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Polyethylene30-Aug-2024
SINGAPORE (ICIS)–Click here to
see the latest blog post on Asian Chemical
Connections by John Richardson.
Chemical companies, as my ICIS colleague Kevin
Swift and I write in today’s blog, need “to
write their own story”.
This can only come from a much more rigorous
approach to scenario planning from the C-Suite
level down that needs to then permeate to every
decision at every level of an organisation,
from long-term investment planning right down
to even month-by-month pricing and production-
volume decisions.
And key to building proper scenarios, now that
the Chemicals Supercycle, is understanding
demographics as demographics are chemicals
demand destiny.
Chemicals demand is of course the number of
people multiplied by per capita consumption.
Because of the increasing uncertainty about the
rate at which most of the world’s population is
going to age and shrink, one set of scenarios
on future population levels makes no sense at
all.
Front and centre of the global demographics
crisis is China given that in 2024, ICIS
expects China to drive 40% of the world’s
polymers demand from just 18% of the global
population.
There is a huge variance in estimates of
China’s population decline that you simply must
factor in. For example, China’s population may
decline to 767 million by 2100 or just 373
million!
Kevin’s scenario modelling on China’s
demographics and its polymers demand is an
important starting point for your boardroom
discussions:
Under the ICIS Base Case, major resins
demand rises from 103.1 million tonnes in 2020
and starts to mature in the 2030s, reaching
188.6 million tonnes in 2050. After 2050, a
falling population and evolving market/economic
dynamics adversely affect demand, which falls
to 89.3 million tonnes in 2100. This is a level
consistent with pre-2020 demand.
With a more pessimistic outlook on
population and reduced economic dynamism under
the Dire Demographics scenario, major resins
demand rises from 103.1 million tonnes in 2020
and starts to mature in the 2030s, reaching
116.2 million tonnes in 2050.
With a falling population and adverse
economic dynamics, demand falls to 38.7 million
tonnes in 2100, a level consistent with
pre-2010 demand.
Equally important is consideration of what
these demand outcomes could mean for China’s
polymers trade flows:
The Base Case suggests China remains a net
importer of major resins, but its net import
position falls from 27.4 million tonnes in 2020
to 4.7 million tonnes in 2050. We only focus on
the period to 2050.
Under the Dire Demographics scenario,
production is more than sufficient and by
early-2030s China attains self-sufficiency in
these resins and emerges as a net exporter of
3.6 million tonnes in 2035, 7.1 million tonnes
in 2040, 9.7 million tonnes in 2045 and 11.6
million tonnes in 2050.
Please write your own story by conducting the
right kind of planning for a far more nuanced
and uncertain chemicals world.
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.
Speciality Chemicals30-Aug-2024
SINGAPORE (ICIS)–Saudi Arabian producer
Methanol Chemicals Co’s (Chemanol) specialty
chemicals subsidiary Madarat Al-Dhara Chemicals
Co has signed an agreement to secure a
long-term supply of ethylene oxide (EO) from
Sadara Chemical Company.
The EO supply is intended for Madarat
Al-Dhara’s methyl diethanolamine (MDEA) and
choline chloride projects, Chemanol said in a
filing to the Saudi bourse, Tadawul, on 29
August.
Details on cost and volume of the EO supply
deal were not disclosed.
“Chemanol aims to become one of the largest
producers of specialty petrochemicals in the
region given that all targeted products would
be the first of their kind in the region,” the
company said.
Financial and capacity details of the MDEA and
chlorine chloride projects were not disclosed.
“Such products would be used in many vital and
strategic industries such as oil and gas
Industry, nutrition additives industry,
extraction of environmental harmful gases,
carbon capture and storage technologies and
others.”
MDEA is crucial for gas purification, while
choline chloride plays roles in animal
nutrition, chemical processes, and industrial
applications.
In May, Chemanol completed its Saudi riyal (SR)
80 million ($21 million) acquisition of an
80%
stake in Global Company for Chemical Industries
(GCI), a specialty and fine chemicals
manufacturer.
The company is aiming to expand its specialty
chemicals market share and diversify its
product offerings.
Ethylene29-Aug-2024
SAO PAULO (ICIS)–Argentina’s petrochemicals
players are in a wait-and-see mode about the
effects a cut to import tariffs announced this
week could have in the market and whether it
will lower prices which, for many materials,
remain higher than global prices.
Earlier this week, the Argentinian cabinet said
it would cut the so-called PAIS tax from 17.5%
to 7.5% from 2 September.
Introduced in 2012, the PAIS acronym responds
to the name Tax for an Inclusive and Solidary
Argentina (Impuesto Para una Argentina
Inclusiva y Solidaria) and was presented by the
at the time left-leaning administration as a
tax on purchases of foreign currency.
In practice, given that most imports are priced
in dollars, the tax ended being practically an
import tariff and contributed to Argentina
becoming one of the most closed economies to
trade in the world.
President Javier Milei, in office since
December 2023, has promised to turn the system
upside down and make the Argentinian economy a
bastion of liberalism.
The cabinet’s intention is to end import
tariffs altogether. The minister for the
economy, Luis Caputo, has been quoted in the
Argentinian press as saying the country should
be “moving forward in the elimination of all
export duties, a perverse tax that we do not
like and hinders” Argentina’s economic
progress.
PETROCHEMICALS MUST
WAITThis week, sources in
Argentina, who have been reporting higher
prices for several materials compared to the
rest of the world for months, were sceptical of
any quick effect from the cut to the PAIS tax.
Some estimated, however, that the lower rates
could slash petrochemicals import prices, on
average, by $200/tonne.
Most sources also mentioned the example of Dow,
which is the sole polyethylene (PE) producer in
Argentina and has greatly benefited from the
closed economy up to now.
Petrochemicals and the wider industrial
sectors, including construction, remain the
hardest hit industries amid the country’s
recession, which is trying to digest the ‘shock
therapy’ being implemented by the government.
Consumers are squeezed and few can afford the
luxury of even thinking about purchasing the
higher-priced, petrochemicals-intensive durable
goods, which are the ones which could revive
the beleaguered chemicals industry.
Moreover, those with stocks of materials
purchased in imports under the previous PAIS
rates are unlikely to lower their prices until
they sell them – that period could be a few
weeks or a few months.
“Plastic sales remain weak because people think
prices will go down with the tax reduction. But
I am not convinced the reduction will be
immediate and all at once. Prices could only
come down once the new imports under the new
regime come into force,” said one source at a
large distributor.
“It will be slow process, over one or two
months – we will have to see how petrochemicals
producers react and whether they start lowering
prices straight away or do it in phases.”
This source and others said Dow announced to
its customers in Latin America prices increases
of around $100/tonne for most materials,
although that increase was not applied in
Argentina, said the distribution source.
Dow is Argentina’s sole producer of
polyethylene. It operates facilities at the
Bahia Blanca petrochemicals hub, south of
Buenos Aires.
According to ICIS Supply & Demand, it has
the capacity to produce 730,000 tonnes/year of
ethylene, 307,000 tonnes/year of high density
polyethylene (HDPE), 329,000 tonnes/year of
linear low density polyethylene (LLDPE), and
40,000 tonnes/year propylene.
As the sole PE producer in a country locked up
to external trade, Dow has greatly benefited in
the past two months. Sources
reported earlier in the year the company
was selling PE at $2,400/tonne, when global
prices stood at around $1,200/tonne.
The price increase announced earlier in the
year added more doubts to the company pricing
strategy.
Dow had not responded to a request for comment
at the time of writing.
The source at the large distributor added,
“Dow’s $100/tonne increase was not implemented
it in Argentina as prices remain higher than
global prices.
“If the reduction in the PAIS tax brings a
reduction of $200/tonne, for example, perhaps
Dow first decides to raise prices by $100/tonne
and then take the $200/tonne hit and see what
the market’s reaction is. Right now, we do not
know how it will play out.”
STAYING PUTAnother
source at a petrochemicals distributor, with
decades of experience behind him, described the
largest recession it has seen in its career. In
such an environment, he went on to say, prices
should go down to prop up demand, at least,
according to economy theory.
But Argentina, it added, has escaped economy
theory often in past decades so nothing can be
taken for granted.
The source even added that it was mulling
whether to attend an industry event next week
in Buenos Aires, just in case a business
opportunity is lost while it attends the
conference.
On 4 September, the Latin American
Petrochemical and Chemical Association (APLA)
is holding its annual conference on
sustainability, which together with its
logistics event and the annual event are the
three highlights in the Latin American
petrochemicals markets.
“There is a strong, very strong recession, and
we have to be very attentive to each business
that emerges in order to be on the edge of not
losing the opportunity or do a bad sale,” said
the source.
Font page picture source: Shutterstock
Focus article by Jonathan
Lopez
Global News + ICIS Chemical Business (ICB)
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Ammonia29-Aug-2024
HOUSTON (ICIS)–Fertilizer producer OCI Global
announced it has successfully completed the
sale of its equity interests in Iowa Fertilizer
Company (IFCO) for $3.6 billion to Koch Ag
& Energy Solutions.
The producer said the closing of the deal
involving the large-scale US greenfield
nitrogen fertilizer facility marks a
significant milestone in OCI’s strategy to
unlock value for shareholders
Located in Wever, Iowa the plant was the first
greenfield nitrogen fertilizer plant built in
the US in over 25 years, and the largest
private construction project in Iowa’s history,
adding more than 3,500 jobs during the
construction period.
The facility opened in 2017 and has the
capacity to produce 3.5 million tonnes of
nitrogen fertilizers and diesel exhaust fluid
annually.
“This acquisition marks another significant
investment in the growth of our fertilizer
business,” said Mark Luetters, Koch Ag &
Energy Solutions president.
“In the past 15 years, we have invested $2
billion in our North American production
facilities to enhance reliability, expand
production and improve logistics for our
customers. This investment enhances our ability
to serve customers long-term by providing
additional flexibility to adapt to their
nitrogen preferences.”
The Wever facility adds to the Koch
Fertilizer holdings, which includes four
nitrogen production facilities in the US and
one in Canada plus an extensive terminal
network.
The company and its affiliates also have
partial ownership of three nitrogen facilities
in Trinidad and Tobago, as well as a phosphate
production facility in Morocco.
The sale was first announced last December and
OCI said it is confident that under Koch’s
stewardship, IFCO will be well positioned for
its next phase of growth.
“This milestone further reinforces OCI’s
standing and record as a successful developer,
operator and investor. Looking ahead, we will
continue to deploy our distinctive knowledge,
management expertise and entrepreneurial spirt
into further value accretive ventures,” said
Nassef Sawiris, OCI executive chairman.
Adipic Acid29-Aug-2024
LONDON (ICIS)–BASF is to end production of
adipic acid and several downstream units at
Ludwigshafen, Germany, as part of structural
changes underway at the site, the company said
on Thursday.
Production of adipic acid will conclude at the
site over the course of 2025, while units to
manufacture cyclododecanone (CDon) and
cyclopentanone (CPon), which utilize adipic
acid as a raw material, will cease in the first
half of the year.
The company is planning to cut around €1
billion in costs from the site, with new CEO
Markus Kamieth expected to fully set out what
steps will be taken at the company’s capital
markets day in September this year.
The company had already cut back adipic acid
production capacity at the site in
2023, but had kept a some capacity onstream
to feed into those downstream units.
BASF expects to cease deliveries of CDon and
CPon, which are used in nylon 12 and
pharmaceuticals production respectively, and is
in talks with customers, the company added.
It will continue to produce adipic acid in
Onsan, South Korea, and Chalampe, France, BASF
added.
The decision was taken as part of the ongoing
strategic review of site operations to “ensure
competitiveness under changing market
conditions”, the company said in a statement.
Around 180 workers will be affected by the
closures, with BASF planning to explore the
possibility of employment positions elsewhere
within the group.
“These closures are part of the development of
a long-term target picture for the
transformation of the Ludwigshafen site,” said
BASF industrial relations director Katja
Schwarpwinkel.
Thumbnail photo: BASF’s Ludwigshafen,
Germany production complex. Picture source:
BASF
Updates throughout
Adipic Acid29-Aug-2024
LONDON (ICIS)–BASF is to end production of
adipic acid and several downstream units at
Ludwigshafen, Germany, as part of structural
changes underway at the site, the company said
on Thursday.
Production of adipic acid will conclude at the
site over the course of 2025, while units to
manufacture cyclododecanone (CDon) and
cyclopentanone (CPon), which utilize adipic
acid as a raw material, will cease in the first
half of the year.
Speciality Chemicals29-Aug-2024
LONDON (ICIS)–A “worrying” future lies ahead
for the UK chemicals industry because there is
no concrete roadmap in place to eliminate
fossil fuels, the think tank Green Alliance
said on Thursday.
Researchers at the organization warned that up
to 140,000 jobs in the industry are at risk in
the long term if policymakers fail to plan for
its decarbonization.
The figure is far greater than the 33,700
workers currently employed by the steel
industry, the most recent subject of talk
about job losses and decarbonization.
The UK chemicals industry accounts for 19% of
the UK’s industrial emissions and is heavily
dependent on fossil fuels for energy and
feedstocks.
It will also, however, play an important role
in providing vital components for net-zero
technologies, including batteries and wind
turbines, the Green Alliance noted.
Despite the chemical industry’s strategic
value, government support has been minimal so
far because of its focus on carbon capture and
storage (CCS) and hydrogen fuel.
As a result, more important areas such as
electrification and the substitution of fossil
fuel feedstocks are in danger of being left
behind, Green Alliance said.
It pointed out that a new industrial strategy
will provide an opportunity to secure the
future of the industry and safeguard the
resilience of the UK economy.
“The government needs to develop a coherent
vision for what a successful green chemical
industry looks like,” said Liam Hardy, senior
policy analyst at Green Alliance.
Crude Oil29-Aug-2024
LONDON (ICIS)–The economic outlook in the EU
and eurozone improved in August on stronger
industry confidence and brighter employment
expectations.
The European Commission’s Economic Sentiment
Indicator (ESI) rose in both the EU (+0.4
points to 96.9) and eurozone (+0.6 points to
96.6), according to official data on Thursday.
This reflected improved confidence in industry,
services and retail trade, while confidence
among consumers and in construction remained
broadly stable.
Employment prospects rose more significantly in
both blocs following several months of decline,
with the Employment Expectations Indicator
(EEI) up 0.9 points to 99.6 in the EU and
higher by 1.3 points to 99.2 in the eurozone.
For the largest EU economies, the ESI improved
in France (+4.3); Spain (+1.3); the Netherlands
(+0.9); and Poland (+0.3). It declined in
Germany (-1.7); and Italy (-1.2).
The sharp uptick in France was likely due to
the Olympics being hosted in Paris, analysis
from Oxford Economics suggested.
Ammonia28-Aug-2024
HOUSTON (ICIS)–The US Department of
Agriculture (USDA) announced it is partnering
with business owners to expand innovative
fertilizer production, create more rural jobs
and strengthen local economies by awarding $35
million through the Fertilizer Production
Expansion Program (FPEP).
Appearing at the annual Farm Progress Show in
Boone, Iowa, USDA Secretary Tom Vilsack
revealed the agency is granting funds for seven
projects in seven states through the FPEP,
which is funded by the Commodity Credit
Corporation.
This program provides grants to independent
business owners to help them undertake such
efforts as modernize equipment, adopt new
technologies and build production plants.
“The investments announced today will increase
domestic fertilizer production and strengthen
our supply chain, while creating good-paying
jobs to benefit all Americans,” said Vilsack.
USDA has invested $286.6 million in 64 projects
across 32 states through FPEP. These projects
have created 768 new jobs and will help
increase domestic fertilizer production by over
5.6 million short tons.
The FPEP was created with a commitment of up to
$900 million in funding to address issues
facing farmers due to rising fertilizer prices
due to a variety of factors including the
Ukraine conflict and a lack of industry
competition.
Citing examples of the investments, the agency
highlighted that in Virginia ammonium sulfate
producer AdvanSix will expand a facility
utilizing an almost $12 million grant.
The company currently provides 31,400
agricultural producers with ammonium sulfate on
the East Coast and in the Midwest.
Through this project, AdvanSix will expand
their operational capacity by 195,000 short
tons/year and increase their total output to
more than 36,000 agricultural producers.
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