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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.
Ammonia30-Jul-2024
HOUSTON (ICIS)—Chemical company Clariant
Catalysts has announced the expansion of its
strategic cooperation with global engineering
firm KBR regarding ammonia production.
Clariant said the partners will continue
collaborating on traditional ammonia projects
while significantly increasing their focus on
low-carbon and carbon-free green ammonia
applications.
It further said the solutions will combine
Clariant’s outstanding AmoMax ammonia synthesis
catalysts with KBR’s K-GreeN ammonia
technologies to maximize the economics and
energy efficiency of ammonia production.
For the production of carbon-free green
ammonia, KBR’s technology is combined with
Clariant’s catalyst to convert green hydrogen
with nitrogen from an air separation unit.
Clariant said the partners’ complete green
ammonia solution has already been selected for
10 prestigious green ammonia projects around
the world.
“We are proud of our long and successful
history as partners and are delighted to
strengthen our cooperation with KBR. By
extending our collaboration towards sustainable
ammonia solutions, we generate synergies for
innovations supporting fertilizer production
and the energy transition,” said Georg Anfang,
Clariant Catalysts, vice president syngas and
fuels.
“Our state-of-the-art catalysts optimally
complement KBR’s advanced process technologies
to enable economical and reliable large-scale
production of low-carbon and green ammonia.”
KBR has licensed and designed over 250
grassroot ammonia plants worldwide with
Clariant providing catalysts best suited for
the optimum performance of KBR-licensed ammonia
plants.
Ammonia30-Jul-2024
HOUSTON (ICIS)–Although net income and sales
fell year on year, US fertilizer producer CVR
said it had a solid result for Q2 2024, which
was driven in part by a combined ammonia
production rate of 102%.
The producer of ammonia and urea ammonium
nitrate (UAN) announced during the period it
had a net income of $26 million and net sales
of $133 million for Q2 compared to net income
of $60 million and net sales of $183 million
for the second quarter of 2023.
CVR said its facilities remained consistent
compared to this quarter in 2023 as they
produced 221,000 short tons of ammonia, of
which 69,000 net tons were available for sale.
The remaining balance was upgraded to other
products, including 337,000 short tons of urea
ammonia nitrate (UAN).
In Q2 2023, those levels were at 219,000 tons
of ammonia, with 70,000 net tons available to
sale with the remainder upgraded, including
339,000 short tons of UAN.
The average realized gate prices for UAN has
also decreased with it down by 15% to
$268/short ton, while ammonia dropped 26% to
$520/short ton year-on-year.
During this period in 2023 the average realized
gate prices for UAN and ammonia were at
$316/short ton and $707/short ton respectively.
“CVR Partners reported solid operating results
for the second quarter of 2024 driven by safe,
reliable operations and a combined ammonia
production rate of 102%,” said Mark Pytosh, CVR
Partners CEO.
“The spring planting season experienced some
weather interruptions, however, planted acreage
was higher than expected and demand for
nitrogen fertilizer was strong.”
Pytosh added that they expect to see good
demand for nitrogen fertilizer remaining
throughout 2024 even with prices being higher
than experienced in 2023.
“Our focus for the remainder of the year will
continue to be on safe, reliable operations and
maximizing our free cash flow generation,”
Pytosh said.
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Ethylene30-Jul-2024
LONDON (ICIS)–Germany’s
chemical-pharmaceutical industry is operating
at unsustainably low capacity utilization as it
continues to face severe challenges, raising
doubts over the sector’s long-term prospects,
industry officials said at a webinar hosted by
the chemical producers’ trade group.
Operating rates remain below profitability
threshold
Bureaucracy and other challenges discourage
production and investment
Domestic demand weak as Europe’s growth
engine has stalled
In the second quarter, the operating rate was
only 75.1%, down from 78.1% in the first,
according to the latest industry data.
It was the 11th consecutive quarter when the
rate was below the long-term average of around
82%, which the industry needs to operate its
assets profitably.
(Blue bars: capacity utilization; orange line:
profitability threshold; source: VCI)
The low operating rates reflect the challenges
the industry faces in producing in Germany and
call into question the country’s long-term
outlook for chemical production and
investments. So said Christiane Kellermann, an
economist at the German Chemicals Industry
Association (VCI).
More capacity may need to be removed from the
market as it does not make economic sense to
run plants unprofitably in the long term, she
said.
Meanwhile, companies are holding back on new
domestic investments while shifting more
investments abroad, she noted.
BUREAUCRACY
The burden from bureaucracy is the top
challenge for chemical production in Germany,
according to a recent survey of VCI member
companies.
Bureaucracy is not an abstract concept, but
rather a significant cost factor for companies,
Kellermann said.
According to the survey, chemical companies
estimate that the cost linked to bureaucracy,
as a share of sales, comes to about 5% on
average.
Other challenges are high energy and raw
materials costs, a lack of qualified labor and
geopolitical uncertainties, according to the
survey.
Energy and material costs are down from
2022-2023 peak levels but remain high, with no
significant further relief expected, Kellermann
said.
WEAK DOMESTIC DEMAND
While chemical export demand has stabilized,
domestic demand is weak.
Most of the major domestic customer industries,
with the exception of food and paper, saw
year-on-year sales declines in the first five
months of 2024.
Germany’s GDP is expected to grow only
marginally this year, said Jupp Zenzen,
economist at the German Chamber of commerce,
who also presented at the webinar.
Since early 2022, the country has been in a
stagnation phase, which continues in 2024,
Zenzen said, adding: “We won’t have growth this
year.”
2024 GDP FORECASTS:
Government
+0.3%
Bundesbank
+0.3%
Government export
council
+0.2%
Joint forecast by leading
institutes
+0.1%
Chamber of Commerce
flat
(Compiled by the Chamber of Commerce)
For the second quarter,
GDP fell by 0.1% from the first quarter,
following a 0.2% quarter-on-quarter increase in
the first quarter, according to data from the
country’s federal statistics office on Tuesday.
Overall industrial production remains below
pre-COVID levels and the chamber currently does
not see an upward trend, Zenzen said.
Domestic new orders are trending down as demand
is weak, he said.
Export demand seems to have stabilized as “the
world economy is robust”, but this has yet to
be reflected in the orderbooks of German
industrial producers, he said.
Most of the big domestic industrial sectors are
pessimistic about their business expectations,
and their plans for domestic investments are
largely “negative”, which is dimming the
prospects for growth, he said.
CHEMICAL PRODUCTION
In contrast to overall industrial production,
Germany’s chemical production recovered at the
start of the year but since then has moved
sideways, said Kellermann.
The trade group expects the country’s chemical
production (excluding pharmaceuticals) to rise
by 5.0% in 2024, which, if realized, would come
after a 10.4% decline in 2023.
While at first glance a 5% increase may seem
strong, production remains far from levels
during 2010-2021, she said, and pointed to the
following chart showing Germany’s chemical
production (excluding pharma) since 2008:
Whereas chemical production recovered quickly
after the 2008-2009 global financial crisis and
after the pandemic, it has yet to recover from
its collapse in 2022 in the wake of the Ukraine
war, she said.
Currently, production is “incredibly” low,
meaning that the expected 2024 growth would not
mark a return to past production levels, she
said.
Customer inventories may often be so low that
even if customers produce only a little, they
will have to order some chemicals and other
materials – but this can hardly be described as
a recovery, she noted.
Compared with weak sales in 2023, chemical
producers expect an improvement in sales this
year but are pessimistic about profits because
of their high costs, according to the VCI
survey.
Companies now expect that demand and chemical
production could begin to recover in 2025-2026,
according to the survey. Their previous
expectation was for a recovery to get underway
in the second half of 2024.
Thumbnail photo source: VCI
Focus article by Stefan
Baumgarten
Please also visit Macroeconomics:
Impact on Chemicals
Speciality Chemicals30-Jul-2024
BARCELONA (ICIS)–Collapsing second quarter
financial results show that the industry may
face permanently low growth, driving the need
for radical business model transformation.
Q2 financial results show persistent
downturn in sales, profitability
Europe chemicals still plagued by
China-driven global overcapacity, higher
production costs, poor downstream demand
BASF reports double-digit fall in net
income, weighed by lower prices. Warns of
second half risks from stronger price
reduction, lower volume growth
Dow CFO says consumer durables, building
and construction will likely remain weak
through the rest of the year
Need for widespread closures to balance
supply and demand
Chemical companies need to adopt radical
new business models
End of China’s economic miracle means there
will be no return to strong demand growth
globally
In this Think Tank podcast, Will
Beacham interviews ICIS business
solution specialist Nigel
Davis, ICIS market development
director 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.
ICIS is organising regular updates to help
the industry understand current market trends.
Register here .
Read the latest issue of ICIS
Chemical Business.
Read Paul Hodges and John Richardson’s
ICIS
blogs.
Polyethylene30-Jul-2024
SINGAPORE (ICIS)–Click
here to see the latest blog post on Asian
Chemical Connections by John Richardson.
Warning: Don’t put sustainability in the
equivalent of a broom cupboard in the basement
of your chemicals company HQ because profits
from green and circular chemicals are today
thin on the ground.
Companies in Europe, South Korea and Singapore
etc. should perhaps instead focus on
higher-value chemicals and polymers that
address the challenges of reducing carbon and
circularity.
They may have to in parallel close their
commodity chemicals capacities down in a world
of declining consumption growth.
Everything is connected. Don’t make the mistake
of intellectually compartmentalising
sustainability into, again, a broom cupboard as
the energy and chemicals transitions are
connected to other big picture changes.
In summary, this is how the chemicals world
could look in just a few years’ time:
• Global chemicals demand has peaked and will
from now on decline because of demographics,
the end of the China “growth miracle,” downward
pressures on consumption from sustainability,
the impact of climate change on economies and
maybe artificial intelligence.
• As demand shrinks, the feedstock-advantaged
Middle East and the US continue to add capacity
to gain bigger slices of a shrinking pie. So
does China for self-sufficiency reasons.
• Chemicals companies elsewhere increasingly
focus on niche, smaller-volume higher-value
chemicals and polymers. They shut down
commodities capacities and choose to import the
commodities they need.
• Japan serves as an example of a country that
is already travelling down this path.
Please don’t make the mistake of assuming that
this is just another downcycle. The evidence
instead points to a fundamental realignment of
the chemicals industry.
If you think otherwise, you must believe that
the chemicals industry is divorced from the
rest the world when, of course, it isn’t.
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.
Ammonia29-Jul-2024
HOUSTON (ICIS)–US crops have continued to make
steady progress with 77% of the corn acreage
now silking with soybean blooming also at 77%,
according to the latest US Department of
Agriculture (USDA) weekly crop progress report.
The current rate of silking does trail the 79%
level achieved in 2023 but is slightly ahead of
the five-year average of 76%.
Corn having reached the dough stage is now at
30%, above both the 25% mark from last year and
the five-year average of 22%.
For corn conditions, there is still 3% rated
very poor with 6% now listed as poor. There
remains 23% considered fair with 52% now seen
as good and 16% continuing to be viewed as
excellent.
For soybeans, there is 77% of the crop now
blooming, which is just below the 79% from 2023
but is ahead of the five-year average of 74%.
The amount of acreage setting pods has reached
44%, which is behind the 46% from last year,
but it is above the five-year average of 40%.
For soybean conditions, there remains 2% as
very poor and 6% as poor. There is now 25%
listed as fair with 54% as good and 13% as
excellent.
In harvesting updates, winter wheat is now at
82% completed, which is ahead of the 77% mark
from 2023 and the five-year average of 80%.
Ethylene29-Jul-2024
HOUSTON (ICIS)–So far in the earnings season,
US chemical producers have given up on a second
half recovery and will rely on their own
actions to increase earnings while they wait
for interest rates to fall.
US-based chlor-alkali producer Olin and
specialty chemicals producer Eastman were the
latest to abandon the prospect of a second-half
recovery.
Excluding the effects of Hurricane Beryl,
Olin expects the second half of 2024
to resemble its first half in terms of
adjusted earnings before interest, tax,
depreciation and amortization (EBITDA).
Eastman
does not expect any improvement in primary
demand in its key markets and geographies.
US-based paints and coatings producer
Sherwin-Williams flat-out said that
it did not expect to get any help from the
market during the company’s second half.
Improvements will have to come from within
Sherwin-Williams.
Similarly, RPM International said it will rely
on its margin achievement plan (MAP) to
increase earnings in
what it has called a no-growth and
low-growth economy.
Such self-help measures led Evonik to raise its
guidance even though it noted
the absence of any broad-based macroeconomic
recovery.
PPG lowered its full-year guidance because of
lower auto production and uneven industrial
production. However, PPG did break from the
trend, in that it expected US economic activity
to improve as the second half progressed.
Growth should continue in Mexico.
In China, PPG said growth should continue for
the company during the second half but at a
slower pace. Demand in Europe is uneven but
stabilizing.
Dow, meanwhile,
expects a slower pace of recovery for some
of its end markets for 2024.
In an interview with ICIS, Dow’s CFO said
consumer durables and building and construction
will likely remain weak through the rest of the
year.
In North America, volumes for architectural
coatings will not return to pre-pandemic levels
until 2025, Dow said.
HIGHER INTEREST RATES HOLD BACK KEY
CHEM END MARKETSFor many key
chemical end markets, elevated interest rates
continue to suppress demand.
The Federal Reserve has maintained the nation’s
benchmark federal funds rate at a multiyear
high of 5.25-5.50% as part of a campaign to
lower inflation to its target of 2%.
The elevated federal funds rate has raised
interest rates throughout the US economy,
making big-ticket items like homes,
automobiles, appliances and furniture more
expensive.
The higher rates have had an additional effect
on the existing home market. Consumers who have
cheap mortgages are reluctant to sell their
houses and assume a new 30-year loan with a
much higher rate.
These homeowners are hanging on to their
houses, and this trend has battered the
nation’s existing home market,
bringing sales to a 30-year low.
The slowdown in existing home sales has lowered
demand for architectural coatings, furniture,
mattresses and appliances.
For these end markets to recover, Dow said that
30-year mortgage rates need to fall to about
5%. Right now,
they are at 6.78%.
SIGNS OF CONSUMER
STRAINSherwin-Williams noted
some signs of strain among US consumers. It is
not just inflation, which remains above the
Fed’s target of 2%. They have depleted savings
and taken on debt.
Business from insurance claims declined because
consumers were reluctant to pay deductibles,
the company said.
It noted weakness in its do-it-yourself (DIY)
products sold to consumers through third-party
retail stores. These customers tend to be more
sensitive to price than those that shop at
Sherwin-Williams’ paint stores.
Dow noted that sales to contractors were
stronger than those to DIY consumers.
RPM also warned of uncertain DIY demand.
Companies outside of the chemical industry are
also seeing signs of weakening consumer demand.
The fast-food chain McDonald’s
also noted consumer weakness. In the second
quarter, global same-store sales fell by 1.0%
and US same-store sales fell by 0.7%. The
broadcaster CNBC said it was the first time
that same-store sales fell since the fourth
quarter of 2020.
McDonald’s said that consumers have become more
careful about how they spend their money.
Real disposable incomes in the US
barely grew in June following an increase
of 0.3% the previous month. Growth in consumer
spending also slowed down in June.
RATE CUTS BECOME MORE
LIKELYConsumers could get some
relief in the upcoming months. The Federal
Reserve could indicate that it is ready to
start lowering the benchmark interest rate
during its next meeting on 31 July.
Inflation is showing signs of falling to its
target of 2%.
Many expect that the first rate cut will happen
during the Federal Reserve’s meeting on 18
September.
The anticipation of future rate cuts would
trickle through the economy and lower rates for
mortgages and other forms of debt.
If the inflation continues to cool and if the
Federal Reserve continues lowering rates, then
mortgages could reach the 5% threshold that Dow
said could lead to a sustained recovery for
several key end markets.
MORE CHEMS SCHEDULED TO DISCUSS
OUTLOOKSMany more companies
should reveal their guidance and outlook during
the next two weeks as earnings season
continues. So far, it looks like the industry
will have to continue waiting for a sustained
recovery.
Insight article by Al
Greenwood
Thumbnail shows a torn dollar. Image by
Shutterstock.
Ethylene29-Jul-2024
HOUSTON (ICIS)–Here are the top stories from
ICIS News from the week ended 26 July.
INSIGHT OUTLOOK:
Next US president may upend EV policies, trade,
regulations
The US election could see Donald Trump return
as president with majorities in both
legislative chambers, which could bring a
reduction in excessive red tape, weaker support
for electric vehicles (EVs) and impose even
more ponderous tariffs and trade restrictions.
OUTLOOK: Red Sea
diversions, tight capacity to pressure rates
higher, but could ease in
August
Tight capacity as vessels continue to divert
away from the Red Sea and Suez Canal for the
longer voyage around the Cape of Good Hope is
likely to keep upward pressure on ocean freight
rates, but an early start and end to the
typical peak season could provide some relief.
INSIGHT: US
chemical exports more exposed to China today as
potential new trade war looms – ICIS
analysis
As campaigns heat up heading towards the US
elections in November, trade wars and tariffs
are now front and center in the minds of global
chemical players. Producers and customers must
brace for the prospects of higher tariffs,
particularly on Chinese imports, as well as
retaliatory tariffs by China.
Dow sees B&C,
consumer durables weakness persisting through
2024, rate cuts needed – CFO
Weakness in building and construction, and
consumer durables demand is expected to persist
through 2024, likely pushing out a meaningful
earnings recovery to 2025, Dow’s chief
financial officer said on Thursday.
INSIGHT:
Venezuela’s petchems may finally get a chance –
but unlikely to be under
Maduro
Venezuelans go to the polls on Sunday with the
hope of a free and fair election, in which case
President Nicolas Maduro is widely expected to
lose office in a country where the economy has
been battered by years of mismanagement,
corruption, and US sanctions.
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