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Ethylene26-Aug-2024
CHARLOTTE, North Carolina (ICIS)–August
started with reports of high weekly initial
unemployment claims, a weak manufacturing PMI
reading and a lackluster payroll report. Equity
markets did not react well to this as evidenced
by a three-day sell off. But the panic ended, a
rebound ensued and we are back to where we were
on 31 July as the underlying economic
fundamentals of a late-phase business cycle
remain. The economy is slowing, not falling off
a cliff.
Job creation continues, even after the softer
showing in July and the unemployment rate
ticking up to 4.3%, largely the result of
Hurricane Beryl. In the latest JOLTS (Job
Openings and Labor Turnover) report, there are
1.2 job openings per unemployed, which is down
from a year ago.
Overall labor market supply and demand
relationships appear to be moving back towards
pre-pandemic levels. With a still positive
labor market, incomes are holding up for
consumers and providing support for the US
economy.
The headline July Consumer Price Index (CPI)
was up 2.9% year on year, the lowest comparison
since March 2021. Progress on disinflation
continues and inflation is heading back towards
the Fed’s target.
Economists expect inflation to average 3.1%
this year, down from 4.1% in 2023 and 8.0% in
2022. This is still above the Fed’s target.
Inflation should soften to 2.4% in 2025 and
2026. As a result, interest rate futures
overwhelmingly expect the Fed to cut rates in
September.
Turning to the production side of the economy,
the July ISM US Manufacturing Purchasing
Managers’ Index (PMI) registered 46.8, down 1.7
points from June and a reading that was below
expectations.
A March expansionary reading had ended 16
months of contraction in manufacturing, but
since then the readings have been
contractionary. Overall manufacturing
production contraction deepened. New orders
slipped further into contraction, and order
backlogs and inventories contracted at a faster
pace. Only five of the 18 industries expanded.
The ISM Services PMI rebounded 2.6 points to
51.4, a slightly expansionary reading.
The Manufacturing PMI for Canada remained in
contraction (15 months and counting) during
July while that for Mexico contracted slightly
after nine months of expanding. Brazil’s
manufacturing PMI expanded for a seventh month.
Euro Area manufacturing has been in contraction
for 24 months. The UK PMI, however, expanded
for a third month.
China’s manufacturing PMI retreated below
breakeven levels, ending eight months of
positive readings. This is indicative of a
stalling recovery.
Turning to the demand side of the economy,
light vehicle sales rose in July and although
inventories have moved up in recent months,
they still remain low.
We expect light vehicle sales of 15.7 million
this year before improving to 16.2 million in
2025. We expect sales of 17.2 million in 2026.
This would bring activity back to the last
cyclical peak in 2018.
Housing activity continues to be tepid amid
affordability issues and low builder
confidence. We expect that housing starts will
average 1.39 million in 2024 and 1.45 million
in 2025. We expect housing activity to improve
to 1.50 million in 2026.
Demographic factors will support housing
activity during the next five or more years.
There is significant pent-up demand for housing
and a shortage of inventory. Affordability
continues to be an issue.
Retail sales have been lackluster so far this
year, but the July results were positive,
aiding to the strength in equity markets. Sales
at food services and drinking places remain
positive. Consumers are taking on more debt.
Overall consumer spending may be slowing but
remains positive.
Business fixed investment, led by a need to
boost productivity and reshoring initiatives,
will take over from consumer spending as a
driver of the US economy. This is typical of a
late-stage business cycle.
Taking all of these demand and supply
considerations together, it appears that
downstream activity is improving and that the
severe destocking cycle is ending. A restocking
cycle for major resins is emerging.
US real GDP rose 5.8% in 2021 and then slowed
to a 2.5% gain in 2022. The much-anticipated
recession failed to emerge for a variety of
reasons, and in 2023 the economy expanded 2.5%
again.
US economic growth in H1 2024 has been strong
but is likely to slow, and when it is all said
and done, 2024 growth will likely be another
2.5% gain. This pace is well above long-term
growth potential.
The slowdown in quarterly economic activity
suggests that in 2025, the economy should rise
1.8% over average 2024 levels, followed by a
modest 2.0% gain in 2026. The US is once again
outpacing the other advanced nations.
Led by the UK and the Mediterranean nations,
Europe’s economic prospects appear to be
improving. China struggles with soft economic
activity and appears to be exporting its way
out of its stalled recovery.
Ethylene26-Aug-2024
HOUSTON (ICIS)–Here are the top stories from
ICIS News from the week ended 23 August.
SHIPPING: Panama
Canal adds additional transit slot, raises
maximum draft allowance
As the water level in the freshwater lake that
feeds the Panama Canal’s locks continues to
rise, the Panama Canal Authority (PCA) has
increased the maximum allowable draft to 50ft
(15.25m), effective immediately, and will add
an additional transit slot beginning 1
September.
Canada needs to
act on rail stoppage, now – chem group
CIAC
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.
Canada government
reluctant to intervene as freight rail shutdown
begins
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.
LyondellBasell
declares FM on rail shipments to Canada amid
CPKC, CN work stoppage
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.
Canadian freight
railroads prepare to resume operations after
brief shutdown
Freight railroads Canadian National (CN) and
Canadian Pacific Kansas City (CPKC) are
preparing to restart operations after the
federal government stepped in to end a labor
dispute with workers – although it remains
unclear on Friday when exactly a full freight
rail service will resume.
Canada rail
dispute: Union issues fresh strike notice,
despite government order for binding
arbitration
-Labor union Teamsters Canada Rail Conference
(TCRC) on Friday issued a strike notice for
Monday, 26 August, against railroad Canadian
National (CN).
Ethylene26-Aug-2024
MADRID (ICIS)–Sentiment among Germany’s
petrochemicals-intensive manufacturing sectors
worsened in August to its lowest level since
February, research institute Ifo said on
Monday.
Sentiment among construction companies remained
stable at low levels, while overall sentiment
deteriorated as the German economy is
“increasingly” falling into crisis, said the
analysts.
“In manufacturing, the index fell considerably.
Companies were significantly less satisfied
with the current business situation.
Expectations fell to the lowest level since
February,” said Ifo.
“[Manufacturing] companies once again reported
declining order backlogs. The situation for
investment goods manufacturers, in particular,
is difficult.”
Sentiment among petrochemicals-intensive
construction companies remained stable but low
due to, on the one hand, companies being
slightly more satisfied with the current
business situation but, on the other, reporting
declining expectations about future business
conditions.
The overall Ifo’s Business Climate Index
fell from 87.0 points in July to 86.6 points in
August.
“Companies assessed their current situation as
worse. In addition, expectations were more
pessimistic. The German economy is increasingly
falling into crisis,” said Ifo.
Earlier in August, Ifo reported that sentiment
among
chemicals companies is also falling, with
operating rates declining further.
‘MARGINALLY’ GOOD
NEWSAnalysts at Oxford Economics
said the fall in the Ifo Business Climate Index
came as no surprise but added it could be seen
as a positive after a string of negative
indicators in past weeks, not least last week’s
flash manufacturing PMI index for August, which
showed Germany and eurozone’s manufacturing still in
contraction territory.
The downturn in Germany’s manufacturing sector,
the largest in the eurozone, weighed greatly on
the index.
“Although this [Ifo Business Climate Index]
marks the fourth consecutive decline after the
index peaked in April, it is marginally good
news as other surveys had pointed to a sharper
deterioration,” said Oxford Economics on
Monday.
“We think it will take Germany’s manufacturing
sector until end of this year to emerge from
the economic slump but the deterioration in the
services sector highlights the broad weakness
in the German economy.”
The analysts went on to say the road ahead for
Germany’s economic recovery will be a “bumpy”
one, adding they still expect the economy to
expand in the third quarter, although “cannot
exclude” a contraction at this point.
However, the analysts said they are more upbeat
about the coming quarter, with a recovery
potentially taking place towards the end of
2024 in Germany’s economy after the shock
suffered in the past two years related to the
energy crisis and high interest rates.
“We maintain that a recovery will ensue towards
the end of this year on the back of a turning
industrial cycle and easing financial
conditions,” concluded Ifo.
“Last week’s data on negotiated wage growth and
our expectations of falling inflation data for
this week, pave the way for the ECB [European
Central Bank] to cut rates twice this year
followed by a series of cuts next year.”
Front page picture: Chemical plants in
Moers, Germany
Source: Jochen
Tack/imageBROKER/Shutterstock
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Polyvinyl Chloride26-Aug-2024
MUMBAI (ICIS)–India will continue imposing
antidumping duties (ADDs) on chlorinated
polyvinyl chloride (CPVC) imports originating
from China and South Korea.
The ADDs apply to CPVC resins as well as
compounds, with rates ranging from $593/tonne
to $792/tonne, depending on origin and
producer, according to India’s Ministry of
Finance.
They are set for five years and can be revoked
or amended, if necessary.
S.No
Country of origin
Country of export
Producer
Type
Amount in ($/tonne)
1
China
Any country including China
Any
CPVC resin
790
2
China
Any country including China
Any
CPVC compound
605
3
Any country other than China and Korea
China
Any
CPVC resin
790
4
Any country other than China and Korea
China
Any
CPVC compound
605
5
Korea
Any country including Korea
Hanwha Solutions Corp
CPVC resin
593
6
Korea
Any country including Korea
Hanwha Solutions Corporation
CPVC compound
792
7
Korea
Any country including Korea
Any producer other than mentioned above
CPVC resin
593
8
Korea
Any country including Korea
Any producer other than mentioned above
CPVC compound
792
9
Any country other than China and Korea
Korea
Any
CPVC resin
593
10
Any country other than China and Korea
Korea
Any
CPVC compound
792
Source: India Ministry of Finance
India’s anti-dumping duties on CPVC imports
from China and South Korea were initially
imposed on 26 August 2019 for a period of five
years.
These measures have been extended following
recommendations by the designated authority to
protect the domestic industry.
It was determined that dumping and injury to
Indian manufacturers were likely if the
existing measures were not extended.
Speciality Chemicals26-Aug-2024
LONDON (ICIS)–Here are some of the top stories
from ICIS Europe for the week ended 23 August.
Aviation fuel prices hit new lows amid growing
bearishness
European spot jet fuel quotations plunged to
14-month lows towards mid-week, bearing the
brunt of tepid demand and ongoing upstream
softness, with the short-term outlook unclear
as the peak travel season winds down.
Europe SAN contract prices increase double
digits in August
August contract prices have increased €70/tonne
in the European styrene acrylonitrile (SAN)
market, the first price increase since April
2024, mainly driven by composite costs of the
€78/tonne contract price increase for upstream
styrene, and the €36/tonne contract price
increase for secondary feedstock acrylonitrile
(ACN).
EU plans up to 36.3% definitive tariffs on EV
imports from China
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.
Quantafuel cancels pyrolysis-based chemical
recycling project in Sunderland, UK
Quantafuel Sunderland Limited, part of UK
recycling major Viridor, has halted the
development of its planned pyrolysis-based
chemical recycling plant in Sunderland, a
company spokesperson confirmed late on Monday.
IPEX: Global index down on softer prices in NW
Europe, NE Asia
Lower chemical prices in northwest Europe and
northeast Asia drove the global spot ICIS
Petrochemical Index (IPEX) down by 0.2% in the
week ending 16 August.
Ammonia26-Aug-2024
TORONTO (ICIS)–Labor tribunal Canada
Industrial Relations Board (CIRB) on 24 August
ordered Canada’s two freight railroads and
about 9,300 unionized workers to resume rail
service at 0:01 eastern time on 26 August.
Freight rail service on both Canadian National
(CN) and Canadian Pacific Kansas City (CPKC)
was
shut down on Thursday, 22 August amid a
protracted labor dispute.
With the order, the CIRB follows
directions Canada’s federal labor minister
issued shortly after the shutdown began.
The dispute between railroads and workers would
be settled through binding arbitration, in line
with the minister’s directions, the CIRB said.
The board said that “the current circumstances
and
impact of work stoppages involving Canada’s
two main rail companies” were reasons for its
decision. The board will provide detailed
reasons later, it said.
UNION, RAILROADS WILL
COMPLY
Labor union Teamsters Canada Rail Conference
(TCRC) and the railroads said they would comply
with the board’s decision.
CPKC asked workers to return to work for the
day shift on Sunday, 25 August, in order to
restore service as quickly as possible and
avoid further disruptions to supply chains.
TCRC added that while it would comply with the
CIRB’s decision, it would appeal the ruling in
court.
In Canada’s chemical industry, trade group
Chemistry Industry Association of Canada (CIAC)
has said that going by past experience, for
each day of a rail disruption it could take
three days or more to return to service once
labor issues are resolved.
CIAC is particularly concerned about the
supply of chlorine and derivatives for
drinking water treatment during rail
disruptions. For safety reasons, chlorine can
only be shipped by rail.
Although the rail shutdown began on 22 August,
the railroads stopped accepting chlorine and
other hazardous materials for shipment before
that date. The disruption in rail service
prompted fears that Canadian chlorine plants
could be forced to curtail or stop production.
Canada-based chemical producers rely on rail to
deliver more than 70% of their products, with
some exclusively using rail.
About 80% of Canada’s chemical production goes
into export, with about 80% of those exports
going to the US, according to CIAC.
(Map by Miguel Rodriguez Fernandez)
Meanwhile,
LyondellBasell declared force majeure on
all cargo movements by rail to Canada and
industrial chemical producer
Chemtrade Logistics warned about the impact
of the rail disruption on its financial
results.
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:
Additional reporting by Adam Yanelli and
Nurluqman Suratman
Gas26-Aug-2024
SINGAPORE (ICIS)–Here are the top stories from
ICIS News Asia and the Middle East for the week
ended 23 August 2024.
INSIGHT: Asia BD capacity growth to accelerate
to 10% in 2025
By Ann Sun 23-Aug-24 10:35 SINGAPORE
(ICIS)–The Asian butadiene (BD) market is
anticipated to experience large-scale capacity
expansion between Q4 this year and end-2025,
with nine projects scheduled to begin
operations.
Asia BDO market demand unable to reduce
inventories, oversupply persists
By Corey Chew 22-Aug-24 11:16 SINGAPORE
(ICIS)–The Asian 1,4-butanediol (BDO) market
has been going through a downtrend that started
about a month ago, mainly due to the falling
domestic China market.
INSIGHT: China’s EVA capacity expected to
exceed 2.6 million tonnes in 2024
By Amy Yu 20-Aug-24 17:12 SINGAPORE
(ICIS)–China’s EVA capacity is forecast to
exceed 2.6 million tonnes in 2024, a
year-on-year growth rate of 17%, considering
Jiangsu Hongjing New Material a new plant with
200,000 tonnes/year is scheduled to come on
stream in Q4.
INSIGHT: China plasticizer alcohols’ supply
growth accelerating
By Lina Xu 19-Aug-24 17:08 SINGAPORE
(ICIS)–China’s plasticizer market is
diversifying, leading the supply expansion of
feedstock alcohols amid high requirements for
end-products and growing emphasis on
sustainability in operations in recent years.
Asia naphtha back in the black within a day;
volatility to stay
By Li Peng Seng 19-Aug-24 11:06 SINGAPORE
(ICIS)–Asia’s naphtha intermonth spread
returned to the positive zone on 16 August,
after slipping into the red the day before for
the first time this year, with volatile trades
expected to persist amid uncertainties over
supply balances.
INSIGHT: China’s MEG export market changes amid
volatile global fundamentals
By Cindy Qiu 22-Aug-24 14:00 SINGAPORE
(ICIS)–China’s monoethylene glycol (MEG)
exports have been on an uptrend in recent years
due to the rapid expansion of domestic
capacity. MEG exports totalled around 93,000
tonnes in January-June 2024 and are expected to
exceed 150,000 tonnes for the year as a whole.
India’s BPCL to invest Rs1.7 trillion on
capacity growth over five years
By Priya Jestin 20-Aug-24 12:58 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.
Ammonia23-Aug-2024
HOUSTON (ICIS)–Although the Canadian railroad
labor strife is poised to carry on further, US
fertilizer participants are not growing overly
concern as this action comes at a slower time
of the year for domestic applications and fresh
buying.
With it being late August most of the attention
of domestic growers are either on advancing
harvesting campaigns or commencing those
efforts soon, with some locations still tending
to mature crops.
There were also strong summer refilling
efforts, which together is overall keeping the
pull for nutrients light for most products
although volume of nitrogen, phosphate and
potash have continued to move over August on
barges and terminals.
As a source said they had zero concerns so far
and not hearing that the situation is
concerning customers either, “I assume if it
persists there will be. It’s just happening at
a time of year that it isn’t impactful enough
to our industry.”
The railroad strike appeared to have been
resolved on 22 August when the government
directed the matter to the Canada Industrial
Relations Board (CIRB) for binding arbitration,
with Canadian National (CN) and Canadian
Pacific Kansas City (CPKC) having said they
were preparing to begin running.
Then on Friday labor union Teamsters Canada
Rail Conference (TCRC) issued a strike notice
for 26 August, against railroad Canadian
National (CN) with approximately 6,500
unionized employees set to withdraw their
service starting Monday.
As there was prior to the start of this strike
activity, there is also optimism from some that
this will not be a protracted dispute.
The US is about to enter a period of what has
been anticipated to be good post-harvest
demand, with a source saying a work stoppage
“could be an issue then but generally these
things resolve quickly.”
Earlier this week industry group Fertilizer
Canada said disruptions to rail services across
the country will cost the fertilizer industry
millions per day in lost sales revenue, with an
average of 69,000 tonnes of fertilizer product
transported per day.
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.
Ammonia23-Aug-2024
TORONTO (ICIS)–Labor union Teamsters Canada
Rail Conference (TCRC) on Friday issued a
strike notice for Monday, 26 August, against
railroad Canadian National (CN).
The move surprises as railroads CN and Canadian
Pacific Kansas City (CPKC) said earlier they
were preparing to resume
operations after a government order on
Thursday that referred the labor dispute
between TCRC and the railroads to the Canada
Industrial Relations Board (CIRB) for binding arbitration.
The country’s labor minister issued the order
after the railroads locked out about 9,300
workers and shut
down operations on Thursday, 22 August,
00:01 Eastern Time.
In Friday’s strike notice, TCRC
said that about 6,500 unionized CN workers
would withdraw their service starting Monday,
26 August, 10:00 Eastern Time.
However, it added that its differences with CN
were not “insurmountable” and that it remained
available for discussions to avoid a further
work stoppage at CN.
TCRC’s strike notice also surprises because the
union said earlier that
it took down picked lines again CN and that
unionized CN workers would start returning to
work on Friday. Picket lines at CPKC, however,
would remain in place, the union said.
Teamsters president Francois Laporte said in
remarks to public broadcaster CBC/RDI on Friday
that the union was looking at its legal options
and would “use our constitutional rights” to
“fight” for workers’ interests.
He also confirmed that despite the referral to
the CIRB, the industrial action at CPKC was
continuing.
Political commentators said that the union may
seek to challenge the constitutionality of the
minister’s referral of the dispute to the CIRB
for binding legislation.
There is legal precedent that deems the right
to strike and to collective bargaining as a
constitutional right.
Bottomline: Despite earlier
hopes that binding arbitration would end the
dispute and trains would run again soon,
freight rail service remains disrupted and it
is unclear when it will resume.
CHEMICALS AND RAIL
Canada-based chemical producers rely on rail to
ship more than 70% of their products, with some
exclusively using rail.
About 80% of Canada’s chemical production goes
into export, with about 80% of those exports
going to the US, according to CIAC.
Chlorine plants in Canada may
have to shut down if reliable rail service
does not resume soon, CIAC CEO Bob Masterson
said.
(Map by Miguel Rodriguez Fernandez)
Meanwhile, LyondellBasell on
Thursday declared force majeure on all rail
shipments to Canada and industrial chemical
producer Chemtrade Logistics
warned about the impact of the rail disruption
on its financial results.
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:
With additional reporting by Adam Yanelli
and Nurluqman Suratman
Thumbnail photo source: CN
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