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Ethylene27-Sep-2024
HOUSTON (ICIS)–Hurricane Helene made landfall
Thursday night as a Category 4 storm in the
northwestern part of the US state of Florida.
The storm made landfall in the Big Bend region
just east of the mouth of the Aucilla River,
according to the National Hurricane Center at
23:20 Eastern time (3:20 GMT Friday). Maximum
sustained winds were around 140 miles/hour.
Helene was moving north-northeast, with a
hurricane warning in effect for Anclote River
to Mexico Beach.
Big Bend is a sparsely populated region of
Florida.
However, a storm surge warning includes Tampa
Bay, an important hub for the US fertilizer
industry.
Nearly 1 million customers in Florida were
without power, according to tracker
PowerOutage.us.
PORT CLOSURESInbound and
outbound traffic to Port Tampa Bay ceased ahead
of the storm, and the port’s shipping channels
were closed.
Port Tampa Bay is an energy products gateway
for oil and gas, jet fuel and petroleum
products, as well as fertilizers. It is also a
gateway for construction and building
materials.
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.
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, insurance data company
CoreLogic said on Wednesday.
Reconstruction following hurricanes can
increase demand for many chemicals and
polymers.
Additional reporting by Al Greenwood
Potassium Sulphate (SOP)26-Sep-2024
HOUSTON (ICIS)–Australian BCI Minerals
announced it has commenced operations at its
Mardie salt and potash project after receiving
all necessary Western Australian and
Commonwealth government environmental
approvals.
It has begun filling evaporation ponds 1, 2,
and 3 with BCI Minerals set to update and
resubmit its groundwater monitoring and
management plan (GMMP) for further approval
before filling evaporations ponds 4 through 9.
Construction of the salt-first component of the
project is over halfway completed with it
expected the company will achieve first salt on
ship in Q2 2027.
Located 80km south of Karratha, in the Pilbara
region, Mardie is anticipated to produce 5.35
million tonnes/year of high-quality industrial
salt for export and 140,000 tonnes/year of
sulphate of potash (SOP). It has an operating
life expected to exceed 60 years.
“Australia hasn’t developed a salt project of
this significance in 25 years, and the Mardie
Project will be Australia’s largest solar salt
project and the third largest globally,” said
David Boshoff, BCI Minerals managing director.
“With the projected growth in demand for high
grade industrial salt in our target Asian
markets, BCI Minerals is strongly positioned to
supply global markets with Mardie salt for
generations.”
Ammonia26-Sep-2024
HOUSTON (ICIS)–A quarter of US oil production
in the Gulf of Mexico remains shut in as Helene
becomes close to becoming a major hurricane.
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
Hurricane Helene has maximum sustained wind
speeds of nearly 110 miles/hour (175 km/hour),
which is 1 mile/hour below becoming a major
hurricane.
It is on track to make landfall in the Big
Bend, a sparsely populated region of
northwestern Florida.
The following map shows the forecasted path of
Helene.
Source: National Hurricane Center
FLORIDA CHEMS AT
RISKHelene could threaten Panama
City, Florida, where Kraton operates a crude
sulphate turpentine refinery and a crude tall
oil (CTO) refinery.
Tall oil is a feedstock for the production of
fatty acids, renewable diesel and sustainable
aviation fuel (SAF).
Helene’s path is too far east to threaten
Pensacola, which is home to some nylon and
thermoset resin plants.
Helene is moving on the opposite side of Texas
and Louisiana in the Gulf of Mexico. Those two
states are home to most of the refineries,
petrochemical plants and LNG capacity of the
US. Operations at those plants will not be
threatened by Helene.
Helene will not make landfall near Tampa Bay,
an important hub for the US fertilizer
industry. Tampa hosts corporate offices,
trading, product storage, shipping and other
logistical operations.
Nonetheless, Helene will disrupt operations at
the port of Tampa Bay.
PORTS CLOSED TO TRAFFIC ALONG EASTERN
GULF COASTInbound and outbound
traffic has ceased among numerous ports along
Florida’s Gulf Coast, including Port Tampa Bay,
an important entrepot.
Tampa is in the region that could see a peak
storm surge of 5-8 feet (1.5-2.4 meters), as
shown in the following map.
Source: National Hurricane Center
The following table shows some of the other
ports in Florida that are closed.
Panama City, Florida
Port St Joe, Florida
St Petersburg, Florida
Manatee, Florida
Source: US Coast Guard
The following ports are open with restrictions.
Pensacola, Florida
Mobile, Alabama
Source: US Coast Guard
RAIL DISRUPTIONS
Railroad company CSX plans 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 photo: Helene. (By the National
Hurricane Center)
(adds missing world “Gulf” in headline)
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Potassium Chloride (MOP)25-Sep-2024
HOUSTON (ICIS)–Canadian fertilizer developer
Karnalyte Resources announced it will begin a
review of its development strategy to evaluate
the economic potential of increasing magnesium
chloride production at their Wynyard project in
Saskatchewan.
This effort will be undertaken by developing
the magnesium assets at the same time as the
development of the potash project.
The company said the carnallite, also known as
hydrated potassium magnesium chloride, is
abundant within their mineral deposit so they
need to determine the economic balance of
developing carnallite for the co-production of
magnesium chloride and potassium chloride.
The aim is to significantly increase magnesium
chloride production through the application of
advanced solution mining technologies.
The Government of Canada lists magnesium as one
of the nation’s 34 critical minerals and it
also appears on the lists in other countries
including the US, the EU and Australia.
Magnesium is a key mineral in the clean
technologies and advanced manufacturing value
chain while magnesium chloride serves as a key
raw material in the production of various
chemicals used in high-tech applications such
as semiconductor manufacturing and in
industries including agriculture and
pharmaceuticals.
“In light of the increasing importance of
magnesium as one of the building blocks for the
green and digital economy, we are reevaluating
our strategy and we believe we should review
the inclusion of concurrent and optimized
magnesium and potash deposit development in our
plans for the benefit of all stakeholders,”
said Danielle Favreau, Karnalyte Resources CEO.
The company said it plans to make progress on
its technical report through the remainder of
the year, which is a key precursor to any mine
construction.
It expects to complete the study on the review
of its development strategy by the first
quarter of 2025.
Wynyard is one of two projects Karnalyte
Resources is advancing with planned phase 1
production calculated at 625,000 tonnes/year of
high-grade granular potash with two subsequent
phases of 750,000 tonnes/year from each phase.
The company noted that all environmental
permits remain valid with preliminary detailed
engineering complete and that the existing
offtake agreement with Gujarat State
Fertilizers & Chemicals Limited remains in
effect.
Ethanol25-Sep-2024
HOUSTON (ICIS)–Companies have shut in nearly
30% of US oil production in the Gulf of Mexico
because of Hurricane Helene, which
meteorologists expect will strengthen into a
powerful Category 4 storm before making
landfall in a sparsely populated region in
northwestern Florida on Thursday.
The following table summarizes 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
511,000
29.18%
Gas, million cubic feet/day
313
16.85%
Source: BSEE
Total
% of US Gulf
Platforms evacuated
17
4.58%
Rigs evacuated
1
20%
Source: BSEE
Given Helene’s eastern path, Shell said it is
ramping up production at Appomattox to normal
levels. Shell has started restoring production
at Stones.
On Monday, bp said it had started to shut in
production at its Na Kika and Thunder Horse
platforms. It is curtailing production its
Argos and Atlantis platforms.
The meteorological firm AccuWeather is warning
that Helene could strengthen into a Category 4
hurricane by the time it makes landfall in the
Big Bend region in northwestern Florida.
A Category 4 storm qualifies as a major
hurricane and has maximum sustained wind speeds
of at least 130 miles/hour (209 km/hour) under
the Saffir-Simpson hurricane wind scale.
“The impacts from Helene will be widespread –
not just confined to locations near landfall in
the Florida Panhandle,” said Jon Porter,
AccuWeather chief meteorologist. “The storm
surge will be life-threatening across the
Florida Panhandle and southward to near Tampa.”
Based on the current forecast, Helene will not
make landfall near Tampa Bay, an important hub
for the US fertilizer industry. Tampa hosts
corporate offices, trading, product storage,
shipping and other logistical operations.
Nonetheless, Helene will disrupt operations at
the port of Tampa Bay.
The US Coast Guard set port condition YANKEE,
under which gale-force winds could disrupt
maritime operations in the next 24 hours.
Railroad company CSX plans 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.
Helene could threaten Panama City, Florida,
where Kraton operates a crude sulphate
turpentine refinery and a crude tall oil (CTO)
refinery.
Tall oil is a feedstock for the production of
fatty acids, renewable diesel and sustainable
aviation fuel (SAF).
Helene’s path is too far east to threaten
Pensacola, which is home to some nylon and
thermoset resin plants.
Helene is moving on the opposite side of Texas
and Louisiana in the Gulf of Mexico. Those two
states are home to most of the refineries,
petrochemical plants and LNG capacity of the
US. Operations at those plants will not be
threatened by Helene.
The following map shows the forecasts path of
Helene.
Source: National
Hurricane Center
THREATS FROM THE
STORMAccuWeather is warning of
catastrophic inland flooding from northern
Georgia to western North Carolina. Strong winds
could knock down power lines and cause outages
that could last for days or even weeks.
The major city of Atlanta, Georgia, is at risk
of significant power outages and flooding.
Much of Florida, Georgia and eastern Alabama
are at risk of tornados on Thursday. On Friday,
the threat shifts to the Carolinas, southern
Virginia, eastern Tennessee and southeastern
Kentucky.
Thumbnail shows Hurricane Helene. Image by
the National Hurricane Center.
Ethylene25-Sep-2024
HOUSTON (ICIS)–Helene strengthened into a
hurricane on Wednesday while maintaining its
course to make landfall in a sparsely populated
region of northwestern Florida later in the
week, meteorologists said.
By the time Helene makes landfall in the Big
Bend region of Florida, it should be a major
hurricane with maximum sustained wind
speeds of at least 111 miles/hour, according to
the National Hurricane Center.
Based on the current forecast, Helene will not
make landfall near Tampa Bay, an important hub
for the US fertilizer industry. Tampa hosts
corporate offices, trading, product storage,
shipping and other logistical operations.
Nonetheless, Helene will disrupt operations at
the port of Tampa Bay.
The US Coast Guard set port condition YANKEE,
under which gale-force winds could disrupt
maritime operations in the next 24 hours.
Railroad company CSX plans 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.
If Helene veers farther west, it could threaten
Panama City, Florida, where Kraton operates a
crude sulphate turpentine refinery and a crude
tall oil (CTO) refinery.
Helene’s path is too far east to threaten
Pensacola, which is home to some nylon and
thermoset resin plants.
Helene is moving on the opposite side of Texas
and Louisiana in the Gulf of Mexico. Those two
states are home to most of the refineries,
petrochemical plants and LNG capacity of the
US. Operations at those plants will not be
threatened by Helene.
FIRMS SHUT IN OIL OUTPUT IN
GULFDespite Helene’s eastern
path, oil companies have still shut in
production in the Gulf of Mexico.
The following table summarizes 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
284,000
16.21%
Gas, million cubic feet/day
208
11.20%
Source: BSEE
Total
% of US Gulf
Platforms evacuated
4
1.08%
Rigs evacuated
0
0
Source: BSEE
Given Helene’s eastern path, Shell said it is
ramping up production at Appomattox to normal
levels. Shell has started restoring production
at Stones.
On Monday, bp said it had started to shut in
production at its Na Kika and Thunder Horse
platforms. It is curtailing production its
Argos and Atlantis platforms.
THREATS OF STRONG WINDS, FLOODS IN
SOUTHEASTERN USHurricane force
winds could extend up to 25 miles (35 km) from
the center of Helene, the National Hurricane
Center said. Tropical storm force winds could
extend up to 275 miles.
The meteorological firm AccuWeather warned that
a storm surge of 6-10 feet (1.8-3.0 meters)
could threaten the Florida coast, beginning
from the north of Tampa Bay to the east of
Apalachicola. A storm surge of 10-15 feet is
expected just east of the Big Bend region of
Florida.
AccuWeather warned that winds of 40-60
miles/hour could extend north across much of
the southeastern US as Helene moves north on
Friday. Flash floods could strike northeastern
Georgia, western North Carolina, eastern
Tennessee and southwestern Virginia.
Thumbnail shows forecasted path of
Hurricane Helene. Image by the National
Hurricane Center.
Petrochemicals25-Sep-2024
NEW YORK (ICIS)–The lack of a meaningful
recovery in volumes amid a weak macroeconomic
backdrop along with geopolitical uncertainty
are key factors hindering mergers and
acquisitions (M&A) activity, panelists said
at a recent meeting of the Societe de Chimie
Industrielle in New York.
“Right now, it’s all about volume in our
businesses. That’s the number one issue,
because we have operating leverage in our
businesses where small increases in volume will
lead to meaningful increases in profitability,”
said Scott Wolff, managing director at private
equity firm American Securities.
“Fortunately, our portfolio companies – mostly
specialties businesses – have maintained real
pricing power during this inflationary period.
So, our margins across portfolio companies are
really strong,” he added.
Wolff is also chairman of US-based specialty
chemical companies Hexion, Meridian Adhesives
and Vibrantz (combination of former Ferro,
Chromaflo and Prince businesses).
On the macroeconomic front, “China is
struggling and is not going to hit 5% growth
while Europe is clearly struggling with Germany
potentially in recession. The US has been
remarkably resilient,” said Peter Young, CEO of
investment bank Young & Partners.
Panelists at the Societe de Chimie
Industrielle meeting from American Securities,
DC Advisory, Young & Partners and
ICIS.
COMMODITY VS
SPECIALTY“Demand is soft but
there’s a bit of a split personality. If you
talk about specialty chemicals, weaker demand
is not helping but at least they’re not facing
overcapacity,” said Young.
“Commodity chemicals is a very different story.
There is a massive increase in capacity in
China of commodity chemicals and plastics,
coupled with the Middle East trying to add
capacity because they want to diversify away
from [fuel], he added, pointing out that an
“irrational amount of capacity” is coming
online.
He doesn’t see global capacity utilization
improving for commodity chemicals until 2028.
“For specialty chemicals businesses, the lower
cost in commodities works to our advantage
because our companies are buying those raw
materials at favorable prices,” said Wolff from
American Securities.
DEALS PUT ON HOLDThis
widespread weakness in volumes has curbed
M&A activity as many potential sale
processes were delayed or put on hold.
“Profits in 2023 dipped for a number of
companies, so a number of processes that were
started in 2023 got pushed back or put on hold
because people were concerned about lower 2023
results and did not have enough visibility on
2024 numbers,” said Federico Mennella, managing
director and US head of chemicals at investment
bank DC Advisory, a unit of Japan’s Daiwa
Securities.
Today, in contrast, players are now focused on
improved 2024 results and have more confidence
in 2025 figures, he noted.
“At the beginning of the year, we expected
volumes in 2024 to be significantly higher than
in 2023. In fact, the M&A market was weaker
than expected in H1 2024, although we
still expect an increase in transactions in the
months ahead and in 2025,” said Mennella.
The banker attributes the slowdown to difficult
credit conditions, geopolitical factors –
including elections in a number of countries,
the war in Ukraine and Middle East uncertainty
– high energy costs and logistics
considerations.
Data from Young & Partners show chemical
M&A activity market is down significantly,
with only 20 deals above $25 million in size
closing in H1 2024 versus 75 for all of 2023
and 86 for all of 2022.
And among the 20 deals closed in H1 2024, 55%
were in Asia – mainly in China with Chinese
buyers.
“That makes the accessible market even smaller
for Western players because private equity
firms are not lining up to do LBOs (leveraged
buyouts) in China,” said Young.
“Chemical deal volume has gone down, mainly
because of uncertainty. And Europe volume has
just plunged because Europe is in trouble.
Their energy sources have changed and are much
higher cost, and in general it is a high-cost
place to make chemicals,” he added.
On a geographic basis, Europe is certainly
being eyed more cautiously and critically in
terms of investment by private equity firms,
Mennella from DC Advisory pointed out.
There are less cross-border deals coming from
China while the US remains a key area of
interest. M&A activity in the US could pick
up with interest rates easing, he added.
“We are also seeing increased M&A activity
in and from Japan, as well as from Southeast
Asian and Middle Eastern companies and
entities,” said Mennella.
Meanwhile, chemical companies themselves are
more active in restructuring, repositioning and
refocusing their businesses, which in turn
drives M&A activity among strategic players
as well as private equity groups, he added.
PROCESSES TAKING
LONGERPrivate equity firms
bought “a lot of companies in the 2015-2019
period which they need to sell soon. Other
private equity groups are raising funds and
want to show good returns on prior
investments,” said Mennella.
“But processes often take longer because of
gaps between sellers and buyers. We expect a
catch-up once we have confidence in 2024
earnings and projections for 2025.” he added.
“You see that every time we go through a peak
and valuations start to come down – volumes
start to drop because buyers and sellers can’t
agree on price,” said Young from Young &
Partners.
In 2023, for American Securities, in
approximately 75% of the deals evaluated by the
investment team, there was no transaction. This
compares to around 30% in a typical year, Wolff
pointed out.
“Broadly speaking, there has been a
buyer-seller disconnect, and there are various
factors [contributing to this] including
interest rates and destocking in 2023. So while
we were able to close a number of transactions,
there is no question that the pace of
dealmaking has been slower for us and the
industry at large,” said Wolff.
GOOD TIME FOR
BOLT-ONSCertain private equity
firms are continuing to make bolt-on
acquisitions to existing platform companies
rather than taking on major new deals on the
buy side.
“From an M&A perspective, the market is
active right now. That’s not necessarily the
case for platform investments. But for add-on
deals, there continues to be an abundance of
opportunities. We are really active on that
front,” said Wolff.
In August 2024, American Securities’ portfolio
company Vibrantz
acquired US-based Micro Abrasives, a
producer of specialty alumina for automotive
refinishing, optics polishing and industrial
lapping markets.
In June 2024, portfolio company Meridian
Adhesives
acquired specialty adhesives producer
Bondloc UK, which makes anaerobic adhesives,
cyanoacrylates, epoxies, UV cure adhesives, and
structural acrylics.
On the sell side for American Securities,
Hexion in April 2024 announced the
sale of its PVA and EPI Emulsions business
to Franklin International, a US-based producers
of adhesives, sealants and polymers that
supplied that Hexion business for over 40
years.
Also in April, Vibrantz
sold its Onda, Spain ceramic floor and wall
tile manufacturing operations to Xphere Global
Specialities, an affiliate of Vidres India
Ceramics.
TARGETED PROCESSES AND FLEXIBLE DEAL
STRUCTURESIn a challenging deal
environment, players are engaging in more
targeted buy or sell processes rather than
putting an asset out for auction. Deal
structures are also becoming more flexible to
bridge any gaps.
“A number of transactions include targeted
processes that do not involve a broad auction.
In other cases, a strategic or private equity
group with sector knowledge targets a specific
asset and approaches the owner directly,” said
Mennella from DC Advisory.
One case in point was Germany-based Henkel
proactively approaching Arsenal Capital
Partners for the acquisition of US-based
protective coatings and sealants producer Seal
For Life industries ($250 million in 2023
sales) and closing the deal in April 2024, he
noted.
“In another situation, instead of a broad
auction, we targeted five logical buyers before
going through any process. Two of the five
submitted bids, and one was accepted. It never
went to the broader market,” said Mennella.
Earnings growth and macro assumptions are much
fuzzier today, often requiring flexible or
hybrid M&A models to get deals done.
“A lot of the acquisitions made in the past
were based on a variety of optimistic
assumptions – the EBITDA was going to increase,
the exit multiple was going to remain or even
increase, interest rates would continue to stay
low, and everything was going to be on a
consistent and predictable trajectory,” said
Mennella.
“Given the recent post-pandemic market
dynamics, many buyers are more flexible and
innovative in structuring and executing their
deals,” he added.
In certain private equity sell-side deals, the
seller is retaining a portion of its stake
rather than exiting 100%.
In August 2024, H.I.G. Capital announced a
deal to sell water treatment solutions
company USALCO to private equity firm TJC
(formerly The Jordan Company) while retaining a
minority stake.
“The willingness of private equity and
strategics to utilize flexibility and
inventiveness helps bridge gaps and gets
transactions done,” said Mennella.
Or private equity firms could simply stand pat
and hold onto their portfolio companies for
longer, especially for those firms with longer
fund lives.
“We’re excited about the investment thesis of
our companies and their long-term potential.
Fortunately, we can be patient,” said Wolff
from American Securities.
“We’d rather realize the earnings growth we see
in these companies before exit, and if that
means holding for longer, that’s fine,” he
added.
CHALLENGE FOR
MANAGEMENTSAmid all the
uncertainty and weak demand backdrop, what
should other chemical company managements do?
“It really depends on who you are and where you
are because the nature of the problem and the
opportunity and the solution are going to be
dramatically different,” said Young of Young
& Partners.
“First, take a real look at the asset and try
to characterize it. And then the solution will
be driven by the nature of that asset – in
terms of its competitiveness, who and where its
customers are, etc.,” he added.
Obviously, a commodity chemical producer in the
US will have very different options than those
in Europe and Asia because of cost
competitiveness.
“Most CEOs are quite nervous these days because
the landscape has changed dramatically and
become much more uncertain. In the US
presidential election, there is going to be a
huge difference in policy depending on who
becomes president – on tariffs and so forth,”
said Young.
“It used to be CEOs could do a base case, have
two or three scenarios, and plan around them.
Now they don’t know what their base case is,
much less what the scenarios are to consider,”
he added.
The path to zero carbon emissions and greater
circularity are additional challenges for
managements, as technologies are all over the
place and return on investment is far from
certain, the banker pointed out.
“Most of these CEOs are saying – I’ve got to do
it. I may not get a return on capital, but I
don’t really have much choice because if I
don’t do anything, five years down the road…
I’m going to be in trouble,” said Young.
LYONDELLBASELL
EXAMPLESome companies are taking
decisive action. US-based LyondellBasell, for
example, is using strong cash flows from its
core cost-advantaged commodity businesses to
invest in plastics recycling and bio-based
chemicals – its Circular and Low Carbon
Solutions business – both organically and
through M&A.
LyondellBasell in August 2024 agreed to acquire
full ownership of Germany-based
APK which uses solvent-based technology to
recycle low density polyethylene (LDPE).
Earlier in February, it bought US mechanical
recycling operations from PreZero.
The company has a goal of producing over 2m
tonnes/year of recycled and renewable-based
polymers by 2030 and taking 20%+ market share
in North America and Europe for these plastics.
In the meantime, LyondellBasell is also
conducting
strategic reviews of six European assets in
its Olefins & Polyolefins (O&P) and
Intermediates & Derivatives (I&D)
segments for potential sale.
By the end of the decade, if the company
follows through on its strategy, it will look
very different from where it is today.
Insight article by Joseph
Chang
Thumbnail photo source: Photo source:
Taidgh Barron/ZUMA Press Wire/Shutterstock
Crude Oil25-Sep-2024
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.
China fresh economic measures stimulate
buying in glycerine market
Pre-holiday restocking not as strong as
expected
Outlook bearish for aromatics
Initial excitement
over China’s new
set of economic stimulus appears to be
fizzling out based on crude price movement.
At midday, Brent crude was down 21 cents
at $74.96/bbl, while US crude was down 26 cents
at $71.30/bbl, after gaining by more than
$1/bbl overnight.
China’s measures amid doubts about the world’s
second-biggest economy’s ability to achieve its
5% GDP growth target followed the US Federal
Reserve’s jumbo 50-basis point (bps)
cut in interest rates on 18 September.
People’s Bank of China (PBoC) measures
announced on 24 September
Source: Oxford Economics/China State
Council
“We believe the recent rapid development in
both domestic and external conditions were the
major driving forces behind the PBoC’s latest
move,” Oxford Economics’ lead economist Betty
Wang said in a research note.
“Domestically, the weaker-than-expected August
economic data suggest that the risk of missing
this year’s growth target has grown,” she said.
“Externally, the Fed’s outsized rate cuts last
week, along with other major central banks’
entering easing mode, has eased the
depreciation pressure on the Chinese Yuan and
provided the PBoC more room to ease monetary
policy,” Wang added.
Concerns about the economic health of the
world’s two biggest economies have been
weighing down on sentiment across the equities
and commodities markets.
For petrochemicals, a slower-than-expected
demand pick-up ahead of China’s October
national holidays have further dimmed prospects
of market recovery.
Petrochemical demand is typically seasonally
strong in September, but pre-holiday restocking
in China failed to gain momentum during the
month until the government announced on 24
September a basket of measures to boost
economic activity.
In Asia’s refined glycerine market,
buyers in China were making enquiries for spot
cargoes.
Mid-Autumn holidays early last week in China,
Taiwan, Japan, and South Korea had also caused
temporary pause in market activities.
China’s economy is sputtering amid a property
downturn. The sector remained on a slump, with
total investments in the industry registering a
10.2% year-on-year decline in January-August
2024, which also weighs down on the
construction industry.
Property and construction are main downstream
industries for petrochemicals.
Chinese factories were also in contraction mode for
the fourth straight month in August,
registering official purchasing managers’ index
(PMI) readings of below the expansion treshold
of 50.
In the polyethylene (PE) pipe
market, major suppliers have maintained
firm offers to China on recent gains in
upstream crude market, while most downstream
converters have completed September procurement
and were waiting for October offers.
Poor demand had recently sent toluene prices in
Asia tumbling to year-to-date lows, while
prices of solvents such as ethyl
acetate (etac) and butyl acetate (butac)
have slumped to multi-year lows.
ICIS analyst Jimmy Zhang expects most
petrochemical products to post price
declines in September, extending the
weakness in August, amid declines in upstream
crude prices and the overall bearish sentiment.
ICIS forecasts that 26 out of the 31 products
it tracks to post lower average prices this
month, led by paraxylene (PX) and purified
terephthalic acid (PTA).
Focus article by Jonathan
Yee and Pearl
Bantillo
Additional reporting from Judith Wang,
Melanie Wee and Helen Yan
Thumbnail image: Lianyungang Port in east
China’s Jiangsu Province on 18 September 2024
(Shuttertock)
Crude Oil25-Sep-2024
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.
Global oil demand to reach 120.1 million
barrels/day in 2050
Petrochemical, road transportation sectors
to be key demand drivers
Annual average world GDP growth of 2.9%
projected for 2023-2050
These regions were identified as the “key
sources of incremental [oil] demand in the
coming years”, OPEC said in its 2024 World Oil
Outlook report released on 24 September.
“India alone will add 8 million barrels/day to
its oil demand during the forecast period
[2023-2050].”
OPEC comprises 13 oil producing countries led
by Saudi Arabia, which is the world’s biggest
crude oil exporter.
Global oil demand is expected to increase by
almost 18 million barrels/day, or by 17.5%,
from 102.2 million barrels/day in 2023 to 120.1
million barrels/day in 2050.
While non-Organisation for Economic
Co-operation and Development (OECD) demand is
projected to increase by 28 million barrels/day
between 2023 and 2050, OECD demand is set to
witness a decline.
OECD refers to a group of 38 highly
industrialized economies.
The strong projected demand growth in the
petrochemical sector, especially in Asia, will
raise oil demand from naphtha production by 2.8
million barrels/day by 2050.
The largest incremental demand during the
forecast period is projected for the
petrochemicals, road transportation and
aviation sectors.
Oil demand in these sectors in the long term is
set to increase by 4.9 million barrels/day; 4.6
million barrels/day; and 4.2 million
barrels/day, respectively.
“Demand projections in the road transportation
sector indicate strong growth over the current
decade before stabilizing at levels above 50
million barrels/day for the rest of the
forecast period,” OPEC said.
“By then, the penetration of EVs [electric
vehicles] is set to increasingly play a role.”
The global vehicle fleet is projected to surge
by about 71% from 1.7 billion in 2023 to 2.9
billion in 2050 with the fastest growth
expected in the EVs segment.
As for refined products, strong long-term
demand growth is expected for ethane/liquefied
petroleum gas (LPG).
“The larger part of this demand growth relates
to the use of ethane as a petrochemical
feedstock, mainly in OECD Americas and the
Middle East,” OPEC added.
GLOBAL ECONOMIC GROWTH REMAINS
ROBUST
Global GDP is projected by OPEC to grow at an
average rate of 2.9% per year between 2023 and
2050.
Non-OECD countries are set to lead this growth,
expanding at an annual rate of 3.7%, while OECD
nations will experience more modest annual
growth at 1.6%.
As a result, in absolute terms the global
economy is expected to more than double in size
from $165 trillion in 2023 to $358 trillion in
2050.
Focus article by Nurluqman
Suratman
Thumbnail image: Crude oil tanker Njord DF,
250m length, 44m height, flag Greece, Baltic
Sea, 31 August 2024 (Olaf
Krüger/imageBROKER/Shutterstock)
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