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Ethylene18-Sep-2024
HOUSTON (ICIS)–The Federal Reserve lowered its
benchmark interest rate by a half point
4.75-5.00% on Wednesday, and the central bank
could lower it by an additional half point by
the end of the year.
The following table summarizes the current and
past forecasts for rates, inflation and GDP by
members of the Federal Reserve.
2024
2025
2026
Fed funds
4.4%
3.4%
2.9%
June forecast
5.1%
4.1%
3.1%
GDP
2.0%
2.0%
2.0%
June forecast
2.1%
2.0%
2.0%
Core PCE Inflation
2.6%
2.2%
2.0%
June forecast
2.8%
2.3%
2.0%
Source: Fed
If the forecasts hold true, the US economy will
achieve a soft landing, with inflation falling
to the Fed’s long-term goal of 2% without
triggering a recession.
FED NOTES WEAKER JOB MARKET,
INFLATIONThe said said that the
job market had slowed since the last time it
voted on rates
at the end of July. Inflation has moved
closer to the Fed’s goal but remains somewhat
elevated.
Unlike its previous statement in July, the Fed
said it “has gained greater confidence that
inflation is moving sustainably toward 2%”.
In addition, the Fed stressed its commitment to
support maximum employment. Its last statement
in July lacked such a statement.
CHEMS WILL WAIT BEFORE RATES TRIGGER
RECOVERY IN DURABLESChemical
producers will have to wait before lower rates
cause a recovery for demand in durable goods
and housing. Both are key end markets for
polymers such as polypropylene (PP), nylon,
acrylonitrile butadiene styrene (ABS) as well
as chemicals used to make polyurethanes, such
as isocyanates, polyols and propylene oxide
(PO).
Huntsman said the lag
is typically about two quarters.
Ultimately, mortgage rates will need to
approach 5% before markets for homes and
durable goods can recover,
according to Dow.
Higher rates had made housing and durable goods
like furniture and appliances less affordable.
Because fewer consumers are buying homes and
moving, they are purchasing fewer durable
goods.
LOWER RATES TEND TO BOOST OIL, CHEM
PRICESTypically, prices for oil
and other dollar-denominated commodities tend
to rise as US interest rates fall.
A rise in oil prices typically causes those for
petrochemicals to increase.
Margins for US-based producers benefit from
higher oil prices because their plants
predominantly rely on gas-based feedstock. By
contrast, much of the world relies on oil-based
naphtha, giving US producers a cost advantage.
FIRST CUT IN MORE THAN FOUR
YEARSThe last time the Federal
Reserve lowered interest rates was
in March 2020, during the COVID-19
pandemic.
Lockdowns, government stimulus and recovery
caused a surge in inflation, which led the
Federal Reserve
to begin raising the benchmark
rate two years later in what became
the most aggressive tightening campaign in more
than 40 years.
The Fed stopped raising the rate in
July 2023.
A year later, inflation started showing signs
of approaching the Fed’s target of 2%. At the
same time, the labor market began cooling off
and returning to more normal levels.
Focus article by Al Greenwood
Thumbnail shows money. Image by ICIS.
Crude Oil18-Sep-2024
SINGAPORE (ICIS)–Tropical Storm Pulasan is
approaching China’s eastern coast and is
expected to make landfall in Zhejiang province
in the afternoon of 19 September
At 8:00 hours Beijing time (01:00 GMT) on
Wednesday, the storm was moving in the
northwest Pacific Ocean, about 570 kilometers
southeast of Naha City in the Ryukyu Islands of
Japan.
Pulasan is moving at a speed of 45
kilometers/hour toward the northeast and
forecast to enter the East China Sea on
Wednesday evening.
It is expected to strengthen into a typhoon and
make landfall along the Yuhuan and Xiangshan
regions in Zhejiang in the afternoon of 19
September, according to China’s National
Meteorological administration (NMA).
Zhejiang’s Ningbo City – which is a
petrochemical hub – initiated Level IV typhoon
emergency response – the lowest of four levels
– at 9:00 hours on Wednesday.
Pulasan would be the second storm to hit east
China in a week.
On 16 September, Typhoon Bebinca made
landfall in China’s financial hub of Shanghai,
causing severe damage to infrastructure and
businesses.
It weakened as its moved inland with its
remnants still affecting the provinces of Anhui
and Henan on Wednesday.
Phosphoric Acid17-Sep-2024
HOUSTON (ICIS)–US conservation groups have
announced the reaching of an agreement with
phosphate mining company P4 Productions which
will result in millions in payments and other
measures to benefit the conservation of sage
grouse and other wildlife.
Under the agreement, P4, which is a subsidiary
of Bayer AG, has agreed to pay $5.1 million to
a trust fund for sage grouse habitat
restoration and conservation and $2.43 million
to acquire land to protect wildlife habitat
connectivity.
There will be an additional $300,000 provided
for sage grouse population surveys.
The company also agrees to operational
restrictions of its Caldwell Canyon phosphate
mine in southeast Idaho to minimize the mine’s
impact on sage grouse.
Some of those measures includes refraining from
rail traffic to or from the mine prior to 27
April each year and evaluating then
implementing selenium dust mitigation measures
at the ore handling and storage area.
This agreement resolves a 2021 lawsuit filed by
the Center for Biological Diversity, Western
Watersheds Project and WildEarth Guardians.
In that action, the parties were challenging a
decision by the Bureau of Land Management (BLM)
to approve approximately 1,559 acres to be
strip-mined for phosphate of what it deemed as
ecologically important land which is essential
to the sage grouse and other species.
Once numbering in the millions the sage grouse
populations is estimated to have declined by as
much as 93% and the conservation groups say
that phosphate mining has had a serious
negative impact, especially on the birds in
this portion of Idaho.
“Phosphate mines have greatly reduced the
ability of many species, including grouse, to
move within and through southeast Idaho to
connect with other populations,” said Chris
Krupp, WildEarth Guardians a public lands
attorney.
“This agreement can be a first step in a
much-needed larger effort to reconnect wildlife
and their habitat in the region.”
The groups said the BLM is now reviewing a
newly proposed mine and reclamation plan and
will be issuing a new decision.
“I’m glad this agreement will help conserve
greater sage grouse and curb the harms of this
mining project,” said Lori Ann Burd, Center for
Biological Diversity’s Environmental Health
Program director.
“This case helped make clear that the federal
government can’t simply ignore the
environmental harms of phosphate mining. This
is a great start, but we’ve got to do much more
to confront the mining industry’s threats to
sage grouse and other imperiled animals and
plants.”
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Diammonium Phosphate17-Sep-2024
HOUSTON (ICIS)–Fertilizer producer Harvest
Minerals announced it has signed a technical
cooperation agreement with PVW Resources
Limited, an Australian company specializing in
the advancement of rare earth element projects.
The company said this collaboration aims to
unlock the rare earth element potential at the
Arapua project in Brazil, with the intention of
progressing on the asset if results of the
fully funded work programs continue to be
favorable.
Under the terms, PVW will provide technical
expertise for the evaluation of the rare earth
element potential of Arapua including reviewing
historical data and identifying new targets for
resource potential.
Results to date have been positive for Harvest
Minerals with the next batch due
in October with the data from these
results the basis for the next stages.
The ongoing rare earth element work program at
Arapua includes re-assaying a large set of rock
samples and drilling data to further detail the
mineralization.
Upcoming there will be planning for additional
drilling for resource expansion and the
evaluating of processing methods and
beneficiation processes to substantiate the
preliminary findings.
The company did say if their fertilizer
interests are not impacted by this agreement.
At Arapua it has been primarily focused on
producing their organic, multi-nutrient
fertilizer branded as KP Fertil, which is
typically applied in Brazil in lieu of more
traditional phosphate fertilizer inputs.
“This partnership opens the door to realizing
the rare earth element potential of Arapua,
adding further value beyond our established
low-cost, high-margin fertilizer business,”
said Brian McMaster, Harvest Minerals chairman.
“Brazil has emerged as a major player in
the international rare earth element space and
PVW is already making inroads into that
space. We are extremely fortunate that
they have seen the potential at Arapua and
agreed to team with us.”
Diammonium Phosphate17-Sep-2024
HOUSTON (ICIS)–Canadian junior explorer Nevada
Organic Phosphate (NOP) announced that their
subsidiary Nevagro, has been informed by the
Bureau of Land Management (BLM) that the agency
is authorizing the Murdock Mountain Phosphate
Exploration project.
British Columbia based NOP said the BLM found
no significant impacts and so the preparation
of an Environmental Impact Statement (EIS)
is not required.
This decision approves the
exploration plan portion of the
prospecting permit application submitted to the
BLM with prospecting permit to be issued
separately.
“The next step in the process will be a request
from the BLM to submit a reclamation bond. In
accordance with US Federal Regulation 43 CFR §
3504.50, a reclamation bond will be
required once the official decision is made to
approve the Prospecting Permit
Application,” said Robin Dow, Nevada Organic
Phosphate CEO.
NOP aims to be one of the only certified
organic rock phosphate producers with
large-scale potential in North America and is
currently advancing on the Murdock
project, which contains a nearly flat lying
sedimentary bed of known phosphate
mineralization in northeast Nevada.
The company said the increasing interest in
organic and sustainable agriculture practices
has contributed to the demand for organic
fertilizers, including those derived from rock
phosphate.
Organic rock phosphate is often marketed
as a fertilizer that not only provides
phosphorus but also contributes to overall
soil health.
Ammonia17-Sep-2024
HOUSTON (ICIS)–The Fertilizer Institute (TFI)
told the US Surface Transportation Board (STB)
in testimony on Tuesday that there is an
ongoing need for the freight rail industry to
shift its focus toward customer service and
growth.
The industry group said the fertilizer segment
has long relied on rail service for the
efficient and safe transport of its products,
but it has struggled with declining service
quality, increasing rates and a lack of
attention to customer needs.
“The fertilizer industry is heavily reliant on
rail and cannot afford to see continued
stagnation in freight rail service,” said Ryan
Bowley, TFI vice president of government
affairs.
“Unfortunately, we have seen freight volumes
plateau, services decline and rates skyrocket.”
TFI said that their testimony comes at a
pivotal time for the Class I railroads as the
STB’s inquiry into the rail industry’s growth
potential highlights a disturbing trend, which
is that freight rail carloads have been in
decline since 2008.
Trucking and other transportation sectors have
consistently expanded their capacity.
At the same time that rail employment has
dropped, and carloads have declined, rail rates
have surged. TFI said between 2005 and 2017,
rates for transporting critical farm inputs
like anhydrous ammonia increased by over 200%.
It noted that such price hikes, combined with
inconsistent service, have made it difficult
for fertilizer companies to meet the
just-in-time delivery demands of farmers across
the country.
“These rising costs and service failures are
particularly troubling for industries like
ours, which depend on rail to move bulk
products safely,” Bowley said.
“Our members regularly face delays, held
shipments and escalating rates, often without
any recourse. It is clear that a new approach
is needed.”
TFI highlighted the need for the rail industry
to pivot toward a customer-focused,
growth-driven model that balances profitability
with service quality as the industry’s adoption
of Precision Scheduled Railroading has led to
deep cuts in staff and equipment and adding to
service issues.
The group did praise recent moves by the STB to
increase oversight of rail service and pricing,
including the implementation of faster
emergency service orders.
It did stress the importance of additional
reforms such as expanding access to reciprocal
switching, a policy that would allow shippers
to switch between competing rail carriers more
easily.
“The rail industry should be actively competing
for freight, not relying on captive customers
to drive revenue. We need a system where
railroads are not just collecting more revenue
from a shrinking base but are growing their
business by serving more customers with better
service,” Bowley said.
Ammonia17-Sep-2024
HOUSTON (ICIS)–US ammonia-to-power solutions
provider Amogy has announced a partnership with
HD Korea Shipbuilding & Offshore
Engineering, POSCO Holdings, Seoul National
University and the American Bureau of Shipping
to explore the feasibility of an innovative
offshore ammonia cracking solution to deliver
low-cost, accessible clean hydrogen fuel.
Amogy said under this partnership, HD Korea
Shipbuilding will design the ammonia supply
system and integrate it into the overall
system, and it will provide its
ammonia-cracking technology.
Seoul National University will contribute
expertise in process design and simulation,
while POSCO Holdings intends to harness its
proprietary cracking process design technology
to optimize the systems needed for ship
application.
The American Bureau of Shipping will oversee
certification of the design as the class
society.
Amogy said ammonia, a hydrogen carrier, offers
a more cost-effective and convenient
alternative to liquefied hydrogen due to its
established storage and transport
infrastructure.
Additionally, with energy density 2.7 times
greater than hydrogen, ammonia is emerging as
an optimal carbon-free fuel for the maritime
industry.
Further, the company said their technology
unlocks the potential of ammonia as a hydrogen
carrier by leveraging state-of-the-art catalyst
materials to crack ammonia into hydrogen and
nitrogen at lower reaction temperatures with
high durability thereby reducing heating and
maintenance requirements.
“We are excited to join forces with this
esteemed consortium to develop an innovative
offshore ammonia cracking solution,” said
Seonghoon Woo, Amogy CEO.
“This partnership marks a pivotal advancement
in leveraging ammonia to achieve net-zero
emissions.”
Ethylene17-Sep-2024
SAO PAULO (ICIS)–The likely increase in
Brazil’s import tariffs for dozens of chemicals
will start improving beleaguered domestic
producers’ poor margins even though
petrochemicals prices remain low, according to
an analyst at US credit rating Fitch.
Marcelo Pappiani, credit analyst for Brazilian
chemicals producers, added that imports into
Brazil and the wider Latin America remain high
and are likely to continue that way as China
and the US work through their overcapacities.
Despite that, prices have stabilized, albeit at
low levels, and “the worst of this downturn”
seems to have subsided, said Pappiani.
The two largest chemicals producers in Brazil,
polymers major Braskem and chlor-alkali and
polyvinyl chloride (PVC) producer Unipar, are
covered by Fitch. The two companies have posted
several quarters of poor financial results on
the back of low prices and competition from
overseas producers.
TARIFFS UPBrazil’s
chemicals producers – represented by trade
group Abiquim, in which Braskem has a
commanding voice –
were hoping the Brazilian cabinet would
increase import tariffs on dozens of chemicals
in September.
However, there have been contradictory reports
on this, with some expecting the hike to be
approved as soon as Wednesday (18 September),
while other reports citing government sources
have said the decision would be pushed back to
December.
The increases would follow a public
consultation earlier this year in which Abiquim
as well as individual companies proposed increasing
tariffs in more than 100 products, most of
them from 12.6% to 20%.
Braskem is, at the same time, partly owned by
the country’s state-owned energy major
Petrobras, so the Abiquim/Braskem lobbying
tandem tends to find open ears in the corridors
of power in Brasilia under the current
government, which has committed to expand the
industrial sector.
Pressure not to increase import tariffs has
also been strong from other
sectors, not least plastic transformers
represented by Abiplast, but the producers’
proposals are expected to have won the day.
“Petrochemicals prices in Brazil and the wider
Latin America seem to have reached the bottom
and we are seeing slightly less pressure on
companies, despite of course still imports
coming into the region in big numbers, from
China, the wider Asia and the US,” said
Pappiani.
“Companies have lobbied the government strongly
for an increase in import tariffs as well as
other measures to prop up the chemicals
industry. Import tariffs seem set to increase
and that should soon make Brazilian producers
more competitive.”
Pappiani is in no doubt higher import tariffs
in several chemicals – when around half of the
Brazilian industry’s demand is covered imports
– are likely to translate into higher prices
for consumers, precisely the reasoning used by
those who oppose the hike.
“President Lula has said he wants to foster the
chemicals sector and has met on several
occasions with CEOs from the industry as well
Abiquim,” said Pappiani.
“But, of course, consumers will end up paying
for higher import tariffs – this happens in all
economic sectors, not just petrochemicals, of
course.”
COMPETITIVENESS THROUGH
TARIFFSAs well as higher prices
for consumers, those opposing the hike in
import tariffs argue that Brazilian
petrochemicals producers should speed up their
modernization and diversification, so they are
not as dependent on government policy for their
profitability.
Pappiani said Braskem is a well-managed company
with international assets which would make it a
profitable enterprise even without government
measures which prop up its competitiveness in
its domestic market.
However, critics of protectionist measures
continue their campaign against the increase in
import tariffs, although according to most
analysts the dice has been cast.
On Tuesday, the president of Abiplast published
a charged article in Brazil’s daily
Estadao in which he wondered if
Braskem would always need state indirect help
to keep afloat, even if its second largest
shareholder is Petrobras, which in theory
should make accessing cheaper raw materials
easier.
“Why are foreign suppliers of petrochemical
products able to be more competitive in their
exports to Brazil, even bearing the costs of
transportation, logistics and exposure to
exchange rate variations? Over the past 40
years, we have exported many of these products
to China; if the Chinese (and other countries)
become competitive by importing Brazilian oil,
why can’t Brazilian [petrochemicals] producers
become competitive?” said Jose Ricardo Roriz
Coelho.
“The exaggerated protection of the few
petrochemical companies in Brazil results in
them directing investments to countries where
they face greater competition in order not to
lose market share. Europe, which is not
competitive due to its lack of raw materials
for petrochemicals, has chosen to add value
further down the production chain by importing
resins from countries that are more efficient
in production.
“Structural problems, such as insufficient
supply of inputs, cannot be solved with
short-term remedies. The debate on new tariffs
and the production chain is crucial,” concluded
Roriz.
Indeed, the prospect of high import tariffs
being approved as soon as this week has already
propped up Braskem’s market capitalization in
the past few weeks.
On 13 September, for instance, the company’s
stock rose by nearly 8% as investors expect an
imminent decision on the increase in import
tariffs, according to a report by
InfoMoney.
The increase in import tariffs could
automatically translate into higher earnings
before interest, taxes, depreciation, and
amortization (EBITDA) for Braskem, to the tune
of $300 million/year, according to some
analysts. Under current business conditions,
that would be roughly the same EBITDA amount
the producer posted in the second
quarter of this year.
“In our view, this additional tariff would help
contain Braskem’s cash burn in recent quarters.
The company would then be better positioned to
capture a future cycle of increases in
petrochemical spreads,” said analysts at XP
cited by InfoMoney.
Front page picture: Facilities operated by
Brazilian polymers major Braskem in the state
of Sao Paulo
Source: Braskem
Interview article by Jonathan
Lopez
Speciality Chemicals17-Sep-2024
BARCELONA (ICIS)–Petrochemical markets are
likely to remain depressed while China and
other countries continue to add significant
capacity, unless big wave of closures and
demand improvement help to achieve balance.
Global capacity additions far outstrip
demand growth
China, Middle East, US likely to continue
expansions
China drove the petrochemical supercycle,
but no longer
China chemicals demand growth likely only
2-4%/year
Prospect of global deflation
Europe can focus on specialty chemicals,
other niches
In this Think Tank podcast, Will
Beacham interviews ICIS Insight editor
Nigel Davis, ICIS senior
consultant Asia John
Richardson 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.
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