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Gas23-Aug-2024
Additional reporting by Anna Coulson
UK energy price cap for October-December set at £1,717
Q4 cap is £149 higher than the Q3 cap, but has fallen
£117 year on year
Higher wholesale energy prices for Q1 2025 suggest a
price cap rise compared to Q4 2024
LONDON (ICIS)–The UK energy price cap for October-December
will increase compared to the previous quarter, energy
regulator Ofgem said on 23 August, but remains lower than
in the same period one year ago.
Introduced in January 2019, the price cap sets the maximum
price that energy suppliers can charge end-users for each
unit of energy. Ofgem sets the cap based on supplier
operating costs, including ICIS wholesale energy price
assessments, as well as VAT and network costs.
Looking ahead, if forward prices for delivery in the first
quarter of 2025 continue at current levels, the wholesale
component of the cap for the period January-March is
expected to be higher than for the preceding three months.
FALLING PRICES
ICIS assessed the British NBP gas Q4 ’24 contract at an
average 97.069p/th from 20 May to 15 August – the period
used by Ofgem to calculate wholesale energy costs for the
upcoming cap.
This is 17.026p/th lower than the Q4 ’23 contract average
over equivalent dates.
The year-on-year difference comes as a result of several
factors, including a gradual fall from a peak in prices
after the Russian invasion of Ukraine and the trade
sanctions which followed.
Fears of strikes at Australian LNG refineries also pushed
up gas prices during 2023, whereas LNG markets were
generally more settled in 2024.
Due to its significant role in power
generation, gas is a key price driver for the UK power
market. This means that UK power prices have moved with a
similar bearish trend to NBP Q4 ’24 prices, at a discount
to Q4 ’23 prices.
ICIS assessed the UK power Baseload Q4 ’24 contract at an
average £85.65/MWh between 20 May and 15 August, 28% lower
than the Q4 ’23 over equivalent dates.
The Q4 ’24 power contract is at a premium to its European
counterparts which indicates that the UK is likely to
import power from neighbouring countries, including France,
through the front-quarter.
Data from French utility EDF shows that nuclear output is
set to average 48.1GW in the period 1 October to 31
December, 7.1GW above the 2019-23 average.
Both gas and power Q1 ‘25 prices are currently at a premium
to Q4 ’24 prices, which will likely result in a larger
wholesale component of the cap for the first quarter of
2025 than for October-December.
CAP OUTLOOK
On 22 August, ICIS assessed the NBP Q1 ‘25 contract at
7.025p/th above the Q4 ’24 contract and the UK power
Baseload Q1 ‘25 contract was £7.10/MWh above the Q4 ’24
contract.
Yearly energy prices generally peak around February, when
the coldest months of the year increase energy demand for
heating. In these months, gas storage facilities start to
deplete and disruptions to supply cause larger price rises
than at other times of the year.
Given the increasing European reliance on LNG, higher
prices also attract LNG shipments to Britain ensuring
stability of supply.
On the power side, French nuclear availability is another
key driver for UK power prices through the first quarter.
The UK power Q1 ‘25 Baseload contract was €109.47/MWh on 22
August, which is €5.22/MWh above its French counterpart,
indicating that the UK is likely to import power from
France through the first quarter of 2025.
ICIS Power Foresight indicates that French nuclear
generation could total 98.6TWh in the period 1 January to
31 March.
However, unplanned outages, downward revisions in nuclear
availability, and cold weather through the first quarter of
2025 would be potential bullish drivers for French and UK
power prices.
Recycled Polyethylene Terephthalate23-Aug-2024
LONDON (ICIS)–Senior Editor for Recycling,
Matt Tudball, discusses the latest developments
in the European recycled polyethylene
terephthalate (R-PET) market, including:
Blue flake prices rise at the low end in
eastern Europe
Wide range of views on eastern Europe bale
prices
Mixed coloured flake demand remains poor
September price talks getting underway
Crude Oil23-Aug-2024
LONDON (ICIS)–Business activity in the
eurozone rose in August, driven by the services
sector, which grew at the fastest pace in four
months.
Growth in services was largely due to the
strongest expansion in France since May 2022 as
the Olympics took place in Paris, according to
S&P Global’s latest Purchasing Managers
Index (PMI) data.
This drove the flash services August PMI index
to 53.3, up from 51.9 in July, which in turn
helped push the HCOB (Hamburg Commercial Bank)
composite PMI index to a three-month high of
51.2.
Cyrus de la Rubia, chief economist at Hamburg
Commercial Bank, warned, however, that the
uplift could be temporary.
“The boost largely comes from a surge in
services activity in France, with the Business
Activity Index jumping by almost five points,
likely linked to the buzz surrounding the
Olympic Games in Paris,” he said.
“It’s doubtful this momentum will carry over
into the coming months, however. Meanwhile, the
overall pace of growth in the services sector
has slowed down in Germany, and the eurozone’s
manufacturing sector remains in rapid decline.”
S&P’s August eurozone manufacturing PMI was
at an eight-month low of 45.6, down slightly
from July. An index figure above 50 indicates
expansion and below 50 contraction.
Elsewhere, the latest PMI data for the UK
showed a significant increase in private sector
business activity, with the composite index
rising to a four-month high of 53.4.
“August is witnessing a welcome combination of
stronger economic growth, improved job creation
and lower inflation, according to provisional
PMI survey data,” said Chris Williamson, chief
business economist at S&P Global Market
Intelligence.
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Ammonia22-Aug-2024
TORONTO (ICIS)–Canada’s federal labor minister
has decided to refer the labor dispute between
the country’s two freight railroads and labor
union Teamsters Canada Rail Conference (TCRC)
to the Canada Industrial Relations Board (CIRB)
for binding arbitration, he said in a webcast
media briefing on Thursday.
Steven MacKinnon expects the CIRB to act “with
dispatch” and rail services at railroads
Canadian National (CN) and Canadian Pacific
Kansas City (CPKC), which shut
down effective Thursday morning, 00:01
eastern time, should resume within a couple of
days, he said.
With the decision, the minister reversed his
previous position.
Just hours before the shutdown took effect, he
had said the government would not intervene but
leave it to the parties to settle the dispute
through the collectives bargaining process, and
last week he rejected CN’s call for binding
arbitration.
However, in Thursday’s press briefing MacKinnon
said that he came to the conclusion that the
negotiations between the railroads and the
union were at an impasse and that collective
bargaining was not working to settle the
dispute.
He therefore decided to direct the CIRB
to settle the dispute through final binding
arbitration;
to extend the terms of the existing
collective agreements until new agreements are
signed.
The CIRB process was “generally a process that
does not take longer than two days”, he said.
However, he conceded that it was not yet quite
clear when exactly rail service will resume,
adding that the CIRB was an independent body
that follows its own procedures.
The CIRB is a quasi-judicial tribunal charged
with keeping the industrial peace in Canada.
The government has come under intense pressure
from trade
groups in Canada and the
US and from Canadian provincial premiers
(governors) to take quick action to end the
shutdown, which threatened the economy and
trade relations with the US.
MacKinnon acknowledged the concerns raised by
the chemical and fertilizer industries about
supplies of chlorine to treat drinking water
and the supply of potash fertilizer to farmers.
It was up to the government to ensure that
shipment of chlorine and fertilizer were not
disrupted, the minister said.
The railroads had stopped accepting shipments
of chlorine and other hazardous materials well
ahead of the 22 August shutdown.
Meanwhile, LyondellBasell on
Thursday declared force majeure on all rail
shipments to Canada and industrial chemical
producer Chemtrade Logistics
warned about impacts from the rail disruption
on its financial results.
With additional reporting by Adam
Yanelli
Thumbnail photo source: CN
Recycled Polyethylene Terephthalate22-Aug-2024
HOUSTON (ICIS)–In light of the recent surge of
ocean freight rates, US plastic scrap trade has
slowed some to overseas destinations, but still
remains robust within North American borders.
Albeit lower this quarter, polyethylene
terephthalate (PET) plastic scrap in particular
continues to be strong in import and export
volumes amid a moderate domestic market.
US remains a net importer of plastic scrap
US PET scrap imported decreased 11% Q2 2024
vs Q1 2024
US PET scrap exported increased 62% Q2 2024
vs Q2 2023
IMPORTS SLOW ON GLOBAL FREIGHT, PET REMAINS
STRONG
Q2 2024 trade data from the US Census Bureau
shows US imports of plastic scrap – noted by
the HS code 3915 – have fallen 10% quarter on
quarter, but still having increased 7% year on
year when comparing with Q2 2023. Plastic scrap
imports include items such as used bottles, but
also other forms of recycled feedstock such as
purge, leftover pairings and now also flake
material.
Imports totaled 114,969 tonnes in Q2 with drops
seen across the major polymer groups for US
scrap import. Polyethylene (PE) scrap was down
13%, while polyethylene terephthalate (PET)
scrap was down 11% quarter on quarter.
Based on volume alone, the drop in PET imports
by 6,857 tonnes is the largest contributing
factor to the overall decrease.
While imports from Canada and Mexico still
dominate total volumes, when looking at PET
specifically, imports from Mexico have dropped
off significantly.
Top sending countries for PET scrap are Canada,
followed by Thailand, Ecuador, Japan, Indonesia
and Honduras as of the 1H2024 data. This means
less than 25% of US PET scrap imports came from
North America, while over 43% of PET imports
originated from Asian countries, a reversal of
the statistics seen just two years prior.
While down quarter on quarter, PET scrap
imports are still elevated in comparison to
previous years, up as much as 24% year on year.
As of Q2 2024, PET makes up 50% of all US
imported plastic scrap, followed by the “other”
plastic scrap category at 29% and PE scrap at
13%.
US recycled polyethylene terephthalate (R-PET)
market participants confirm they have seen a
notable rise in imported R-PET activity from
Asia and Latin America, particularly due to
their cost-competitive position when it comes
to feedstock, labor and facility costs.
Though towards the back half of Q2, ocean
freight rates did substantially rise, likely
curtailing the window of cost competitiveness
for many.
Typically, imports from these overseas
locations must be ordered weeks, if not months,
in advance, and so Q2 import volumes largely
represent demand from one to two months prior.
Even with higher ocean freight rates today, US
converters and recyclers continue to buy
imported flake and pellet to supplement
operations, as it remains cost-competitive in
most cases. R-PET demand on the East Coast has
continued to strengthen during the summer
months and is now looking solid through the end
of the year, a deviation from the typical
seasonal demand pattern.
Though imports come with additional
transportation and cost risk, players accept
that international supply is now woven into the
fabric of the market, much like with virgin
PET.
PET EXPORTS SURGING, OTHER PLASTICS SEE WEAK
GLOBAL MARKETS
Despite the desire for a growing domestic
recycled plastics market, feedstock material
continues to bleed out of the country,
specifically PET bales. US exports of plastic
scrap have increased 5% quarter on quarter to a
total of 112,385 tonnes, while PET scrap
exports have increased 18% quarter on quarter,
and a whopping 62% year on year.
Though the US has always exported a portion of
domestic bale material to other countries,
including Mexico and some in Asia,
exports to Mexico have surged in the last 10
months.
This growing trade relationship is largely
attributed to new capacity in Mexico, paired
with strong local demand which has elevated
local bale prices. As a result, Mexican
recyclers have been purchasing US PET bales as
a lower cost option with high availability.
Overall, exports of other types of plastic
scrap continue to slow, following the Chinese
National Sword and Basel Convention adoption
several years ago.
PE continues to be a leading polymer type for
US plastic scrap exports, coming in at 33,556
tonnes in Q2 2024. According to 1H24 total PE
imports, India is the largest destination at
25%, followed by Indonesia at 15% Canada at
14%, and Malaysia and Vietnam tied at 13%.
As of this past quarter, the US remains a net
importer of plastic scrap.
Speciality Chemicals22-Aug-2024
HOUSTON–Global chemicals major LyondellBasell
has declared force majeure on all rail
shipments to Canada after that country’s two
largest railroads shut
down operations after negotiations for a
new collective bargaining agreement stalled.
The shutdown at Canadian National Railway (CN)
and Canadian Pacific Kansas City (CPKC) began
at midnight eastern time on Thursday, with more
than 9,000 workers locked out after failing to
reach an agreement with their employees’ union.
CN and CPKC have issued all-commodity
embargoes, according to US railroad Norfolk
Southern (NS) in a service alert.
The embargos from CN and CPKC cover all NS
originated traffic destined for Canada and all
Canadian originated traffic destined for NS
destinations for all commodities.
US railroad CSX issued an embargo on all
shipments to and from CN and CPKC that contain
highly hazardous, toxic inhalation hazards and
poisonous inhalation hazards such as chlorine
gas, which is used for water treatment.
Container shipping company Hapag-Lloyd told
customers it has ships in various stages of
loading and unloading in Vancouver, Canada but
has three vessels on various services that are
under review because of the rail disruption.
On 21 August, the carrier said it is ceasing
taking new rail bookings originating in the US
and loading via a Canadian gateway.
Following is a map of the rail network and main
chemical production hubs in Canada.
BACKGROUND
The simultaneous rail disruption at CN and CPKC
has been looming over the chemical and other
industries for months.
Canada’s chemical production is heavily geared
towards export, with 80% destined for foreign
markets – primarily the US, accounting for 80%
of exports.
Rail transportation plays a crucial role,
handling over 70% of Canadian chemical
producers’ shipments, with some relying
entirely on rail.
Officials from the chemical and other
industries have repeatedly warned about the
impacts simultaneous disruptions at
both railroads could have on Canada’s
already weak
economy and on trade with the US.
With additional reporting by Nurluqman
Suratman and Stefan Baumgarten
Thumbnail photo: A Canadian National train.
(Photo by Shutterstock)
Ammonia22-Aug-2024
TORONTO (ICIS)–As the unprecedented work
stoppage at both of Canada’s freight railroads
began on Thursday at 00:01 Eastern Time, it
remains unclear how or when it may end as the
government is reluctant to intervene.
Long-awaited rail shutdown starts
Government reluctant to intervene
Industry warns of economic and public
health impacts
Following lockout and strike notices, more than
9,000 workers at railroads Canadian Pacific
Kansas City (CPKC) and Canadian National (CN)
were locked out at midnight, labor union
Teamsters Canada Rail Conference (TCRC) and the
rail companies confirmed.
TCRC said that the parties were still far apart
in their negotiations but added that it would
remain at the bargaining table.
CPKC called on the government for binding
arbitration to end the dispute, but Canada’s
federal labor minister last week already
rejected a similar call by CN.
Speaking to Canadian public broadcaster CBC/RDI
a few hours before the rail shutdown began,
minister Steven MacKinnon said that the
government would rely on the collective
bargaining process to resolve the dispute,
which is about wages, benefits, work scheduling
and safety issues.
Collective bargaining was “a tried-and-true
method” that helped create prosperity for
Canadian companies and workers and build the
country over decades, he said.
“It works when people put the work in that is
required to get a deal, to make those
compromises at the table, and those are the
most enduring results, and that’s our plan,
that’s the only plan,” the minister said.
Asked about using “back-to-work legislation” to
end the dispute, he noted that Parliament is
currently not sitting.
However, the government was “always prepared
for any eventuality”, he indicated but did not
provide details.
INDUSTRY SAYS GOVERNMENT MUST ACT
NOW
Canadian and US trade groups, including the
US Chamber of Commerce, have called on the
Canadian government to step in and end the
dispute, potentially through binding
arbitration, or if need be, back-to-work
legislation.
The two railroads each day ship goods worth
more than Canadian dollar (C$) 1 billion
(US$735 million), and the shutdown threatens to
shut down the country’s entire economy and
harm trade with the US, the groups said.
Bob Masterson, president of trade group
Chemistry Industry Association of Canada
(CIAC), said that the rail disruption was no
longer an ordinary labor dispute that could be
resolved through bargaining between two
parties, with the government standing on the
sidelines, but rather involved important public
safety and health issues.
One of the railroads stopped accepting critical
chemicals, in particular chlorine and
derivatives for use in drinking water, already
on 12 August, as it began winding down
operations ahead of the work stoppage, and the
other railroad stopped accepting those products
shortly afterwards, he said.
With about 95% of the population relying on
treated drinking water, as of 12 August the
rail dispute therefore became “the interest of
every Canadian across the country”, Masterson
said.
Due to its dangerous nature, under law chlorine
can only be moved by rail, he noted.
The country was “on the road to a public health
crisis” and municipalities may soon need to
issue water boil advisories, “if you don’t
interrupt this now and return service on the
railways,” he said.
“The train towards a crisis is moving, it gets
faster and harder to stop every day, and the
time to stop it is now, and the only people
that have the responsibility and the tools and
authority to do so are the government of
Canada,” he said.
The chemical industry was at the front end of
this supply squeeze, “and we want all elected
officials to be focused on that”, he added.
HARM TO THE ECONOMY
In a separate statement to ICIS, trade group
CIAC reminded of the impacts of the rail
disruption on the overall Canadian economy, the
chemical industry, and chemical trade with the
US.
In Canada, about 80% of chemical production
goes into export, with about 80% of those
exports going to the US, according to CIAC.
At the same time, Canada-based chemical
producers rely on rail to ship more than 70% of
their products, with some exclusively using
rail.
US-Canada chemical trade,
2023:
Canadian exports of industrial chemicals to
the US: Canadian dollar C$18.9 billion,
according to CIAC data.
Canadian imports of industrial chemicals
from the US: C$17.5 billion.
More than C$76 million of industrial chemical
products move on Canada’s rail network daily,
which comes to about C$28 billion a year.
Industrial chemicals include basic chemicals,
synthetic resins, rubbers and synthetic
fibers. Chemicals account for nearly 10%
of total Canadian freight rail traffic.
Furthermore, the chemical industry’s customers
in the automobile, forest products,
construction, minerals and other industries
rely on rail to ship their products.
According to estimates by the Conference Board
of Canada, a two-week rail shutdown would
result in a C$3 billion loss in nominal GDP
this year.
A four-week shutdown could lower GDP by nearly
C$10 billion in 2024 and result in nearly
50,000 job losses, the board said.
The lost income would be felt by households,
businesses and government, the board said.
Canada’s trucking industry was not a viable
alternative to rail as it does not have the
required capacity or enough drivers, the board
noted.
Industry commentators said that the government
could not allow the rail stoppage to last more
than 7-10 days, after which it would likely
need to use back-to-work legislation or binding
arbitration to end the dispute.
However, binding arbitration takes time, and
even with Parliament sitting and working at an
expedited pace, it would take a couple of days
for back-to-work legislation to become law.
In another complication, Prime Minister Justin
Trudeau’s Liberal-led minority government
relies on support from the left-leaning New
Democratic Party (NDP) to keep it in power.
The NDP, however, is close to labor unions and
has warned Trudeau against imposing binding
arbitration or back-to-work legislation.
While the work stoppage started on 22 August,
its negative impacts for chemical producers and
other industries kicked in earlier as they
needed to rearrange logistics and prepare for
potential plant shutdowns.
In the chemical industry, it can be costly to
ramp down and restart large petrochemical
plants as they are in continuous operation and
require a reliable, uninterrupted rail service.
Depending on how long a rail disruption lasts,
it can take weeks, if not months, for the
chemical producers to get production rate back
to normal.
The following table by the American Association
of Railroads (AAR) shows Canadian freight rail
traffic, including chemicals, for the week
ended 17 August and the first 33 weeks of 2024:
(US$1 = C$1.36)
Thumbnail photo source: CN
Focus article by Stefan
Baumgarten
Polyethylene22-Aug-2024
SINGAPORE (ICIS)–Click
here to see the latest blog post on Asian
Chemical Connections by John Richardson.
Whereas it might be reasonably straightforward
to assess the future of China’s direct
chemicals exports (today I look at polyester
fibres and polypropylene as examples of the
kind trade tension Heat Maps you need to
create), the outlook for China’s exports of
manufactured goods is murkier.
See today’s blog post for a full explanation,
and the see the summary below:
In practical terms, because China
completely dominates some manufacturing chains,
there may be no alternatives to China. It could
be in the best interests of the West to do
“win, win” deals with China. Take electric
vehicles as an example. If you assume that EVs
are going to dominate the EU market, and that
the EU auto industry cannot catch up with
China, why not invite China in to build EV
factories in the EU, thereby protecting local
jobs? This is what the Americans did with the
Japanese auto industry back in the 1980s.
Or industrial policy could work in the
opposite direction as the China split with the
West widens. A good example is the US Inflation
Reduction Act. This might over the long-term
even apply to value chains where China
dominates including EVs. The split could widen
to the point where we are much less dependent
on China for everything from our smartphone
components to our polyester shirts.
Or in practical terms, will, as I said,
deals be done and the world muddles through via
Chinese car factories in Europe and exports
from third-party countries like Turkey, Vietnam
and Mexico? (Chinese components go to these
countries, are assembled and move onto the
West, thereby getting around the “sound and
fury” signifying not a great deal of
antidumping duties. This to some extent is
already happening).Now that the Chemicals
Supercycle is over, much more in-depth scenario
planning is essential.
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.
Petrochemicals22-Aug-2024
MUMBAI (ICIS)–India’s Chemplast Sanmar plans
to invest rupee (Rs) 1.6 billion ($19 million)
to expand the capacity at its custom
manufactured chemical division (CMCD) at
Berigai in the southern Tamil Nadu state.
The increase in capacity will help the company
cater to growing demand in various industrial
sectors, a company source said.
Chemplast commissioned the first phase of the
CMCD in September 2023 and expects to bring the
second phase on stream by September 2025, the
source added.
The CMCD project which produces advanced
intermediates for the agrochemical,
pharmaceuticals and fine chemicals segments,
will help the company expand into fine
chemicals and pharmaceuticals, broaden its
portfolio and access new markets and customers,
he said.
“We have recently signed a new letter of intent
(LOI) with an agrochemical innovator for an
advanced intermediate for a new active
ingredient. This is the fifth LOI that we have
signed over the past 20 months,” the source
added.
In addition to the CMCD division, Chemplast has
a production capacity of 107,000 tonnes/year of
specialty paste polyvinyl chloride (PVC)
from its units at Cuddalore and Mettur in Tamil
Nadu.
Chemplast’s wholly owned subsidiary Chemplast
Cuddalore Vinyls Ltd operates 331,000
tonnes/year of suspension PVC capacity in Tamil
Nadu.
The company also produces caustic soda,
chlorochemicals, hydrogen peroxide at its three
manufacturing facilities in the Tamil Nadu
state and in Karaikal in the union territory of
Puducherry.
($1 = Rs83.94)
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