
the strike price, the budget would have to
increase between 2.3-5.4 times in order to
allow for a capacity award consistent with
meeting the revised target. And even if it did,
planning hurdles are set to prevent this, with
the pressure shifting on subsequent auction
rounds.
The budget for offshore wind in the upcoming
round is currently £800m and the maximum strike
price has been set at £73/MWh.
A spokesperson for the department for energy
security and net zero told ICIS that
applications for the sixth allocation round are
currently being assessed. “The Secretary of
State will then carefully consider whether to
increase the budget,” they said.
The government did not confirm an exact figure
for the revised offshore wind target. To
present an idea of how much quadrupling
offshore wind capacity by 2030 would translate
into, ICIS quadrupled its forecast for
installed capacity by the end of 2024,
resulting in 61.08GW by 2030. Actual intended
capacity may vary.
A trader said: “I suspect they will increase
the budget; we have had people backing out of
projects and these will be the people saying
they need better returns so the budget will
need to be higher for the amount of capacity
the government wants.”
CFD BUDGET
ICIS Analytics calculated that, in the next two
CfD rounds, capacity will need to average
16.60GW per auction to obtain the amount needed
to reach the 2030 target. This is to allow
construction time which is usually between six
to eight years.
ICIS calculated that, if the auction cleared at
a strike price of £60/MWh, a budget of £800m
will be able to finance 4.2GW of capacity.
If the auction cleared at the maximum strike
price of £73/MWh, the budget would only be able
to fund 3GW.
If the budget was increased to £1bn, 5.3GW of
capacity could be obtained with a clearing
price of £60/MWh.
Similarly, if the auction cleared at the
maximum strike price of £73/MWh, 3.9GW could be
obtained.
SHORTFALL
While an increase in budget to £1bn would
procure more offshore wind capacity, a larger
budget is required to obtain the capacity
needed to meet the 2030 target.
ICIS Analytics calculated a budget of nearly
£1.8bn is needed to obtain 16.60GW of capacity
in the sixth auction if it cleared at the
lowest price of £44.1/MWh.
This was modelled as the lowest figure as it is
just above the maximum clearing price of the
fifth auction round, which was £44/MWh and
was too low to attract bids ,
If the auction cleared at £60/MWh, which is a
base case scenario, the budget would need to be
nearly £3.2bn.
Furthermore, if the auction cleared at the
maximum strike price, a £4.3bn budget is
required.
However, according to ICIS analyst Robbie
Jackson-Stroud, there are too few entrants to
obtain 16.60GW for the auction, as only 10.6GW
of offshore projects have the required
development consent to proceed to auction.
This therefore puts increasing pressure on the
seventh auction round, due to be held in 2025,
to obtain offshore wind capacity needed to meet
the 2030 target.
As things currently stand, ICIS analytics
forecasts only 39GW of offshore wind capacity
by 2030 under a base case scenario, therefore
falling short of the ambitious target.
.
Ammonia17-Jul-2024
LONDON (ICIS)–The US Department of Agriculture
(USDA) has published the July World
Agricultural Supply and Demand Estimate (WASDE)
report, which shows that corn production is
forecast to increase by 240m bushels while for
soybeans the outlook is for a decrease of 15m
bushels.
Senior editor Mark Milam talks to Sylvia
Traganida about the report and the latest
developments in the US market.
Crude Oil17-Jul-2024
SINGAPORE (ICIS)–Ocean container freight rates
in Asia are expected to remain high in the near
term amid persistent congestion at key ports in
the region, particularly Singapore.
Peak demand season, capacity issues
continue to push up rates
Singapore port wait times reduced, but
challenges remain
ASEAN Express offers faster rail
alternative to sea freight
The
Drewry World Container Index (WCI) edged up
1% to $5,901 per forty-foot equivalent unit
(FEU) for the week ending 11 July, with the
rate of increase easing from a double-digit
pace se in recent weeks.
The Shanghai Containerized Freight Index
(SCFI), which measures spot rates for shipping
containers from Shanghai to major global ports,
meanwhile, dipped 1% week on week to 3,674.86
points in the week ending 12 July.
The convergence of seasonal peak demand and
strained capacity as commercial vessels
continued to avoid the Red Sea and Suez Canal,
are expected to keep shipping costs firm in the
near term for container routes globally, said
Judah Levine, the head of research at online
freight shipping marketplace and platform
provider Freightos.
According to supply chain advisors Drewry,
ocean freight rates are expected to remain high
until the end of the peak season, which
typically falls between August to October each
year.
SINGAPORE CONGESTION
EASING
In Singapore, the world’s second-largest port
and the largest transshipment hub connecting
Asia and the west, the average wait time to
berth has been “reduced to two days or under”,
port operator PSA Singapore said in a statement
on 10 July.
This compares to waiting times up to seven days
for a berth in the port of Singapore in late
May this year, according to logistics data
group Linerlytica.
Singapore has experienced high berth demand and
unscheduled vessel arrivals since the start of
2024, leading to increased waiting times
despite utilizing all available berths, PSA
said.
PSA has since “significantly ramped up its
capabilities to support increased activity and
mitigate the impact of global supply chain
disruptions since the beginning of 2024”.
However, the PSA warned that “the Red Sea
crisis has significantly disrupted global
shipping and trade and we anticipate this
challenging situation to persist for a
prolonged period, potentially extending port
congestion from Asia to Europe”.
For chemical tankers, shipping brokers have
reported varying degrees of congestion and
delays at Singapore ports.
A broker involved in bio-chemicals and clean
petroleum product (CPP) trades noted congestion
at all terminals with delays of at least one
week.
A tanker carrying methyl acetate (MEAC) was
facing a two-week delay in discharging cargoes
at a key terminal in Jurong Island, another
broker said.
Jurong Island is Singapore’s petrochemical hub.
A third broker indicated that delays in
unloading and loading of cargoes at Singapore
ports were generally measured in days rather
than weeks.
A Singapore-based acrylates producer was having
difficulties securing
vessel space, as shipping companies were
bypassing the congested port.
This congestion has also spilled over into
Malaysia, impacting customers in both countries
which are now experiencing delays of up to a
week for July shipments.
Overall port congestion levels in Malaysia have
been reduced, but berthing delays remain at
five days at Port Klang, while Tanjung Pelepas
has limited delays, Linerlytica said in an
update on 10 July.
In India, heavy congestion is also reported at
Colombo port, resulting in backlogs and delays,
with adverse weather conditions around the Cape
of Good Hope compounding the situation, causing
further delays, according to global digital
freight forwarder Zencargo in a note on 15
July.
Vessels are increasingly navigating around the
Cape of Good Hope to avoid the heightened risks
in the Red Sea and Suez Canal due to escalating
Houthi attacks since November 2023, opting for
a longer-but-safer route despite the added time
and costs.
“The market from the Indian subcontinent to
Europe is experiencing significant
disruptions,” it said.
“Carriers have stopped accepting bookings from
South India for Europe due to heavy congestion
in Colombo, causing a minimum delay of three
weeks in transshipment. Carriers are only
quoting on spot rates due to the tight space
situation.”
Historically, Colombo has handled a substantial
portion of India’s containerized exports and
imports due to insufficient direct line-haul
connections from the country’s east coast
ports, according to Zencargo.
However, recent months have seen an unusual
surge in volumes, exacerbated by vessel
diversions linked to Red Sea shipping
disruptions, with ships languishing for over
five days before securing a berth, it said.
In China, port delays have worsened in the week
to 10 July after recent improvements due to
bunching of vessel arrivals, with wait times of
up to four days in Shanghai and up to two days
in Ningbo, Linerlytica added.
China is also set to continue grappling with
rising container prices and leasing rates in
July, according to Haoze Lou, a member of the
broker team at online shipping container
leasing firm Container xChange.
Scarcity of available slots for China-Europe
and China-US routes has intensified, prompting
offline suppliers to offer competitive prices
to attract customers, Lou said.
“In June, we’ve observed a continued rise in
container prices in China, impacting both
trading and leasing activities,” he said,
adding that a rebound is expected over the next
month as slot availability tightens again.
CONTAINER RATES HINGES ON CONSUMER
DEMAND
The outlook for the container trading and
leasing market in the second half of 2024
hinges on a revival in consumer demand but
faces uncertainties due to geopolitical
disruptions and potential labor unrest,
according to Container xChange.
Continued Houthi attacks threaten supply
chains, while potential labor issues in US
ports could further disrupt operations, it
said.
“However, if the current market conditions
persist without major changes, we expect
container rates to ease,” Container xChange
noted.
“This reduction in rates could trigger an
uptick in container buyer activity, as the
buyer side is currently waiting for prices to
decline before resuming trading and leasing
activities.”
RAIL OPTIONS OPEN UP FOR CHINA-SE ASIA
ROUTE
The successful inaugural trips of the ASEAN
Express – a new cargo rail service connecting
Malaysia, Thailand, Laos, and China – highlight
its potential as a faster and more efficient
alternative to traditional ocean freight as it
connects new trade routes and inland ports
across Asia.
This includes the Kontena Nasional Inland
Clearance Depot in Selangor, Malaysia;
Latkrabang Inland Port in Thailand; and the
Thanaleng Dry Port in Laos, which connects to a
railway terminal in Chongqing, southwest China.
The first ASEAN Express cargo train
successfully completed a round trip between
Malaysia and China on 11 July, carrying
electronic appliances and agricultural
products, marking a milestone in regional trade
connectivity which could boost trade of
petrochemical end-products.
The recently launched cargo rail service has
been met with optimism by Asian
recyclers, though immediate impact is
expected to be limited.
While the service directly benefits buyers and
sellers in China, Malaysia, Thailand, and Laos,
recyclers in Taiwan, Indonesia, and Vietnam
anticipate primarily using ships, potentially
freeing up shipping capacity and alleviating
tightness in vessel and container space.
This new service significantly reduces transit
time compared to sea freight, taking just under
14 days compared with up to three weeks by sea.
“This service will provide smoother and more
efficient goods flow throughout the region as
well as enhance rail cargo transport capacity
while reducing logistics costs by an estimated
20% from current market rates,” Malaysian
transport minister Loke Siew Fook said in a
speech at the flag-off ceremony for the new
rail service on 27 June.
“The shorter transport times are also expected
to open up new markets, with the agricultural
sector in particular to benefit by allowing
perishable products to be transported more
quickly by rail,” he added.
Insight article by Nurluqman
Suratman
Additional reporting by Hwee Hwee Tan,
Corey Chew, Arianne Perez and Ai Teng Lim
Thumbnail image: At the Keppel and Brani
port terminals in Singapore, 15 June 2024 (By
Joseph Nair/NurPhoto/Shutterstock)
Crude Oil17-Jul-2024
SINGAPORE (ICIS)–The International Monetary
Fund (IMF) late on Tuesday revised upwards its
economic growth projections for China and
India, with Asia’s emerging market economies
set to remain as the main engine for the global
economy.
However, prospects for the region over the next
five years remain weak, largely because of
waning momentum in emerging Asian economies,
the IMF said in its World Economic
Outlook report.
China’s economic growth projection was upgraded
to 5% for 2024, up 0.4 percentage points from
previous estimate made in April, while India is
now expected to expand by 7%, up by 0.2
percentage points.
By 2029, however, growth in China is projected
to moderate to 3.3%, well below its current
pace, the IMF warned.
China’s growth forecast for 2024 was revised
higher mainly due to a resurgence in private
consumption and robust exports in the first
quarter.
“Resurgent domestic consumption [in China]
propelled the positive upside in the first
quarter, aided by what looked to be a temporary
surge in exports belatedly reconnecting with
last year’s rise in global demand,” the IMF
said.
“These developments have narrowed the output
divergences somewhat across economies, as
cyclical factors wane and activity becomes
better aligned with its potential.”
However, China’s GDP growth is expected to
moderate to 4.5% in 2025 and further decelerate
by 2029, primarily due to challenges from an
aging population and diminishing productivity
growth.
India’s growth estimate for this year was
revised upward due to the carryover effect
from increased growth in 2023 and a positive
outlook for private consumption, particularly
in rural regions.
In Japan, despite the expectation of increased
private consumption in the latter half of 2024
due to strong wage settlements, the overall
growth forecast for 2024 has been revised down
by 0.2 percentage points to 0.7%.
This adjustment is primarily attributed to
temporary disruptions in supply chains and
sluggish private investment during the first
quarter.
Global growth is projected to be in line
with the IMF’s April forecast, at 3.2% in 2024
and 3.3% in 2025.
Focus article by Nurluqman
Suratman
Hydrogen17-Jul-2024
SINGAPORE (ICIS)–Aramco has signed definitive
agreements to acquire 50% of Saudi Arabia-based
Blue Hydrogen Industrial Gases (BHIG), a wholly
owned subsidiary of Air Products Qudra (APQ),
for an undisclosed fee, the energy giant said
late on Tuesday.
The transaction will also include options for
Aramco to offtake hydrogen and nitrogen, it
said in a statement.
APQ is a joint venture between Saudi-based
Qudra Energy and US industrial gases firm Air
Products.
Upon completion of the transaction, Aramco and
APQ are expected to each own a 50% stake in
BHIG, which focuses on producing lower-carbon
hydrogen through a process known as steam
methane reforming (SMR).
Saudi Aramco expects its investment to
contribute to creation of a lower-carbon
hydrogen network in the Eastern Province,
catering to both domestic and regional markets.
“This investment highlights Aramco’s ambition
to expand its new energies portfolio and grow
its lower-carbon hydrogen business,” Aramco
executive vice president for strategy &
corporate development Ashraf Al Ghazzawi said.
“We intend to leverage our growing capabilities
in carbon capture and storage (CCS), as well as
our technical expertise in hydrogen, with the
ambition to support the establishment of a
vibrant marketplace for lower-carbon hydrogen –
helping lay the foundations of a future energy
system.”
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