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Speciality Chemicals09-Dec-2024
LONDON (ICIS)–Here are some of the top stories
from ICIS Europe for the week ended 6 December.
INSIGHT: Global plastics
plan pushed down the road, production remains
in the spotlight
With the idea of a global binding accord on how
to handle plastics waste kicked back into the
long grass for now, negotiations have
progressed but the key points of disagreement
still seem fairly intractable.
2024’s relative stability
in key commodity pricing a contrast to previous
US election years
Heading into 2025, there are a plethora of
factors which chemical markets players are
tracking to see what could impact pricing and
fundamentals, but key among them is the arrival
of a new US President.
Eurozone economy contracts as chemicals
operating rates plunge; outlook grim
The eurozone economy has started to contract
again according to the latest composite
purchasing manager index (PMI), while regional
chemical industry operating rates continue to
fall sharply.
GPCA ’24: Lack of recycling root cause of
plastics pollution, Dow says
Dow has attributed problems with plastics
pollution to a lack of plastics recycling and
not production, the US producer’s chair and CEO
said at the 18th Annual Gulf Petrochemicals and
Chemicals Association (GPCA).
UPDATE: GPCA ’24: Bahrain to host 2025 GPCA
Forum
Manama, the capital of Bahrain, will host the
19th Annual Gulf Petrochemicals and Chemicals
Association (GPCA) Forum on 8-11 December 2025,
according to GPCA promotional material seen by
ICIS.
Crude Oil09-Dec-2024
SINGAPORE (ICIS)–South Korea’s benchmark stock
index continues to bleed on Monday amid
political instability wrought by the shock
martial law announcement on 3 December, with
impeachment motions against President Yoon Suk
Yeol dropped over the weekend due to lack of
quorum.
KOSPI composite index falls for fourth
session
Petrochemical shares tumble along; Nov exports
fall 5.6% year on year
Yoon may be stripped of presidential powers
At the close of trade on Monday, the KOSPI
composite index shed 67.58 points or 2.78% at
2,360.58, with shares of major petrochemical
companies slumping.
The Korean won also weakened sharply against
the US dollar. The pair was trading W1,437.27
as of 07:04 GMT.
When martial law was declared late on 3
December, the won tumbled to a near two-year
low above W1,440 levels versus the greenback.
PETROCHEMICAL EXPORTS
FALLINGSouth Korea is a major
exporter of ethylene, as well as aromatics,
such as benzene, toluene and styrene monomer
(SM).
The overall industry is reeling from a
combination of weak external demand and
overcapacity in China.
South Korean industries, including chemicals,
rely heavily on exports to China, whose
self-sufficiency has grown over the years.
In November, South Korea’s petrochemical
exports declined by 5.6% year on year to $3.6
billion. In the first 11 months of 2024,
however, its petrochemical export volume
increased by 7.5% year on year, the Ministry of
Trade, Industry and Energy (MOTIE) said on 5
December.
Market players said that port operations in
Daesan have been unsteady because of strong
winds, causing delays in cargo deliveries.
“Petrochemical exports are facing difficulties
due to unforeseen factors such as falling
product prices linked to oil prices and bad
weather,” the first vice minister of MOTIE Park
Sung-taek said after a recent visit to the
refinery of Hyundai OIlbank and the
production/export site of Hyundai Chemical.
For Hyundai Oilbank, the arrival of five
carriers and three crude oil import vessels
were delayed because of inclement weather in
late November, while delays also hit shipment
of five product carriers of Hyundai Chemical,
MOTIE noted.
“In order to prevent disruptions in exports, we
will diversify the types of oil reserves from
the existing heavy crude oil to light crude oil
in consideration of the types of oil used by
each refinery, and greatly simplify the oil
reserve lending process so that companies can
quickly provide oil reserves when necessary,”
Park said.
EMERGENCY MEETINGS OF FINANCIAL
REGULATORS CONTINUEThe economic
managers of Asia’s fourth-largest economy – led
by Deputy Prime Minister and Minister of
Economy and Finance Choi Sang-mok – have been
holding daily emergency meetings before markets
open to ensure financial markets stability,
keeping their promise to provide “unlimited
liquidity”.
“The participants agreed that, as domestic and
international uncertainties still persist,
relevant organizations should maintain a closer
emergency cooperation and response system and
mobilize all capabilities to respond in order
to minimize the economic impact of the
political situation.
In a statement on Monday, the Ministry of
Economy and Finance said that “as domestic and
international uncertainties still persist,
relevant organizations should maintain a closer
emergency cooperation and response system and
mobilize all capabilities to respond in order
to minimize the economic impact of the
political situation”.
South Korea intends to
activate a market stabilization fund worth
won (W) 40 trillion ($28 billion) following the
country’s brief dalliance with martial law,
with its slowing economy facing the prospect of
increased US tariffs in 2025.
For the stock market, the MOEF said that W30
billion of the value-up fund “has already been
invested”, with W70 billion to be injected this
week, with another W30 billion scheduled to be
implemented sequentially.
YOON SURVIVES IMPEACHMENT BUT MAY BE
STRIPPED OF POWERSBecause of
lack of quorum, South Korean President Yoon
managed to survive impeachment on 7 December,
which was set into motion following his
declaration of a six-hour long martial law that
disrupted markets.
“The impeachment vote failed to gain the
200-vote hurdle needed to suspend the president
from duties,” Singapore-based UOB Global
Economics & Markets Research said in a note
on Monday.
“The opposition bloc needed only eight votes
from the ruling PPP [People Power Party] to
impeach Yoon as votes by three PPP members had
prompted protesters outside the National
Assembly to chant “five more to go,” it said.
On 8 December, PPP leader Han Dong-hoon said
that Prime Minister Han Duck-soo will manage
the nation’s affairs as an exit plan for Yoon
is being prepared, the constitutionality of
which is being questioned by the opposition
Democratic Party of Korea (DPK).
Focus article by Pearl
Bantillo
Additional reporting by Jonathan Yee
Thumbnail image: Lawmakers in the voting
chamber during the plenary session for the
impeachment vote of President Yoon Suk Yeol at
the National Assembly in Seoul, South Korea on
7 December 2024.(JEON
HEON-KYUN/POOL/EPA-EFE/Shutterstock)
Gas09-Dec-2024
SINGAPORE (ICIS)–Here are the top stories from
ICIS News Asia and the Middle East for the week
ended 6 December 2024.
India
cuts banks’ cash reserves ratio by 50bps;
lowers full-year GDP
forecast
By Priya Jestin 06-Dec-24 17:51 MUMBAI
(ICIS)–India’s central bank on Friday
maintained its benchmark interest rate at 6.5%
but cut its cash reserve ratio (CRR) by 50
basis points to 4%, in a bid to improve growth
and rein in high inflation.
Mideast PMDI, TDI fall on
weak demand amid high freight
costs
By Isaac Tan 06-Dec-24 15:24 SINGAPORE
(ICIS)–Prices for both polymeric methylene
diphenyl diisocyanate (PMDI) and toluene
diisocyanate (TDI) in the Middle East have
decreased this week, reflecting a general
slowdown in demand as the year comes to a
close.
GPCA
’24: Europe chemical industry faces price
pressure from US tariffs on
ChinaBy Jonathan Yee
05-Dec-24 19:15 MUSCAT (ICIS)–An incoming
Trump administration in the US and the promise
of tariffs on all foreign goods will likely
upend the global world order, placing pressure
on the European chemical industry amid ensuing
price volatility, senior industry figures
warned this week.
S
Korea prepares $28 billion market stabilization
fund after martial law
By Pearl Bantillo 05-Dec-24 15:28
SINGAPORE (ICIS)–South Korea is preparing to
activate a market stabilization fund worth won
(W) 40 trillion ($28 billion) following the
country’s brief dalliance with martial law,
with its slowing economy facing the prospect of
increased US tariffs in 2025.
UPDATE: Indonesia begins
antidumping probe on PP
homopolymers
By Jackie Wong 05-Dec-24 15:12 SINGAPORE
(ICIS)–Indonesia has initiated an antidumping
investigation on imported polypropylene (PP)
homopolymer products, according to a government
document obtained by ICIS on Thursday.
INSIGHT: GPCA ’24: GCC
petrochemical players sharpen focus on
longer-term sustainable
growth
By Nurluqman Suratman 04-Dec-24 19:33
MUSCAT (ICIS)–Gulf Cooperation Council (GCC)
petrochemical executives met with global
colleagues in Muscat, Oman, this week as
the focus on sustainable growth continues to
sharpen amid concerns over oversupply, trade
protectionism and geopolitical conflicts.
INSIGHT: Political
instability rocks South Korea after martial
law; no petrochemical impact so
far
By Pearl Bantillo 04-Dec-24 19:06
SINGAPORE (ICIS)–Days before the shock
declaration of martial law in South Korea by
President Yoon Suk-yeol, political wranglings
stalled the 2025 budget deliberations of Asia’s
fourth-biggest economy.
GPCA
’24: Thailand’s PTTGC to start SAF production
in early 2025 – CEO
By Nurluqman Suratman 04-Dec-24 18:00
MUSCAT (ICIS)–Thailand’s PTT Global Chemical
(PTTGC) is expected to begin producing
sustainable aviation fuel (SAF) at its refinery
in Map Ta Phut early next year, the company’s
CEO Narongsak Jivakanun said.
S
Korea President Yoon may face impeachment after
short-lived martial law
By Pearl Bantillo 04-Dec-24 14:07
SINGAPORE (ICIS)–Calls for South Korean
President Yoon Suk Yeol to resign are growing
after his hours’ long martial law that rattled
the country’s equities and foreign exchange
markets.
GPCA
’24: INSIGHT: Middle East PP has leading global
competitive position
By Emiliano Basualto 02-Dec-24 13:00
MUSCAT (ICIS)–The Middle Eastern polyolefin
industry has always been recognised for its
competitive advantages, particularly driven by
access to inexpensive raw materials and low
energy costs.
GPCA
’24: GCC needs to formulate right partnerships
– GPCA chief
By Nurluqman Suratman 02-Dec-24 09:59
MUSCAT (ICIS)–Gulf Cooperation Council (GCC)
petrochemical players must formulate strategic
international partnerships and invest in
optimization and innovation to remain
competitive, according to the secretary general
of the Gulf Petrochemicals and Chemicals
Association (GPCA).
Global News + ICIS Chemical Business (ICB)
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Speciality Chemicals06-Dec-2024
HOUSTON (ICIS)–Rates for shipping containers
from east Asia and China to the US were flat to
softer this week while global average rates
rose by 6%, but the looming strike at US Gulf
and East Coast ports could put upward pressure
on rates in the coming week.
Rates from supply chain advisors Drewry showed
Shanghai-New York rates fell slightly to $5,160
from $5,182, while rates from Shanghai to Los
Angeles plunged by more than 12%, as shown in
the following chart.
The previous chart also shows the sharp
increases in rates from Shanghai to Rotterdam
and Genoa, which contributed to the global
average increase as shown in the following
chart.
Drewry expects an increase in rates on the
Transpacific trade in the coming week due to
the looming ILA (International Longshoremen’s
Association) port strike in January 2025 and
the anticipated rush to ship goods before the
strike begins.
The 15 January deadline for finalizing a new
labor agreement between unionized dock workers
at US Gulf and East Coast ports and the
negotiating entity for the ports is nearing
with no clear progress on a key
remaining issue – automation.
Rates at online freight shipping marketplace
and platform provider Freightos showed a sharp
increase on the Asia-NY trade lane and a 4%
decrease from Asia-LA.
Rates at Freightos are higher than rates at
Drewry.
Judah Levine, head of research at Freightos,
said the increases on Asia-NY are because of
importers again frontloading shipments ahead of
a possible strike and to beat tariffs proposed
by the incoming Trump administration.
Some carriers have already begun introducing
general rate increases (GRIs) to try and push
rates higher.
Levine said the window to move shipments from
the East Coast to the West Coast ahead of a
possible strike is closing, but many retailers
are sitting on significant inventories from
pulling forward shipments ahead of the original
1 October strike deadline.
“These factors may make early December rate
increases difficult to sustain, though prices
could increase later in the month or early in
January ahead of Lunar New Year,” 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
Overall, the US chemical tanker freight rates
were unchanged this week for several trade
lanes, except for the USG-Asia trade lane as
spot tonnage remains tight.
This all-basis limited spot activity to most
regions and as COA nominations are taking
longer than usual for the regular vessel
owners.
They have tried to delay the sailings but there
has been very little spot space in the market
leaving no other options for full cargoes and
in turn impacting spot rates.
MEG, ethanol and styrene still are being seen
quoted in the market from various traders, for
early January loadings to Asia.
Eastbound space had not yet been fully absorbed
despite the few fresh inquiries for small
specialty parcels stemming from USG bound for
Antwerp, most owners waiting for full contract
nominations.
Various glycol, ethanol,
methyl tertiary butyl ether (MTBE)
and methanol parcels were seen quoted to ARA
and the Mediterranean as methanol prices in the
region remain higher.
Additionally, ethanol, glycols and caustic soda
were seen in the market to various regions.
PANAMA CANAL
Fiscal Year 2024 revenue rose from 2023, the
Panama Canal Authority said this week even
after having to reduce crossings for part of
the year because of a severe drought.
The Authority said a noticeable impact from the
drought was a decrease in deep draft transits,
which fell by 21%.
Despite the arrival of the rainy season, the
challenge of water for Panama and the Panama
Canal remains and serves as a reminder that
climate change and its effects are a reality
requiring immediate attention and concrete
action.
Potential solutions include the identification
of alternative sources of water from the 51
watersheds and lakes in Panama, along with
projects that can increase storage capacity to
ensure water availability for the entire
Panamanian population and the Canal’s
operation, thereby ensuring its long-term
sustainability.
At the same time, the Panama Canal is exploring
additional short- and long-term solutions that
can optimize the use and storage of water at
the Canal for the benefit of both the local
population and its operations.
Additional reporting by Kevin Callahan
Thumbnail image shows a container ship.
Photo by Shutterstock
Ethylene06-Dec-2024
SAO PAULO (ICIS)–EU chemicals trade group
welcomed on Friday the “political agreement”
between the 27-country bloc and the
five-country bloc Mercosur on their free trade
deal but, after being 25 years in the making,
loose ends for its ratification remain.
The agreement, yet to be published in full,
must now be ratified by national parliaments as
well as executive EU bodies.
Considering the backlash it has already caused
among some constituencies, such as farmers in
France, it is not certain the deal will be
ratified swiftly. Deforestation concerns in the
Amazon or the sharp differences in workers’
rights in the EU and Mercosur have in the past
also
presented stones on the way.
On Friday, the president of the European
Commission – the EU’s main executive arm – told
citizens of the 450-million people bloc their
“livelihoods are protected”, addressing
particularly farmers’ concerns.
“This is a win-win agreement, which will bring
meaningful benefits to consumers and
businesses, on both sides. We are focused on
fairness and mutual benefit. We have listened
to the concerns of our farmers, and we acted on
them,” said Ursula von der Leyen.
“This agreement includes robust safeguards to
protect your livelihoods. EU-Mercosur is the
biggest agreement ever, when it comes to the
protection of EU food and drinks products. More
than 350 EU products now are protected by a
geographical indication. In addition, our
European health and food standards remain
untouchable.”
She added new safeguards had been added to the
deal to comply strictly with those standards to
access the EU market.
Von der Leyen added EU companies will save €4
billion worth of export duties per year.
BREATHING SPACE FOR BELEAGUERED EU
CHEMICALS?The chemicals industry
has always been in favor of the deal on both
sides of the Atlantic. The EU’s chemicals trade
group Cefic said on Friday its members should
“gain an edge” in trade with Mercosur,
paramount to compete against other global
chemicals players.
The EU and Germany – its largest chemicals
producer – are net exporters of chemicals. In
principle, they have a lot to win with free
trade agreements as they can allow them to
expand markets as trade barriers are reduced.
At the same time, in the global game of trade,
large companies also have more to win than
small- and medium-size enterprises (SMEs), who
do not have the same prowess in terms of reach
and influence.
Chemicals majors also tend to carry commanding
voices in trade groups such Cefic, Germany’s
VCI or, within Mercosur, Abiquim.
In 2022, trade between the EU and Mercosur
stood at €13.6 billion, with a trade surplus in
favor of the EU of €5.2 billion, according to
Cefic figures.
The figures are modest considering the EU’s
chemicals industry’s exports stood at €553.0
billion in 2022.
The 27-country bloc imported chemicals worth
€363.0 billion, so it posted a trade surplus of
€190.0 billion, according to the EU’s
statistics office Eurostat.
This landmark agreement marks a significant
milestone in fostering free, fair, sustainable
and resilient trade relations between the
European Union and the four Mercosur countries
Argentina, Brazil, Paraguay and Uruguay.
Both Cefic and the EU did not mention Bolivia
as a Mercosur member, but the country joined
the bloc in July. Venezuela used to be a part
of it, but its membership was suspended under
the current regime.
Cefic and other industrial trade groups in the
EU had already urged a rapid
conclusion of the agreement in November in
an open letter to EU bodies.
“The EU-Mercosur Agreement opens tremendous
opportunities for both regions. From an EU
perspective, it is a crucial opportunity for
companies to gain a competitive edge by
accessing one of the world’s largest markets,”
said Cefic’s deputy director general Sylvie
Lemoine.
“This agreement enhances market access,
enabling EU businesses to compete more
effectively on the global stage, fostering
economic growth and strengthening the EU’s
industrial base. This is fully in line with the
spirit of the Antwerp Declaration.”
“We now call upon all EU decision-makers to
rapidly ratify and bring the agreement into
force.”
Brazil’s chemicals producers’ trade group
Abiquim had not responded to a request for
comment at the time of writing, but in the past
it has been supportive of the trade deal.
Front page picture source: Cefic
Speciality Chemicals06-Dec-2024
LONDON (ICIS)–While countries around the world
bet on battery technology, Germany has taken a
step back with plans to cut funding for battery
research – to the dismay of its chemicals and
other industries.
Battery research key to energy
transformation
Trying to catch up with China
New government may reverse cuts after
election
With the cuts in the federal government’s 2025
draft budget, the German federal research and
education ministry could stop funding new
battery research projects as soon as next year.
The cuts would also include a reduction in
so-called “commitment appropriations”
(Verpflichtungsermachtigungen) of more
than €100 million for spending on battery
research in future years, according to the
opposition Christian Democrats.
Chemical producers’ trade group VCI said that
the cuts would lead to “a loss of added value”
and raised the risk of Germany becoming more
dependent for batteries on other countries or
regions.
Germany needed strong research funding in this
field in order to catch up with other
countries, said Ulrike Zimmer, head of science,
technology and environment at VCI.
“This is the only way Germany can maintain its
chances in competition with the US and China,
and also train the urgently needed skilled
workers,” she said.
The planned funding cuts have already created
uncertainties at academic and research
institutes, VCI warned in a joint statement
this week with trade groups from the machinery,
electronics and digital sectors.
As it stands, employment contracts could
currently not be extended and new contracts
could not be signed, the groups said.
Research institutions were losing scientists
due to the lack of prospects in the battery
field, and the technology transfer via
collaborations and start-up companies was
coming to a standstill, they said.
They said the cuts would have far-reaching
consequences as they affected all industries
involved in the battery value chain: chemical
companies, mechanical and plant engineering,
cell manufacturers and all industries whose
products are based on the performance, price
and availability of batteries.
Affected sectors included electric vehicles
(EVs), stationary storage systems, drones,
power tools and robots, among others, they
said.
TRYING TO CATCH UP WITH
CHINA
Peter Lamp, head of battery technology at
automaker BMW, told a parliamentary committee
on Wednesday, 4 December that without powerful
batteries, the transformation to a carbon
dioxide (CO2)-neutral energy and transport
industry was not possible.
The availability of modern battery technologies
was crucial to successfully implementing the
energy transition, he said.
Lamp criticized Germany’s current dependence on
Asian battery cell suppliers.
Germany and the EU needed “technological
sovereignty” in this area, he said, adding that
the planned reduction in funding was therefore
“incomprehensible”.
Auto industry trade group VDA said that funding
for battery research was of “central
significance” for the future of the German
automotive industry.
The country’s Fraunhofer research institute
said in a submission to the committee that
government support for battery research was “an
essential prerequisite” for the success of
Germany’s energy and mobility transition.
Battery research played a key role in the
development of electrochemical energy storage
solutions, as well as battery and production
development, it said.
China and other Asian countries were far ahead
in developing and producing batteries, the
institute noted.
“In order to counter the dominance of Asian
players in battery technology and the
associated supply chains, Germany and Europe
must constantly build up skills and
technologies for large-volume battery cell
production for all applications, also as
insurance against geopolitical dependency,” it
said.
NEW GOVERNMENT
Government officials have said that the cuts
were necessary because the country’s supreme court ruled
last year that Berlin needed to trim spending
in order to comply with the “debt-brake”
(Schuldenbremse), which is a
constitutionally enshrined provision to keep
public deficits low and limit debt.
However, there is a chance that the cuts may be
reversed in the event of a change in government
in Berlin. Following the collapse last month
of Chancellor Olaf Scholz’s coalition
government, early elections will likely be held
in February.
The Christian Democrats, which are ahead of
Scholz’s Social Democrats in opinion polls on
the election, have said that the cuts to
battery research, as well as the abolition last
year of an incentive for the purchase of EVs,
were “short-sighted”.
The party has introduced a motion in parliament
calling for “strong battery research in
Germany”, which prompted Wednesday’s
parliamentary committee hearing.
Countries such as China, the US, Japan, and
South Korea had nearly tripled public spending
on battery research over the past four years
while Germany risked falling behind
internationally in this important area, it
said.
The cuts would also jeopardize the support the
government already committed for investments in
construction for battery plants, the party
said, and noted the support the government has
granted to a project by Sweden’s Northvolt at the
Heide chemicals and refining site northwest of
Hamburg.
Spending a lot of money on battery factories
and significantly less on research and training
was “highly risky”, it said.
The Northvolt project may not be realized,
however. The company last month filed for
Chapter 11 protection
and reorganization in the US, raising questions
about its future and the prospects of the
German project.
BATTERIES, EVs AND
CHEMICALS
Batteries and the EVs they power are important
market opportunities for the chemical industry.
An EV contains more plastics and polymer
composites and more synthetic rubber and
elastomers than a conventional vehicle powered
by the internal combustion engine.
However, BASF
said earlier this year that market dynamics
in the EV sector were slowing, and the company
would therefore pause or may not make certain
investments connected to the industry.
One project on which BASF paused work is a
proposed commercial-scale EV battery recycling
metal refinery at its chemicals production
complex in Tarragona, Spain.
GERMANY AUTO INDUSTRY SENTIMENT IN
DECLINE
Meanwhile, the sentiment in
Germany’s automotive industry continued to
deteriorate in November, according to the
latest survey by Munich-based research group
ifo this week.
Demand was weak and the industry remained stuck
in a “mix of far-reaching transformation,
intense competition, and a weak economy”, ifo
said.
Also, thousands of Volkswagen workers went on a
short strike on Monday, 2 December to protest
against potential job cuts and plant closures
in Germany, and their union, IG Metall, has
announced another strike for Monday, 9
December.
The automotive sector drives demand for
chemicals such as polypropylene (PP), along
with nylon, polystyrene (PS), styrene butadiene
rubber (SBR), polyurethane (PU), methyl
methacrylate (MMA) and polymethyl methacrylate
(PMMA).
Additional reporting by Tom
Brown
Please also visit the ICIS
topic page Automotive: Impact on chemicals
Thumbnail photo source: BASF
Focus by Stefan Baumgarten
Recycled Polyethylene Terephthalate06-Dec-2024
LONDON (ICIS)–Senior Editor for Recycling Matt
Tudball discusses the latest developments in
the European recycled polyethylene
terephthalate (R-PET) market, including:
Different views on colourless (C) flake
prices in northwest Europe (NWE)
Higher bale prices heard but not confirmed
in eastern Europe and Poland
Outlook for 2025 still a big question mark
Crude Oil06-Dec-2024
LONDON (ICIS)–Economic growth in both the
eurozone and the EU accelerated in Q3,
according to official revised data on Friday.
Seasonally adjusted GDP increased by 0.4% in
the eurozone and the EU from the previous
quarter.
In Q2, GDP grew by 0.2% in both the eurozone
and the EU from Q1, statistics agency Eurostat
said in an update from its initial estimate at
the end of October.
% change from the previous
quarter
Q1
Q2
Q3
Eurozone
0.3
0.2
0.4
EU
0.3
0.2
0.4
On a year-on-year basis, Q3 GDP increased by
0.9% in the eurozone and by 1.0% in the EU.
Petrochemicals06-Dec-2024
MUMBAI (ICIS)–India’s central bank on Friday
maintained its benchmark interest rate at 6.5%
but cut its cash reserve ratio (CRR) by 50
basis points to 4%, in a bid to improve growth
and rein in high inflation.
Monetary policy stance kept at “neutral”
Year-to-March 2025 GDP growth forecast cut
to 6.6% from 7.2%
High food prices to keep consumer inflation
elevated in Oct-Dec 2024
In its monetary policy decision, the Reserve
Bank of India (RBI) retained its monetary
policy stance at “neutral”. It has maintained
the repo rate at 6.5% since February 2023.
CRR is the percentage of a bank’s total
deposits that it is required to maintain in
cash with the RBI as a reserve.
India is a giant emerging market in Asia and is
a major importer of petrochemicals.
The central bank’s hawkish outlook is due to
persistently high food inflation, which has yet
to stabilize, RBI governor Shaktikanta Das said
during his address to the media.
While the central bank remains optimistic about
India’s growth outlook, following a good
monsoon season and an anticipated revival of
capital expenditure, global factors could slow
down growth, Das said.
“Headwinds from geopolitical uncertainties,
volatility in international commodity prices,
and geo-economic fragmentation continue to pose
risks to the outlook,” RBI said in its official
statement.
The outlook is also “clouded by rising
tendencies of protectionism which have the
potential to undermine global growth and push
inflation higher”, it added.
RBI has lowered its GDP growth forecast for the
fiscal year ending March 2025 to 6.6%, from
7.2% previously, in view of weak fiscal Q2
performance.
India’s GDP for the July-September quarter
slowed to an almost two-year low of
5.4%, on sluggish growth and weak demand.
It was also significantly lower than the RBI’s
projection of a 7% growth for the quarter.
RBI GDP Forecasts
New – 6 December 2024
Old
October-December (Q3)
6.8%
7.4%
January-March (Q4)
7.2%
7.4%
Fiscal year ending March
2025
6.6%
7.2%
April-June (Q1 FY2025-26)
6.9%
7.3%
July-September (Q2)
7.3%
–
Meanwhile, inflation forecast for the current
fiscal year was raised to 4.8% from 4.5% on
continued high food inflation.
“Inflation increased sharply in September and
October 2024, led by an unanticipated increase
in food prices. Core inflation, though at
subdued levels, also registered a pickup in
October,” Das said.
In October, consumer inflation had risen to a
14-month high of
6.21% due to a spike in food prices.
The RBI expects food prices to keep inflation
rates elevated in the October-to- December
quarter, Das said.
RBI inflation forecasts
New – 6 December 2024
Old
October-December (Q3)
5.7%
4.8%
January-March (Q4)
4.5%
4.2%
Fiscal year ending March
2025
4.8%
4.5%
April-June (Q1 FY2025-26)
4.6%
4.3%
July-September (Q2)
4%
–
Focus article by Priya Jestin
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