SINGAPORE (ICIS)–Oil prices tumbled by more than $4/barrel on Monday morning as fears over potential supply disruptions in the Middle East eased, with sentiment weighed down by a sharp contraction in China’s September industrial profits. Israel airstrikes miss Iran’s oil facilities China Sept industrial profits contract 27% year on year China nine-month oil refining losses at CNY32 billion Product (at 04:00 GMT) Latest ($/barrel) Previous ($/barrel) Change ($/barrel) Brent December 72.61 76.05 -3.44 WTI December 68.45 71.78 -3.33 Israel’s retaliatory strikes on Iran over the weekend did not hit Tehran’s oil and nuclear facilities. “The more targeted response from Israel leaves the door open for de-escalation and clearly the price action in oil this morning suggests the market is of the same view,” Dutch bank ING said in a macro note on Monday. “Clearly, if we do see some de-escalation, it would allow fundamentals once again to dictate price direction,” it said. Iran, which is a member of oil cartel OPEC, has the world’s fourth largest proven oil reserves. “And with a surplus market over 2025, this would mean that oil prices are likely to remain under pressure,” ING added. CHINA DATA IN FOCUS China’s September industrial profits fell by 27.1% year on year, while average earnings in the first nine months dropped by 3.5% year on year, according to the country’s National Bureau of Statistics (NBS). Lower production, especially in the motor vehicles sector amid a sharp rise in new energy vehicles weighed on demand. Car production in September fell by 8.1% year on year, while new energy vehicles rose by 48.5% year on year. China, the world’s second-biggest economy, is also its largest crude importer. Its crude oil imports in September reached 45.5 million tonnes, down by 0.6% year on year, according to China Customs data. Crude processing capacity also fell by 5.4%, while capacity in the first nine months of 2024 fell by 1.6% year on year. Meanwhile, the oil refining sector posted losses of yuan (CNY) 32 billion ($4.5 billion) in the first nine months of 2024. The fall was attributed to insufficient market demand, a drop in industrial product prices and a significantly higher base since August, NBS statistician Yu Weining said in a statement on Monday. Investors will be watching a highly anticipated meeting between China’s leaders on 4-8 November in Beijing for potential further stimulus policies to aid growth. On 12 October, China’s finance minister Lan Fo’an had said that the central government might raise debt to arrest economic headwinds. Focus article by Jonathan Yee ($1 = CNY7.13) Thumbnail image: Iran’s capital city of Tehran on 26 October 2024. (By ABEDIN TAHERKENAREH/EPA-EFE/Shutterstock)

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson: Turkey, the subject of today’s post, is booming.  So are Vietnam, Mexico, India, Brazil and Indonesia as the Developing World ex-China region gradually (gradually being the operative word) takes over from China as the No 1 global chemicals and polymers demand driver in volume terms. So, today’s post launches a new series of posts that will take a deep dive into the Developing World ex-China mega region. But please do not get carried away in thinking that developing countries outside China will bring the global chemicals industry back into healthy balance anytime soon. During meetings at this year’s EPCA, senior executives forecast that the recovery would take anywhere between another three-to-nine-years. Also bear in mind that even when markets do come back into better balance, we will never entirely return to conditions during the 1992-2021 Chemicals Supercycle because of long-term economic problems in China, increasing global trade tensions, climate change and sustainability pressures. But volatility and change always create opportunities. A major aspect of increasing global trade tensions is of course China’s split with the West. This is one of the reasons why I believe we will see chemicals demand growth in countries such as Turkey being above consensus expectations. Turkey has long been the manufacturing outsourcing destination of choice for the EU. Plus, of course, there’s Turkey’s great strategic location. The country acts as a bridge between Europe, the Middle East, North Africa, and Central Asia, offering exporters access to all these different markets, some of which are booming. Demographics, at least for the next 20 years or so, are still on Turkey’s side as it remains a youthful country Then there are the growing trade tensions with China. But the reality is that the West will still have to do business with China in the many manufacturing value chains where it is dominant such as electric vehicles and solar panels. The “window dressing” of appearing to take reshoring seriously will be to increasingly do business through third-party countries such as Turkey, Mexico and Vietnam. This process is already well underway. It seems probable that more and more Chinese investment will move to these third-party countries to get around higher import tariffs and antidumping duties etc, a case in point being BYD’s plans to build a factory in Turkey. There will many opportunities, some temporary and some permanent, as the Developing World ex-China in general overtakes China as the No1 driver of global polymers demand. 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.

SINGAPORE (ICIS)–Here are the top stories from ICIS News Asia and the Middle East for the week ended 25 October. Asia’s naphtha market eyes demand uptick By Li Peng Seng 21-Oct-24 11:38 SINGAPORE (ICIS)–Asia’s naphtha intermonth spread was near a two-month high recently and it may be able to hold firm in the near term on reduced arbitrage volumes in November and anticipated demand growth ahead. Energy transition plan reset needed with renewed focus on Asia – Aramco President By Jonathan Yee 21-Oct-24 14:22 SINGAPORE (ICIS)–Saudi Aramco chief Amin Nasser on Monday called for a new energy transition plan that considers the needs of all countries, specifically those in Asia and the broader Global South, amid growing oil demand. Asia ACN regional producers bullish on tighter supply; India’s BIS deadline nears By Corey Chew 22-Oct-24 11:07 SINGAPORE (ICIS)–Asia acrylonitrile (ACN) prices saw a recent uptrend the past two weeks, with plants of key regional producers in Taiwan and South Korea under planned maintenance. PODCAST: Macroeconomic pressure continues to weigh on Asia recycling sentiment By Damini Dabholkar 22-Oct-24 17:13 SINGAPORE (ICIS)–The short-term demand outlook for recycled polymers from Asia remains sluggish especially for low-value grades, mainly due to poor economics and brand users’ preference of cheaper virgin plastics. Emerging Asian economies’ strong growth to subside amid China slowdown – IMF By Nurluqman Suratman 23-Oct-24 12:07 SINGAPORE (ICIS)–Emerging Asian economies are expected to see strong economic growth subside, partly due to a sustained slowdown in China, the International Monetary Fund (IMF) said on Tuesday. PODCAST: Asia methanol impacted by geopolitical uncertainty, supply cuts expected in Q4 By Damini Dabholkar 24-Oct-24 23:00 SINGAPORE (ICIS)–Asian methanol markets in recent weeks were driven more by sentiment than changes in fundamentals as participants respond to an escalation of the conflict in the Middle East. However, some supply changes in coming months are expected to alter the landscape in Q1 2025. Supply glut casts shadow over Asia PC market recovery By Li Peng Seng 25-Oct-24 13:08 SINGAPORE (ICIS)–China’s polycarbonates (PC) spot demand has remained sluggish as ample supplies have kept purchases on a need-to basis, and this trend will persist through yearend.

HOUSTON (ICIS)–Demand for chlorine derivatives and caustic soda benefited from US hurricanes and two new pulp and paper plants that opened in South America, which provided some bright spots in what has otherwise been a challenging market due to the slowdown in home building and durable goods, US-based Olin said on Friday. Bleach and hydrochloric acid are used in water treatment and cleaning. For caustic soda, demand continued to be strong because of demand from alumina and from the pulp and paper industry, said Ken Lane, CEO. He made his comments during an earnings conference call. Demand from South America has been the most robust, with two recent pulp and paper plant startups, he said. Lane did not specify the plants. However, Brazilian producer Suzano started up the largest single pulp production line in the world in Ribas do Rio Pardo, Mato Grosso do Sul state, Brazil. CHLORINE REMAINS IN TROUGHDespite the temporary boost from hurricanes, demand for chlorine remains in a trough, with demand below pre-COVID levels, according to Olin. Looking ahead, the uncertainty that the chemical industry experienced in the second half of 2024 should continue into 2025, Lane said. Such uncertainty will persist until interest rates fall further. Higher interest rates have weakened demand for PVC in several key end markets such as housing, automobiles and durables. In addition, chlorine is used to make titanium dioxide (TiO2), a white pigment that is used to make paints opaque. Demand will not spring back until lower interest rates lead to a recovery in activity in housing and other markets that are sensitive to rates, Lane said. BLOW FROM HURRICANE BERYLOlin expects to take a $135 billion hit from damage that Hurricane Beryl caused to its operations in Freeport, Texas. During the third quarter, $77 million was connected to chlor-alkalis and $33 million was related to epoxy resins, the company said. During the fourth quarter, $25 million was related to chlor-alkalis. Olin had conducted an emergency shutdown, the company said. The shutdown caused problems that were not apparent until the company began to restart its operations. Olin completed those repairs about a week ago, it said. The company also built some temporary infrastructure, which it will continue to operate until the middle of next year. Thumbnail shows wood, which is used with caustic soda to make pulp. Photo by Global Warming 

HOUSTON (ICIS)–Rates for shipping containers from east Asia and China to the US fell this week, but carriers have announced an increase in blank sailings so they can tighten capacity and maintain a floor on prices. Rates have been falling steadily since July as importers pulled forward peak season volumes to get ahead of the dock workers strike at East Coast and US Gulf ports. Judah Levine, head of research at online freight shipping marketplace and platform provider Freightos, said some carriers added blank sailings on Asia-to-US routes. Last week, Mediterranean Shipping Co (MSC) announced four blank sailings on its Asia-USEC 2M service, citing ongoing congestion at some ports related to the brief work stoppage. Levine said the action could also be to maintain a floor on rates. Global average rates fell by 4% and are just above $3,000/FEU (40-foot equivalent unit), according to supply chain advisors Drewry and as shown in the following chart. Rates to the East Coast fell by 6.1% to around $5,200/FEU, with rates to the West Coast falling by 2.6% to around $4,800/FEU, as shown in the following chart. Transpacific rates are now about 30% below the July peak, and Levine expects them to continue to soften as the market is in a slow period between the end of the Christmas holiday peak season and the Lunar New Year. “As long as Red Sea diversions continue to absorb capacity on an industry level, prices may not fall much further than seen back in April,” Levine said. Container ships and costs for shipping containers are relevant to the chemical industry because while most chemicals are liquids and are shipped in tankers, container ships transport polymers, such as polyethylene (PE) and polypropylene (PP), are shipped in pellets. They also transport liquid chemicals in isotanks. LIQUID TANKER RATES FLAT TO LOWER Overall, US chemical tanker freight rates were softer this week for several trade lanes, in particular the USG-to-Brazil and USG-Asia trade lanes as spot tonnage remains readily available. There has been limited spot activity to both regions and COA nominations are taking longer than usual. The vessel owners have tried to delay the sailings but there has been very little spot interest in the market leaving no other options for full cargoes and in turn impacting spot rates. On the transatlantic front, the eastbound leg remains steady as there was ample space available, which readily absorbed the few fresh inquiries for small specialty parcels stemming from the USG bound for Antwerp. Various glycol, ethanol, methyl tertiary butyl ether (MTBE) and methanol parcels were seen quoted to ARA and the Med as methanol prices in the region remain higher. Additionally, ethanol, glycols and caustic soda were seen in the market to various regions. Additional reporting by Kevin Callahan

SAO PAULO (ICIS)–The financial week in Latin America ends with the confirmation that its two largest economies’ performance is taking diverging paths as Brazil’s unexpected healthy growth brings to the fore overheating fears, while Mexico’s slowdown is proving harsher than previously thought. Healthier-than-expected growth in Brazil occurs against the backdrop of a fast-slowing Mexican economy, where political woes at home and in the US, due to the upcoming presidential election, are taking a toll on output, expected by the IMF below 2% in both 2024 and 2025. This week, official figures in Mexico confirmed the slowdown in August, compared with July, with output in most subcategories, including petrochemicals-intensive sectors such construction, falling. Output was still up on a year-on-year basis. The latest IMF GDP growth forecasts published this week were another jag of cold water on Mexico’s new Administration led by Claudia Sheinbaum, with the Washington-based body expecting output to expand just by 1.5% in 2024, down from its previous forecast for 2.2% growth. The IMF added output would slow further in 2023, growing at 1.3%. See bottom table for data on the main Latin American economies’ GDP growth and inflation forecasts. Meanwhile, Brazil’s economic performance has outpaced all forecasts in 2024, at home and abroad, and is likely to end up expanding by 3% or slightly more this year, which is causing unexpected price rises and a reversal of the monetary policy easing started a year ago: interest rates are due to stay higher for longer there. MEXICO WOES INCREASE AS US POLL NEARSA cynical observer of North American politics may say that the most important election for Mexico is not its own, which was held in June and returned to Parliament a historic supermajority for the center-left, statist Morena party of President Claudia Sheinbaum. The most important poll for Mexico, the argument goes, would be that of the US, Mexico’s main clients for around 80% of goods the country manufactures. The statement could ring true from 2025 onwards if Republican candidate Donald Trump is voted back into the White House, with promises to implement sweeping import tariffs hikes, including for Mexico and Canada, the two countries sharing the USMCA free trade zone with the US in North America. As opinion polls remain tight in the big Mexican neighbor, uncertainty south of the border increases, and business expansion plans are put on a wait-and-see mode. The peso (Ps) has weakened by nearly 15% against the dollar year to date, and it would be expected to take a direct hit on 6 November if the morning after the election Trump is voted back into the White House, according to analysts. On Friday, the peso was trading at $1:Ps19.90, a sharp depreciation from the $1:Ps16.97 exchange rate it started the year trading at. Despite the peso’s depreciating, making dollar-denominated imports more expensive for Mexican companies and households, the overall economic slowdown is continuing to cause a fall in inflation. This week, Mexico’s statistics office said the much-followed inflation figure for the first fortnight of October had continued falling, leaving still room for the central bank – known as Banxico – to lower interest rates in its upcoming monetary policy committee (MPC) meeting in November. The headline annual rate of inflation stood in the first half of October at 4.7%, practically flat month on month, with the breakdown of the data showing non-core inflation fell to 9.7% year on year, while core inflation – which excludes more volatile prices for food and energy – was broadly unchanged at 3.9%, year on year. However, 5 November could be a before-and-after day for Mexico’s economy, with its currency the first to react to a potential Trump return to the White House. “The fall in Mexican core services inflation in the first half of October in principle gives Banxico space to press ahead with another 25bp [basis points] rate cut next month, but much will hinge on the outcome of the US election,” said analysts at Capital Economics this week. Mexico’s main interest rate benchmark was set in September at 10.50%. “An abrupt move down in the peso could put the easing cycle on pause … The outcome of the US election may well change the outlook for monetary policy in Mexico, especially if a Trump victory leads to a sharp sell-off in the peso. This would probably prompt Banxico to pause (or even reverse) its easing cycle.” Adding to the doom and gloom, US credit rating agency Fitch said on Friday that, as well as changes to trade policy, a Trump Administration could also have negative implications for Mexicans living in the US and the remittances they send home, which are a key income source for millions of Mexicans to make ends meet. “Central American countries in particular will be highly vulnerable to policy changes as their economies rely heavily on remittances … Immigration tightening and a more confrontational posture from the US towards Mexico and Central American countries could emerge should former president Donald Trump be re-elected,” said Fitch. “While implementation remains uncertain, his administration has increasingly indicated a willingness to significantly restrict border crossings and materially increase deportations of undocumented migrants.” Remittances do matter, especially for smaller Central American countries. According to Fitch’s calculations, remittances in El Salvador and Nicaragua account for more than 30% of their GDP. In Mexico, remittances’ weight has risen from 2% in 2014 to the current 3.5%. Due to its large economy, the size of Mexicans’ remittances stood in 2023 at just over $63 billion – a figure larger than several smaller Latin American countries’ annual output. Fitch added that a Democratic victory in the election would mean policy continuity, not least because candidate Kamala Harris and Vice President has overseen immigration policy in the past four years. However, Democratic proposals show how the immigration debate has tilted towards the right, with some proposed restrictions unthinkable just a few years back. “The administration has voiced the intention to push for a bipartisan law that failed to pass in 2024 after Republican objection. The bill aims to close loopholes in the asylum process, give the president greater authority to shut the border when crossings are high, and limit immigration parole, which allows migrants to temporarily enter the US,” said Fitch. BRAZIL BOOM HAS UNWANTED SIDE EFFECTSAs previously analyzed in this article earlier in October, Brazil’s economy has beaten the odds in 2024, with its GDP expected to expand by more than 50% than most forecasts said at the beginning of the year – from below 2% to potentially slightly above 3%. This success is coming accompanied by a series of challenges, not least inflation and interest rates, which remain high. That fact has made Latin America’s largest economy to reverse course on easing monetary policy, on fears that lower borrowing costs would be set to spur already healthy consumption and feed inflation higher. The president of the Banco Central do Brasil (BCB), Roberto Campos Neto, said earlier this week inflation risks remained skewed to the upside. His colleague at the central bank’s board in charge of international affairs, Paulo Picchetti, reiterated the bank’s commitment to continue bringing inflation down, even if that implied making consumption more expensive via higher borrowing costs. “We chose to be completely data-dependent [on next moves], with a clear commitment to do what is necessary in terms of monetary policy to make inflation converge to the target,” said Piccheti, quoted by news agency Reuters. Brazil’s central bank has the mandate to keep price rises at around 3%. Brazil’s data for the H1 October inflation continued showing price rises widening, compared with September, with the annualized rate at 4.5%, up from 4.1%. “A lot of the rise can be pinned on a further rebound in food and electricity inflation [caused mostly by extreme weather events, with a severe drought hitting the country in August and September]. Core services inflation dropped which, on the face of it, is encouraging,” said Capital Economics. “But that was driven by volatile items, such as airfares. We estimate that the central bank’s measure of underlying core services inflation, which strips out such items, ticked up last month. Taken together with comments from BCB policymakers warning about strong services inflation and unanchored inflation expectations, a step up in the pace of rate hikes from 25bp to 50bp is looking increasing likely.” Brazil’s main interest rate benchmark, the Selic, currently stands at 10.75%. IMF forecasts (in % change) GDP growth 2023 GDP growth forecast 2024 GDP 2025 growth forecast Inflation 2023 Inflation forecast 2024 Inflation forecast 2025 Brazil 2.9 3.0 2.2 4.6 4.3 3.6 Mexico 3.2 1.5 1.3 5.5 4.7 3.8 Argentina -1.6 -3.5 5.0 133.5 229.8 62.7 Colombia 0.6 1.6 2.5 11.7 6.7 4.5 Chile 0.2 2.5 2.4 7.6 3.9 4.2 Peru -0.6 3.0 2.6 6.3 2.5 1.9 Ecuador 2.4 0.3 1.2 2.2 1.9 2.2 Venezuela 4.0 3.0 3.0 337.5 59.6 71.7 Bolivia 3.1 1.6 2.2 2.6 4.3 4.2 Paraguay 4.7 3.8 3.8 4.6 3.8 4.0 Uruguay 0.4 3.2 3.0 5.9 4.9 5.4 Latin America and the Caribbean 2.2 2.1 2.5 14.8 16.8 8.5 Focus article by Jonathan Lopez

LONDON (ICIS)–Weak demand continues to be a concern in the European acetone and phenol chain and in the wider chemicals industry and Q4 will remain tough, in view of year-end considerations, but when will demand turn a corner? Europe ICIS editors Jane Gibson (acetone and phenol), Heidi Finch (bisphenol A and epoxy resins), Meeta Ramnani (polycarbonate), Mathew Jolin-Beech (methyl methacrylate) and ICIS senior analyst Michele Bossi (aromatics and derivatives) discuss current market conditions, in particular demand challenges, in view of residual macro and geopolitical headwinds, although easing interest rates and the trade defense investigation for epoxy bring some hopes and opportunities in Europe. However, global oversupply driven by growing capacity in China, falling deep sea freight rates making imports more interesting again and the need for restructuring actions in PC and regulatory changes are just some of the challenges that the chain is facing. Demand fundamentally weak across markets; Q4 destocking on top Acetone/ phenol length to increase when turnarounds end, on poor demand Some hopes, but no big expectations of recovery for 2025 EU epoxy AD case could support more domestic sourcing in 2025 Global oversupply, Asian exports likely to continue to weigh on the chain Restructuring in Europe PC production BPA ban in food contact materials a blow, but widely expected/prepared for Podcast editing by Meeta Ramnani Podomatic Player Podomatic Player

SAO PAULO (ICIS)–Spanish chemicals sales are expected to rise in 2024 by 4.8%, compared with 2023, to €86.5 billion while output is expected to expand by 7.1%, the country’s chemicals trade group Feique said this week. The enviable figures for chemicals are expected to be repeated in other manufacturing sectors as well as in the services sector, which makes up around 80% of Spain’s economy and includes its powerful tourism industry. For 2025, Feique forecasts chemicals sales will rise by 4.2%, compared to 2024, pushing the country’s chemicals sales over the €90 billion mark for the first time. Output is expected to rise by 3.2% next year. As far as the economy’s ups and downs, the 2010s will be a decade most Spaniards will want to turn the page on after the country’s banking sector had to be bailed out by the EU in the hangover of its housing bubble, with the consequent strict austerity policies which were the only game in town at the time. Spaniards can feel a bit more upbeat about the 2020 as its equator approaches, after a start which made many feared a lost decade was on the cards amid a health emergency that put the country under one of Europe’s strictest lockdowns, in a place where being outside is the norm, and with tourism brought to its knees. It was not to be. Society’s mental health may still be reeling, and may do so for years to come, but the economy’s health is evident and, moreover, the recovery is reaching sectors outside services, creating hopes the much-needed diversification in the economy might finally be taking place. Just like after its accession to the EU in the 1980s, generous and well-targeted subsidies from the 27-country bloc are propping up the green economy and, with it, manufacturing. However, the motor of the recovery has once again been tourism: more than 80 million people visit Spain annually, a trend increasing post-2020. Much has been written about how after the pandemic consumers are prioritizing spending on ‘experiences’, rather than goods: Spain has developed over the past 50 years one of the world’s strongest tourism sectors. Meanwhile, the booming and fiscally prudent Germany of the 2010s has in the space of just two years turned into the sick man of Europe as it pays a high price for its decades-long geostrategic error of over depending on Russian natural gas, an error which has hit the chemicals industry hard. The IMF said this week Germany’s output in 2024 is expected to be flat, compared with 2023, a year which was already hard on Germany as the peak of the energy crisis sank in. Spain’s healthy macroeconomic and chemicals sector-specific figures come against a backdrop of political woes. Spain has not been immune to the current European trend of strong and corrosive polarization. Since July 2023, the center-left government has been navigating in a minority in Parliament. Pedro Sanchez’s cabinet minority has raised the prospects it may not be able to pass a Budget for 2025, the most important vote annually in Madrid’s Congreso de los Diputados. While under Spanish law, the cabinet could extend this year’s Budget into next, its inability to pass a new Budget to implement its recent electoral promises would weaken it greatly. Meanwhile, passing a Budget for 2025 before the year-end would come to guarantee the cabinet’s survival for at least another two years – if needed, it could expand 2025’s budget into 2026. The term is due to end in 2027. While the economy booms, Spanish politics is suffering a Latin Americanization process – experts’ theory that political instability and fragmentation, leading to weaker Administrations, is the new norm after the hangover of the 2008 financial crash came to end the previous bi-partisan system of alternance in office. ‘ROCKET’ DOMESTIC ECONOMY IS CHEMICALS GAINThis week, the IMF raised up its GDP growth forecast for Spain in 2024 to 2.9%, up from its July forecast of 2.4% and one percentage point above its forecast a year ago. In 2025, Spain’s output is expected to expand by 2.1%. Both years, the country’s growth is set to be well above that of the eurozone’s two largest economies, Germany and France. IMF GDP GROWTH FORECASTSWorld and main European economies 2024 Versus July forecast 2025 Versus July forecast World 3.2 0.0 3.2 -0.1 Germany 0.0 -0.2 0.8 -0.5 France 1.1 0.2 1.1 -0.2 UK 1.1 0.4 1.5 0.0 Italy 0.7 0.0 0.8 -0.1 Spain 2.9 0.5 2.1 0.0 The healthy macroeconomic figures are filtering down nicely to the chemicals sector, still feeling the scars of the falls in sales and output in 2023, after years of relentless growth except for 2020. Strong domestic demand and, in 2024, a recovery in exports – which account for around two-thirds of Spain’s chemical sales have allowed the sector to weather the storm better in peers in other major eurozone economies. In the post-pandemic instability, Spanish chemicals sales rose sharply in 2021 and 2022, as prices globally shot up, but fell by nearly 7% in 2023 as prices came down, with output declining by 0.7% compared with 2022. In 2024, the story has been one of growth again, as already forecast in an interview with ICIS in July by Feique’s director general. “Prices are recovering from the lows we saw in 2023 – I think by the end of the year selling prices on average should reach pre-crisis levels. Demand at home is holding up strongly and exports remain healthy,” said Juan Labat at the time. “In Spain, production of basic chemicals is recovering strongly, and this is important because output in that subgroup had fallen the most, down 11% in 2023, but it is up 8% year to date [to July]. Practically all sectors are performing well – paints, personal care, pharmaceuticals… Considering the economics of countries around us, the Spanish economy is bit of a rocket.” For comparison, chemicals sales in Germany, the largest chemicals producer in Europe, stood at €229.3 billion in 2023, in a powerful manufacturing sector which employs 470,000 workers. For comparison again, Spain’s chemicals companies are expected to close 2024 with a 250,000-strong workforce. However, the headline positive figures hide underperformance in key sectors, according to Feique’s President, Teresa Rasero, who is also the board’s chair at Spain’s subsidiary of French industrial gases major Air Liquide. This week, Feique’s annual assembly re-elected her for the post for another year. Rasero said that while consumer chemicals, specialties, and health products are growing healthily, basic chemicals are still struggling with high energy costs, worsened by Spain’s “non-existent or very low” public support for energy-intensive industries, compared with peers such as Germany or France. In the EU jargon, this is called the carbon emission rights expenses. Feique said that figure in Spain in 2024 is expected to stand at a mere €300m annually in coming years, well below the support which neighboring countries have deployed, which runs into the billions. “[Emissions expenses compensation is] non-existent or very low compared to the few countries that have established a comparable regime. The problem is that it is precisely the production of basic chemicals or other similar energy-intensive industrial sectors that are essential to maintaining our strategic autonomy,” said Rasero. “We need more competitive energy prices and to accelerate the decarbonization processes, which are key aspects for the future of the European productive economy.” Feique’s president said the €300 million support in Spain is set to fall very short in a chemicals sector which would need €3 billion annually in investments to decarbonize between 2025 and 2050, according to the trade group’s forecast – a whooping €75 billion which will hardly be realized if all the effort is to come just from the private sector. The trade group said the annual €3 billion would need to be distributed in €1.7 billion for capital expenditure (capex) to build and modernize chemicals plants; €850 million for operational adjustments during technological transitions; and €450 million for maintenance and regulatory compliance. The daunting task is clearly showed in the headline figure of what the industry must achieve: Spain’s chemicals must reduce 12.4 million tonnes of annual CO2 emissions by 2050. DECARBONIZATION FUND: WHO PAYS?The Spanish cabinet has spent months negotiating a bill with employers and employees representatives an industrial policy, with both sides supporting the overall bill’s targets. With the decarbonization challenge hurrying along, Spain may be finally coming to terms with the fact that its weakened manufacturing sectors need revival, so it is able to weather storms such as the 2020 shock, when airports, hotels, and beaches remained empty. Spain’s manufacturing accounts for around 12% of its GDP. Economists’ mantra about a healthy economy being one in which 20% of its output comes from manufacturing only rings true, among the EU’s major economies, in Germany, after decades of delocalization and deindustrialization in most of Europe. Spain’s attempt to pass an industrial policy worth the name is also a bit of a novelty: the country’s policymakers had not sat to negotiate a similar initiative since the 1980s, when the country seemed to confidently put most of its eggs in the tourism basket, Barcelona’s 1992 Olympics catalyst included. With that industrial policy bill expected to pass, Feique is proposing to include in its implementation the creation of a decarbonization fund. “[The Decarbonization Fund could be financed with] at least 50% of the income from emission rights, which last year reached €3.5 billion. We estimate the fund should aim for a figure close to €2.5 billion annually, which would help guarantee the continuity of our country’s strategic industrial assets in a competitive manner,” said Rasero. In the past years, Feique’s executives have said, publicly but also privately, that the cabinet has been prone to listen to the trade group’s lobbying, giving an access to the corridors of power it lacked in the past, as the cabinet aims to expand and improve manufacturing employment. Taking advantage of that, Feique is confident the bill will include proposals to implement carbon contracts which would resemble those already in place in EU countries such as Germany and the Netherlands – another chemistry hub due to its location – as well as Denmark. “Our objective is that carbon contracts for difference [compensation to energy-intensive sectors] can be applied to essential technologies for decarbonization such carbon capture, utilization, and storage (CCUS), electrification, hydrogen, and renewable gases, oriented both to supply and demand requirements, when necessary,” said Rasero. SPAIN POLICIES, EU-WIDE DECISIONS The 27-country EU remains, despite recent setbacks and delays to key policies, the world’s self-declared champion in the effort to decarbonize, a move which could not come sooner in a region which mostly lacks all the conventional energy sources that have fueled the modern industrial era. Whether the bloc and the world at large are able to decarbonize in such a relatively short period of time – target for 2050 in the EU, 2060 in countries such India or China – remains to be seen. However, for Spain specifically, climate change deceleration and adaptation are set to be key challenges in years to come, as increasing and more intense heatwaves and droughts hit its powerful agricultural sector, as well as human health. However, certain wave against urgent decarbonization targets is gaining traction in the EU, fueled by climate change skepticism related to the loss of jobs. The trend is reaching the EU’s capital Brussels, where policymakers are considering delays in the targets. Turning upside down an industrial model created over the past two centuries in just two decades was always going to be a challenge, to put it mildly. Industry players in all sides – employers and employees – around the EU have, have been lobbying hard for some of those delays, which will invariably increment regulatory burdens and, most likely, costs. In July, Feique’s Labat he said the EU’s new approach to industry was good news, but added finetuning is needed if the EU is serious about safeguarding its diminished remaining industrial fabric. For example, he was very critical of the many changes to the deadlines for phasing out some polluting technologies, which only contribute to create uncertainty for many businesses, he said, arguing companies do want to go greener but are fearful of failing along the way if the regulatory environment is 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 [capital expenditure] plans with just the short or medium term in mind: those assets are planned for several decades.” In another interview with ICIS in July, the chemicals lead at the country’s main trade union, Comisiones Obreras (CCOO), said the industry’s workers do see an opportunity in the EU Green Deal, rather than a threat, but added that tight timeframes risk jeopardizing that support. “We have had cases, like in automotive, where obviously adapting a plant producing combustion engine vehicles to produce EVs [electric vehicles] is an expensive and time-consuming process: the authorities want us to go faster than we could possibly go,” said Daniel Martinez at the time. “And, still on EVs, the infrastructure across the EU – with a few exceptions – remains far from what is needed for a full transition towards electric mobility. We need to be realistic here.” All in all, he concluded, moves by some political groups in the EU to practically dismantle the Green Deal are not welcomed by the chemicals industry as a whole, which is set to benefit from the green transition, he said, describing himself as a “techno-optimistic.” This week, Rasero said the EU’s current music about industry is starting to rhyme, after the recent publication of official reports by Enrico Letta and Mario Draghi, showing a potentially competitive pathway towards an EU’s decarbonized industry, as well as the approval of the EU’s Strategic Agenda 2024-2029. She also mentioned the chemical industry’s own Declaration of Antwerp. While fully supporting decarbonization efforts by 2050, the private-led initiative was mostly an emergency cry for extended state support if the endeavor is to be successful. “The EU must propose an industrial model that is simultaneously oriented towards sustainability and competitiveness, and which always keeps in mind the objective of reducing the costly and complex regulatory framework and the administrative burdens that flood us with inefficiencies,” said Rasero. “The model must serve to reduce the cost of energy in the EU, guarantee access to critical and strategic raw materials, and effectively transform industrial sectors while respecting technological neutrality.” SPAIN CHEMICAL SALESTurnover in thousand million euros Annual change in % Source: Feique Insight by Jonathan Lopez

LONDON (ICIS)–Senior editors Caroline Murray and Matt Tudball interviewed Marco Piscitelli, founder and CEO of International Gate, at the company’s customer event in Verona, Italy on 23 October to get his views some of the key topics impacting the European polyethylene terephthalate (PET) and recycled PET (R-PET) markets, including: ‘Theoretical’ global oversupply of PET and how freight, energy costs and economics all play a part in the market The importance of customers finding the right partners to navigate challenges in 2025 The ‘Recycling Revolution’ and the impact of the Single Use Plastics Directive (SUPD) The ‘chaos’ around the lack of legislative clarity facing the PET and R-PET markets in 2025 Suitability of single pellet solutions (SPS) for brands with high recycled content targets.