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Ethylene19-Aug-2024
HOUSTON (ICIS)–Here are the top stories from
ICIS News from the week ended 16 August.
US may consider
VCM, EDC expansions amid global PVC oversupply
– ICIS
US-based polyvinyl chloride (PVC) producers may
consider upstream and cost-advantaged vinyl
chloride monomer (VCM) and ethylene dichloride
(EDC) expansions rather than going all the way
to the polymer as global competitive pressures
in PVC should remain intense, an ICIS analyst
said.
Canada railroads
may lock out workers starting 22
August
Freight railroads Canadian Pacific Kansas City
(CPKC) and Canadian National (CN) may start to
lock out workers on 22 August.
Weak demographics
to prolong effects of chem
overcapacity
Weak growth in the world’s population will slow
economic growth, tighten labor markets and
likely prolong the global glut in polyolefins,
according to ICIS analysts.
INSIGHT: US chem
feedstock costs hit pandemic lows as midstream
buildout continues
Prices for ethane, the predominant US feedstock
used to make ethylene, have fallen this month
to levels not seen since the pandemic, and they
will likely remain depressed until colder
weather arrives later in the year.
Canada rail
disruption could shut economy down, harm trade
relations with US
US and Canadian chemical distributors and other
trade groups are warning about potentially
“catastrophic” impacts of a rail disruption
that could start in Canada next week.
Biodiesel19-Aug-2024
LONDON (ICIS)–Fresh upcoming legislation in
the EU and UK from 2025 are set to galvanise
the biofuels sector by setting minimum targets
for sustainable fuels usage in the aviation
sector, but hesitance remains among the larger
players.
New mandates set to galvanise sector growth
Larger incumbents still cautious about big
bets
Pace of demand growth after SAF mandates
remains to be seen
The EU sustainable aviation fuels (SAF) mandate
will set a minimum floor for fuel at EU
airports to contain at least 2% from 2025 and
gradually tick up each year, to hit 6% by 2030.
These targets ratchet up dramatically from that
point, with the 2030-35 period likely to be a
transformational period for the aviation
sector, as the SAF mandate to increase
from 6% to 20% in just five years.
By 2050, SAF is expected to become the dominant
form of aviation fuel, with the EU mandating
that airport fuels be 70% SAF by the midpoint
of the century.
Over the next 26 years, aviation firms and
fuels producers will need to solve many
colossal questions, including the precise
composition of the fuels and how those raw
materials can be sourced and scaled.
Although the European Commission’s ambitions
for SAF growth over the next half-decade are a
far cry from the step changes required between
2030 and 2050, the introduction of those first
minimum targets will be transformational.
“I think it’s widely seen as a game-changer in
the sector,” said ICIS markets editor for
biofuels Nazif Nazmul.
SAF currently makes up 0.1% of the global
aviation fuel mix and approximately 0.5% in the
EU, according to Nazmul, so a 2% target for
next year means that airport fuel providers
will be under pressure to ramp up capacity
quickly.
SLOWING AMBITIONS
Despite this, the last few months have seen a
spate of delays and cancellations from some of
the largest entrants to the sector, in Europe
and elsewhere.
BP announced in June that it is dramatically
scaling back its bet on SAF, in the wake of
taking full ownership of Brazil-based sugarcane
and ethanol major Bunge Bioenergia.
The company has paused planning of two projects
and continues to assess three others, which it
attributed to a desire to simplify its new
fuels portfolio.
Shell also announced a pause to work on its
flagship Rotterdam, Netherlands biofuels plant
as part of a bid to control costs, but also “to
assess the most commercial way forward for the
project,” according to Shell downstream
renewables and energy solutions director
Huibert Vigeveno.
The pause will allow Shell to optimize its
project development order and reduce the number
of engineers on the ground at the site, but
projected savings are counterbalanced by a
heavy price. Shell estimates that the
write-down from the move will cost the company
$600 million to $1 billion.
STILL EARLY STAGE
Shell has not commented on the capacity for the
2025 EU mandate to improve market conditions,
but the impact of the new legislation could
take time to trickle through the market.
Spain’s Cepsa, on the other hand, is proceeding
with its €1.2bn, 500,000 tonnes/year biofuels
project, with start-up scheduled for 2026.
“There is a huge chunk of the aviation market
that biofuels was not a part of previously,
when biofuels were previously relegated to road
transport,” Nazmul said.
“But now it has opened up to aviation and I
think this is something that definitely got the
oil majors interested in the first place. But I
think the scale is something that they’re
beginning to question. Is it something that
they’re able to pull off right now or should
they wait for the market to get a little bit
more mature?”, he added.
A factor in many green chemicals and green
fuels markets is the imminent extent of the
scale-up dictated by policymakers at a point
where many technologies thought to be necessary
for decarbonisation are at the pre-commercial
or pilot stage.
As with chemical recycling, which has seen
players try to step up quickly from pilot to
small scale to commercial scale plants,
biofuels players need to move fast to meet
targets.
But the economics of the sector remain
challenging for now, and future prospects
opaque, meaning that slower-moving fuel sector
incumbents may hang back and let more
specialized firms take the first larger steps.
“The pace of market growth following the
rollout of the mandates remains to be seen,
which is why some larger players are opting to
hold back for the time being,” Nazmul said.
FEEDSTOCK, TECHNOLOGY
QUESTIONS
Like the rest of the bio-based materials
sectors, the question of what feedstocks and
technologies will be viable as the market grows
remains unclear, with players betting on
different routes.
“That’s the question no one knows for sure,”
Nazmul said. Currently there are seven
different routes to produce SAF, and it’s kind
of a gamble.”
“Will there be enough feedstock? Will there be
enough capacity? Will we be importing for
example SAF from the US? Doesn’t that defeat
the entire purpose of slashing emissions when
you’re shipping these biofuels long
distances?”, he added.
The wider world is observing the steps taken in
Europe and the US to develop a viable
commercial market for SAF, but few moves have
been made outside those regions so far.
The same may be the case for large energy
sector incumbents, who have the financial
flexibility to wait for the market to mature a
little before going all in. 2025 may prove to
be the starting gun for the sector to develop
in earnest, but the real rewards may be further
down the line.
“Asian countries are really interested in SAF,
we’re seeing some investments in Japan, but
countries like India and China are yet to
really commit. It’s a matter of time and I’m
sure those companies and those countries are
assessing the best possible options out there,”
Nazmul added.
SECTOR BACKGROUND
Biofuels are liquid fuels derived from
biomass, such as biodegradable agricultural,
forestry or fishery products, municipal waste,
or biodegradable industrial waste.
Biofuels can be categorized into four
generations:
First-generation: Produced
from food crops like corn and sugarcane using
conventional technology. These biofuels have
moderate costs, as they depend heavily on
crop prices.
Second-generation: Made from
non-food biomass like agricultural residues,
wood, and waste. These are more expensive due
to the advanced technology required.
Third-generation: Derived
from algae and other fast-growing biomass,
but have high costs that are expected to
decrease with technological advances.
Fourth-generation: Involve
biofuels that capture and store carbon during
production, often using genetically modified
organisms. These also have high costs but may
become more affordable as technology
improves.
Biofuels are increasingly popular across many
industries but especially in the transportation
sector. This is due to concerns over the impact
and supply of fossil fuels, and the fact that
many of these fuels are compatible with
existing systems.
Supply and demand have been bolstered by
legislative mandates and corporate climate
commitments aimed at promoting sustainability
and the environmental benefits of biofuels.
This has led to a significant increase in
demand in recent years.
While first-generation biofuels once dominated
the market, there has been a significant shift
towards second-generation biofuels.
Despite incentives, the global transition to
biofuels faces challenges. High costs and
uncertainty about profitability hinder vital
investments. Long-term take-up goals have also
increased concerns over supply capabilities.
Insight by Tom Brown and
Zara Najimi
Click
here to visit the ICIS biofuels topic
page
Polyethylene19-Aug-2024
SINGAPORE (ICIS)–Click
here to see the latest blog post on Asian
Chemical Connections by John Richardson.
STILL WAITING FOR the end of the chemicals
downturn? If so, I believe you are wasting
precious time. Read in detail in today’s blog
and see my ten summarised reasons below. Print
this off and pin it on your boardroom wall:
Most of the G20 countries, which account
for more than 70% of global polyethylene demand
(chemicals and polymers are equivalent to
economic activity) is ageing.
Immigration is of course the answer to some
extent, but this is politically very difficult
in the West.
In the regions and countries where
populations are youthful, not enough people –
because of politics in the West – are likely to
be able to move to the rich world for better
economic opportunities, and to escape conflicts
and the effects of climate change.
Climate change will more likely be
successfully mitigated in the rich world. But
the risk is that the Developing World ex-China
does not get the financing and technologies it
needs to mitigate the impact of climate change.
China is the immediate centre of the crisis
for the global chemicals industry because
global capacity was added on wrong growth
assumptions. China’s chemicals demand growth
could turn negative because of an ageing
population, the end of the real-estate bubble
and geopolitics.
Geopolitics mean that we are likely to see
a change in chemicals trade flows. A bipolar
world – one centred on China and its allies and
the other on the US and its allies – is one
outcome
The oil and gas majors could end up
dominating chemicals to compensate for
declining oil demand due to electric vehicles
and fuel efficiency, as China moves to
chemicals self-sufficiency by itself and/or
with imports largely from its geopolitical
partners in the Middle East
We are in the early stages of a new
industrial revolution driven by sustainability
As was the case with the start of the first
industrial revolution, it is impossible to say
what will be the winning and losing
technologies.
For chemical companies without strong
feedstock advantages, without the right
geopolitical locations- and which have too much
exposure to the diminishing China import
markets – it is success in sustainability that
is the route to new competitive advantage.
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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Speciality Chemicals19-Aug-2024
LONDON (ICIS)–Here are some of the top stories
from ICIS Europe for the week ended 16 August.
Europe MA prices remain under upward pressure
as new production issue curbs Sept
availability
European maleic anhydride (MA) spot prices
continue to be under upward pressure this
week as constraints in northwest Europe seem
poised to restrict availability for
September, too.
Europe fatty alcohol spot prices stabilise
after bullish H1 August
European mid-cut fatty alcohol spot prices
held steady this week after two consecutive
weeks of €50/tonne increases.
Eurozone chemical production up in June, Q2
GDP rises 0.3%
Chemical production firmed in the eurozone
for the second consecutive month amid a wider
decline in industrial production during the
month, with GDP in the region continuing to
firm, growing by 0.3% in the second quarter.
Germany’s Aug economic outlook down on US
economy, Mideast concerns
Sentiment for Germany’s economic outlook fell
sharply in August on concerns over the US
economy and the protracted conflict in the
Middle East.
MA rebounds in northwest Europe on new
outage, price gap with south of region
grows
European maleic anhydride (MA) spot prices
firmed this week on supply constraints in
northwest and central Europe that arose in
the first half of the week.
Gas19-Aug-2024
SINGAPORE (ICIS)–Here are the top stories from
ICIS News Asia and the Middle East for the week
ended 16 August 2024.
China July industrial output growth slows; H2
outlook dims
By Nurluqman Suratman 15-Aug-24 16:49 SINGAPORE
(ICIS)–China’s industrial output growth in
July slowed to a four-month low of 5.1%,
aggravating concerns about continued
manufacturing slowdown, with a growing set of
data suggesting the world’s second-largest
economy is struggling to gain momentum.
Asia PBT market faces logistical challenges
amid Q3 lull
By Corey Chew 15-Aug-24 10:29 SINGAPORE
(ICIS)–The Asia polybutylene terephthalate
(PBT) market saw the Indian region being
affected by logistical challenges to a larger
extent compared to northeast Asia.
Major S Korea producers withdraw ADD probe
petition against China SM
By Luffy Wu 14-Aug-24 18:45 SINGAPORE
(ICIS)–South Korean producers Hanwha Total
Energies and Yeochon NCC are withdrawing their
request for an antidumping probe on styrene
monomer (SM) imports from China, based on a
petition they filed with the Korea Trade
Commission on 12 August.
Singapore’s 2024 key exports growth forecast
trimmed on demand concerns
By Nurluqman Suratman 13-Aug-24 15:30 SINGAPORE
(ICIS)–Singapore’s non-oil domestic exports
(NODX) growth forecast for 2024 has been
revised downward to 4-5%, Enterprise Singapore
(EnterpriseSG) said on 13 August.
China July petrochemical index falls as demand
remains sluggish
By Yvonne Shi 12-Aug-24 15:55 SINGAPORE
(ICIS)–The ICIS China petrochemical index
dropped by 3.07% month on month to 1,241.5 in
July, with acetone experiencing the largest
decline due to weak downstream demand.
Ammonia16-Aug-2024
TORONTO (ICIS)–US and Canadian chemical
distributors and other trade groups are warning
about potentially “catastrophic” impacts of a
rail disruption that could start in Canada next
week.
Railroads Canadian Pacific Kansas City (CPKC)
and Canadian National (CN) said they may start
to lock
out workers starting Thursday, 22 August,
if no progress is made on reaching new
collective agreements.
Ahead of the potential lockout, the railroads
have already embargoed certain shipments.
The US Alliance for Chemical Distribution (ACD)
and Canadian group Responsible Distribution
Canada (RDC) said the disruption would affect
“a myriad of hazardous materials”, in
particular chlorine for drinking water.
Municipalities do not have weeks of chlorine
stocks, meaning that a supply disruption will
pose a risk to public health and safety, the
groups said.
ACD and RDC member companies serve as
intermediaries for municipalities, receiving
rail shipments of chlorine and other water
treatment chemicals and then shipping them to
end-users.
The chemical distribution trade groups said
Canada’s labor minister, Steven MacKinnon,
needed to intervene.
However, he rejected the call by
CN to step in and refer the dispute to the
Canada Industrial Relations Board (CIRB) for
binding arbitration.
Canada’s government believes in the collective
bargaining process “and trusts that mutually
beneficial agreements are within reach at the
bargaining table,” the minister said on
Thursday.
In a ruling last week, the
CIRB held that no rail services, even for
chlorine, needed to be maintained during a
strike or lockout.
Canada’s chemical and other industries had
urged the CIRB to order that minimum rail
services be maintained during any industrial
action to ensure the delivery of chlorine to
water-treatment facilities, as well as other
essential goods and fuels.
For chlorine, a chlor-alkali plant in North
Vancouver supplies both Western Canada and the
US West with liquid chlorine for use in
drinking water.
TRADE WITH US AT STAKE
John Corey, president of the Freight Management
Association of Canada, said a rail disruption
would not only shut Canada’s economy down but
it would also affect the US, given the high
level of integration between the two countries.
CN and CPKC are Canada’s only two freight
railroads and industry has no alternative to
rail to ship product into and out of the
country, Corey said in a webcast media
briefing.
A rail disruption would further hurt Canada’s
reputation in the US as a “legitimate trading
partner”, he warned.
“The Americans are looking up at us and saying,
‘What are you doing to fix this?’,” he added.
The labor contracts at both CN and CPKC expired
on 31 December 2023 – but the issue has yet to
be resolved as Canada seems to be
“sleep-walking”, he said.
He reminded of the damage caused by last year’s
13-day strike at Canada’s West Coast port
strike and the 2022 blockade of the
Ambassador Bridge from Windsor in Ontario to
Detroit, Michigan – events from which Canada
seems to have “learned very little”.
If Canada continues to have this kind of
disruptions and is unable to deliver product to
its largest trading partner by far, the US
would have to think of alternatives, he said.
The current labor uncertainty has already
impacted supply chains, he said.
If the rail service shuts down on 22 August,
ports will shut down within two days because no
product is able to get into and out of ports,
he said.
For each day that the rail service is down it
will take one week to get supply chains back to
normal, meaning that a 10-day disruption could
impact the supply chain until the end of the
year, he noted.
Canada’s government needs to take “some action”
if the rail service is disrupted next
week.
“Back-to-work legislation” was one option, but
it was also an admission that the labor
negotiation process is flawed, he said.
Binding arbitration, which is used to settle
labor disputes involving police or
firefighters, would be a better option, but the
government seems to have ruled that out, he
said.
CHEMICALS AND RAILThe
bulk of Canada’s chemical production is
exported to the US and Canadian chemical
producers rely on rail to ship more than 70% of
their product, with some exclusively using
rail.
Without a rail service, chemical producers
could be forced to shut down plants within a
week, trade group Chemistry Industry
Association of Canada (CIAC) has said.
The Canadian chemical sector moves over 500
railcars/day and it requires over 1,500
road-based tanker trucks to carry the same
load, according to the CIAC. However, the
trucking industry does not have that kind of
capacity.
Furthermore, the movement of many chemical
products is restricted to rail due to their
hazardous nature.
According to CIAC data, more than Canadian
dollar (C$) 76 million (US$55 million) of
industrial chemical products move on Canada’s
rail network daily, or C$28 billion each year.
Chemicals account for nearly 10% of all
Canadian rail traffic.
Furthermore, the chemical industry’s customers
in the automobile, forest products, minerals
and other industries ship most of their product
by rail.
Elsewhere, about 75% of all fertilizers
produced and used in Canada is moved by rail.
The following table by the American Association
of Railroads (AAR) shows Canadian freight rail
traffic, including chemicals, for the week
ended 10 August and the first 32 weeks of 2024:
In recent earnings calls, chemical company
Chemtrade Logistics,
midstream energy firms Pembina and Keyera, fertilizer
major Nutrien and others
have raised the rail disruption as a concern,
and railroad CN reduced its 2024 earnings
guidance citing the impact of the labor
uncertainty.
The rail disruption threat comes as Canada’s
economy is facing a shallow downturn.
(US$1 = C$1.37)
With additional reporting by Adam
Yanelli
Thumbnail photo source: Canadian
National
Recycled Polyethylene Terephthalate16-Aug-2024
LONDON (ICIS)–Senior editor for recycling,
Matt Tudball, discusses the latest developments
in the European recycled polyethylene
terephthalate (R-PET) market, including:
Growing number of enquiries for food-grade
pellets in August
Actual confirmed deals remain limited
Buyers take various approaches to pellet
purchasing
Wider R-PET market stable due to holidays
Crude Oil16-Aug-2024
SINGAPORE (ICIS)–Malaysia’s economy is
expected to maintain a strong growth momentum
in the second half of the year, after expanding
at a faster annualized rate of 5.9% in Q2, on
the back of improving domestic spending and
external demand.
Q2 marks fastest GDP growth in six quarters
Petroleum and chemical products led Q2
manufacturing growth
Robust demand for non-electronics goods to
boost exports
On a quarter-on-quarter seasonally adjusted
basis, the economy expanded by 2.9% in April
June, accelerating from the 1.5% expansion in
Q1 2024, Bank Negara Malaysia (BNM) – the
country’s central bank – said on Friday.
Q2 growth was primarily driven by stronger
domestic demand and further expansion in
exports, according to BNM.
For the whole of 2024, BNM forecasts the
economy to post a 4-5% GDP growth, stronger
than the 3.7% growth in 2023.
The final year-on-year Q2 GDP print was revised
up from the previous estimate of 5.8% and
represented a strong acceleration from the 4.2%
expansion in the preceding quarter.
At 5.9%, the Q2 GDP growth was fastest
quarterly growth recorded since Q4 2022,
according to the Department of Statistics
Malaysia showed.
Malaysia is southeast Asia’s fifth-largest
economy and a net exporter of polyolefins.
It is also one of the largest producers and
exporters of oleochemical products worldwide,
contributing about 20% to global capacity,
according to the Malaysian Petrochemicals
Association (MPA).
The country’s central bank expects household
spending to remain strong in H2, driven by
employment and wage growth and policy support.
Investments will be fueled by ongoing projects,
while exports will benefit from the global
technology upcycle and robust demand for
non-electronics goods, it said.
However, downside risks include weaker external
demand, geopolitical tensions, and lower
commodity production, BNM said.
CHEMICALS LEAD Q2 MANUFACTURING
GROWTH
The manufacturing sector registered in
April-June 2024 grew by 4.7% year on year, up
from 1.9% in the previous quarter, aided by a
broad-based improvement across all sub-sectors.
The petroleum, chemical, rubber, and plastic
products segment led the expansion, with Q2
annualized growth accelerating to 4.1% from
1.1% in Q1.
Q2 final consumption expenditure rose by 5.6%
year on year, up from 5.1% in Q1, as private
spending increased by 6.0%, up from 4.7% in Q1.
Exports for the period rose by 8.4%, outpacing
Q1’s 5.2% growth, while imports posted a faster
growth of 8.7% compared with 8.0% in Q1.
Focus article by Nurluqman
Suratman
Polyethylene16-Aug-2024
SINGAPORE (ICIS)–Click
here to see the latest blog post on Asian
Chemical Connections by John Richardson.
The world as it stands today tells us that US
doing extremely well in the key China HDPE
import market. Using trade data and ICIS price
benchmarks:
In 2023 over 2022, US sales turnover in
soared by $500m as its exports in tonnes to
China also increased. In January-June 2024 over
the same period last year, its turnover was up
by another $106m.
Meanwhile in 2023 over 2022 as their
shipments to China dipped – and because of
lower pricing – Iran’s turnover was down by
$468m, Saudi Arabia by $449m, the UAE by $412m
and South Korea by $176m.
But the January-June 2024 data show the UAE
and South Korea clawing back some ground.
“In H1 2024, US [total] PE exports were 46.5%
of total sales and operating rates above 90% –
a far cry from 21% in 2017 when operating rates
were also much lower in the mid-80% range,”
wrote my colleague Joe Chang in a15 August ICIS
news article.
This suggests that the US, because of its
feedstock advantages, gained sales turnover in
markets other than just China in H1 2024 – and
in the other grades of PE.
The comprehensive nature of ICIS price
benchmark and trade data means that it is
possible to produce charts like the ones in
today’s post for other countries and regions
such as Europe, Latin America, Africa, Turkey
and India.
But this familiar world of trade flows driven
by feedstock costs is rapidly changing.
If the US-China geopolitical split continues,
this raises the question of where China will in
future source most of its chemicals import
volumes.
Demographics will also shape demand, and so
trade flows, in China and elsewhere.
A later blog post will discuss demographic
analysis which suggests that China’s population
in 2020 could have been 130-250m lower than the
1.42bn official number. This would
obviously have major implications for historic
and future chemicals demand in China.
But perhaps China’s cap on refinery capacity
from 2028 onwards, due to the electrification
of vehicles, will limit its capacity growth,
thereby creating a bigger opportunity for
exporters.
Geopolitics, demographics, debts and
sustainability will, I believe, be the new
defining shapers of chemicals and polymers
trade flows. The world as it stands today,
represented by most of the analysis in today’s
post, is coming to an end.
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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