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Ethylene08-Aug-2024
HOUSTON (ICIS)–Chemical companies are
expecting a lacklustre second half of the year,
but, so far, they will unlikely suffer through
a recession, despite the spate of pessimistic
economic data and the worst stock-market
selloff in more than a year.
The financial press has said that much of
the selloff was caused by investors abandoning
the Japanese carry-over trade.
Chemical executives have not warned of a
possible recession during their earnings calls.
It is unclear if recent events will
increase the likelihood of larger and more
frequent rate cuts by the Federal Reserve.
SO FAR, STATISTICS DO NOT INDICATE
RECESSIONThe recent selloff in
the stock market was enough to give anyone a
jolt.
The major US indices had three consecutive
trading days of selloffs, with the last one on
Monday causing declines that exceeded 2%. It
was the worst day in more than a year.
The weakness of the subsequent relief rally is
also concerning, with the declines resuming on
Wednesday.
But the stock market is not the economy, and,
so far, the four key statistics used to measure
its health do not point to a recession.
One of those statistics,
non-farm payrolls, grew by 114,000 in July,
a pace below the expectations of most
economists. While the US had a bad month, it is
still adding jobs, said Kevin Swift, ICIS
senior economist for global chemicals.
Moreover, the payroll statistics indicate that
some of the weakness in the data was caused by
the effects of Hurricane Beryl, Swift said.
Two other key statistics are still expanding,
he said. Those are industrial production and
real personal income less transfer payments.
Only real business sales have shown softness,
Swift said.
PROSPECTS STILL WEAKThe
unlikely risk of a recession provides cold
comfort to the chemical industry, which has
spent months waiting for a recovery after what
many described as the worst destocking cycle
ever.
Almost universally, companies have given up on
the prospects of a second half recovery.
Improvements in profit will have to come
internally from cost-cutting or efficiency
measures. The market will not help.
Consumers have largely spent the excess savings
that they pocketed from government stimulus and
support that followed the pandemic, Swift said.
The lower quintile of consumers is under
pressure.
Chemical companies noted stress among consumers
who are more sensitive to costs, such as those
who buy paints and coatings for do-it-yourself
(DIY) projects.
They are buckling under the weight of elevated
interest rates, which have made housing and
consumer durables less affordable.
Before the markets for such items improve, Dow
said that mortgage rates
need to fall towards 5%.
The prospect of declines will depend on
expectations for the benchmark federal funds
rate, which the Federal Reserve will likely
decide to lower at its next meeting on
September 18.
Even then, it will take time for those rate
cuts to trickle down to chemical markets.
Huntsman said the
lag is typically about two quarters.
Insight article by Al
Greenwood
Thumbnail shows an indicator board for a
stock exchange. Image by BIANCA DE
MARCHI/EPA-EFE/Shutterstock
Hydrogen08-Aug-2024
LONDON (ICIS)–India’s Hygenco Green Energies
has signed a memorandum of understanding (MoU)
with Mitsubishi Power to explore delivering
green hydrogen and ammonia-fired gas turbine
combined cycle (GTCC) power plants.
The agreement includes supplying green fuel for
Mitsubishi Power’s GTCC technology and
developing commercially viable green hydrogen
and ammonia production assets on a
‘build-own-operate’ or ‘gas-as-a-service’
basis.
“We are excited to leverage our expertise in
green hydrogen and ammonia to support the
decarbonization of power generation and
contribute to a sustainable energy future, ”
said Hygenco CEO Amit Bansal.
The partnership, backed by financial support
from the Japan International Cooperation Agency
(JICA), will provide its integrated solutions
in India and globally, Hygenco added in a
statement.
Ammonia07-Aug-2024
HOUSTON (ICIS)–CF Industries said in its
latest nitrogen fertilizer market outlook that
in the near-term it expects the global
supply-demand balance to remain constructive,
led by nitrogen import requirements through
year-end for Brazil and India.
The producer also anticipates there will be
continued wide energy spreads between North
America and high-cost production in Europe.
The fertilizer producer said from the end of
the second quarter of 2024 into the third
quarter of this year this segment of
fertilizers has faced challenges which include
gas curtailments in Egypt and Trinidad, along
with scheduled outages and a lack of
substantial urea export availability from
China.
These factors the producer said have actually
been beneficial for supporting global nitrogen
pricing during a period of year that typically
sees lower prices and low global shipments as
demand shifts from the northern hemisphere to
the southern hemisphere.
“Over the medium-term, significant energy cost
differentials between North American producers
and high-cost producers in Europe and Asia are
expected to persist. As a result, the Company
believes the global nitrogen cost curve will
remain supportive of strong margin
opportunities for low-cost North American
producers,” said CF Industries.
“Longer-term, management expects the global
nitrogen supply-demand balance to tighten as
global nitrogen capacity growth over the next
four years is not projected to keep pace with
expected global nitrogen demand growth of
approximately 1.5% per year for traditional
applications and new demand growth for clean
energy applications.”
It further said that global production is
expected to remain constrained by the ongoing
challenges related to cost and availability of
natural gas.
Looking specifically at North America the
producer said it believes nitrogen channel
inventories in the region for all products are
below average based on strong demand for urea
and UAN during the spring application season
and higher-than-expected planted corn acres.
CF added that reported UAN and ammonia fill
programs achieved prices above 2023 levels
despite softening farm economics in the region
as corn and soybean prices have fallen due to
higher forecasted production in 2024 in the US
and Brazil.
For Brazil urea consumption is forecasted to
increase 3% year over year to more than 8
million tonnes, supported by improved supply
availability and lower global urea prices.
Urea imports to Brazil in 2024 are expected to
be in the range of 7 million to 8 million
tonnes as domestic production remains limited.
Regarding India CF said the country is expected
to be active importing urea through the second
half as the country secured lower-than-expected
volumes in its two most recent tenders.
In addition, urea consumption is expected to
rise to support rice, wheat and other crop
sowings.
Currently CF expects urea imports to India in
2024, including volumes supplied on a
contractual basis, to be in a range of 5
million to 6 million tonnes as there are
recently revitalized plants and new facilities
operating at higher rates.
For Europe, the producer said there was
approximately 25% of ammonia and 30% of urea
capacity reported in shutdown or curtailment
mode in early July.
CF said because of this situation it
anticipates ammonia operating rates and overall
domestic nitrogen product output in Europe will
remain below historical averages over the
long-term, especially given the region’s status
as the global marginal producer.
As a result, the company does expect imports of
ammonia and upgraded products to the region to
be higher than historical averages.
Looking at China, CF said the ongoing urea
export policy continues to cause limited urea
export availability from the country.
For the first six months of 2024, China
exported 140,000 tonnes of urea, which is 86%
lower year-on-year.
For Russia, the producer said their view is
that urea exports will increase this year due
to the start-up of new urea granulation
capacity and the willingness of certain
countries to purchase those volumes, including
the US and Brazil,
Russian ammonia exports are projected to rise
with the completion of the country’s Taman
ammonia terminal in the second half, though
annual ammonia export volumes are projected to
remain below pre-war levels.
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Speciality Chemicals07-Aug-2024
HOUSTON (ICIS)–The Panama Canal Authority
(PCA) is immediately increasing the maximum
authorized draft for vessels transiting the
waterway to 49ft (14.94m) as water levels have
improved in Gatun Lake.
The increase in draft restrictions will allow
vessels to carry more cargo per trip as many
had to carry less than a full load to meet the
previous draft restrictions.
The region has been through an intense drought
that caused the PCA in 2023 to lower allowable
drafts and to limit the number of vessels
permitted to transit each day, a first since
the canal formally opened in 1914.
Restrictions have gradually eased over the past
few months and are approaching the average
daily transits of 36-38/day seen prior to
impacts from the drought.
The better conditions at the canal are likely
to improve transit times for vessels traveling
between the US Gulf and Asia, as well as
between Europe and countries on the west coast
of Latin America.
This should benefit chemical markets that move
product between regions, as shown in the
following chart.
WAIT TIMES FOR NON-BOOKED
VESSELS
Wait times for non-booked southbound vessels
ready for transit have been relatively steady
at around two days, according to the Panama
Canal
Authority (PCA) vessel
tracker.
As of 7 August, the tracker showed wait times
of 0.4 days for northbound traffic and 2.1 days
for southbound traffic.
Visit the ICIS Logistics – impact on
chemicals and energy topic
page
Thumbnail image shows a
container ship passing
through the Panama Canal.
Courtesy the Panama Canal
Authority
Propylene07-Aug-2024
SINGAPORE (ICIS)–The third plenary session of
the Chinese Communist Party (CCP) Central
Committee recently concluded in July, with the
CCP underlining the country’s long-term
economic strategy. This session, a significant
event in China’s economic planning, serves as a
guide for both immediate and long-term
policies.
Market balance healthier than expected on
delays in capacity additions
No specific stimulus policies announced,
market participants eye 5% GDP target
Market sentiment generally supported by
Third Plenum
Senior Editor Julia Tan speaks with Senior
Analyst Joey Zhou on what China’s Third Plenum
could mean for Asia’s propylene markets.
Crude Oil07-Aug-2024
SINGAPORE (ICIS)–China’s exports rose 7.0%
year on year to $300.6 billion in July, a
slowdown from the previous month, adding to
signs that the country’s economic growth is
losing momentum amid the persistent weakness in
manufacturing sector.
Trade surplus narrowed to $85 billion in
July
Further monetary policy easing expected
Weakening domestic demand and trade
tensions persist
The country’s imports, meanwhile, grew by 7.2%
year on year in July, reversing the 2.3%
decline in the previous month, according to
data from China Customs.
The latest July figures resulted in a trade
surplus of close to $85 billion, down from
June’s $99.05 billion.
“The year-on-year numbers will benefit from a
favorable base effect, but overall momentum
looks to be weakening with new export orders in
contraction the last few months even before new
tariffs on
Chinese EVs [electric vehicles] take
effect,” Dutch banking and financial
information services provider ING said in a
note on Wednesday.
China’s total goods imports and exports grew
6.2% year on year in the first seven months,
with exports increasing 6.7% and imports rising
5.4%, separate China Customs data released on
Wednesday showed.
China’s foreign trade in goods reached $3.5
trillion from January to July, with exports
totaling $2.01 trillion and imports amounting
to $1.49 trillion.
The country’s trade surplus expanded by 7.9%
year on year to $518 billion during the same
period.
TRADE TRACKING WEAKER
MANUFACTURING
The July trade figures align with earlier data
showing that both official manufacturing and
non-manufacturing purchasing managers’ indexes
(PMIs) continued to soften in July, pointing to
a slowdown in China’s economic momentum.
China’s official manufacturing PMI remained in
contraction territory for the third month in a
row in July, slipping 0.1 point to a five-month
low of 49.4.
“Weaker external demand and excess capacity in
some sectors could continue to weigh on
manufacturing prices and contribute to the
domestic deflationary pressure,” said Ho Woei
Chen, an economist at Singapore-based UOB
Global Economics & Markets Research.
Meanwhile, the China Federation of Logistics
& Purchasing (CFLP) non-manufacturing PMI
unexpectedly fell to a nine-month low of 50.2
in July, despite still marking its 19th
consecutive month of expansion since January
2023.
Following China’s July Politburo meeting’s
commitment to introduce new economic support
measures and boost consumption to drive
domestic demand, details remain scarce, Ho
said.
The People’s Bank of China (PBOC) took concrete
steps in July, cutting interest rates and
spurring commercial banks to lower loan prime
rates.
The PBOC reduced the seven-day reverse repo
rate by 10 basis points (bps) and the one-year
Medium-term Lending Facility (MLF) rate by 20
bps.
Consequently, the 1-year and 5-year loan prime
rates (LPR) decreased to 3.35% and 3.85%,
respectively.
The PBOC’s adjustments to MLF and LPR impact
borrowing costs in China, influencing bank
lending rates and the overall cost of credit.
With the US Federal Reserve poised to cut
interest rates in September, further monetary
policy easing is anticipated in China, UOB’s Ho
said.
“We predict an additional 15 bps rate cut by
the end of 2024, bringing the 1-year LPR down
to 3.20%. Moreover, a near-term cut of 50 bps
to the reserve requirement ratio (RRR) is also
possible,” she added.
GROWTH OUTLOOK REMAINS
WEAKManufacturers’ sentiment
remains bleak as China’s economy faces twin
challenges: weakening domestic demand and
escalating external trade tensions, which
contributed to a slower-than-expected growth in
the second quarter.
China’s GDP growth slowed to 4.7% year-on-year
in the second quarter, pulling the year-to-date
growth down to 5.0% for the first half.
“The two big drags on GDP growth continued to
be the property sector and consumption,” said
Lynn Song, ING’s chief economist for Greater
China.
“Despite GDP growth remaining on pace to
achieve the 5% growth target for now, there
will be less supportive base effects in H2
2024, making the road to 5% challenging,” Song
said.
“We will likely need to see further policy
support in the coming months if this goal is to
be reached.”
Although some easing measures were introduced
in mid-May, the property sector remains under
pressure, weighing on domestic consumption and
investment, and increasing deflation risks,
analysts at Japan’s Nomura Global Markets
Research said.
However, exports are expected to stay strong,
supported by low inflation, a weak yuan, and a
rebound in the global goods cycle, Nomura said.
“We still hold the view that the policy pivot
in the property sector is real, although its
planning and execution was slowed by
policymakers at
the third plenum,” it added.
Focus article by Nurluqman
Suratman
Potassium Chloride (MOP)06-Aug-2024
HOUSTON (ICIS)–US fertilizer producer Mosaic
said there are factors which suggest the global
potash market is balanced while the phosphate
market will remain tight not only for 2024 but
beyond.
In its Q2 earnings statement, which had a
second quarter net loss of $162 million, the
producer said its market outlook is that North
American demand remains robust as it sees there
are still buyers who continue to seek out and
secure summer fill volumes.
It is their view that part of this is a result
of farmers and retailers having emptied their
bins this spring with substantial crop
fertilizing.
Yet challenging weather has been present all
summer and there is growing concern from
end-users that yields could be impacted with a
dip in income likely to result in less
post-harvest demand.
Looking at Brazil briefly the producer feels
that the level of in-season demand present
could be described as solid and comes primarily
from concerns of low stocks.
For the global potash segment Mosaic said
supply constraints are likely to continue to
abate this year amid expectations of seeing
higher exports from Belarus and Russia.
It also noted though that the recent contract
settlements in China and India should help
further stimulate buying activities further in
both southeast Asia and into India.
In terms of Chinese phosphate exports the
producer said that rate has declined 27% year
on year, during the first six months of 2024,
which equates to over 1 million tonnes.
Mosaic said in its view the long-term outlook
remains favorable as domestic and industrial
needs will continue to be prioritized over
fertilizer exports in the long term.
Looking at grains and oilseeds it is their
expectations that stock-to-use ratios will
remain low and constructive agriculture
fundamentals and economics are expected to
continue to incentivize growers to maximize
yields.
Mosaic said while corn and soybean fundamentals
as well as prices have softened recently when
viewing nutrients, they overall remain
affordable and that bodes well for future
demand.
It noted that during this year the El Nino
weather pattern is expected to shift to a La
Nina classification which holds the potential
for creating a favorable backdrop in southeast
Asia, India and Brazil.
Ammonia06-Aug-2024
HOUSTON (ICIS)–Still churning over parts of
the southeastern US tropical storm Debby has
kept the fertilizer market watching carefully
with producer Nutrien saying that to this point
it has not been affected by the heavy rain and
winds.
With operations in Florida and Georgia the
producer undertook emergency plans ahead of the
initial landfall as a hurricane on 5 August in
the northern part of Florida. It has since trek
across Georgia and into South Carolina with
storm impacts extending a considerable
distance.
“Our facilities in Florida and Georgia were not
impacted in any material way by Tropical Storm
Debby,” said a Nutrien spokesperson.
“We have emergency preparedness plans in place
that were followed, and we will continue to
monitor the storm’s path while taking necessary
measures to protect the safety of our people
and the integrity of our operations.”
The fertilizer industry was initially concerned
that Debby could directly strike the key hub of
Tampa, Florida, which is vital as the city is
home to both corporate offices and trading
operations but has product storage, shipping
and other logistical assets.
Tampa did see heavy rainfall with some
localized flooding but did avoid any
significant damage.
One concern will be how much crop damage has
been experienced with a substantial amount of
acreage in the path of the storm.
As the crops in some of these areas are fairly
mature the excessive rain and wind could cause
substantial damage and result in a decrease in
eventual yield. That lost income could see
farmers become more hesitant on fresh
fertilizer commitments.
Potassium Chloride (MOP)06-Aug-2024
HOUSTON (ICIS)–Intrepid Potash saw indications
of improving production during Q2 which has
helped support continued expectations that
their 2024 potash output will be approximately
15% higher year on year.
In a project and operational update, the US
fertilizer producer said at the HB Solar
Solution mine in Carlsbad, New Mexico, it
completed work on the replacement extraction
well in June.
It is now serving as the primary source of
brine for the current evaporation season and
Intrepid expects it will be the primary for
future seasons.
Also underway is phase two of installing a
system to clean the injection pipeline and
remove scaling to help ensure more consistent
flow rates. All pipeline is installed with
tanks set and the producer expecting to
commission the project during Q3.
At the Brine Recovery mine in Wendover, Utah,
the construction of primary pond 7 is finished
and is being filled with brine. It is expected
to increase the brine evaporative area and
maximize availability, increasing grade, and
improving production by the fall of 2025.
At the East Underground Trio mine the producer
said because of the efficiencies from the two
continuous miners placed into service in 2023,
and the operation of a fine langbeinite
recovery system, it had significant improvement
in production rates and cost structure year on
year.
Intrepid said for the first six months of 2024
the cost of goods sold totaled approximately
$284 per short ton, which compares to the same
prior-year figure of $320 per short ton.
The Q2 average net realized sales
prices for potash and Trio averaged
$405 and $314 per short ton, respectively,
which compares to $479 and $333 per short ton
during Q2 2023.
“Our strategic focus continues to be improving
our potash production, and I’m happy to share
that we saw the first indications of this in
our second quarter results,” said Matt Preston,
Intrepid Potash CFO and acting principal
executive officer.
“Improved brine grades at HB from the Eddy
Cavern and good early-season evaporation rates,
allowed us to extend our spring production
season and we still expect our 2024 potash
production to be approximately 15% higher than
2023.”
Preston added that when looking at the
quarterly results their operational and
financial performance continues to be solid
with significant improvement in both total and
per ton production costs.
“As the broader potash market looks to be
finding its midcycle pricing floor, we remain
focused on improving our unit economics by
means of higher potash production,” Preston
said.
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