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Speciality Chemicals17-Sep-2024
BARCELONA (ICIS)–Petrochemical markets are
likely to remain depressed while China and
other countries continue to add significant
capacity, unless big wave of closures and
demand improvement help to achieve balance.
Global capacity additions far outstrip
demand growth
China, Middle East, US likely to continue
expansions
China drove the petrochemical supercycle,
but no longer
China chemicals demand growth likely only
2-4%/year
Prospect of global deflation
Europe can focus on specialty chemicals,
other niches
In this Think Tank podcast, Will
Beacham interviews ICIS Insight editor
Nigel Davis, ICIS senior
consultant Asia 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.
Power17-Sep-2024
Ursula von der Leyen announces key energy
roles for Denmark, Spain and the Netherlands
Teresa Ribera will oversee delivery of the
bloc’s Green Deal, with former Danish energy
minister Dan Jorgensen to take the energy brief
Parliamentary hearing needed to confirm
candidates in post
LONDON (ICIS)–European Commission president
Ursula Von der Leyen named former Danish energy
minister Dan Jorgensen as her pick for the
energy brief on 17 September, as she unveiled
the structure of the incoming College of
Commissioners.
The role is likely to work closely with big
green portfolios for Spain and the Netherlands,
as von der Leyen presented a leaner, more
cross-cutting college than in the previous
mandate.
Spain’s Teresa Ribera, one of six executive
vice-presidents, will be responsible for a
“clean, just and competitive transition”.
Her work will involve ensuring the EU stays on
track to meet its goals under the bloc’s Green
Deal and proceed with both decarbonising and
industrialising the economy in parallel.
Ribera has been Spain’s ecological transition
minister since 2018, a role which covers both
energy and environmental policy. She was a key
figure in finalising a number of energy files,
including the electricity market reforms, when
Spain held the rotating EU presidency in the
second half of 2023.
Ribera will also pick up responsibility for
competition policy from outgoing Danish
commissioner Margrethe Vestager.
Current Dutch commissioner Wopke Hoekstra will
retain the climate brief he has held since
August 2023, becoming commissioner for
“climate, net-zero and clean growth”.
His responsibilities will include climate
diplomacy and decarbonisation, alongside
implementation and adaptation. The former Dutch
finance minister will also pick up
responsibility for taxation.
Jorgensen’s work will focus on lowering energy
prices, investment in clean energy and cutting
dependencies. His brief will also cover
housing, which covers aspects including energy
efficiency.
Von der Leyen told reporters that Jorgensen’s
broad experience as an energy minister made him
a good fit for the role.
She pointed to topics including the energy
crisis, building an energy union and lessening
Europe’s dependence on fossil fuels as key
agenda items, alongside deepening Europe’s
interconnections and supply corridors.
Von der Leyen also said Jorgensen was well
suited to continue work on joint energy
procurement, which she called “one of the top
topics to increase the market power of the [EU]
on the global energy market”.
Jorgensen was Denmark’s minister for climate,
energy and utilities from 2019-2022, before he
became minister for development cooperation and
global climate policy.
The commissioners-designate must be approved by
the European Parliament before they take up
their roles. Von der Leyen said it was
impossible to say when the process would be
complete but she hoped it would be soon.
The initial goal was 1 November, but that may
slip. The parliament can accept or reject the
whole Commission, and has previously used its
role to replace certain candidates and demand
adjustments to portfolios.
COORDINATION IS KEY
Asked about overlap between Ribera’s and
Hoekstra’s briefs, von der Leyen told reporters
that all commissioners and executive
vice-presidents would need to work closely
together.
“You cannot put reality in little boxes and
separate the different topics from each other.
“Reality: everything is intertwined and
interlinked,” she said, stressing that
coordination and cooperation were paramount.
Von der Leyen also cut an additional layer of
commission vice-presidents in the new college,
which she said meant a “leaner structure, more
interactive and interlinked”.
CZECH DEVELOPMENTS
Josef Sikela, a contender for the energy job,
will instead become commissioner for
international partnerships.
Sikela was well regarded for his work during
the energy price crisis, when the Czech
presidency convened multiple energy councils in
the second half of 2022 to stabilise the
situation.
His work will involve oversight of the €300bn
Global Gateway programme, which invests in
infrastructure abroad.
Von der Leyen said the role had links with
energy and trade, pointing to examples of
working with African countries on renewable
energy or critical raw materials to help
underpin the bloc’s competitiveness.
Crude Oil17-Sep-2024
LONDON (ICIS)–Hopes of a recovery in Germany’s
economy are fading, think tank ZEW said on
Tuesday, as its economic sentiment indicator
fell for the third month in a row.
The research group’s September economic
sentiment indicator declined by 15.6 points
from August to 3.6 points, while its assessment
of the current situation in Germany was down by
7.2 points to -84.5 points, the lowest since
May 2020.
Both indicators also fell
sharply in August from the previous month.
The economic sentiment indicator began its 2024
downward trend in
July.
“The hope for a swift improvement in the
economic situation is visibly fading,” said ZEW
president Achim Wambach.
“In the latest survey, we once again observe a
noticeable decline in economic expectations for
Germany.”
The outlook for the eurozone was also gloomy,
with the September economic sentiment indicator
down by 8.6 points to 9.3 points.
The assessment of the current situation in the
eurozone fell by 8 points from August,
remaining firmly in negative territory at -40.4
points.
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Petrochemicals17-Sep-2024
LONDON (ICIS)–Click
here to see the latest blog post on
Chemicals & The Economy by Paul Hodges,
which suggests OPEC+ risks losing control of
oil markets.
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. Paul Hodges is the chairman of
consultants New
Normal Consulting.
Polyethylene17-Sep-2024
SINGAPORE (ICIS)–Click
here to see the latest blog post on Asian
Chemical Connections by John Richardson.
I did the same exercise on global ethylene
markets almost exactly a year ago as I do in
today’s post.
This makes me wonder why there is talk of early
signs of a global recovery in olefins and
derivative markets.
Based on the new calculations, what would it
take to return global operating rates to their
very healthy 1992-2023 average of 88%?
Assuming global production, which is about the
same as demand, stays unchanged from our base
case, global capacity would have to grow by an
average of around 2m tonnes a year versus our
base case of 6.2m tonnes a year.
This implies capacity closures elsewhere to get
to the 2m tonnes a year of 2024-2030 capacity
growth.
Global capacity would need to grow at an
average 1% per year to achieve a 2024-2030
operating rate of 88%. This would compare with
the 1992-2023 average of 4%.
One might argue that we have underestimated
global demand given the likelihood of a
loosening cycle by the Fed, perhaps a big dose
of Chinese economic stimulus, and booming
economies in the developing world such as
India’s.
But what happens in the rest of the world is
less consequence compared with events in China.
Today’s second chart – showing China’s
percentage shares of global demand for the
major ethylene derivatives in 1992 (at the
start of the Chemicals Supercycle) and by the
end of this year – underlines the
disproportionate role that China has come to
play in driving global consumption:
In 1992, from a 22% of the global population,
China’s average share of global demand across
these ethylene derivatives was 6%. China’s
share of global demand is forecast to reach 40%
from only an 18% share of the global population
by the end of 2024.
The Economist wrote in its 7 September issue
that the real Chinese economic picture may be
bleaker than is commonly painted.
“The official [Chinese government] numbers show
that the GDP growth rate has reverted to
pre-pandemic level, despite the moribund
housing industry and low investment in
infrastructure,” wrote the magazine
“This is a risible claim, says Logan Wright of
Rhodium Group, a consulting firm. ‘The broader
problem is simply that the GDP data have
stopped bearing any resemblance to economic
reality,’ he explains.
My ICIS colleague, Kevin Swift, has looked at
disagreements over China’s population level. In
the blog’s 30 August post, he wrote:
“Demographer Yi Fuxian at the University of
Wisconsin has questioned assumptions about
current Chinese population and the likely path
forward. He examined China’s demographic data
and found clear and frequent discrepancies.
These should parallel each other, and they do
not.
“Yi posits that China population in 2020 was
1.29bn, not 1.42bn, an undercount of over
130m.”
If China’s population was smaller than commonly
assumed in 2020, so perhaps was its chemicals
demand, making today’s global oversupply worse.
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.
Ammonia17-Sep-2024
HOUSTON (ICIS)–The US Department of Energy
(DOE) has announced a conditional commitment
for up to $1.559 billion to Wabash Valley
Resources to help finance a commercial-scale
waste-to-ammonia production facility using
carbon capture and sequestration (CCS)
technology.
The government funding would be part of a total
investment of $2.4 billion that Wabash Valley
Resources would secure for the project through
private investment.
Located in West Terre Haute, Indiana, the
project is being planned to produce 500,000
tonnes of anhydrous ammonia annually and
permanently sequestering 1.6 million tonnes of
carbon dioxide annually.
Officials said it will have the potential to be
the world’s first, carbon-negative ammonia
production facility and that the company would
be repurposing an industrial gasifier to
utilize petroleum coke.
This will be the US’ first efforts to
utilize petroleum coke to produce ammonia and
store the associated emissions via
permanent geologic sequestration.
Wabash Valley Resources said it is their
intention to demonstrate a commercially and
environmentally viable end-use
alternative for petroleum coke, which
is a waste product generated during
the oil refining process.
Officials said this project would play a
critical role in securing domestic fertilizer
supply for the region commonly known as the
Corn Belt, contributing to both food security
and climate goals.
This low-carbon ammonia would be
cost-competitive compared to existing ammonia
imports, helping to drive down costs for local
businesses and consumers.
It was noted that while ammonia fertilizer is a
crucial element of the US agricultural system,
its production is a significant contributor to
climate change. Globally, the manufacturing of
the nutrient accounts for 1% to 2% of all
carbon dioxide emissions.
Through this project, Wabash Valley Resources
is striving to reduce the agricultural
industry’s emissions.
In addition to its environmental benefits, the
project is expected to create 500 construction
jobs and 125 operations jobs.
Ammonia16-Sep-2024
HOUSTON (ICIS)–Expected to make landfall late
Monday in South Carolina but not develop
further, the next round of tropical weather is
already delivering wind and rains to the region
but for the fertilizer industry, it was not
seen as being the type of threat that Hurricane
Francine was last week.
While South Carolina and North Carolina have
significant agriculture activities and
infrastructure along with crop nutrient
operations and distribution, fertilizer
manufacturing is less prevalent than in other
parts of the US.
The storm was being classified as a tropical
rainstorm with potential to produce several
inches of rain per hour with it expected to
trek northward once it makes landfall. There
have been tropical storm-force winds seen from
this event but there has not been a defined
center of circulation.
In terms of major fertilizer activity, Canadian
producer Nutrien has the Aurora Phosphate plant
in Aurora, North Carolina, with the city
located near the coast. The company said it is
keeping aware and taking necessary steps.
“We are actively monitoring the tropical storm
system and have comprehensive emergency
response plans in place to ensure the safety of
our people and operational integrity of our
facilities,” said a Nutrien spokesperson.
Like the previous tropical weather that has
struck the US, this storm’s wrath will bring
the most damage to crops.
Harvesting of corn and soybeans are underway,
with cotton and other crops now maturing also
in jeopardy, with the heavy rainfall likely
causing some localized flooding.
Harvesting campaigns in both South Carolina and
North Carolina have been halted, with this
trend possibly carrying into the surrounding
states. If the rain is extensive the delay
could be several days, if not longer depending
on rainfall amounts.
The concern is with a delay in these activities
it creates an additional lag for starting
post-harvest field activities like
end-of-the-year fertilizing.
The US Department of Agriculture (USDA)
reported that 47% of the corn crop had been
completed with only 1% of soybeans having been
harvested in North Carolina. There were no
results provided for South Carolina.
As with Hurricane Francine which hit both
Louisiana and Mississippi much more severely,
the true impact of this latest tropical system
will be felt in crop damage rather than damaged
fertilizer plants or retail operations.
There is concern that any loss of yields will
mean less income for farmers which then could
cause a sizeable decrease in buying for further
volumes.
Recycled Polyethylene Terephthalate16-Sep-2024
HOUSTON (ICIS)–As the US recycled polyethylene
terephthalate (R-PET) market continues to
develop and new players establish supply
relationships across members in the value
chain, pricing mechanisms have shifted
significantly over the course of the last 5+
years.
Historically, R-PET pricing was linked to
virgin pricing, but at a deficit, meaning
recycled resins were expected to be cheaper
than virgin. Now, the tables have turned,
particularly for sought after
“sustainability-driven” grades of recycled
resin which typically command a premium to
virgin due to the tight supply and high demand
of these higher quality, clear resins.
Pricing for these grades of recycled resins has
shifted within the R-PET industry, such that
pellet prices are largely based on their own
feedstock and production costs.
While spot pellet pricing is subjected to the
additional lens of local supply and demand,
including substitution with imports or cheap
virgin, contract pellet pricing is now largely
based off of bale feedstock formulas, with some
contracts specifying individual step inputs,
and others specifying the bale index and then
an adder to represent the processing cost.
Eventually, the market may move to a uniform
indexed pellet price, settled on a routine
frequency by the market, similar to how R-PET
pricing is established in Europe, or how other
commodity resin prices are established in the
US, such as polyethylene (PE).
Within the ICIS US R-PET commodity services,
two new price series have been introduced which
represent food grade pellet pricing calculated
via a formula, starting with bale feedstock
costs.
While each contract will have unique formula
inputs which are largely kept private, the
following prices are meant as an indicator of
average pellet pricing based on formula, as
this can vary significantly from active spot
market transactions – depending on the current
market supply and demand.
There is one assessment for the East Coast and
one for the West Coast based on various bale
feedstocks.
The formula is listed below:
[([(Bale price indicator + bale freight ) ÷
bale yield] + bale to flake processing costs) ÷
flake yield] + flake to pellet processing costs
= pellet price
Formula input descriptors:
Bale price indicator: What quality
(curbside or deposit) and region (East Coast vs
West Coast) descriptors are used for selecting
base pricing for bale feedstock costs in
relation to the type most often used by local
recyclers.
Bale freight: Cost to transport material
from bale producer (typically material recovery
facility (MRF)) to bale buyer (typically the
recycler/reclaimer).
Bale yield: Factor to account for loss of
material due to contamination within the bale;
Curbside bales have higher contamination levels
and thus lower yields.
Bale to flake processing costs: Associated
production costs from sorting, washing,
grinding processes, including but not limited
to facilities costs, utilities, labor, etc.
Flake yield: Factor to account for loss of
material due to contamination from flake to
pellet stage.
Flake to pellet processing costs:
Associated production costs from pelletization,
including but not limited to facilities costs,
utilities, labor, etc.
The numeric input values were gathered from
market participants, with median values used
among responses. The inputs are subject to
change pending further feedback or market cost
changes, such as the recent inflation of
production costs within the last ~2-4 years.
This price excludes delivery costs of the final
pellet. This price also excludes explicit
margin adders, though some processing costs may
include inherit margin depending on the
processing yield fluctuation.
For more information on these new series, or to
share feedback, please contact Emily Friedman
at Emily.friedman@icis.com.
Ammonia16-Sep-2024
HOUSTON (ICIS)–Even with recent poor weather
at hand, the US harvest continues to advance
with 9% of corn completed and 6% of soybean
acreage finished, according to the latest US
Department of Agriculture (USDA) weekly crop
progress report.
The weekly update showed there is 9% of the
corn crop harvested, which is above the 8% rate
from last year and the five-year average of 6%.
Texas is the leading state with 80% of their
crop done with North Carolina next at 47%.
There is currently 85% of corn at the dented
stage, which is behind the 88% achieved in 2023
but it is ahead of the five-year average of
84%.
45% of the crop is rated mature, which trails
the 48% mark from last year, but the current
pace is above the five-year average of 38%.
For corn conditions, there is still 4% rated
very poor and 8% as poor with 23% now as fair.
There is 49% listed as good with 16% remaining
as excellent.
Soybeans dropping leaves is now at 44% of the
crop, which trails the 2023 level of 47% but is
higher than the five-year average of 37%.
In the first update on soybean harvesting, the
USDA said there is 6% of the crop completed,
which is ahead of the 4% level from last year
and the five-year average of 3%.
Louisiana is the leading state with 46%
completed followed by Mississippi at 44%.
For soybean conditions, there is still 3%
listed as very poor with 8% now as poor. 25%
remains as fair and 52% as good, with there now
12% rated as excellent.
In other harvesting updates, there is 10% of
the cotton acreage completed with sorghum
harvest having reached 24%.
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