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Petrochemicals17-Sep-2024
LONDON (ICIS)–Click
here to see the latest blog post on
Chemicals & The Economy by Paul Hodges,
which suggests OPEC+ risks losing control of
oil markets.
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. Paul Hodges is the chairman of
consultants New
Normal Consulting.
Polyethylene17-Sep-2024
SINGAPORE (ICIS)–Click
here to see the latest blog post on Asian
Chemical Connections by John Richardson.
I did the same exercise on global ethylene
markets almost exactly a year ago as I do in
today’s post.
This makes me wonder why there is talk of early
signs of a global recovery in olefins and
derivative markets.
Based on the new calculations, what would it
take to return global operating rates to their
very healthy 1992-2023 average of 88%?
Assuming global production, which is about the
same as demand, stays unchanged from our base
case, global capacity would have to grow by an
average of around 2m tonnes a year versus our
base case of 6.2m tonnes a year.
This implies capacity closures elsewhere to get
to the 2m tonnes a year of 2024-2030 capacity
growth.
Global capacity would need to grow at an
average 1% per year to achieve a 2024-2030
operating rate of 88%. This would compare with
the 1992-2023 average of 4%.
One might argue that we have underestimated
global demand given the likelihood of a
loosening cycle by the Fed, perhaps a big dose
of Chinese economic stimulus, and booming
economies in the developing world such as
India’s.
But what happens in the rest of the world is
less consequence compared with events in China.
Today’s second chart – showing China’s
percentage shares of global demand for the
major ethylene derivatives in 1992 (at the
start of the Chemicals Supercycle) and by the
end of this year – underlines the
disproportionate role that China has come to
play in driving global consumption:
In 1992, from a 22% of the global population,
China’s average share of global demand across
these ethylene derivatives was 6%. China’s
share of global demand is forecast to reach 40%
from only an 18% share of the global population
by the end of 2024.
The Economist wrote in its 7 September issue
that the real Chinese economic picture may be
bleaker than is commonly painted.
“The official [Chinese government] numbers show
that the GDP growth rate has reverted to
pre-pandemic level, despite the moribund
housing industry and low investment in
infrastructure,” wrote the magazine
“This is a risible claim, says Logan Wright of
Rhodium Group, a consulting firm. ‘The broader
problem is simply that the GDP data have
stopped bearing any resemblance to economic
reality,’ he explains.
My ICIS colleague, Kevin Swift, has looked at
disagreements over China’s population level. In
the blog’s 30 August post, he wrote:
“Demographer Yi Fuxian at the University of
Wisconsin has questioned assumptions about
current Chinese population and the likely path
forward. He examined China’s demographic data
and found clear and frequent discrepancies.
These should parallel each other, and they do
not.
“Yi posits that China population in 2020 was
1.29bn, not 1.42bn, an undercount of over
130m.”
If China’s population was smaller than commonly
assumed in 2020, so perhaps was its chemicals
demand, making today’s global oversupply worse.
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.
Ammonia17-Sep-2024
HOUSTON (ICIS)–The US Department of Energy
(DOE) has announced a conditional commitment
for up to $1.559 billion to Wabash Valley
Resources to help finance a commercial-scale
waste-to-ammonia production facility using
carbon capture and sequestration (CCS)
technology.
The government funding would be part of a total
investment of $2.4 billion that Wabash Valley
Resources would secure for the project through
private investment.
Located in West Terre Haute, Indiana, the
project is being planned to produce 500,000
tonnes of anhydrous ammonia annually and
permanently sequestering 1.6 million tonnes of
carbon dioxide annually.
Officials said it will have the potential to be
the world’s first, carbon-negative ammonia
production facility and that the company would
be repurposing an industrial gasifier to
utilize petroleum coke.
This will be the US’ first efforts to
utilize petroleum coke to produce ammonia and
store the associated emissions via
permanent geologic sequestration.
Wabash Valley Resources said it is their
intention to demonstrate a commercially and
environmentally viable end-use
alternative for petroleum coke, which
is a waste product generated during
the oil refining process.
Officials said this project would play a
critical role in securing domestic fertilizer
supply for the region commonly known as the
Corn Belt, contributing to both food security
and climate goals.
This low-carbon ammonia would be
cost-competitive compared to existing ammonia
imports, helping to drive down costs for local
businesses and consumers.
It was noted that while ammonia fertilizer is a
crucial element of the US agricultural system,
its production is a significant contributor to
climate change. Globally, the manufacturing of
the nutrient accounts for 1% to 2% of all
carbon dioxide emissions.
Through this project, Wabash Valley Resources
is striving to reduce the agricultural
industry’s emissions.
In addition to its environmental benefits, the
project is expected to create 500 construction
jobs and 125 operations jobs.
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Ammonia16-Sep-2024
HOUSTON (ICIS)–Expected to make landfall late
Monday in South Carolina but not develop
further, the next round of tropical weather is
already delivering wind and rains to the region
but for the fertilizer industry, it was not
seen as being the type of threat that Hurricane
Francine was last week.
While South Carolina and North Carolina have
significant agriculture activities and
infrastructure along with crop nutrient
operations and distribution, fertilizer
manufacturing is less prevalent than in other
parts of the US.
The storm was being classified as a tropical
rainstorm with potential to produce several
inches of rain per hour with it expected to
trek northward once it makes landfall. There
have been tropical storm-force winds seen from
this event but there has not been a defined
center of circulation.
In terms of major fertilizer activity, Canadian
producer Nutrien has the Aurora Phosphate plant
in Aurora, North Carolina, with the city
located near the coast. The company said it is
keeping aware and taking necessary steps.
“We are actively monitoring the tropical storm
system and have comprehensive emergency
response plans in place to ensure the safety of
our people and operational integrity of our
facilities,” said a Nutrien spokesperson.
Like the previous tropical weather that has
struck the US, this storm’s wrath will bring
the most damage to crops.
Harvesting of corn and soybeans are underway,
with cotton and other crops now maturing also
in jeopardy, with the heavy rainfall likely
causing some localized flooding.
Harvesting campaigns in both South Carolina and
North Carolina have been halted, with this
trend possibly carrying into the surrounding
states. If the rain is extensive the delay
could be several days, if not longer depending
on rainfall amounts.
The concern is with a delay in these activities
it creates an additional lag for starting
post-harvest field activities like
end-of-the-year fertilizing.
The US Department of Agriculture (USDA)
reported that 47% of the corn crop had been
completed with only 1% of soybeans having been
harvested in North Carolina. There were no
results provided for South Carolina.
As with Hurricane Francine which hit both
Louisiana and Mississippi much more severely,
the true impact of this latest tropical system
will be felt in crop damage rather than damaged
fertilizer plants or retail operations.
There is concern that any loss of yields will
mean less income for farmers which then could
cause a sizeable decrease in buying for further
volumes.
Recycled Polyethylene Terephthalate16-Sep-2024
HOUSTON (ICIS)–As the US recycled polyethylene
terephthalate (R-PET) market continues to
develop and new players establish supply
relationships across members in the value
chain, pricing mechanisms have shifted
significantly over the course of the last 5+
years.
Historically, R-PET pricing was linked to
virgin pricing, but at a deficit, meaning
recycled resins were expected to be cheaper
than virgin. Now, the tables have turned,
particularly for sought after
“sustainability-driven” grades of recycled
resin which typically command a premium to
virgin due to the tight supply and high demand
of these higher quality, clear resins.
Pricing for these grades of recycled resins has
shifted within the R-PET industry, such that
pellet prices are largely based on their own
feedstock and production costs.
While spot pellet pricing is subjected to the
additional lens of local supply and demand,
including substitution with imports or cheap
virgin, contract pellet pricing is now largely
based off of bale feedstock formulas, with some
contracts specifying individual step inputs,
and others specifying the bale index and then
an adder to represent the processing cost.
Eventually, the market may move to a uniform
indexed pellet price, settled on a routine
frequency by the market, similar to how R-PET
pricing is established in Europe, or how other
commodity resin prices are established in the
US, such as polyethylene (PE).
Within the ICIS US R-PET commodity services,
two new price series have been introduced which
represent food grade pellet pricing calculated
via a formula, starting with bale feedstock
costs.
While each contract will have unique formula
inputs which are largely kept private, the
following prices are meant as an indicator of
average pellet pricing based on formula, as
this can vary significantly from active spot
market transactions – depending on the current
market supply and demand.
There is one assessment for the East Coast and
one for the West Coast based on various bale
feedstocks.
The formula is listed below:
[([(Bale price indicator + bale freight ) ÷
bale yield] + bale to flake processing costs) ÷
flake yield] + flake to pellet processing costs
= pellet price
Formula input descriptors:
Bale price indicator: What quality
(curbside or deposit) and region (East Coast vs
West Coast) descriptors are used for selecting
base pricing for bale feedstock costs in
relation to the type most often used by local
recyclers.
Bale freight: Cost to transport material
from bale producer (typically material recovery
facility (MRF)) to bale buyer (typically the
recycler/reclaimer).
Bale yield: Factor to account for loss of
material due to contamination within the bale;
Curbside bales have higher contamination levels
and thus lower yields.
Bale to flake processing costs: Associated
production costs from sorting, washing,
grinding processes, including but not limited
to facilities costs, utilities, labor, etc.
Flake yield: Factor to account for loss of
material due to contamination from flake to
pellet stage.
Flake to pellet processing costs:
Associated production costs from pelletization,
including but not limited to facilities costs,
utilities, labor, etc.
The numeric input values were gathered from
market participants, with median values used
among responses. The inputs are subject to
change pending further feedback or market cost
changes, such as the recent inflation of
production costs within the last ~2-4 years.
This price excludes delivery costs of the final
pellet. This price also excludes explicit
margin adders, though some processing costs may
include inherit margin depending on the
processing yield fluctuation.
For more information on these new series, or to
share feedback, please contact Emily Friedman
at Emily.friedman@icis.com.
Ammonia16-Sep-2024
HOUSTON (ICIS)–Even with recent poor weather
at hand, the US harvest continues to advance
with 9% of corn completed and 6% of soybean
acreage finished, according to the latest US
Department of Agriculture (USDA) weekly crop
progress report.
The weekly update showed there is 9% of the
corn crop harvested, which is above the 8% rate
from last year and the five-year average of 6%.
Texas is the leading state with 80% of their
crop done with North Carolina next at 47%.
There is currently 85% of corn at the dented
stage, which is behind the 88% achieved in 2023
but it is ahead of the five-year average of
84%.
45% of the crop is rated mature, which trails
the 48% mark from last year, but the current
pace is above the five-year average of 38%.
For corn conditions, there is still 4% rated
very poor and 8% as poor with 23% now as fair.
There is 49% listed as good with 16% remaining
as excellent.
Soybeans dropping leaves is now at 44% of the
crop, which trails the 2023 level of 47% but is
higher than the five-year average of 37%.
In the first update on soybean harvesting, the
USDA said there is 6% of the crop completed,
which is ahead of the 4% level from last year
and the five-year average of 3%.
Louisiana is the leading state with 46%
completed followed by Mississippi at 44%.
For soybean conditions, there is still 3%
listed as very poor with 8% now as poor. 25%
remains as fair and 52% as good, with there now
12% rated as excellent.
In other harvesting updates, there is 10% of
the cotton acreage completed with sorghum
harvest having reached 24%.
Ethanol16-Sep-2024
HOUSTON (ICIS)–Gevo has received a patent for
its process that converts ethanol into olefins
in a single step, providing another way to make
propylene from renewable feedstock, the
US-based renewable chemicals producer said on
Monday.
The patent, No 12,043,587 B2, addresses the
company’s process that relies on catalyst
combinations for the process, which can make
propylene and butylenes, which are also known
as butenes.
Gevo had licensed the technology to LG Chem.
Chemical companies have had limited ways to
produce propylene or butylenes from renewable
feedstock.
Technology already exists to dehydrate ethanol
to produce ethylene. Companies could then
convert the ethylene to propylene through a
metathesis unit, but that would require an
additional step and another plant, which would
increase costs.
Another route is to hydrotreat natural oils and
used cooking grease to produce renewable
naphtha. That naphtha could then be cracked in
traditional ethylene plants to produce olefins
and aromatics.
This process faces possible feedstock
constraints if companies wish to use nonfood
feedstocks. Already, oleochemical producers
that rely on tall oil have had to compete with
renewable diesel producers for feedstock.
Gevo did not compare the costs of its process
to these existing ways to make propylene and
butylenes from renewable sources.
Petrochemicals16-Sep-2024
NEW YORK (ICIS)–It has been a long time coming
and there is plenty more time before the
chemical industry finally sees a meaningful
upturn in the durable goods cycle, in turn
giving a much-needed boost to commodity
chemicals, according to Jefferies.
“We expect demand stabilization in 2025, with a
restock cycle and a rate-driven durables goods
cycle in 2026-2027 to set the stage for the
next period of tight commodity chemical
supply/demand balances – MDI (methylene
diphenyl diisocyanate) and methanol first, in
our view, then acetyls, then olefins,” said
Laurence Alexander, analyst at Jefferies, in a
research note.
In his base case scenario, the analyst sees US
durable goods demand flat to down 3% in 2025
and up around 10% in 2026.
The anticipated turn in the cycle for housing
and durable goods would be a strong catalyst
for shares of Eastman, Huntsman, Avient and
DuPont, he pointed out.
For chemicals in the near term, Alexander
expects Q3 2024 to show a return to “normal
seasonality” and Q4 volume outlooks to be
trimmed 1-2% on more caution on the Christmas
spending season – especially in Europe – as
well as automotive production this winter.
TRIMMING OUTLOOK FOR
CELANESEGiven the softer
near-term outlook, the Jefferies analyst also
trimmed his earnings per share (EPS) estimates
on Celanese for Q3 (by $0.06 to $2.84), Q4 (by
$0.05 to $3.09) and for 2025 (by $0.10 to
$10.40).
“Credit easing is likely needed to trigger a
demand rebound, and any tailwind from an
improved credit environment will likely not be
evident until mid-2025 at the earliest,” said
Alexander.
“Although destocking has faded, demand trends
remain broadly sluggish with few signs of a
recovery. European demand has yet to trough,
North America is flattish and the recovery in
Asia has been muted,” he added.
By end-market, he sees electronics likely
rebounding but at a slower pace until consumer
confidence improves and automotive production
accelerates.
Consumer durables and construction demand is
likely to remain soft into next summer.
And automotive demand is muted overall, with
headwinds to production schedules likely in the
near term. Longer term, he expects better
momentum in electric vehicle (EV) sales in
China.
Focus article by Joseph Chang
Ethylene16-Sep-2024
HOUSTON (ICIS)–Here are the top stories from
ICIS News from the week ended 13 September.
INSIGHT: Wall Street reaction to
Methanex/OCI deal negative on valuation,
leverage
Methanex’s announcement that it will acquire
OCI Global’s international methanol business
for $2.05 billion drew a swift negative initial
reaction, with its stock price plunging 7.9% at
the close of its first day of trading after the
announcement.
Storm Francine veers path, could
potentially hit petchems hubs in west
Louisiana
Storm Francine continues strengthening into a
hurricane as it approaches the southern costs
of the US, but its path could veer slightly
west and potentially hit key petrochemicals
sites in Louisiana which border with Texas.
US chem, oil operations begin shutting
ahead of storm Francine
Some chemical and upstream oil and gas
companies are shutting down operations ahead of
Tropical Storm Francine, which is expected to
strengthen into a hurricane on Tuesday night
and make landfall along the US coast of
Louisiana on Wednesday or Wednesday night.
Francine strengthens into hurricane,
heads for US Gulf Coast
Francine has strengthened into a hurricane and
is moving northeastward across the Gulf of
Mexico, with landfall expected in Louisiana,
US, on Wednesday afternoon or evening.
Louisiana chemical plants shut down as
Hurricane Francine nears landfall, major
capacities at risk
Several chemical companies are shutting down
plants in Louisiana, with others taking other
precautionary measures as the eye of Francine –
now a Category 2 hurricane – approaches the
coast for imminent landfall.
Hurricane Francine passes over
Louisiana parish with many chem
plants
Ascension parish, home to Geismar and its many
chemical plants, was among the regions hardest
hit by Hurricane Francine, which has caused
hundreds of thousands of power outages.
SHIPPING: Asia-USEC container rates
plunge by 20% as shippers avoid possible ILA
strike
Average global rates for shipping containers
fell significantly this week, including a 21%
decrease from Shanghai to New York, as shippers
are shifting cargo deliveries to the US West
Coast to avoid the planned strike on 1 October.
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