HOUSTON (ICIS)–Weak growth in the world’s population will slow economic growth, tighten labor markets and likely prolong the global glut in polyolefins, according to ICIS analysts. For polyethylene (PE), around 135 billion lb (61 million tonnes) of additional PE capacity should start up from 2019-2028, versus demand growth of 87 billion lb during the same period, said Harrison Jacoby, ICIS director of PE. He made his comments at ICIS networking briefings in Houston and New York. The typical world-class PE plant produces 1 billion lb/year, Jacoby said. That represents an excess of 48 PE plants. The demand gap is similarly stark for polypropylene (PP). About 50 million tonnes of additional PP capacity should start up from 2019-2028, versus demand growth of 30 million tonnes, said Ramesh Iyer, director of polymers Americas at ICIS. The typical global scale plant produces 1 billion lb/year, he said. That represents an excess of about 45 global plants. IT COULD TAKE YEARS TO GROW OUT OF THE GLUTWithout plant shutdowns, it could take several years for the world to grow out of its current supply glut. Demographers expect the world’s population will peak sooner and at a lower level than estimates from five to 10 years ago, said Kevin Swift, ICIS senior economist for global chemicals. In about 20 countries, populations are declining, he said. Some countries in Latin America are tracking the demographic trends of Europe at a lag. In China, the biggest market for PE and PP, weak demographics are compounding the effects of youth unemployment, low consumer confidence and the bust in the property market, Swift said. He expects actual economic growth in China to be stagnant. Other economists typically subtract three to five points from official Chinese GDP statistics “The economy is growing slowly, if it all,” he said. In the US, Swift warned that labor markets will likely remain tight because of slower population growth. He noted that for every two Baby Boomer workers who are retiring, one member of the Generation Z cohort will join the labor market. Population growth will be concentrated in countries in the Africa, the Middle East and southeast Asia regions, Swift said. LOWER INFLATION RAISES PROSPECTS OF RATE CUTSIn the US, Swift noted some signs of improvement. One measure of inflation, the producer price index (PPI), came in below expectations. Another measure, the consumer price index (CPI) came in at expectations. Both readings greatly increase the likelihood that the Federal Reserve will start lowering its benchmark interest rate at its next meeting in mid-September. The expectations of a rate cut have already started to lower mortgage rates on home loans, which should boost sales by making housing more affordable. Ultimately, that will trickle down to demand for plastics and chemicals used in house construction and in home furniture and appliances. Longer term, members of the millennial demographic cohort are reaching their prime age to buy homes, Swift said. That, combined with lower rates, should provide a tremendous tailwind for the housing market for the rest of the decade before reversing itself. LIKELY PLANT SHUTDOWNSAny growth in the US will not alleviate what will likely be the need to rationalize polyolefin capacity. The magnitude of the global supply glut is too large. Some producers have already started to rationalize higher cost PE and PP capacity, and Jacoby and Iyer expect the trend to continue. In the US, PE plants will remain competitive because of their feedstock advantage, Jacoby said. Focus article by Al Greenwood Thumbnail shows the construction of a chemical plant.

LONDON (ICIS)–The US Department of Agriculture (USDA) has published its World Agricultural Supply and Demand Estimate (WASDE) report for August. The August report forecasts an increase in corn and soybean production with corn at 15.1 billion bushels, up 47 million bushels from the July report, and soybeans projected at 4.6 billion bushels, up by 154 million bushels. Senior editors Mark Milam and Sylvia Traganida discuss the latest estimates, and take an in-depth look at current trends in the US market.

SINGAPORE (ICIS)–South Korean producers Hanwha Total Energies and Yeochon NCC are withdrawing their request for an antidumping probe on styrene monomer (SM) imports from China, based on a petition they filed with the Korea Trade Commission on 12 August. The probe, which was initiated upon requests from Korean producers, has been ongoing since 9 April and was supposed to end on 8 September. This petition withdrawal by the two companies is likely to conclude the four-month ADD investigation which have triggered significant concerns of Asian market players on a potential change in intra-Asia SM trade landscape since South Korea is China’s biggest export market for SM. Expectations heightened in June that Korea will launch antidumping duties (ADDs) on China-origin SM after China extended its five-year ADDs on SM imports from three origins, including Korea. KTC had held discussions and hearings in June to determine whether Chinese SM imports are causing material damage to Korea’s domestic market. China is no longer a regular importer of Korean SM, but some market players were expecting China’s ADD extension could trigger retaliations by Korea as a political countermeasure. Korea’s probe on SM imports from China has faced strong opposition from local end-users in downstream acrylonitrile-butadiene-styrene (ABS) industry which rely on feedstock from China to run their plants. During the period of June 2023 to June 2024, South Korea accounted for around 74% of China’s total SM exports, according to ICIS Supply and Demand Database. Although Chinese cargoes are no longer expected to be subject to Korean ADDs in near term, high logistics costs and elevated domestic spot prices in China could continue to hamper China-Korea SM talks. Some Chinese suppliers may also continue searching for alternative markets to diversify their sales portfolio. Focus article by Luffy Wu Thumbnail image: At Taicang Port in China on 12 January 2024.(Costfoto/NurPhoto/Shutterstock)

SINGAPORE (ICIS)–South Korean producers Hanwha Total Energies and Yeochon NCC are withdrawing their request for an antidumping probe on styrene monomer (SM) imports from China, based on a petition they filed with the Korea Trade Commission on 12 August. The probe, which was initiated upon requests from Korean producers, has been ongoing since 9 April and was supposed to end on 8 September. Expectations heightened in June that Korea will launch antidumping duties (ADDs) on China-origin SM after China extended its five-year ADDs on SM imports from three origins, including Korea.

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. The ICIS data continue to tell us that we are facing the biggest shake-up in the modern history of the petrochemicals industry. Let’s today use high-density polyethylene (HDPE) China accounted for just 6% of global HDPE demand in 1992 although it had a 22% share of the global population. By the end of 2024, we expect China to generate 33% of global demand from an 18% share of the population. For far too long, our industry overlooked the warning signs: China’s rapidly ageing population, its real estate bubble and the geopolitical split with the West. It was only a question of when rather than whether the Chinese economy would enter a more challenging phase. We can see from the ICIS data on spreads and margins that the “when” arrived in late 2021 – the Evergrande Moment. CFR China HDPE injection grade price spreads over CFR Japan naphtha costs have averaged just $212/tonne since the end of Petrochemicals Supercycle – from January 2022 onwards. This compares with the $487/tonne average during the Supercycle – 1992 until 2021. So, spreads need to rebound by 130% to get back to where they were during the Supercycle. This year, as we can see from the chart in today’s post, they have fallen to a new record low. Global capacity was added largely on the assumption that China’s HDPE demand growth would be higher than is going to be the case. My highly unscientific “wisdom of crowds” approach, which involved talking to lots of people, suggests that the consensus view was that China’s petrochemicals demand growth in general would be at 6-8% over the long term. Low single digit growth now seems more likely. Global HDPE operating rates were very healthy during the Petrochemicals Supercycle. Including two years after the end of the Supercycle (the 1992-2023 period), we estimate they averaged 88%. We forecast a global operating rate of just 75% in 2024-2030. Global capacity would have to grow by just 173,000 tonnes a year versus our base case assumption of 2.6m tonnes a year if 2024-2030 were instead to reach 88%. Rationalisation of capacity in disadvantaged regions such as Europe and Asia ex-China seems likely as China, the Middle East and the US carry on building. So much for what we know. What about the “unknown unknowns”? Here are just two of them: What will be the size of China’s population by the end of the century and therefore its HDPE and other resins demand? Estimates range from 633m to 525m or even less. Can China fully maintain its role as the Workshop of the World? Or will reshoring and trade tensions eventually lead to a major decline in Chinese exports? Facts, or rather data, are sacred. So should be rigorous scenario planning as “one size fits all” views of the future won’t get us anywhere. Neither will a repeat of the conventional thinking that got us into this mess in the first place. 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.

MUMBAI (ICIS)–Indian Oil Corp (IOC) plans to beef up its petrochemical production capacity to 14m tonnes/year by 2030 which will increase the state-owned company’s petrochemical intensity index (PII) to 15%, nearly triple its current level, company chair SM Vaidya said. Total petrochemical investments to reach Rs1.2 trillion Domestic industry projected to grow at 8-10% over the next few years Local demand estimated to hit $1 trillion by 2040 Petrochemical projects worth Indian rupees (Rs) 300 billion ($3.6 billion) are under various stages of implementation, while feasibility studies are ongoing on projects worth Rs900 billion, based on IOC’s annual report for the fiscal year ending March 2024. The company’s current petrochemical production capacity stands at 4.28 million tonnes/year, based on its annual report for the fiscal year ending March 2024. IOC’s PII refers to the percentage of crude oil that is directly converted into chemicals. “We are integrating petrochemicals into our refining operations,” IOC chairman SM Vaidya said at the company’s annual general meeting on 9 August. “This oil-to-chemical approach will enrich our value chain, meet rising petrochemical demand, reduce import reliance, and insulate the bottom line from the impacts of oil price fluctuations,” he said. By 2026, its refining capacity will have increased by more than 25% from the current 70.3 million tonnes/year to 87.9 million tonnes/year, Vaidya said at  IOC’s annual general meeting on 9 August. By the end of the decade, IOC expects its refining capacity to be 107.4 million tonnes/year, according to the annual report released on 18 July. “In 2023-24, we successfully commissioned the first phase of naphtha cracker expansion and paraxylene-purified terephthalic acid (PX-PTA) revamp project in Panipat and an ethylene glycol plant at Paradip. These have propelled our PII to 6.1%,” Vaidya said. In November 2023, IOC increased the capacity at the naphtha cracker at its Panipat refinery complex from 857,000 tonnes/year to 947,000 tonnes/year. Following the PX-PTA revamp at its Panipat refinery, IOC has increased its PX production to 460,000 tonnes/year and PTA output to 700,000 tonnes/year, as per the company website. In March 2024, the company inaugurated its 357,000 tonne/year monoethylene glycol (MEG) project at its Paradip refinery complex. PETROCHEMICAL PROJECT PIPELINE Indian Oil plans to commission a 150,000 tonne/year butyl acrylate plant at its Gujarat refinery in the current financial year 2024-25. One of the company’s ambitious petrochemical projects include the mega complex at Paradip in eastern Odisha state, Vaidya said, noting that the Rs610 billion project is IOC’s “largest ever investment at a single location”. The petrochemical complex will include a world-scale 1.5 milion tonne/year naphtha cracker unit along with downstream process units for producing polypropylene (PP), high density polyethylene (HDPE), linear low-density polyethylene (LLDPE) and polyvinyl chloride (PVC). The Paradip petrochemical project is currently in implementation stage and the company expects to commission it by August 2029, IOC said in its annual report released on 18 July. As part of its future expansions, IOC expects to begin operations at the 200,000 tonne/year PP plant at its Barauni refinery and 500,000 tonne/year PP line at its Gujarat refinery before end-March 2026, based on the company’s annual report. IOC has also enhanced its lube oil base stocks (LOBS) capacity at its Haldia complex and is setting up new plants at its Gujarat and Panipat refineries, Vaidya said, adding, “we aim to increase the capacity from 730,000 tonnes/year to 1.5 million tonnes/year”. The company expects to commission the 60,000 tonnes/year polybutadiene rubber (PBR) plant at its Panipat refinery by March 2025 as per the annual report. These planned expansions by IOC will help meet the rising petrochemical demand in the country, IOC stated in its latest annual report. The domestic petrochemical industry is “poised for substantial growth, driven by India’s sturdy macro fundamentals, population expansion and presently low per capita polymer consumption,” it said. India’s overall petrochemical demand is projected to nearly triple by 2040, with the industry’s value expected to reach the $1 trillion mark, said Indian minister for petroleum and natural gas Hardeep Singh Pur in a presentation at the Asia Petrochemical Industry Conference (APIC) in May 2023. Focus article by Priya Jestin ($1 = Rs83.91) Thumbnail image: An Indian Oil petrol pump in Kolkata, 17 January 2022. (By Indranil Aditya/NurPhoto/Shutterstock)

HOUSTON (ICIS)–Industry group Fertilizer Canada has requested federal authorities take action as CN Railway and Canadian Pacific Kansas City have issued embargoes immediately halting certain fertilizer shipments ahead of an anticipated labor strike. Fertilizer Canada is calling on the federal government and Labour Minister Steven MacKinnon to assist all parties and the Teamsters Canada Rail Conference (TCRC), in reaching agreements. Further, it is asking that there be a directive for binding arbitration that prohibits TCRC from undertaking strike action and the railroads from lockout action. The railroads have said they could lock out workers on 22 August if union leadership and the companies are unable to achieve immediate progress or reach a negotiated settlement or agree upon binding arbitration. Fertilizer Canada said that embargoes issued 12 August impact essential ammonia fertilizer products. In addition, service for all products will also begin to slow three to five days ahead of a work stoppage and take between three to five days to reach regular service upon conclusion. The group said the threat has already begun to impact fertilizer movement and the industry anticipates further slowdowns. It noted that a work stoppage which halts nutrient transportation will potentially have disastrous effects on crop yields and food security. It further stated that according to recent polling that 55% of Canadians believe the government has a role to play in the collective bargaining process and should step in to prevent impacts. “The long-lasting and cascading impacts of labor disruptions are felt before and after the stoppage even takes place,” says Karen Proud, Fertilizer Canada president and CEO. “We have had the threat of a work stoppage hanging over our heads since the beginning of the year. Farmers around the world rely on Canada’s fertilizer industry to maximize crop yields, and the fertilizer industry relies on rail to get our products to market.” The group is urging the federal government to amend the labor code to strengthen the bargaining process and also recognize fertilizer as an essential good critical to food security that should continue to move during work stoppages. “Canada’s reputation has been damaged by the numerous supply chain disruptions in recent history,” Proud said. “This uncertainty gives our international competitors like Russia and China an advantage. We need swift action to protect Canada’s reputation as a reliable trading partner.” 75% of all fertilizer produced and used in Canada are moved by rail with limited alternatives to rail. Not only does this supply support to Canadian farmers, but US and international growers also rely on this flow of fertilizer. Fertilizer Canada represents producers, manufacturers, wholesale and retail distributors of nitrogen, phosphate, potash and sulphur fertilizers.

HOUSTON (ICIS)–Belgium chemical distributor Manuchar announced it has reached an agreement to acquire a majority stake in Proquiel Quimicos. While financial terms were not disclosed, Manuchar said this acquisition fits their ambition to strengthen its distribution platform and broaden its product portfolio. Established in 1985, Proquiel Quimicos specializes in chemical distribution serving a wide range of industries with a comprehensive portfolio including solutions for mining, water treatment, fertilizer, aquaculture and industrial applications. The company has five strategic locations across Chile serving more than 1,000 active customers. Manuchar has been present in Chile since 2004, operating via its regional headquarters in Santiago and three additional offices and operational sites. The closing of the acquisition by Manuchar is expected to occur in Q4 2024, subject to approval by competition authorities. “Proquiel is a sophisticated and highly diversified business with exposures to attractive end markets. It is highly complementary to Manuchar’s growth strategy in areas such as human nutrition, animal nutrition and mining related to renewable energy,” said Philippe Huybrechs, Manuchar Group CEO. “Manuchar intends to take a leading role in the consolidation of the global chemical distribution landscape. We are happy to welcome Proquiel Quimicos into our Manuchar Group.”

TORONTO (ICIS)–Freight railroads Canadian Pacific Kansas City (CPKC) and Canadian National (CN) may start to lock out workers on 22 August: CPKC will issue notice to labor union Teamsters Canada Rail Conference (TCRC) “of its plan to lock out employees at 00:01 ET on August 22 if union leadership and the company are unable to come to a negotiated settlement or agree to binding interest arbitration”, it said in a statement. CN will have “no choice” but to begin a phased and progressive shutdown of its network, starting with embargoes of hazardous goods, which would culminate in a lockout at 00:01 Eastern Time on August 22nd, “unless there is immediate and meaningful progress at the negotiating table or binding arbitration”, it said. CN also requested the intervention of Canada’s federal labor minister, it added. TCRC, for its part, said that it remains committed to negotiating new collective agreements. The railroads’ lockout warning comes after the Canada Industrial Relations Board (CIRB) on 9 August imposed a 13-day cooling-off period in the labor dispute about wages, benefits, work scheduling and safety. Canada’s chemicals, fertilizer and other industries have been facing the threat of a rail labor disruption for months now. In early May about 9,300 unionized conductors, train operators and engineers at CN and CPKC voted for a strike as early as 22 May, while the labor minister referred the matter to the CIRB for a decision about a strike’s impacts on public safety and health. With the referral, the minister suspended the right to strike as under law a legal strike or lockout could not occur until the board had made its decision. The minister asked the CIRB to examine whether certain rail deliveries such as fuel, food and chlorine for water-treatment facilities should be declared essential services, allowing shipments to continue during work stoppages. However, the CIRB ruled last Friday (9 August) that no rail activities needed to be maintained during a strike or lockout, thus clearing the way for industrial action after the expiry of the 13-day cooling off period. IMPACT ON CHEMICALS Trade group Chemistry Industry Association of Canada (CIAC) warned again of the impact of a freight rail disruption on Canada’s chemical industry and the overall economy. “Canada’s economy relies on rail to keep products and commodities moving,” the group’s CEO, Bob Masterson, said in a statement. Chemicals needed for water treatment and sewage treatment are shipped by rail, he said. Many CIAC members were “captive” to CPKC and/or CN, with no viable alternatives for shipments, he said. Companies producing highly regulated goods – about one-third of CIAC members – typically begin shutdown procedures before 72 hours’ notice of a strike or lockout is given, he said. Although plants at some CIAC member companies can only operate up to two days without rail service before having to be shut down, most will be shut down within a week, he said. The Canadian chemistry sector alone moves over 500 railcars/day, he said. It would require over 1,500 road-based tanker trucks to carry the same load,  he said. There was no “Plan B” because of a lack of availability of trucks and drivers and the additional cost of moving product over long distances, Masterson said. Furthermore, many chemical products are restricted to move by rail due to their hazardous nature, he added. According to CIAC, more than Canadian dollar (C$) 76 million (US$55 million) of industrial chemical products move on Canada’s rail network daily, or C$28 billion each year. Chemicals account for nearly 10% of all Canadian rail traffic, the group said. Furthermore, the chemical industry’s customers in the automobile, forest products, minerals and other industries ship most of their product by rail, it said. CIAC is urging a negotiated solution to the conflict, it said. However, should negotiations fail, Canada’s federal government “must be prepared to act quickly to order the parties to return to work and the negotiating table to protect Canadians, Canadian workers directly affected by the disruption, and the Canadian economy,” the group said. The group added that the CIRB’s decision not to impose requirements to ensure the rail shipment of essential products – such as fuel, food or chlorine for water treatment – during industrial action was “concerning”. FERTILIZERS In the fertilizer industry, trade group Fertilizer Canada said that the railroads on Monday, 12 August, issued embargoes immediately halting certain fertilizer shipments 10 days ahead of an expected labor disruption. The threat of a work stoppage has already begun to impact the movement of fertilizers, and the industry expects further embargoes and slowdowns in rail service, the group said. A work stoppage that prevents the transportation of fertilizer would have “potentially disastrous effects” on crop yields and food security, it added. Fertilizer Canada wants the government “to take immediate action to assist all parties” in reaching agreements, “including ordering a directive for binding arbitration that prohibits TCRC from undertaking strike action and CN and CPKC from lockout action,” it said. Furthermore, the group is asking the federal government to recognize fertilizers as an essential good critical to domestic and global food security that should continue to move during work stoppages, it said. Canada’s reputation has already been damaged by numerous supply chain disruptions in the recent past and the renewed labor uncertainty will give its international competitors an advantage, Karen Proud, CEO of Fertilizer Canada, added. Canadian chemical producers rely on rail to ship more than 70% of their product, with some exclusively using rail, while in the fertilizer industry about 75% of all fertilizers produced and used in Canada is moved by rail. The following table by the American Association of Railroads (AAR) shows Canadian freight rail traffic for the week ended 3 August  and the first 31 weeks of 2024: In their recent earnings calls, midstream energy firms Pembina and Keyera, as well as fertilizer major Nutrien and others raised the looming rail disruption as a concern, and CN reduced its 2024 earnings guidance, citing the impact of the labor uncertainty. Meanwhile, Canada continues to face the threat of new labor disruptions at its West Coast ports. However, as of Monday, neither the BC Maritime Employers Association (BCMEA) nor trade union and International Longshore and Warehouse Union Local 514 issued the required 72-hour notices before a legal strike or lockout can begin. (US$1=C$1.37) Additional reporting by Al Greenwood Thumbnail photo source: Keyera