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Speciality Chemicals30-Sep-2024
LONDON (ICIS)–Here are some of the top stories
from ICIS Europe for the week ended 27
September.
Intensifying seller competition pushes Europe
plasticizer DOTP spot prices to nine-month
low
Intensifying competition between Turkish,
northeast Asian and local sellers pushed down
dioctyl terephthalate (DOTP) prices in the
European plasticizers spot market.
BASF sets new corporate strategy, mulls ag
solutions IPO, to exit Brazil
coatings
BASF is planning an overhaul of its structure,
marking a clearer delineation between
businesses it considers core and “standalone”
units serving specific industries, and is
readying the separation of its agricultural
solutions operations.
Europe PX imports down more than a third in H1
amid softer demand, freight costs
Imports of paraxylene (PX) into the EU and the
UK fell by 35.6% in the first half of 2024 year
on year because of weaker downstream demand and
higher freight costs, according to new data
from the ICIS Supply and Demand database.
Europe PP September contract prices soften on
underwhelming demand
European polypropylene (PP) contract prices
have softened for September, despite initial
offers of increases.
September flash PMIs show eurozone economy
stagnating, UK still growing
Initial purchasing manager index (PMI) figures
for the eurozone reveal that the region’s
economy is contracting, with the previously
resilient services sector weakening and the
manufacturing recession deepening.
Crude Oil30-Sep-2024
SINGAPORE (ICIS)–In a bold move to revitalize
its economy and restore investor confidence,
China unveiled a comprehensive package of
monetary and fiscal measures less than a
week before the country goes on a week-long
holiday.
Concerns about fundamental weakness in the
world’s second-biggest economy, however, temper
optimism on the positive near-term impact of
the measures.
Government efforts to boost economy
positive but overdue – economists
Financial markets euphoria may be
short-lived
August data show further economic
deterioration
The People’s Bank of China (PBOC) on 24
September unveiled a package of stimulus
measures, featuring
cuts to a crucial interest rate and
reduced reserve requirements for banks.
Two days before October, the central bank said
that commercial banks will be asked to lower
their interest rates on existing mortgages to
ease burden on households, which could
translate to an overall boost in
consumption. (adding this bit as this
happened over the weekend)
China has plans to issue yuan (CNY) 2
trillion in sovereign bonds this year,
according to newswire agency
Reuters, citing unnamed sources.
The measures are a step in the right direction,
especially as multiple measures have been
announced together rather than spacing out
individual piecemeal measures to a more limited
effect, said Lynn Song, chief economist for
Greater China at Dutch banking and financial
information services provider ING.
“We continue to believe that there is still
room for further easing in the months ahead as
most global central banks are now on a rate-cut
trajectory. If we see a large fiscal policy
push as well, momentum could recover heading
into the fourth quarter.”
Following a series of gradual moves to boost
growth, economists had been expecting more
significant easing measures, which are now seen
as overdue.
“The sheer scope and urgency of introducing
measures across multiple domains simultaneously
underscores the government’s determination to
place growth on a firmer footing to meet this
year’s 5% growth target”, economists at
Singapore bank DBS said in a note.
On 26 September, the Politburo of
the Communist Party of China held an
unscheduled meeting to announce additional
fiscal and consumer-focused support measures.
According to a meeting memo, Beijing aims to
boost spending and cut interest rates, increase
income for low- and middle-income groups and
revitalize capital markets.
The Politburo also pledged to stabilize the
country’s property market, preventing further
decline, and for the first time, has vowed to
strictly limit new commodity residential
construction and optimize existing housing
inventory.
“We continue to believe that securing the
delivery of pre-sold but unfinished homes with
direct funding from the central government is
the only possible way to revive the country’s
declining property sector,” Japan’s Nomura
Global Markets Research said in a note.
To boost the capital market, China’s
political leaders pledged vigorously guide
medium- and long-term funds to enter the
market, and clear the bottlenecks of social
security funds, insurance, wealth management
and other funds entering the market.
FINANCIAL MARKETS CHEER ECON
MEASURES
The multifaceted plan has yielded immediate
results, with the China’s benchmark
CSI 300 benchmark surging by more
than 15% in the week ended 27 September,
its biggest weekly gain since 2008.
The index tracks the performance of the top 300
stocks traded on the Shanghai Stock Exchange
and the Shenzhen Stock Exchange.
At the close of trade on 27 September, the
Shanghai Composite Index settled at
3,087.53, up by 2.88% from the previous
session, while the Shenzhen Composite jumped
6.05% to close at 1,737.56.
Shares of major chemical producers such as
Hengli Petrochemical, Satellite Chemical, and
Rongsheng Petrochemical have rallied with double-digit
gains over the past four sessions,
mirroring the broader market rally.
Analysts, however, cautioned that
the market euphoria may be
short-lived as longstanding investor worries
over China’s structural and balance sheet
challenges, including a heavy local debt
burden, an aging population, deflation, and
eroding confidence, will not be easily
reversed.
“After years of stimulus cries, this week
actually matters to equities – as evidenced by
the initial boost to Chinese stocks, which
should continue into Q4,” said Shehzad Qazi,
managing director of research firm China Beige
Book International.
“Beijing has strongly implied it’s establishing
a short-term put, though the mechanisms
mentioned this week (borrowing facilities for
stocks, market stabilization fund, etc) are not
yet operational, and some may never be.”
While the slew of new measures will boost
confidence to some extent, these monetary and
financial policies alone are enough to arrest
the worsening economic slowdown, according to
Nomura analysts.
“In our view, the size of incremental stimulus
might be less than 3% GDP per year, and markets
should place more emphasis on the specifics of
any stimulus package,” they said.
“If not designed well, a stimulus program, even
if seemingly large, could have a slow and
limited impact on growth.”
AUGUST
DATA DOWNBEAT
The latest set of stimulus measures are likely
in response to further deterioration in China’s
macroeconomic data in
August, but these may not be
sufficient to reverse the downturn in China’s
property market, according to Singapore’s
UOB Global Economics & Markets
Research.
Industrial growth in the country slowed in
August to 4.5% year on year compared
with a 5.1% pace set in
July, due to contraction in heavy
industries such as steel and cement.
Robust electronics production and a surge in
exports offer a short-term boost, although
protectionist measures from other
countries threaten future growth.
Industrial profits swung back to a sharp
contraction in August,
slumping by 17.8% year on year,
marking the first contraction since March.
In the services sector, which depends largely
on domestic demand, activity also lost
momentum, with growth slowing to 4.6%
year on year in August, bringing the
eight-month average expansion to 4.9%.
Household consumption and private investment
remain depressed.
The crisis in the property sector continues,
and the support measures implemented last
spring (around March-May 2023) have failed
to stimulate housing demand. Most property
developers are still facing major solvency or
liquidity problems.
” While market sentiment was lifted by the
stronger-than-expected measures, skepticism has
remained on any lasting impact on China’s
growth or the property market,” UOB
economist Ho Woei Chen said.
“PBoC’s re-lending programme has faced a slow
take-up due to the poor potential returns and
weak buying sentiment while developers continue
to face funding risks,” Ho said.
“It is thus important for authorities to
implement stronger measures to accelerate the
reduction of supply glut,” she added.
Deteriorating conditions on the labour market
are adding to the property crisis, which is
significantly impacting household morale and
spending, said Christine Peltier,
economist at French bank BNP Paribas.
Growth in retail sales slowed again in August
to just a 2.1% year-on-year increase.
“Deflationary pressures are also persisting due
to weak domestic demand and production
overcapacities, falling property prices, slower
wage growth and declining global commodity
prices,” Peltier said.
In August, China’s consumer price
index rose by 0.6% year on year, but
core inflation hit a low of 0.3%, and the
production price index fell for the 23rd
consecutive month.
China’s official manufacturing purchasing
managers’ index (PMI) remained in contraction mode for the
fifth month in September, although the
number inched up to 49.8 from 49.1 in August.
Insight article by Nurluqman
Suratman
Thumbnail photo shows a container terminal
in Taicang, Suzhou Port in China (Source:
Costfoto/NurPhoto/Shutterstock)
Polyethylene30-Sep-2024
SINGAPORE (ICIS)–Click here to see the
latest blog post on Asian Chemical Connections
by John Richardson: Last week’s launch of a new
“stimulus bazooka” by the Chinese government
might lead to a rally in chemicals and polymer
pricing.
But so what if prices go up over the next few
weeks? The price rises will be of little
long-term consequence unless we see big shifts
in spreads and margins in the key polyethylene
(PE) market.
Between January 2014 and December 2021,
northeast Asia integrated variable cost
naphtha-based PE margins averaged $451/tonne;
from January 2022 until the third week of
September, they averaged just $2/tonne.
In late 2019/early 2020, northeast Asia PE
margins briefly turned negative as oversupply
increased. But the full downturn was delayed by
reduced feedstock availability and a surge in
PE demand resulting from the pandemic. Then
came the Evergrande Moment
Average CFR China PE price spreads over CFR
Japan naphtha costs are at just $280/tonne so
far this year, the lowest since our price
assessments began in 1993. We have seen three
consecutive years of new record-low spreads. It
is of course no coincidence that the three
years have followed the Evergrande Moment.
HDPE spreads would have to rebound by 129%,
LDPE spreads by 48% and LLDPE spreads by 88% to
see a return to the old market conditions.
Average PE spreads would thus have to rise by
80%.
Follow the ICIS PE spread and margin data every
week to discover whether a recovery is really
happening in China.
My view, as you know, is that China’s economy
faces deep long-term challenges resulting from
the end of the real-estate bubble and an ageing
population. The extent to which it can maintain
its dominant role in global exports is also in
question because of a much more difficult
geopolitical environment.
I don’t believe that any amount of likely
economic stimulus in China (there are political
and economic limitations on stimulus) can fully
address these challenges. It is what it is. We
need to get used to a Chinese chemicals market
where demand growth for some products might
even go negative.
You may disagree. But what we can and should
agree on is the story that’s been consistently
told by PE spreads and margins since January
2022.
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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Gas30-Sep-2024
SINGAPORE (ICIS)–Here are the top stories from
ICIS News Asia and the Middle East for the week
ended 27 September.
Asia
BD market sentiment to be driven by domestic
China fluctuations
By Ai Teng Lim 24-Sep-24 13:05 SINGAPORE
(ICIS)–Asian spot prices for butadiene (BD)
imports made sizeable gains this month,
alongside a bullish domestic yuan-denominated
market in China.
China
petrochemical futures rally on fresh economic
measures
By Fanny Zhang 24-Sep-24 16:42 SINGAPORE
(ICIS)–China’s petrochemical futures markets
surged on Tuesday following announcement of
fresh measures to rev up activity in the
world’s second-biggest economy.
India
to be among global oil demand growth drivers in
2023-2050 – OPEC
By Nurluqman Suratman 25-Sep-24 13:09 SINGAPORE
(ICIS)–India is expected be a major driver of
global long-term oil demand growth through to
2050, alongside the Middle East and Africa,
OPEC said in a report.
Market diversification
key to weather challenges in Asia
recycling
By Arianne Perez 23-Sep-24 12:46 SINGAPORE
(ICIS)–Asian producers of recycled polyolefins
have been struggling to stay afloat since 2023
amid a general slump in trade of fast-moving
consumer goods (FMCGs).
Slow
recovery in Asia petrochemical markets; Q4
sentiment bearish
By Jonathan Yee 25-Sep-24 14:26 SINGAPORE
(ICIS)–Macroeconomic challenges in China have
kept overall sentiment bearish in Asia’s
petrochemical markets, but there was a late
pick-up in demand for some products just days
before a week-long holiday in the country in
October.
Intra-Asia VAM spot
trades may contract amid downstream
woes
By Hwee Hwee Tan 26-Sep-24 10:46 SINGAPORE
(ICIS)–Asia’s import demand for vinyl acetate
monomer (VAM) is being dampened by slower
demand and macroeconomic woes persisting into
the fourth quarter of 2024.
INSIGHT: China 2024 crude
imports, throughput to fall on economic
headwinds
By Patricia Tao 27-Sep-24 14:27 SINGAPORE
(ICIS)–China is expected to record lower crude
oil imports and refinery throughput this year
on weaker-than-expected distillates demand
during the typical peak consumption season amid
economic headwinds and increased market
penetration of alternative fuels.
PODCAST: Asia fatty
alcohol market uptrend may prompt switch to
LAB
By Damini Dabholkar 24-Sep-24 14:24 SINGAPORE
(ICIS)–Prices of Asia’s fatty alcohol midcuts
may be nearing a ceiling as demand from Europe
is expected to wane after October, given the
looming EU Deforestation Regulation (EUDR)
which starts on 30 December.
Ethylene27-Sep-2024
HOUSTON (ICIS)–Nearly a quarter of US oil
production in the Gulf of Mexico remains shut
in following Hurricane Helene, a government
agency said on Friday.
The following table shows the disruptions to US
Gulf production that were caused by Helene,
according to the Bureau of Safety and
Environmental Enforcement (BSEE).
Total
% of US Gulf
Oil, bbl/day
427,000
24.39%
Gas, million cubic feet/day
343
18.46%
Source: BSEE
Total
% of US Gulf
Platforms evacuated
9
2.43%
Rigs evacuated
0
0%
Source: BSEE
Helene has weakened to a tropical depression
after making landfall on Thursday night as a
powerful Category 4 hurricane on the
northwestern coast of Florida.
Since making landfall, the storm has knocked
out power to millions, caused floods and
produced record storm surges.
It set new all-time tide gauge records in the
Tampa Bay area, a hub for the fertilizer
industry, according to the meteorological firm
AccuWeather.
Overall damage could be in the tens of billions
of dollars, AccuWeather said.
Such widespread power outages and floods will
lower demand for plastics and chemicals.
Afterwards, repairs should boost demand for
paints, coatings and other plastics and
chemicals used in construction.
Acetone27-Sep-2024
LONDON (ICIS)–Ahead of the approaching
European Petrochemical Conference (EPCA) in
Berlin 7-10 October, ICIS editors discuss
market conditions in a variety of solvent
markets.
Ahead of the approaching European Petrochemical
Conference (EPCA) in Berlin 7-10 October, ICIS
editors discuss market conditions in a variety
of solvent markets.
Market updates on methyl ethyl ketone
(MEK), methyl isobutyl ketone (MIBK),
isopropanol (IPA), phenol, acetone, toluene,
mixed xylenes, glycol ethers and propylene
glycol ethers, butyl acetate and ethyl acetate
Trade flows and impact of freight rate
movements
Overcapacity versus low demand levels
Upcoming maintenance programs
In this episode, Jane Massingham talks to
editors Nick Cleeve, Jane Gibson, Zubair Adam,
Cameron Birch and Marion Boakye.
Ammonia27-Sep-2024
HOUSTON (ICIS)–More than 4 million outages
were reported in the southeastern US on Friday
after Hurricane Helene made landfall as a
powerful Category 4 storm in northwestern
Florida.
The southeastern US does not have a lot of
chemical production. But such widespread power
outages, in addition to disruptions caused by
flooding, will lower demand for plastics and
chemicals more broadly.
The power outages are concentrated in the US
states of South Carolina, Georgia, Florida and
North Carolina, according to the website
poweroutage.us.
Among the few chemical plants near Helene’s
landfall site are a crude sulphate turpentine
refinery and a crude tall oil (CTO) refinery
that Kraton owns in Panama City, Florida. Tall
oil is a feedstock fatty acids, renewable
diesel and sustainable aviation fuel (SAF).
Kraton has not returned requests for comment in
regard to its preparations for Helene.
Since Helene made landfall, it has weakened
into a tropical storm, with maximum sustained
wind speeds of 45 miles/hour (75 km/hour),
according to the National Hurricane Center.
The following map shows its projected path.
Source: National
Hurricane Center
PORT CLOSURESInbound and
outbound traffic at Port Tampa Bay ceased ahead
of the storm, and the port’s shipping channels
were closed.
Tampa is an important hub for the US fertilizer
industry, hosting corporate offices, trading,
product storage, shipping and other logistical
operations.
Other port closures include Panama City, St
Joe, St Petersburg, Manatee and Key West on
Florida’s west coast, as well as Fernandina,
Jacksonville and Canaveral on Florida’s east
coast.
ENERGY DISRUPTIONS
The following table shows the disruptions to US
Gulf production that were caused by Helene,
according to the Bureau of Safety and
Environmental Enforcement (BSEE).
Total
% of US Gulf
Oil, bbl/day
441,923
25.25%
Gas, million cubic feet/day
363.39
19.81%
Source: BSEE
Total
% of US Gulf
Platforms evacuated
27
7.28%
Rigs evacuated
1
20%
Source: BSEE
The Gulf of Mexico accounts for 14% of US
production of crude oil and 5% of total dry gas
production, according
to the Energy Information Administration
(EIA).
RAIL DISRUPTIONS
Railroad company CSX planned to
close its TRANSFLO terminals in Tampa and Tampa
Port on Thursday.
Railroad company Norfolk Southern said that
customers with shipments moving through the
southeast and mid-Atlantic should prepare for
delays.
RECONSTRUCTION AND CHEM
DEMANDHurricane Helene’s current
path could put $5.64 billion worth of housing
at risk to storm surge flooding, an insurance
data company said on Wednesday.
Nearly 25,000 residential properties in the
Tallahassee and Homosassa Springs metropolitan
areas are at risk, said CoreLogic.
“Helene has the potential to become a
once-in-a-generation storm,” said Jon Porter,
chief meteorologist for the meteorology firm
AccuWeather. It estimates that most of Florida
and much of the southeastern US will be exposed
to winds reaching 40-60 miles/hour.
AccuWeather expects that most of Florida and
all of the states of Georgia, South Carolina
and North Carolina are at risk for tornados.
For hurricanes in general, reconstruction can
translate to increased demand for many
chemicals and polymers.
The white pigment titanium dioxide (TiO2) is
used in paints.
Solvents used in paints and coatings include
butyl acetate (butac), butyl acrylate
(butyl-A), ethyl acetate (etac), glycol ethers,
methyl ethyl ketone (MEK) and isopropanol
(IPA).
Blends of aliphatic and aromatic solvents are
also used to make paints and coatings.
For polymers, expandable polystyrene (EPS) and
polyurethane (PU) foam are used in insulation.
Polyurethanes are made of methylene diphenyl
diisocyanate (MDI), toluene diisocyanate (TDI)
and polyols.
High density polyethylene (HDPE) is used in
pipe. Polyvinyl chloride (PVC) is used to make
cladding, window frames, wires and cables,
flooring and roofing membranes.
Unsaturated polyester resins (UPR) are used to
make coatings and composites.
Vinyl acetate monomer (VAM) is used to make
paints and adhesives.
Thumbnail shows Helene before it made
landfall. Image by National Hurricane
Center.
Recycled Polyethylene Terephthalate27-Sep-2024
LONDON (ICIS)–Senior Editor for Recycling,
Matt Tudball, discusses the latest developments
in the European recycled polyethylene
terephthalate (R-PET) market, including:
October price talks underway, but some
different views emerging
Flake and food-grade pellet demand still
flat ahead of October
Market divided over views for Q4 and Q1
demand
Crude Oil27-Sep-2024
LONDON (ICIS)–The economic outlook in the EU
and eurozone was stable in September, as higher
construction and consumer confidence was offset
by a decrease in industry.
The European Commission’s Economic Sentiment
Indicator (ESI) was flat in the EU at 96.7
points and fell by 0.3 points in the eurozone
to 96.2, according to official data on Friday.
“The steadiness of the ESI in the EU resulted
from improved confidence in construction and
among consumers, offset by a decrease in
industry confidence. Confidence in services and
retail trade remained broadly stable,” the
Commission said in a statement.
For the largest EU economies, the ESI worsened
in France (-1.4) and Germany (-1.2), while it
improved in Poland (+2.0), Spain (+1.9), Italy
(+1.2) and the Netherlands (+0.5).
Employment prospects for September were also
broadly unchanged, with the Commission’s
Employment Expectations Indicator (EEI) up 0.3
points to 100.0 in the EU and higher by 0.1
points to 99.5 in the eurozone.
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