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Ethylene01-Aug-2024
MADRID (ICIS)–EU measures to prop up its
industrial fabric are going in the right
direction, with some key demands of the
chemicals industry now worked into regulation.
Still, more is needed if the 27-country bloc is
to salvage what remains of its thriving
industrial region, according to Juan Labat,
director general at Spain’s chemicals trade
group Feique.
Labat said moves to slow the implementation of
the Green Deal are not destined to kill the
plan in all but name. He said chemicals remain
fully behind the spirit of the Deal, but
pointed out that some of its time frames are
too tight.
In Spain, the cabinet is preparing an
Industrial Policy regulation to be passed after
the summer recess in Parliament: Labat praised
the law – if anything, because it is the first
of its nature in four decades, he said.
In the second part of this interview to be
published on 2 August, Labat expands on good
fortune favoring Spain’s chemicals. The
industry is displaying robust growth, despite
the many challenges the global economy has
faced in the past four tumultuous years, with
Spanish unemployment falling and consumer
spending strong.
The second part will also touch on Feique’s
relationship with the main chemicals trade
unions. Chemicals is in Spain almost an
exception in which entrepreneurs and their
workers tend to largely agree on collective
bargaining as well as demands they take to the
government as a sector. There was an exception
this year where a small dispute on wages ended
in the National Court with the judge ruling in
favor of workers.
THE EU UMPTEEMTH INDUSTRIAL
PLANThose who follow the EU’s
industrial policies – admittedly, not an
attention catching topic for most Europeans but
such an important one as the region is aiming
to lead the green economy in coming decades –
may recall how in 2022 when the US passed the
Inflation Reduction Act (IRA). This move by the
US threw its EU neighbour across the Atlantic
off guard.
At the stroke of a pen at the Oval Office and a
budget of slightly more than $300 billion
dollars – small compared to some of the EU’s
plans in the past four years – the US swung its
doors open to large green investments.
The US, of course, also benefits from lower
energy costs thanks to its renewed status as a
global producer of crude oil and natural gas.
The US’s IRA and China’s focus to heavily
subsidize sectors such as solar energy and
electric vehicles (EVs), making them world
leaders, forced the EU to wake up to the fact
that its Green Deal, a decent attempt at least
on paper to fight climate change, needed some
tweaks here and there.
One big tweak, long demanded by the industry,
has been the so-called contracts for
difference, which Labat praised as they
contemplate state support for companies while
they drop old polluting technologies and adopt
new ones, where costs are still much higher.
But Labat was not that positive about the
overall implementation of the Green Deal which,
as so many EU stories before it, kept being
changed by Members of the European Parliament
(MEPs) or even by the European Commission which
had approved the initial Green Deal in its role
as the EU’s executive branch.
Labat is sanguine about, for example, changes
to the deadlines in which polluting
technologies must be phased out by, which
overall creates high uncertainty for many
businesses which want to go greener but are
fearful of failing along the way if the public
authorities and their regulations are unstable.
“What we saw, for example, with Green Deal
targets for certain technologies to be phased
out by 2035, which soon after the Deal’s
passing were changed to 2033: that is simply
not serious and the opposite of legal
certainty,” said Labat.
“We want to go greener, but it would help if
the authorities understood the huge undertaking
this will mean. And, obviously, companies in
our sector don’t work out their capex plans
with just a short or medium term in mind: those
assets are planned for several decades.”
In perhaps a sign the pendulum is swinging, the
EU or some of its members at least find itself
mulling the delay of some of those initially
very ambitious targets. After years in which
the chemicals’ lobbying in Brussels seem to
fall on deaf ears, trade group Cefic and its
national association feel vindicated, finally.
Labat was asked, however, if delaying targets –
which potentially could be delayed again and
again, according to the circumstances – is not
pure and simple giving up on the Green Deal,
which foresaw a net-zero EU economy by 2050.
“Absolutely not – we are still very much behind
the Green Deal. But I think the world of 2020
looks very different to the one now, just four
years in, and more and more people are agreeing
that some short timeframes to face out
technologies were impossible and, in the end,
could hurt the industry in the EU more than
benefit it,” said Labat.
“The Green Deal is a good framework, but for it
to succeed it cannot be changed practically
every month: that only creates uncertainty and
I fear if that’s the norm, more and more may
decide to set camp elsewhere with their green
capital expenditures [capex]. We have a Green
Deal, with clear objectives, let’s work on it,
let’s develop it – but don’t keep changing it
all the time.”
The Green Deal did look very good on paper –
less good seem to have been the implementation
policies linked to it, said Labat.
The ‘contracts for difference’ apart, Labat
said the EU still must understand the industry
needs better and work on energy costs, which
remain the highest among the large world’s
chemicals producers.
SPAIN NOVELTY: AN INDUSTRIAL
POLICYThe Spanish governments in
office in the 1990s and 2000s did not have
industry as a key sector to protect and prop
up, the world’s own dynamics not helping either
as many companies thought at the time moving
production to cheaper Asian countries – China –
was simply too good of a business plan.
Spain rested on its laurels in industrial
policy, while witnessing and ripping the
benefits of its services-heavy economy: its
tourism prowess being the prime example and a
sector which, year after year, hits records.
Over the past 30 years, the tourism sector has
more than doubled. In 1995, 33 million visitors
visited Spain. By 2023, 85 million did so.
This
news story by Spanish financial newspaper
Expansion shows the data.
But many in Spain see tourism also as a curse.
Many economists say that for a country’s
economy to be successful, its manufacturing
sectors should account for 20% of its output.
Many countries in the EU – France and Spain two
of them – have seen their industrial sectors
fall to levels of around 10-13% in the past
three decades.
There comes in the current coalition cabinet of
the center-left Socialist Party and the
far-left Sumar party: industrial workers are
supposed to be one of its main constituencies,
so scoring goals on that front is in their own
interest.
The cabinet and chemicals are on the same page
on this one, although Labat recognized the fact
that an Industrial Policy in itself is a
novelty and, because of that, the way it is
implemented will be key and success is not
guaranteed.
Overall, Feique likes what he is hearing.
“There have been so many Industrial Policies
which ended up literally not being worth the
paper they were written on. And I think that’s
linked that many of them generated frustration
among those they were aimed at. Also, many of
them seemed to fail to grasp that an
‘industrial policy’ worth the name must be
transversal and practically have involved all
ministries and authorities: it cannot be small,
scattered measures here and there,” said Labat.
“It must look and energy and its costs, at
employment, and many other issues. The current
thinking in the government is indeed for the
regulations not to finance or implement
specific measures. Instead, it will create
government agencies which will oversee the
policy’s implementation.
“It contemplates a six-year industrial policy,
split in three-year plans, and it’s in those
plans where specific and sectorial measures
will be implemented. Overall, we are liking
what we are hearing. But we are also pragmatic,
and past experiences tell us Spain has not
precisely been an example of industrial policy
success. Touch wood this time it is – chemicals
would benefit so much if the things described
above end up being implemented and, crucially,
they work for everyone involved.
“Finally – we are talking about a draft
proposal for now: we will need to see what the
law looks like and, more importantly, what
resources are allocated to the specific
measures set to be announced.”
Interview article by Jonathan
Lopez
Hydrogen01-Aug-2024
SINGAPORE (ICIS)–In 2012-2023, China’s
hydrogen production more than doubled, with 80%
of its 2023 output derived from coal and
natural gas.
With refineries playing a crucial role in the
country’s overall hydrogen production, the
ongoing shift toward chemical production is set
to further boost demand.
This trend is expected to accelerate the
adoption of cleaner blue and renewable hydrogen
sources in refineries.
Join ICIS Asia deputy news editor Nurluqman
Suratman, ICIS hydrogen principal analyst
Patricia Tao and ICIS hydrogen senior analyst
Anita Yang as they discuss the increasing
importance of hydrogen in China’s refining
sector.
Crude Oil01-Aug-2024
SINGAPORE (ICIS)–South Korea’s petrochemical
exports rose by 18.5% year on year by value to
$4.19 billion in July, supporting the overall
growth in total shipments abroad, official data
showed on Thursday.
The country’s total exports rose by 13.9% year
on year to $57.5 billion in July, following a
revised 5.1% gain in June, the Ministry of
Trade, Industry and Energy (MOTIE) said in a
statement.
South Korea’s export growth streak has now
reached 10 months, but a rebound in imports has
trimmed the trade surplus, potentially weighing
on GDP growth in the current quarter.
South Korea’s economy
posted a slower Q2 annualized growth of
2.3% compared with the 3.3% pace set in the
preceding quarter amid sluggish domestic
consumption.
Imports were up by 10.5% at $53.9 billion,
reversing the 7.5% drop in June, resulting in a
July trade surplus of around $3.6 billion.
South Korea’s trade balance from January to
July ballooned by $51.2 billion, hitting a
record high not seen since 2018.
Exports to China reached $11.4 billion in July,
a 14.9% year-on-year increase and the highest
in 21 months, driven by growing demand for
semiconductors, wireless communication devices,
and other IT items as the industry’s recovery
continues.
This marks the fifth consecutive month that
exports to China have exceeded $10 billion.
As a result, South Korea’s total exports to
China from January to July this year reached
$74.8 billion, a 6.7% increase and the highest
among all export destinations for the period.
The country’s exports to the US set a new
record for July at $10.2 billion, a 9.3%
increase.
South Korea’s exports to southeast Asia reached
$9.9 billion in July, a 12.1% increase, driven
by strong demand for major export items such as
IT products, petroleum products, and
petrochemicals.
This marks the fourth consecutive month of
growth in exports to ASEAN nations.
Exports to India increased by 13.4% to $1.6
billion, while those to the Middle East jumped
by 50.6% to $2.2 billion for the second
consecutive month and exports to Japan rose by
10.1% to $2.6 billion.
South Korea’s energy imports in July rose by
11.9% year on year to $10.9 billion, fueled by
a 16.1% increase in crude oil shipments and a
23.8% rise in gas imports.
MANUFACTURING DIPS
Separately, the S&P Global South Korea
manufacturing purchasing managers’ index (PMI)
released on Thursday declined from 52.0 in June
to 51.4 in July, indicating a slowdown in the
sector.
Although output and new orders continued to
grow, rates of expansion eased to their lowest
levels in three months.
A surge in new product launches drove up
orders, particularly from overseas clients, as
domestic demand remained sluggish.
Consequently, new export orders continued to
grow for the seventh consecutive month, fueled
by robust demand from southeast Asia, the US
and Japan.
“Together with today’s weaker-than-expected
exports and softened business surveys, we are
wary of a possible moderation in exports in the
near future,” Dutch banking and financial
information services provider ING said in a
note.
“However, export details – by product and by
destination – are quite encouraging so far,
thus it is still too early to conclude that
export momentum is trending down.”
Global News + ICIS Chemical Business (ICB)
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Petrochemicals31-Jul-2024
NEW YORK (ICIS)–The US chemical industry,
along with other interest-rate sensitive
sectors, is poised to get a lift as the US
Federal Reserve moves closer towards its first
interest rate cut – a move increasingly likely
in September.
“The economy is moving closer to the point at
which it will be appropriate to reduce our
policy rate,” said Fed chair Jerome Powell at
the FOMC press conference.
“The question will be whether the totality of
the data, the evolving outlook and the balance
of risks are consistent with rising confidence
on inflation and maintaining a solid labor
market. If that test is met, a reduction in our
policy rate could be on the table as soon as
the next meeting in September,” he added.
The economy is seeing broader disinflation
today, including now in both housing and
non-housing services, compared to last year
when it was centered on goods.
FOCUS SHIFTS TO LABOR
MARKETAfter being laser-focused
on bringing inflation down to its target of 2%
for the past couple of years, the Fed is now
more confident on progress towards this goal
and is thus focusing more evenly on its dual
mandate of maximum employment as well as price
stability.
“When we were far away from our inflation
mandate, we had to focus on that. Now we’re
back to closer to an even focus,” said Powell.
“You’re back to [labor] conditions that are
close to 2019 conditions, and that was not an
inflationary economy… We don’t think of the
labor market in its current state as a likely
source of significant inflationary pressures,”
he added.
Powell said he does not want to see further
material cooling in the labor market.
Unemployment has ticked up to 4.1% today versus
a low of 3.4% in April 2023. Other measures
have also indicated softening, including the
Employment Cost Index (ECI) and the Job
Openings and Labor Turnover Survey (JOLTS)
report.
In the latest JOLTS report, the ratio of job
openings to number of unemployed remained at
1.2x, basically back to pre-pandemic levels.
The number of hires also ticked down.
CHEMICAL INDUSTRY AWAITS RATE
CUTSA rate cut in September,
along with guidance of further cuts to come,
would be welcome news for the chemical sector
as the long-anticipated H2 2024 recovery is
pretty much dead, according to
comments on Q2 earnings calls.
Dow chief financial officer Jeff Tate
told ICIS he expects weakness in building
and construction (B&C) and consumer
durables demand to persist through 2024, and
that substantial rate cuts are needed to kick
start demand.
“In terms of the timing [of a meaningful
recovery] going into 2025, from our vantage
point, we think it’s going to take some
substantive interest rate movement,” said Tate.
“If mortgage rates are in that 7%-plus range,
we probably need to start to see that trending
towards a 5%-type of handle to really get that
sizeable movement – to really release some of
that residential housing momentum that is
impacting consumer durables,” he added.
Several chemical companies cited ongoing
weakness in residential building and
construction on their Q2 earnings calls.
High interest rates have hurt affordability for
housing, not only dampening sales of new homes,
but existing homes as those with low-rate
mortgages from purchasing or refinancing during
the pandemic are disincentivized to move –
locked in their so-called “golden handcuffs”.
The stock market, including chemical stocks,
rallied hard into the Fed press conference and
maintained their gains through the close. In
the past couple of weeks, chemical and other
economically sensitive stocks have caught a bid
in anticipation of the Fed preparing to ease.
LONG AND VARIABLE
LAGSJust as there are “long and
variable lags” to when the economy responds to
rate hikes, as we are seeing with the easing of
inflation and the labor market today after the
Fed finally stopped hiking rates after July
2023, it works the same for rate cuts.
It will take time for the economy to respond
favorably to rate cuts as well and thus the
risk of recession is not off the table.
However, the Fed is confident it is in a good
position to deal with unexpected weakness.
“We’re certainly very well positioned to
respond to weakness with the policy rate at
5.3%. We certainly have a lot of room to
respond if we were to see weakness,” said
Powell.
Insight article by Joseph
Chang
Ethylene31-Jul-2024
HOUSTON (ICIS)–The Federal Reserve flagged on
Wednesday the threat of rising unemployment,
opening the prospect of the first rate cut
since it started its campaign to get inflation
back to its 2% target.
“The economic outlook is uncertain, and the
committee is attentive to the risks to both
sides of its dual mandate,” the Federal Reserve
said.
The Federal Reserve is charged with keeping
inflation under control and promoting maximum
employment.
If the Fed is concerned about unemployment
rising too quickly, it could loosen monetary
policy by lowering the benchmark federal funds
rate.
It voted on to keep the rate steady at
5.25-5.50%. However, its comments opened the
prospects of a cut during its next meeting
scheduled for September 18.
In its latest statement, the Fed noted that the
labor market has softened.
Job gains have moderated, and the unemployment
rate has moved up, although it remains low, the
Fed said.
Also, the fed said that inflation remains
“somewhat elevated”.
During its last rate-setting meeting in June,
the Fed said that job gains have remained
strong, and the unemployment rate remained low.
Moreover, it said that inflation remained
elevated without qualifying it.
Polypropylene31-Jul-2024
MADRID (ICIS)–Latin American petrochemicals
prices remain in the doldrums due to global
oversupply, but domestic producers are hoping a
sustained increase in freight costs and
protectionist measures could start improving
their dented market share.
Petrochemicals in the world’s quintessential
‘price taker’ region – Latin America remains a
net importer and therefore is at the mercy of
global price swings – have had some of the
toughest years in memory: high levels of
lower-priced imports have heavily reduced
operating rates in the region.
In Brazil, producers’ operating rates stood in
May at a record low of 58%, according to the
country’s chemicals trade group Abiquim. The
story repeats itself in most Latin American
countries, perhaps with the only exception of
Mexico.
There, the government increased import tariffs
in several chemical products and the country’s
North American status makes its petrochemicals
industry less prone to the woes its southern
neighbors have to deal with.
Still, Braskem Idesa, the largest polyethylene
(PE) producer in Mexico, has not been able to
avoid the competition from imports from Asia
and the US in a much-oversupplied polymers
market, with its
sales and profit also hit by the situation.
Most economists believe Argentina’s GDP is
going to fall around 4-5% this year, with a
stronger rebound in 2025. However, most
petrochemicals suffered heavy falls in demand
this year of around 40%, according to some
sources.
In Latin America as a whole, players in the
PE and polypropylene (PP)
markets, two of the most widely used polymers,
expect little improvements in demand in coming
months, under a global oversupply which is
expected to remain or even widen as yet more
capacities come on stream.
BRAZIL: THIRST FOR
GASPetrochemicals producers in
Latin America’s largest economy, Brazil, have
been losing market share for the past two years
as China’s dumping of its oversupplied
chemicals to the rest of the world continues
apace.
The chemicals trade group in the country
Abiquim, in which polymers major Braskem has a
commanding voice, grasped its opportunity when
President Luiz Inacio Lula da Silva took office
in January 2023.
Abiquim started then a lobbying campaign for
higher import tariffs – the previous
liberal-minded administration of Jair Bolsonaro
had lowered them – to protect domestic
producers’ market share, but also calls about
high natural gas prices which, producers say,
is making the industry uncompetitive in the
global stage.
Lula’s cabinet, whose declared aim is to create
more and better industrial jobs, has listened
to Abiquim and in 2023 raised tariffs twice,
and another increase is widely expected by
September after a public consultation in which
the industry – Abiquim as well as individual
companies – requested increasing
tariffs in more than 100 chemicals.
On the other hand, a coalition of a variety of
trade groups who import most of the chemicals
they use in their manufacturing processes –
plastics converters, for example – have
been lobbying on the opposite direction:
for tariffs to stay unchanged or, in their best
scenario, even lowered.
In natural gas, Brazil’s prices are admittedly
much higher than the US’, the other large
Americas’ chemicals market. According to
Abiquim, they are five times higher, although
that multiple varies according to the obvious
gas price swings.
In June, Lula and several ministers went to
gas-rich Bolivia to sign deals to increase
imports of natural gas as
well as fertilizers, taking with them
several executives from manufacturing trade
groups; Abiquim’s head, Andre Passos, was part
of the entourage.
Only time will tell if, as Abiquim put it, the
deals for natural gas end up representing a
“historic step” for
chemicals in Brazil, who supposedly could
sharply lower their gas costs if more supply
from Bolivia – and potentially from Argentina –
went to Brazil.
Despite this progress, Brazil’s industrial
sectors continue to import chemicals because
they are simply not produced in the country,
which imports nearly half of all the chemicals
it uses in its factories: the country lacks
special chemicals production which, in times of
crisis, could help it weather global downturns.
As a consequence, the three main chemicals
producers, mostly producing basic chemicals or
polymers, have been hit hard by the global
downturn.
Braskem and Unipar’s financial
results continued suffering in the first
quarter of 2024, while Unigel remains involved
in a battle for its
survival after its natural gas-based
fertilizers division, combined with the
downturn in the chemicals division as well as a
high debt burden put its finances against the
wall.
Unipar and Braskem are set to publish
second-quarter financial results in coming
weeks. Unigel has not released financials since
Q1 2023, an option allowed by Brazil’s
financial regulations for companies in
financial distress.
The severe floods that affected Brazil’s
southernmost state of Rio Grande do Sul in May
are likely to hit the country GDP growth in
2024, although bodies such as the IMF expect a strong
rebound in 2025 as reconstructions efforts
gather pace.
While mostly out of the media spotlight by now,
the floods were Brazil’s worst ever and its
images will remain etched in Brazilians’
retinas for years. They left 182 dead, with 29
people still unaccounted for. Nearly 2.5
million people were affected at the peak of the
crisis in the 11.5-million-strong state and its
economy came to a standstill during May.
Brazil’s vast geography makes it prone to be
victim of a variety of weather phenomena which
are only set to increase in number and severity
as climate change continues its course. Experts
agree the country needs
to step up its climate change adaptation
measures.
IMF estimates
(in %)
GDP growth 2024
GDP growth 2025
Difference with April forecast
2024
Difference with April forecast
2025
Brazil
2.1
2.4
-0.1
0.3
Mexico
2.2
1.6
-0.2
0.2
Latin America and the
Caribbean
1.9
2.7
-0.1
0.2
SHEINBAUM INCOGNITAIn
October, Mexico’s Claudia Sheinbaum will take
over as president from Andres Manuel Lopez
Obrador, who handpicked her for the role.
Sheinbaum will be sworn in after 60%
of her compatriots backed her, with
her Morena party achieving in parliament a
supermajority of two thirds of seats.
The IMF also downgraded its GDP growth forecast
for Mexico in 2024, as the presidential
transition takes place and until Sheinbaum’s
policies become clearer but upgraded them for
2025. Energy policies,
greenhouse gas (GHG) emissions, and the
burden of the
overindebted crude oil state-owned major
Pemex will be on the spotlight.
Mexican manufacturing is showing signs of a
slowdown due to internal policy but
also because of the US November election, where
the export-intensive economy sends most of the
goods it produces. The downturn in the US
manufacturing sectors remains, with its
Mexican peers taking the collateral damage.
Corporate Mexico was never too fond of Lopez
Obrador’s left-leaning rhetoric, although the
president did not really change much in the
economic fundamentals.
In public, and for now at least, companies
think Sheinbaum will be a better ally for the
private sector, although many still fear what
she may do with the supermajority backing her
in parliament. One-party constitutional reforms
are possible.
In an interview with ICIS,
Sergio Plata, an executive at Braskem Idesa,
said companies are liking the tune of
Sheinbaum’s first steps as president-elect, and
praised her visit to the petrochemicals hub of
Veracruz after winning the election, in which
she showed deep knowledge of the chemicals
industry and its needs, he said.
Despite enjoying better operating rates than
its Brazilian peers and certain protection from
higher import tariffs, Mexican petrochemicals
producers also continue to be hit by the global
downturn in the sector.
Apart from the aforementioned Braskem Idesa,
Mexico’s largest chemicals company Alpek and Orbia posted poor set
of results for the second quarter.
ARGENTINA REVIVAL?Many
economists in Argentina and outside it have
come to think the country has no solution as
its economy became dysfunctional under a
subsidy-dependent, corruption-prone, and closed
to imports system where the large middle
classes are now just a distant memory.
According to official figures, around 60% of
Argentinians live in poverty.
The country’s demise is studied in business
schools as a case of a developed economy which
downgrades to emerging economy status. In
December, however, Javier Milei was sworn in as
president under the promise of turning the
country upside down and make it a liberal
bastion, with a largely deregulated economy.
While his shock therapy has caused havoc, he is
still backed by most Argentinians: the dislike
for the previous failed administration and its
mismanagement remains latent, and Milei had
warned during the campaign the changes would be
painful.
While the economy may rebound strongly in 2025,
petrochemicals are not expected to benefit much
from it, as the recovery is expected to be led
by export-intensive and foreign
reserves-generating sectors such as crude oil,
agriculture, or mining.
The petrochemicals-intensive manufacturing and
construction sectors have
been hit the hardest by the recession.
Inflation has started to slowly fall, but it
remains at an annual rate of 271%.
Petrochemical sources in the country are
already bracing for more hardship
in 2025, with demand expected to fall
again. Indeed, it will take many quarters for
consumers to have the means and the confidence
to buy higher-priced and
petrochemicals-intensive durable goods.
“Everyone is wondering for how long people can
take the shock therapy. If the changes
implemented by Milei bear fruit, Argentina
could be a completely different, and perhaps
better country,” said in July a source at a
distributor in the country.
“But will he achieve what he is proposing? I am
not that certain.”
MADURO DRAGS ONVenezuela
may also end up being studied in business
schools’ textbooks, having gone in just three
decades from powerful oil exporter to
poor nation, plagued by insecurity, with a
third of its population gone abroad since 2015,
and with a president who is a dictator in all
but name.
The country’s demise started in the 1990s and
worsened after the socialist PSUV party took
over in 2001, first under Hugo Chavez and later
under Nicolas Maduro.
On 28 July, the country held an election with
hopes it could be free, unlike the 2018
election which gave the PSUV got more than 95%
of seats in parliament and which ultimately
made Venezuela a pariah country.
Several analysts and even opposition figures in
Venezuela hinted that, if Maduro lost the
election, he could be given the option to leave
for exile in some of the few allies he has –
Cuba and Russia recurrently mentioned –
allowing Venezuela to start afresh.
Opinion polls consistently showed Maduro was on
course for a defeat. Turnout on 28 July was
high, and long queues of Venezuelans at the
polling stations drew a picture of thirst for
change.
However, when the official results came
in, most Venezuelans realized the election
had just been yet another farce. The government
said Maduro had renewed its mandate with 51.2%
of the votes, with the main opposition
candidate at 44%.
Few countries have recognized Venezuela’s
result yet, apart from some of Maduro’s allies,
some of them global pariahs themselves. Even
China, tired of lending Venezuela large sums
which it fears it will never get back, has not
been unfriendly to opposition leaders.
The US, the EU, and traditional allies in Latin
America such as Colombia’s Gustavo Petro,
Brazil’s Lula, or Chile’s Gabriel Boric had
also said a recount should take place again
with full transparency; the very demand coming
from the opposition since the official results
were announced.
The coming days and weeks are crucial. However,
after years of demise, Maduro’s exile, if it
happens, would only represent for most
Venezuelans a small glimmer of a very distant
light at the end of a very dark tunnel.
Front page picture: Brazilian President
Lula (right) meets chemicals industry
representatives in Brasilia in May, including
Abiquim’s director general Andre Passos (right,
behind Lula)
Picture source: Abiquim
Insight by Jonathan Lopez
Power31-Jul-2024
UK government announced a budget boost of
more than £500m for the sixth CfD auction
round, raising the budget to over £1.5bn
This means offshore wind funding has
increased from £800m to £1.1bn, the largest
budget ever
Despite this vast increase, the budget will
not be enough to procure the capacity needed to
meet UK’s 2030 offshore wind target
LONDON (ICIS)–Modelling by ICIS Analytics
indicates that the UK government’s latest £530m
funding increase to its Contracts for
Difference (CfD) scheme is too low to procure
the capacity required to meet its 2030 offshore
wind target.
The UK aims to quadruple offshore wind capacity
by 2030, a target the Labour government first
announced before being elected.
The budget boost was announced on 31 July,
ahead of the sixth auction round of the
Contracts for Difference (CfD) scheme this
summer, and raises the overall budget to over
£1.5bn.
The pot for offshore wind has now increased
from £800m to £1.1bn, the largest ever budget.
But to meet the UK
target, nearly £3.2bn would be needed – if the
auction cleared at a base case scenario strike
price of £60/MWh, ICIS analysis shows.
Furthermore, there are too few auction entrants
to procure the 16.6GW of offshore wind capacity
needed in the first place. This is because only
10.6GW in projects have the required
development consent to proceed to auction.
“Last year’s auction round was a catastrophe,
with zero offshore wind secured,” energy
secretary Ed Miliband said in a statement,
adding that the new budget would support
construction work for the sector.
The
unsuccessful 2023 fifth auction round saw
no offshore wind bids mainly due to a low
strike price in the wake of increasing supply
chain costs.
The previous government had set the maximum
strike price for offshore wind in the sixth
auction at £73/MWh, allocated offshore wind its
own funding pot and set a budget of £800m.
The new government’s aim to quadruple offshore
wind capacity is also an increase on the UK’s
previous target.
OFFSHORE WIND ANALYSIS
To interpret targetted 2030 capacity, ICIS
quadrupled its forecast for installed capacity
by the end of 2024, resulting in 61.08GW by
2030.
Actual intended
capacity may vary, and the government did not
address enquiries that could help specify the
exact date from which it intended to quadruple
capacity.
ICIS Analytics calculated that, in auction
rounds six and seven, offshore wind capacity
needs to average 16.60GW per auction to obtain
the capacity needed to reach the 2030 target.
Calculations show that if the auction cleared
at a strike price of £60/MWh, the £1.1bn budget
could finance 5.8GW of capacity. Similarly, if
the auction cleared at its maximum strike price
of £73/MWh, the budget would only be able to
fund 4.3GW.
Given that only 10.6GW of offshore projects
have development consent to proceed to auction,
this puts
increased pressure to secure further
capacity on the seventh auction in 2025.
For now, ICIS Analytics forecasts only 39GW of
offshore wind capacity will be built by 2030,
under a base case scenario.
BOOST FOR ONSHORE
WIND
The overall budget the CfD scheme is divided
into three pots (see infographic) depending on
the technology it supports. The budget for pot
one, for established technologies like onshore
wind, was increased from £120m to £185m as a
result of the latest £530m injection.
The government has also
removed a de-facto ban on onshore wind in
England this month.
Additional policy tests previously meant that
wind power planning applications had to go
though additional hurdles compared to many
other types of energy development proposals.
The government also plans to consult on
bringing onshore wind back into the nationally
significant infrastructure projects regime,
meaning decisions on large onshore wind
projects would be made by the Secretary of
State instead of local planning authorities.
This could further speed up permitting.
ICIS analyst Robbie Jackson-Stroud
previously stated that onshore wind is
cheaper and quicker to build but has a thin
pipeline of projects due to previous red tape.
“While there is more opportunity for the
technology, it may take until the seventh
auction round for onshore projects to be ready
to bid in the CfD,” Jackson-Stroud said.
FLOATING OFFSHORE WIND
Pot two, which is for emerging technologies
such as floating offshore wind, saw a funding
increase from £105m to £270m. This should help
the UK move closer to its target to deploy up
to 5GW of floating offshore wind capacity by
2030, despite £15m being ringfenced support for
tidal stream projects.
ICIS previously reported that the increase
in maximum strike price to £176/MWh and budget
of £105m for the sixth auction could make the
round more attractive to developers and could
procure more floating offshore wind capacity.
In the fifth auction, there were no bids for
floating offshore wind amid a low strike price
of £116/MWh and a budget of only £37m for the
pot.
Speciality Chemicals31-Jul-2024
LONDON (ICIS)–Eurozone inflation in July is
expected to rise from 2.5% to 2.6%, above
market expectations, with services being the
driving component, according to data from
European Commission statistics body Eurostat.
Looking at the main components, services are
expected to see the highest annual rate in July
(4.0%, falling from 4.1% in June), followed by
food, alcohol and tobacco (2.3%, also falling
from 2.4% in June) and non-energy industrial
goods (0.8%, compared with 0.7% in June) Energy
holds the position of highest growth, growing
to 1.3% from 0.2% in June.
Despite the higher than expected rate of
inflation, the downward overall downward
trajectory remains intact, according to
analysts at banking group ING, but may not be
at a pace to allow for further rate cuts in the
immediate future.
“Survey data still suggests that the downward
trend in inflation is likely to continue. And
keep in mind that, at the current level,
interest rates still imply restrictive monetary
policy,” said ING chief economist for the
eurozone Peter Vanden Houte.
The debate on whether The European Central Bank
should or should not introduce a cut in
September will only be finalised once another
six weeks of remaining economic data is
reviewed. The central bank’s monetary policy
committee convenes on 12 September.
The eurozone inflation flash estimate is issued
at the end of each reference month. The final
figures for July are schedules to be released
for 20th August 2024.
Ethylene31-Jul-2024
SINGAPORE (ICIS)–Ethane is gaining favor as
the feedstock for steam crackers in China, as
its competitive prices make ethane-cracking the
most profitable route for ethylene production
compared to other options.
Join ICIS LPG analysts Lillian Ren and Yan Wang
as they discuss how Chinese steam crackers are
eyeing ethane as a cracking feedstock.
Several steam cracker operators in China
plan to revamp and switch to cracking more or
only ethane instead of propane.
Propane/butane still takes a larger share
than ethane in steam cracker feedstock slates.
The cost advantage of ethane will narrow
with increasing demand and a single global
source.
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