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Ammonia16-Jul-2024
HOUSTON (ICIS)–US agribusiness titan Cargill
announced it has surpassed the 50% completion
milestone in the construction of its new canola
facility located in West Regina, Saskatchewan.
Cargill broke ground on the facility in July
2022 and anticipates opening in 2025 with the
new facility having the capacity to process 1
million tonnes of canola per year, producing
crude canola oil for food and biofuel markets
and canola meal for animal feed.
“The addition of the Regina facility to the
Cargill network will play a critical role
connecting the Canadian canola industry to the
expanding domestic and global market
opportunities for vegetable oil, high quality
meal and biofuels,” said Jeff Vassart, Cargill
Canada president.
“The current construction environment is full
of unique challenges and this project has faced
many headwinds since we broke ground, but we
are committed to becoming a best-in-class
option for canola growers in the region, along
with helping decarbonize the global food and
fuel supply chain.”
To support rail and road infrastructure around
the new plant, Cargill recently completed the
purchase of just over 400 acres near the
facility location which it said will allow for
better connection to existing rail lines.
This will provide the site with additional
optionality to bring canola seed to Regina when
needed, providing a new destination for farmers
in western Canada.
Speciality Chemicals16-Jul-2024
NASHVILLE (ICIS)–Unfavorable farming
fundamentals, including weaker grain prices,
high cost of credit, and weather issues will
continue to hit demand for fertilizers, said
market participants on the sidelines of the
Southwestern fertilizer conference (14-18
July).
Grain prices have slumped to the lowest level
since December 2020 as Tropical Storm Beryl was
expected to bring rains to the Midwest. This
could boost yields at a time when prices are
already under downward pressure due to ample
availability.
“The US farmer is in the worst shape that I
have seen in my career, and this is
concerning,” said a trader with over 15 years
of experience.
Urea prices in the US are the cheapest in the
world right now, as expected for this time of
the year due to it being the offseason.
Some market players believe prices are low
domestically to discourage more imports.
Importers may even look at re-exports to Brazil
and Latin America if urea prices in New Orleans
decline below $290-295/short ton FOB Nola.
The level of $290/short ton FOB Nola is
equivalent to $360/tonne CFR (cost &
freight).
For now, the urea level in Nola is in the mid
$300s/short ton FOB Nola for July shipment.
The phosphates market is getting more attention
than urea in the US given the lack of
availability for monoammonium phosphate (MAP)
due to countervailing duties (CVD) on product
arriving from Russia and Morocco.
The lack of MAP availability is seeing prices
trade at around $120/tonne premium to
diammonium phosphate (DAP), when usually the
premium is $20/tonne.
There is more demand for triple phosphate (TSP)
as some players are forced to switch due to the
lack of MAP supply.
The CVD rate for Russian producer PhosAgro is
currently at 28.50%, while for Morocco the
process is under review and could result in an
increase in CVDs from 2.12% to 14.21% in
October/November.
Thumbnail shows crops being grown at a
farm. Image by Shutterstock.
Speciality Chemicals16-Jul-2024
BARCELONA (ICIS)–Rampant overcapacity in China
may change as limits to refinery expansions and
new plants stifle feedstock availability.
Big structural reforms needed to improve
China’s economy
China petrochemical trends become more
complicated
Country plans to cap refinery capacity at 1
billion tonnes/year from 2027-2040
China forging closer relations with Saudi
Arabia
Swift rise in China electric vehicles
threatens petrochemical feedstocks
Zero carbon rules limit future plant
construction in China
Europe needs to act fast to protect its
industry
In this Think Tank podcast, Will
Beacham interviews ICIS Insight editor
Nigel Davis, ICIS senior
consultant Asia John
Richardson and Paul
Hodges, chairman of New Normal
Consulting.
Editor’s note: This podcast is an opinion
piece. The views expressed are those of the
presenter and interviewees, and do not
necessarily represent those of ICIS.
ICIS is organising regular updates to help
the industry understand current market trends.
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Expandable Polystyrene16-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
Speciality Chemicals16-Jul-2024
LONDON (ICIS)–Strong service sector
performance and robust exports through 2024
amid cooling inflation points to the eurozone
economy bottoming out following the emergence
of tentative green shoots during the first
quarter of the year, the IMF said.
The organisation upped its forecast for
eurozone growth to 0.9% for 2024, a 0.1
percentage point increase from the previous
forecast in April, on the back of growing
evidence that the bloc may have put the low
point of the economic cycle behind it.
Wage growth is expected to drive consumption,
while loosening monetary policy could drive an
uptick in investment, the IMF said, although
players in sectors such as construction see the
impact of rate cuts being slow to ripple
through the market.
With manufacturing still underperforming
compared to services, as highlighted by
Eurostat data on Monday showing that EU
industrial output shrank month on month in May
on the back of productivity declines across all
most sub-sectors.
Eurozone industrial activity was stagnant in
April, with March the only month to see output
increase month on month, according to Eurostat
data.
This slower manufacturing sector recovery is
likely to drag on economic escape trajectory in
countries like Germany, which the IMF projects
will see GDP growth of 0.2% this year.
Other member states such as Spain are likely to
see considerably stronger growth, the agency
added, increasing its 2024 GDP growth forecast
for the country by 0.5 percentage points to
2.4%.
Investment analysts have projected greater
political stability in the UK after a general
election delivering a strong mandate to the
Labour Party and five years until the next
election, and the IMF has upped its forecast
for the country. UK GDP is now expected to
stand at 0.7% this year a 0.2 percentage point
increase from the IMF’s April outlook.
The impact of cyclical factors buffeting global
markets has receded, despite still-high
shipping costs due to the ongoing Red Sea
disruption, and overall economic activity is
shifting closer to actual potential, according
to the IMF.
“Despite gloomy predictions, the global economy
remains remarkably resilient, with steady
growth and inflation slowing almost as quickly
as it rose,” said IMF chief economist
Pierre-Olivier Gourinchas.
Global growth is expected to have bottomed out
at 2.3% in 2022 following an inflation spike to
9.4% that year, and growth is expected to stand
at 3.2% this year and 3.3% in 2025.
Inflation has come down since then, allowing
for a modest rate cut by the European Central
Bank, but the pace of disinflation has slowed,
the IMF noted, with the service sector momentum
buoying European growth also propping up
inflation.
The European Central Bank cut rates by 25 basis
points in June, but markets are not projecting
another when its monetary policy committee
convenes on Thursday. The US Federal Reserve is
yet to cut rates, with officials guiding for
just one reduction this year.
US central bank caution is feeding through to
emerging market central banks, the IMF noted.
“A number of central banks in emerging market
economies remain cautious in regard to cutting
rates owing to external risks triggered by
changes in interest rate differentials and
associated depreciation of those economies’
currencies against the dollar,” it said.
Europe is showing fewer signs of economic
overheating than the US, which is likely to see
slightly slower than expected growth this year
as the labour market slows and consumption
drops. US GDP is expected to be 2.6% this year,
according to the IMF.
“Unlike in the United States, there is little
evidence of overheating [in the eurozone], and
the European Central Bank will need to
carefully calibrate the pivot toward monetary
easing to avoid an inflation undershoot,”
Gourinchas said.
Economic scarring also remains more apparent in
the developing world, with many nations still
struggling to turn the page from the aftermath
of the pandemic compared to economies like the
US, which has already moved past pre-COVID
growth levels.
Focus article by Tom
Brown.
Thumbnail photo: Outside the IMF’s
Washington, DC headquarters (Source: Gripas
Yuri/ABACA/Shutterstock)
Ammonia16-Jul-2024
LONDON (ICIS)–Caprolactam (capro) availability
in Europe has been very tight until recently,
following a shortage of sulphur and low
downstream demand. However, slow capro demand
has helped to balance the market.
Senior capro editor Marta Fern joins senior
fertilizer editors Julia Meehan and Sylvia
Traganida to discuss current developments and
what lies ahead for the market.
Liquefied Petroleum Gas16-Jul-2024
SINGAPORE (ICIS)–The US overtook the Middle
East for the first time as China’s largest
supplier of propane and butane in the first
half of 2024.
US, Mideast account for 90% of China’s
propane, butane imports in past two years
US’ share to China’s LPG imports at 49.4%
in H1
China H1 propane imports up 18%; butane
imports down 15%
Listen to ICIS LPG analysts Yan Wang and Shihao
Zhou as they discuss the drivers behind the
changes in data and the preferences of major
Chinese importers.
Hydrogen16-Jul-2024
SINGAPORE (ICIS)–In a bid to achieve its
ambitious emissions targets, China is ramping
up efforts to boost low-carbon hydrogen
production through regulatory reforms.
While hydrogen production and demand in China
have steadily increased in recent years,
renewable hydrogen – a crucial element in
decarbonizing hard-to-abate industries – still
makes up less than 2% of the country’s total
hydrogen output.
China has committed to peaking carbon emissions
by 2030 and achieving carbon neutrality by
2060.
ICIS Asia deputy news editor Nurluqman Suratman
and ICIS analyst Yu Yunfeng delve into the
latest developments in China’s hydrogen
industry on this podcast.
China’s 2023 Hydrogen Production: 37
million tonnes, 4.5% year-on-year growth
Trade Tensions: EU concerns about unfair
competition
Emerging Trend: Transportation sector to be
second largest hydrogen user
Polyethylene16-Jul-2024
SINGAPORE (ICIS)–Click here to see the
latest blog post on Asian Chemical Connections
by John Richardson: Understanding what was
going to happen to petrochemicals capacity
additions in China used to be easy as all you
had to do was read the state-run press.
I am referring to comments in the local media
way back in 2014 that China was going to push
much harder towards petrochemicals
self-sufficiency.
This helps explain why in products such as
polypropylene (PP), China’s percentages of
capacity over demand could this year exceed
100%.
But conversations with industry sources
indicate that interpreting what will happen
next to China’s capacity growth has become way
more complex.
Let’s start with the decision to cap China’s
refinery capacity at some 1 billion tonnes a
year from 2027 onwards up to at least 2040.
This is a huge change from 2000-2026 when
capacity is forecast to increase by more than
250%.
The reason for the cap on refinery capacity is
that China wants 40% of its car fleet to
comprise electric vehicles (EVs) by 2030. It
also wants all new car sales to be EVs by that
year.
At first glance, this indicates that China
won’t have sufficient local petrochemicals
feedstock to maintain its aggressive
self-sufficiency push. One could thus reach the
conclusion that deficits or imports will rise
given the weaker economics of importing
feedstocks.
But local refineries may be turned into
petrochemicals feedstock centers.
As local transportation fuels demand declines,
maintaining good refinery operating rates may
hinge on China’s ability to export increasing
quantities of gasoline and diesel which in a
world of increasing trade tensions may be
difficult.
I had thought that China’s push towards peak
carbon emissions by 2030 and carbon neutrality
before 2060 would make it difficult to get
approval for heavy industrial projects for
start-up after 2030. Now, though, I’ve been
told that the push to reduce carbon emissions
is already making it hard to win approvals.
Each province in China has reportedly been
given a carbon budget. If a province wants to
make room in its budget for a heavy industrial
project, it might have to shut down an existing
plant.
Combine this with the small scale of some
petrochemicals plants in China and we will or
already are seeing closures of older plants to
make way for new facilities, I’ve been told.
This especially applies to the more developed
provinces with high carbon output.
If all of this is true, do not assume that this
is automatically good news for all
petrochemicals exporters to China because of
the demographic-driven demand slowdown, China’s
sustainability push and the country’s closer
relationship with Saudi Arabia.
As I’ve been stressing over the last three
years, events in China point to a much more
confused and blurred picture. Don’t panic and
embrace confusion as this is the only sensible
response.
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.
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