TORONTO (ICIS)–Canada’s federal government needs to exercise its authority and act quickly on the complete freight rail stoppage, set to start midnight at 00:01 Eastern Time, trade group Chemistry Industry Association of Canada (CIAC) said. The simultaneous rail disruption at both of the country’s freight railroads, Canadian National (CN) and Canadian Pacific Kansas City (CPKC), has been looming over the chemical and other industries for months. It was apparent that the rail labor dispute could not be resolved through collective bargaining, CIAC told ICIS in an update on Wednesday. The government therefore should impose binding arbitration, with a prohibition on the right to strike/lockout, the group said. Failing that, parliamentarians could be recalled to pass back-to-work legislation, CIAC said. “We believe it is important for the government to act sooner rather than later to mitigate any impacts to the Canadian economy and the workers who support it, and our trading relationships,” it said. It was government’s and parliament’s role to protect the public interest, from both a public safety perspective and in terms of protecting Canadian workers and businesses broadly from the economic harm that was already being caused by the pending rail stoppage, the group said. As for public safety, CIAC noted in particular the continued rail supply of chlorine to municipalities to ensure safe drinking water. LEARNING FROM THE US Compared with Canada, the US under its Railway Labor Act (RLA), 1926, was more adept at ensuring that railways keep operating during labor disputes, CIAC said. The RLA nearly eliminates the risk of shutdowns while allowing for business and labor to negotiate, the group said. In fact, there have been very few rail labor disruptions in the US over the past 100 years, CIAC said, adding: “Just one, lasting one day.” CIAC is advocating that Canada follow the US approach in order to avoid the near-annual disruptions of Canada’s rail and port infrastructure, it said. CHEMICALS AND RAIL 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 ($13.9 billion), according to CIAC data. Canadian imports of industrial chemicals from the US: C$17.5 billion in 2023. 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. CIAC members see reliable rail services as a key factor in deciding whether to locate a new facility or expand operations in Canada, the group said. Likewise, investors see rail service as essential when they are “looking to Canada to take advantage of our skilled labor and abundant and well-priced natural resources”, it added. CANADIAN POLITICSAlthough the chemical and other industries have repeatedly warned about the impacts simultaneous disruptions at both railroads could have on Canada’s weakening economy and on trade with the US, the federal government under Prime Minister Justin Trudeau has yet to act decisively. While CIAC declined to speculate about the reasons for the government’s hesitation, political commentators noted that Trudeau’s Liberal-led minority government relies on the left-leaning New Democratic Party (NDP) to keep it in power. Earlier this week, the NDP, which is close to labor unions, warned Trudeau against imposing binding arbitration or back-to-work legislation, as this would undermine the rail workers’ right to bargain for collective agreements. If the NDP withdraws its support in parliament, the government would fall. In current opinion polls, the Liberals are well behind the opposition Conservatives. Map by Miguel Rodriguez Fernandez Rail labor union Teamsters Canada Rail Conference (TCRC) on Sunday served the required 72-hour strike notice on CPKC, following CPKC’s earlier lockout notice, and CN served a 72-hour lockout notice on TCRC. The railroads continued to wind down operations on Wednesday ahead of the start of the work stoppage on Thursday. Trudeau said in webcast remarks to media on Wednesday that the government was following the issue “extremely closely”, adding that it was in the best interest of the railroads and the union to find a negotiated resolution. Federal labor minister Steven MacKinnon, who met with the railroads and TCRC on Tuesday, continues to press for a negotiated settlement of the labor dispute, which is about wages, benefits, work scheduling and safety issues. “Get a deal at the table. Workers, farmers, businesses and all Canadians are counting on it,” he said on social media. MacKinnon last week rejected CN’s call to refer the dispute to the Canadian Industrial Relations Board (CIRB) for binding arbitration. 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. 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: ($1=C$1.36) Thumbnail photo source: CPKC

SINGAPORE (ICIS)–Japan’s chemical exports rose 12% year on year to yen (Y) 1.04 trillion in July, driven in part by increased plastic materials shipments abroad, with a weaker yen also contributing to the inflated trade figures overall, official data showed on Wednesday. Trade deficit of Y622 billion recorded in July, reversing June surplus Overall exports to key trade partner China increase 7.2% in July Yen hit 38-year low against US dollar in July The growth in July chemical exports extends the upward trend to seven consecutive months, building on favorable low base effects following a string of contractions throughout most of 2023. The country’s exports of plastic materials rose by 16.6% year on year to Y303.8 billion in July, the Ministry of Finance (MOF) said in a statement. By volume, exports of plastic materials rose by 8.9% year on year to 471,703 tonnes. Shipments of organic chemicals rose by 19.4% year on year to Y185.5 billion in July. Exports of motor vehicles rose by 6.2% year on year to Y1.69 trillion in July, while shipments of motor vehicle parts were up by 4.4% at Y376 billion. Japan’s overall exports rose by 10.3% year on year to Y9.62 trillion in July, while imports were up 16.6% at Y10.2 trillion. This resulted in a trade deficit of around Y622 billion, reversing the surplus of about Y224 billion in June. By region, shipments to the US rose 7.3% year on year, a slightly slower pace than the previous month, while exports to China increased 7.2%. In contrast, shipments to the EU declined 5.3% year on year. WEAKER YEN INFLATING EXPORT FIGURESThe MOF reported that that the yen averaged 159.77 against the US dollar in July, marking a 12.3% decline in value compared to the same period last year. The yen plummeted to a 38-year low against the US dollar on 3 July, breaching the 162-per-dollar threshold for the first time since December 1986, as divergent monetary policies between Japan and the US continued to drive the currency’s decline. Higher interest rates in the US make dollar-denominated assets more attractive due to higher yields compared with Japanese assets. The yen has made strong gains after the BOJ’s decision on 31 July to raise interest rates to levels not seen since 2007, following the one on 19 March this year when the central bank lifted a negative interest rate policy and ended equity purchases and yield curve controls. On Wednesday, the yen was trading at around 145.5 to the dollar. The rate has fluctuated over the last 30 days, with a high of 156.9 and a low of 144.7. EXPORTS PROPELLING ECONOMY TO RECOVERY After a two-quarter slump, Japan’s economy bounced back in the April-June period, posting an annualized growth rate of 3.1%, driven by a resurgence in consumer spending and continued exports growth. “We expect the latest growth rebound to extend into Q3 supported by an extension of the consumption rebound, aided by influx of tourists and accelerated tech investments,” Alvin Liew, senior economist at Singapore-based UOB Global Economics & Markets Research said. The rebound in consumption is likely to encourage the central bank to stay the course on its monetary policy normalization path, but recent market volatility may prompt the central bank to exercise greater caution, Liew said. “We continue to expect the BOJ to stay on the rate tightening trajectory although it may not be a continuous cycle and likely to be a limited normalization path.” Focus article by Nurluqman Suratman

SINGAPORE (ICIS)–The European Commission (EC) has announced a draft decision to impose up to 36.3% definitive countervailing duties on imports of battery electric vehicles (EVs) from China. The draft rates are lower than the provisional duties published on 4 July and took effect on 5 July, the commission said on 20 August.  China car companies Definitive duties (draft) Provisional duties BYD 17.0% 17.4% Geely 19.3% 19.9% SAIC 36.3% 37.6% Other cooperating companies 21.3% 20.8% All other non-cooperating companies 36.3% 37.6% The Commission said that definitive measures must be imposed no later than four months after imposition of provisional duties and definitive findings will be published by 30 October 2024 at the latest. It granted a lower individual duty rate of 9% to US EV maker Tesla as it was classified as an exporter from China at this stage, down from the 20.8% provisional rate. The duties, once finalized, will be in force for five years. In a response to EC’s decision, China’s Ministry of Commerce said that the EU’s ruling discriminates between different types of Chinese companies which distorted the results of the investigation. “The final ruling was based on the ‘facts’ unilaterally identified by the EU, rather than the facts recognized by both sides. China firmly opposes this and is highly concerned,” the ministry said. The China Association of Automotive Manufacturers (CAAM) voiced strong opposition to the decision, saying that the European Commission seriously “distorted the facts” of China’s EV industry. The EU duties bring great risk and uncertainties to Chinese companies’ operations and investment in the bloc, damage their business confidence, as well as impact EU’s development of EV industry, the association said. The automotive industry is a major global consumer of petrochemicals, which account for more than a third of the raw material costs of an average vehicle. EVs and associated battery markets provide growth opportunity for the chemical industry, with chemical producers separately developing battery materials, as well as specialty polymers and adhesives for the environment-friendly vehicles. Thumbnail image: Cars for export at Yantai port in China – 07 August 2024 (Costfoto/NurPhoto/Shutterstock)

SINGAPORE (ICIS)–The 18th Annual Gulf Petrochemicals and Chemicals Association (GPCA) Forum will be held in Muscat, the capital of Oman, on 2-5 December. The annual event will take place for the first time in Oman and will address the theme “Industry’s Next Chapter: Driving Sustainable Advancement for Global Progress”, event organizer GPCA said in a statement released on 20 August. The 17th Annual GPCA Forum last year in Qatar attracted 5,127 delegates. The chemicals industry makes up the second largest manufacturing sector in the Gulf Cooperation Council (GCC) after oil and gas, producing over $108 billion worth of products every year, according to the GPCA. The GCC comprises Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE.

HOUSTON (ICIS)–The National Corn Growers Association (NCGA) said it is urging Canadian Prime Minister Justin Trudeau to resolve a dispute between his nation’s railways and the employees. The US trade group is concerned if left unresolved, the labor issues could result in a strike interrupting rail service into the US. The NCGA said Canada is the third-largest destination for US agricultural exports and the second-largest source of agricultural imports. The main threat to corn growers is that a strike could interrupt shipments of fertilizer imports and exports of ethanol, corn and byproducts used as animal feed just as harvest is getting close to commencing in many of the key states. “If a strike shuts down rail service from Canada into the US, it will adversely impact America’s farmers who rely on rail to ship goods between the two countries,” said Harold Wolle, National Corn Growers Association president. “We encourage Prime Minister Trudeau, the Teamsters and Canadian rail workers to do everything possible to avoid such a strike.” Both railways have issued lockout notice which would begin 22 August while the union has issued a strike notice also starting 22 August. The NCGA noted that under federal labor law, Canadian officials can order all parties to enter binding arbitration and that it has joined other agricultural groups in sending a letter to the prime minister calling for action. “We plan to keep calling for a resolution on this issue. The stakes are high, and this is the last thing our farmers need as they deal with a drop in corn prices and higher input costs,” Wolle said.

HOUSTON (ICIS)–Fertilizer Canada said disruptions to rail services across the country will cost the fertilizer industry an estimated C$55-63 ($40.3-46.2) million per day in lost sales revenue. Facing a potential strike, the industry group is urgently calling on the federal government to take immediate action to prevent a work stoppage on both railways. It wants to see binding arbitration that prohibits Teamsters Canada Rail Conference (TCRC) from undertaking strike action and CN Railway and Canadian Pacific Kansas City (CPKC) from lockout action. Both railways have served lockout notices to TCRC beginning 22 August and TCRC has served a strike notice to CPKC also beginning 22 August. “The time for action is now. We can no longer patiently wait for a resolution. The federal government must protect Canada’s economy and food security by ordering binding arbitration,” said Karen Proud, Fertilizer Canada president and CEO. The group noted that the railways move an average of 69,000 tonnes of fertilizer product per day, which is equivalent to four to five trains. The fertilizer industry is among the first to experience slowdowns. As on 12 August, the movement of some ammonia products were halted when they were embargoed. Since that action the railways have issued further embargoes, including US railways halting shipments to Canada. Currently 75% of all fertilizer produced and used in Canada is moved by rail, with minimal transportation alternatives, with 90% of those volumes which are destined for the US market delivered by rail. “In the last seven years, Canadian supply chain labour disruptions have cost the fertilizer industry nearly a billion dollars,” Proud said. “These stoppages are doing immense damage to our reputation as a reliable trading partner.” “Our customers, who rely on Canadian fertilizer products, are being forced to turn to our competitors in Russia, Belarus and China. We can’t afford for our railways to shut down, and we can’t afford a passive approach to our supply chains any longer. We need long-term solutions.” Fertilizer Canada represents producers, manufacturers, wholesale and retail distributors of nitrogen, phosphate, potash and sulphur fertilizers. $1.00=C1.36

LONDON (ICIS)–Crude benchmarks are likely to be subject to bearish pressure in week 34 as Chinese oil demand concerns take centre stage. However, European and US economic data released later this week may provide clues to future monetary policy decisions and provide hope for upcoming interest rate cuts. ICIS experts look at factors that are forecast to drive oil prices in Week 34.

LONDON (ICIS)–Construction output in the eurozone rebounded in June after declining for three months, official data showed on Tuesday. Seasonally adjusted production in construction rose by 1.7% from May and was also higher, by 1.4%, in the EU. Eurozone output had been on a downward trend since March, with the EU following a similar track, though with a marginal, near flat 0.1% rise in April. Building construction, civil engineering and specialized construction activities all increased in June from the previous month in both the eurozone and EU, according to statistics agency Eurostat. On a year-on-year basis, June construction output in the eurozone was 1.0% higher in the eurozone and 0.1% lower in the EU. Numerous petrochemicals and specialty chemicals are key ingredients in products used for modern construction, including adhesives, ad-mixtures, sealants, coatings, paints, flooring, insulation and water proofing.

MUMBAI (ICIS)–India’s state-owned Bharat Petroleum Corp Ltd (BPCL) plans to invest rupee (Rs) 1.7 trillion ($20.3 billion) over the next five years to grow its refining and fuel marketing business, as well as expand its petrochemicals and green energy businesses. 44% of total earmarked for refinery, petrochemical capacity growth Bina refinery/petrochemical project due for commissioning in FY2028-29 New refinery project being mulled As part of the investment initiative named ‘Project Aspire’, some Rs750 billion will go to increasing capacity at BPCL’s refineries and expand its petrochemical portfolio, company chairman G Krishnakumar said in the company’s annual report for the fiscal year ending March 2024. “The demand for major petrochemical products is expected to rise by 7-8% annually. This presents a strategic opportunity to expand refining capacity alongside the development of integrated petrochemical complexes,” Krishnakumar said. BPCL’s planned petrochemical expansions include the new petrochemical projects at its Bina refinery in the central Madhya Pradesh state, and the Kochi refinery in the southern Kerala state. The Bina project is a brownfield expansion that will raise the refinery’s capacity by 41% to 11m tonnes/year, to cater to the requirements of upcoming petrochemical plants, which include a 1.2m tonnes/year ethylene cracker and downstream units. The site is expected to produce 1.15m tonnes/year of polyethylene (PE), including high density PE (HDPE) and linear low density PE (LLDPE); 550,000 tonnes/year of polypropylene (PP); and 50,000 tonnes/year of butene-1 The complex will also produce chemicals such as benzene, toluene, xylene, the annual report said. “Technology licensors for all critical packages, and project management consultants for refinery expansion and downstream units have been onboarded and work at the site commenced in the first week of July 2024,” Krishnakumar said. BPCL has chosen US-based Lummus to provide technologies for the new ethylene plant and downstream units at the complex. The refinery will be ready for commissioning by May 2028, while petrochemical operations will begin in the financial year ending March 2029. At Kochi, BPCL’s 400,000 tonne/year PP project is progressing as per schedule and is on track for commissioning in October 2027. It plans to raise its Kochi refinery capacity by 16% over the next five years to 18m tonnes/year, based on data from the company’s latest annual report. https://subscriber.icis.com/news/petchem/news-article-00110958286 The company also plans to set up additional petrochemical capacities over the next few years. “To meet the anticipated demand beyond our planned expansions in Bina and Kochi, we are actively evaluating options for setting up additional integrated refining and petrochemical capacities within the next 5-7 years,” Krishnakumar said BPCL has begun evaluating options to set up a new refinery with a planned capacity of around 9 million to 12 million tonnes/year, a company official said, adding, “we are exploring a new refinery either on the east coast or at other locations”. In Mumbai, the company also plans to expand its refinery capacity by a third to 16m tonnes/year in the next five years, according to its annual report. In the eastern Odisha state, BPCL expects to begin operations at its 200 kilolitre/day ethanol plant at Bargarh by October 2024. Once operational, the integrated refinery is expected to produce both first generation (1G) as well as second generation (2G) ethanol using rice grain and paddy straw as feedstock. Focus article by Priya Jestin ($1 = Rs83.85) Thumbnail image: The Bharat Petroleum import terminal at Haldia in West Bengal on 13 March 2021. (Debajyoti Chakraborty/NurPhoto/Shutterstock)