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Ethylene03-Sep-2024
SAO PAULO (ICIS)–The Brazilian government’s
decree changing natural gas regulations could
potentially overhaul the market and, along the
way, benefit the chemicals industry by
providing it with cheaper energy and eventually
with ethane-based feedstocks.
The job of a lobbyist may be well paid, but it
must be a hard one most of the time. For years,
Brazil’s chemicals trade group Abiquim had been
lobbying for the government to pass regulations
which would allow the natural gas which comes
as a byproduct from crude oil production to
stay within the economy, and not be just
reinjected into the ground again.
To make common cause on that lobbying, Brazil’s
polymers major Braskem has also been saying for
years that it stands ready
to expand its Duque de Caxias facilities,
in the state of Rio de Janeiro, as soon as the
necessary gas and derivatives were available.
For years, those demands had fallen in deaf
ears.
Until 26 August, when the cabinet presided by
Luiz Inacio Lula da Silva passed a decree
contemplating, among other measures, higher
powers for the oil and gas regulator ANP to set
up the amount of gas which is reinjected into
the system, for instance.
If fully implemented, the decree could
completely change the natural gas market in
Brazil, and ultimately benefit the chemicals
industry via lower energy costs and,
potentially, having more ethane, rather than
crude-based naphtha, as a raw material.
In a written response to ICIS, Abiquim’s
director general Andre Passos celebrated the
decree and did not share the fears of some
analysts, who see in giving regulators more
power than traditional willingness to basically
intervene the market.
REINJECT OR NOT TO REINJECT – AND WHO
PAYS THE BILLActing on natural
gas in Brazil had almost become an imperative
since the US shale gas revolution changed that
country’s energy landscape, making it again a
net exporter and reviving the petrochemicals
industry to an extent no-one could imagine just
two decades ago.
In the US and Brazil, the two largest chemicals
producers in the Americas, the contrast is
stark: natural gas prices in the southern
neighbor are around four times higher than in
the US.
However, some analysts have said they are
concerned about the type of action
taken, arguing that giving regulators such as
the ANP more power could lead to more
government interventionism in the oil and gas
sector, potentially denting Brazil’s crude
sector attractiveness to invest.
However, lest not forget that Brazil’s crude
sector is mostly dominated by one player,
Petrobras, and this player is majority owned by
the state: its CEO is appointed or dismissed as
the President sees fit, and the crude major is
effectively one more arm of the cabinet – a
ministry of energy bis, so to speak.
Still, Brazil’s crude sector was meant to go
towards more liberalization, not less. And this
is where the decree on natural gas passed in
August overreaches, according to critics, the
scope of what a government should do or should
not do to encourage certain economic activity.
According to the decree, the ANP will be able
to mandate to crude oil players the levels of
natural gas they can reinject back into the
system during their crude oil extraction
operations, and how much they should make
available for companies and households.
In simpler words: crude producers will have to
go from reinjecting most of the gas – at a very
low cost – to create an infrastructure to
transport that gas onshore.
For now, crude oil majors operating in Brazil
have, for the most part, kept quiet about the
decree. In a written response to ICIS on 29
August, Shell said it was “analyzing” the
decree, without any further comment, a response
it has not updated as of 3 September.
Petrobras and Equinor had not responded to a
request for comment at the time of writing.
Equally, Braskem did not respond either to
questions about potential petrochemicals
expansions or how the decree could affect
investments in crude oil and, ultimately,
affect the industrial sectors if that was to
happen.
Petrobras’ CEO, Magda Chambriard, said,
however, the company would do “everything
possible” to reinject as much gas as it is able
to, but also reminded how this reinjection will
only be possible in the production platforms to
be started up in the future.
“On the platforms that are already there [in
operation] and on those that are already being
delivered, this [reinjecting more gas] will not
be possible,” said Chambriard, quoted by
specialized publication Offshore
Energy.
Abiquim’s Passos is not concerned at all and
said that the powers given to ANP is a natural
step for “an aspect of oil and gas production”
that was not previously covered by the
regulators.
“The power to regulate will be used considering
the interests of producers, consumers, and the
state and, obviously, without implying a
disincentive or a halt to new investments. In
any case, given the magnitude of investments in
oil, new investments specifically for gas would
not significantly alter the competitiveness of
oil exploration and production (E&P) in
Brazil,” said Passos.
“Abiquim is confident that the costs associated
with E&P in Brazil’s oil sector are
sufficiently low to cover any additional costs
that may arise.”
And to the fears about higher intervention from
the government, Passos said it was a “global
characteristic” of the crude oil and gas
sectors to be highly regulated.
CHEMICALS CHEERS,
FINALLYAbiquim’s Passos is well
aware of Petrobras’ CEO warning about the
slowness in the natural gas market, and how it
may take years for the changes benefiting
chemicals to take place.
But, after years of unsuccessful lobbying,
Passos is a happy man who says the authorities
have finally a vision of what chemicals should
be and what its problems are. With that, he is
ready to wait.
“Nothing will be immediate. However, there is a
compatibility between the time needed for
greater availability of natural gas, improving
the competitiveness of this raw material in
Brazil, and the time required for petrochemical
projects to mature – we should consider that
this is a structural action with medium- and
long-term impacts,” said Passos.
However, after years of lobbying for a decree
like the one just passed, the trade group was
understandably exultant, not least because this
comes just two months after another success. In
June, Abiquim and Passos as its representative
were part of Lula’s entourage when he went on a
state visit to gas-rich Bolivia in June.
During the visit, Brazil and Bolivia signed
agreements to expand natural gas supplies, in a
long-running business relationship which has
made Bolivia the key supplier to the Brazil’s
most populous, industrious and wealthiest
states in the south via the pipeline Gasbol,
the longest natural gas pipeline in South
America at 3,150 kilometers (1,960 miles).
At the time, Abiquim described the
agreements inked in Bolivia as a “historic”
step for Brazil’s chemicals and which, together
with the latest natural gas moves, could pave
the way for a truly competitive sector in the
global stage, said the trade group.
Agreements on fertilizers were also signed as
Brazil, already one of the world’s bread
baskets, continues to post a large trade
deficit in that field.
According to Brazil’s government, the deals in
Bolivia and the decree on the regulatory
environment for natural gas could unleash
investments of Brazilian reais (R) 96 billion
($17 billion) in natural gas, biomethane, and
fertilizer plants, as cited by Abiquim in its
statement following the decree’s passing.
SEVERAL DEALS, LITTLE
RESULTSAbiquim’s lobbying has
been directed where it could make the most
difference: the government and Petrobras,
admittedly achieving more success with the
former than the later.
In its quest for expanding natural gas supplies
and lower prices, Abiquim knocked on Petrobras’
door in 2023 and formed a working
group to explore solutions to the “critical
situation” the chemicals industry was in.
Nothing was heard about that working group, so
this year the two parties gave it another shot
and singed a memorandum of understanding (MoU)
aiming for the same: to find ways of making the
petrochemicals industry more competitive.
So far, nothing concrete has been communicated,
while chemicals remains with its operating
rates at record lows as imports continue
flooding Brazil and the wider Latin America,
with an increase in import tariffs later this
year one of the elements which, according to
Abiquim, could start fixing the beleaguered
Brazilian domestic chemicals production.
“Over the last few months, both teams
(Petrobras and Abiquim) have been concerned
about handling anonymized data from the sector.
Creating a safe environment for members to
access competitive natural gas is Abiquim’s
focus,” said Passos.
“The high volume of natural gas consumption for
the sector justifies the continuation of the
negotiations. We are very pleased with the
technical capacity and fairness of the process
and how it has been handled by both parties.”
Front page picture: Abiquim’s director
general Andre Passos (second from the right) in
Brasilia on 26 August, when the new national
energy and natural gas policies were
signed
Picture source: Brazil’s Ministry of Mines
and Energy
($1 = R5.64)
Insight by Jonathan Lopez
Speciality Chemicals03-Sep-2024
BARCELONA (ICIS)–New
analysis suggests the chemical industry may
face a more rapidly aging and shrinking
population in key markets such as China, while
the subsequent drag on demand means new
business models will be required.
China-driven petrochemicals supercycle is
over
China’s population may be aging and
shrinking more quickly than previously thought
China may switch to become net exporter of
many synthetic resins
Demographic shifts will shrink demand for
chemicals throughout developed world
Developing world faces challenges which may
slow growth
New business models will be required to
create opportunities from these trends
In this Think Tank podcast, Will
Beacham interviews Nigel
Davis and John
Richardson from the ICIS market
development team 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.
Register here .
Read the latest issue of ICIS
Chemical Business.
Read Paul Hodges and John Richardson’s
ICIS
blogs.
Petrochemicals03-Sep-2024
MUMBAI (ICIS)–Several ports across India’s
western state of Gujarat have resumed normal
operations even as heavy rains are projected to
continue throughout the week.
Operations at some ports had suffered some
disruptions since late August because of
inclement weather.
In a note dated 2 September, shipping and
logistics firm GAC Shipping, Logistics &
Marine Services said that activities at Kandla
port had been severely impacted due to the
heavy rainfall since 26 August and cargo
operations had slowed down.
Operations have now resumed at the port, it
added.
At Mundra port, vessel movements and cargo
operations have also restarted and are now back
to normal.
Dahej port has also resumed operations after
suspending berthing operations at several
terminals due to heavy rainfall and wind on 29
August.
The same was true for Pipavav port, which
halted operations on 28 August.
Sikka and Hazira ports, on the other hand, have
continued normal operations.
On Tuesday afternoon, the Indian Meteorological
Department said that isolated extremely heavy
rainfall is likely over parts of Gujarat
between 3 September and 4 September.
There is a risk of low-to-moderate flash floods
occurring in parts of Gujarat over the next 24
hours, it added.
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Ethylene02-Sep-2024
SAO PAULO (ICIS)–Brazil’s manufacturing PMI
index for August sharply slowed down from July
on the back of output falling for the first
time in several months due to subdued sales,
and elevated cost pressures, analysts at
S&P Global said on Monday.
At 50.4 points in August, the manufacturing PMI
stood just above the 50.0 point mark which
separates expansion from contraction. It also
represented a sharp slowdown from July’s 54.0 points.
Brazil manufacturing
August
July
June
May
April
March
February
January
December 2023
November
October
September
PMI index
50.4
54.0
52.5
52.1
55.9
53.6
54.1
52.8
48.4
49.4
48.6
49.0
Source: S&P Global
While the fall in production was described as
slight, it marks a reversal from the growth
trend seen earlier in the year.
New business growth slowed to a multi-month
low, though some firms noted a shift from
imported to domestic goods due to high shipping
fees, suggesting a complex demand environment
where domestic producers may be benefiting from
import challenges, but overall demand remains
subdued.
Export sales growth also softened, with
improved demand from Asia and the Middle East
offset by lower orders from the US and Mercosur
countries.
Cost pressures intensified significantly,
reaching a multi-year high. Companies reported
increased prices for chemicals, fabrics,
foodstuffs, packaging, plastics and
transportation, often attributing these rises
to currency depreciation.
Despite these challenges, manufacturers showed
increased optimism about the year-ahead
outlook. This positive sentiment was attributed
to plant expansion plans, product
diversification efforts, investment intentions,
and forecasts of a potential pick-up in demand.
Employment continued to rise, albeit at a
slower pace than earlier in the year. The
moderation in job creation was linked to
shortages of skilled job seekers and
cost-cutting measures at some units.
Nevertheless, the continued growth in
employment allowed firms to reduce their
backlogs of work.
“The Brazilian manufacturing sector suffered a
loss of momentum in August, with surging cost
pressures hampering firms’ ability to secure
new business. Manufacturers even took the step
of scaling back production and softened the
pace of hiring in a bid to limit costs,” said
Pollyanna De Lima, economics associate director
at S&P Global Market Intelligence.
“Firms will be hoping for an improvement in the
real exchange rate soon to help relieve some of
the pressure on costs and lead to a
revitalization of growth in the months ahead.”
Front page picture: Facilities operated by
Brazilian polymers major Braskem in the state
of Sao Paulo
Source: Braskem
Ethylene02-Sep-2024
HOUSTON (ICIS)–Here are the top stories from
ICIS News from the week ended 30 August.
ICIS Economic
Summary: US economy slowing, not falling off a
cliff
August started with reports of high weekly
initial unemployment claims, a weak
manufacturing PMI reading and a lackluster
payroll report. Equity markets did not react
well to this as evidenced by a three-day sell
off. But the panic ended, a rebound ensued and
we are back to where we were on 31 July as the
underlying economic fundamentals of a
late-phase business cycle remain. The economy
is slowing, not falling off a cliff.
IPEX: Global spot
index slips on lower prices in northeast Asia,
US Gulf
The global spot ICIS Petrochemical Index (IPEX)
slipped by nearly one-percentage point in the
week ending 23 August, on the back of price
falls in northeast Asia and the US Gulf.
Outages, demand
supporting US ethylene prices at two-year
highs
US ethylene spot prices have begun to decline
but remain at two-year highs in both Texas and
Louisiana after a series of cracker outages and
improvement in derivative demand.
Argentina
petchems to take time to feel benefits from cut
to import tariffs
Argentina’s petrochemicals players are in a
wait-and-see mode about the effects a cut to
import tariffs announced this week could have
in the market and whether it will lower prices
which, for many materials, remain higher than
global prices.
RAIL: US rail
companies strike deals with unions months ahead
of next bargaining round
US railroads Norfolk Southern (NS) and BNSF
have reached tentative, five-year collective
bargaining agreements with several labor unions
four months ahead of the opening of the next
collective bargaining round, the companies
announced on Friday.
Petrochemicals02-Sep-2024
LONDON (ICIS)–Click
here to see the latest blog post on
Chemicals & The Economy by Paul Hodges,
which looks at the major changes underway in
the auto market and how they are set to
transform the chemicals business.
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.
Speciality Chemicals02-Sep-2024
LONDON (ICIS)–Here are some of the top stories
from ICIS Europe for the week ended 30 August.
Europe OX post-summer
restocking intentions unclear as weak demand
lingers
Restocking operations after the summer were
once common practice in the European
orthoxylene (OX) market, but this year could be
different.
BASF
to shut down adipic acid production at
Ludwigshafen next year
BASF is to end production of adipic acid and
several downstream units at Ludwigshafen,
Germany, as part of structural changes underway
at the site, the company said on Thursday.
Rising costs, outages
fail to rattle sluggish propylene oxide market
in Europe
Outages at domestic suppliers, a local unit
being flagged for a potential sale and rising
production costs have failed to rattle a
sluggish European propylene oxide (PO) market.
Europe August nylon 6,6
contract prices soften in a slow
market
European nylon 6,6 contract prices for August
softened from July levels, posting highly
varied monthly deltas.
Global spot index slips
on lower prices in northeast Asia, US
Gulf
The global spot ICIS Petrochemical Index (IPEX)
slipped by nearly one-percentage point in the
week ending 23 August, on the back of price
falls in northeast Asia and the US Gulf.
Petrochemicals02-Sep-2024
MUMBAI (ICIS)–India’s economic growth slowed
down to 6.7% in the April-June 2024 on reduced
government capital expenditure during the
national elections and an uneven monsoon
season, official data showed.
The fiscal Q1 growth was the lowest GDP growth
in 15 months, according to the Ministry of
Statistics and Programme Implementation (MoSPI)
on 30 August. The country’s fiscal year ends in
March.
The number was lower than the 7.8%
growth posted in the previous quarter and
the 8.2% pace set in April-June 2023.
The growth was also lower than the Reserve Bank
of India’s (RBI) forecast of 7.2% for the
quarter.
For current fiscal year ending March 2025, the
central bank is projecting a GDP growth of
7.2%, with Q2 at 7.2%, Q3 at 7.3% and Q4 at
7.2%.
The slowdown in GDP growth occurred due to
reduced government spending during the election
period, RBI governor Shaktikanta Das said at a
press conference on 31 August.
India’s general elections
were held from 19 April to 1 June 2024.
“Domestic economic activity continues to be
resilient on positive trends in agriculture,
and an anticipated increase in government
expenditure. Manufacturing activity continues
to gain ground on the back of improving
domestic demand,” he added.
An anticipated increase in government
expenditure over the next few months would
provide the required support to economic
growth, Das said.
India’s economic growth has been robust, with
an average growth rate of 8.3% over the last
three years, he added.
Crude Oil02-Sep-2024
SINGAPORE (ICIS)–China’s August official
manufacturing purchasing manager index (PMI)
dropped to a six-month low of 49.1, while a
private survey by Caixin gives an expansion
print of 50.4 from 49.8 in July.
The official PMI published by the National
Bureau of Statistics (NBS) had been in
contraction territory for four consecutive
months, pointing to persisting weakness in
factory activity.
The sub production index fell to 49.8 in August
from 50.1 in July, while new order index
declined to 48.9 in August from 49.3 in the
previous month, NBS said.
High temperatures, intensive rain and seasonal
lull in combine dragged the PMI figures,
according to NBS.
For Caixin, the private firm said there was a
slight uptick in production index and strong
rebounding in new order index, which is mainly
driven by improving basic demands and all types
of promotions.
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