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Ethylene03-Jul-2024
HOUSTON (ICIS)–Hurricane Beryl is on track to
make landfall on Monday near the border of
Mexico and the US on the Gulf Coast, although
the path could change in the next few days.
If Beryl holds to its forecasted path, it would
spare the major refining and petrochemical hubs
in the US and Mexico. In addition, few if any
energy companies may choose to shut in US oil
and gas wells in the Gulf of Mexico.
Major US oil and LNG ports would escape the
worst of the storm.
The following map shows the forecasts path of
Hurricane Beryl as of midday on Wednesday.
The forecasted path puts Hurricane Beryl
between the Mexican petrochemical hub of
Altamira, Tamaulipas state and the US hub of
Corpus Christi, Texas state.
IF BERYL CHANGES COURSE, IT COULD
THREATEN CORPUS CHRISTIIn
addition to being a refining and petrochemical
hub, Corpus Christi is a major oil-exporting
port and hosts a terminal that exports
liquefied natural gas (LNG).
Were a storm to disrupt US LNG exports, it
would have a knock-on effect on petrochemical
prices by shutting down one of the eight LNG
export terminals in the country. If the
disruption lasted long enough, prices for
natural gas would fall.
Lower gas prices would drag down those for
ethane, the main feedstock that US crackers use
to produce ethylene. Petrochemical producers
could benefit from lower feedstock costs.
UPDATE ON HURRICANE
BERYLHurricane Beryl is the
first Category 5 hurricane to form so early in
the season. Category 5 hurricanes have the
strongest winds under the Saffir-Simpson
Hurricane Wind Scale, with speeds exceeding 157
miles/hour (253 km/hour).
Beryl is near Jamaica and it should weaken as
it approaches the Yucatan peninsula in Mexico,
where it should make landfall on Friday. It
will cross the peninsula, enter the Bay of
Campeche and remain north of the Mexican state
of Veracruz, which is home to the petrochemical
hub of Coatzacoalcos and the Ethylene XXI
integrated polyethylene (PE) complex.
It will swing north before making another
landfall near Brownsville, Texas state and
Matamoros, Tamaulipas state.
BUSY HURRICANE
SEASONMeteorologists have warned
that this year’s hurricane season
could be the most active ever, with 17-25
named storms. Out of those, 8-13 should be
hurricanes and 4-7 should be major hurricanes.
Major hurricanes are Category 3-5 storms with
wind speeds of at least 111 miles/hour.
Polypropylene03-Jul-2024
RIO DE JANEIRO (ICIS)–Brazil’s polymers major
Braskem is still facing some logistical
challenges at its facilities in Triunfo, in the
floods-hit state of Rio Grande do Sul,
according to a letter to customers seen by
ICIS.
Braskem was forced to shut down its Triunfo
facilities after the severe flooding which
affected the state in May.
By the beginning of June, the producer said it
hoped its operations would return to normality
in a few days, according to a spokesperson in a
written response to
ICIS.
However, according to the letter to customers,
dated 28 June, Braskem’s operations at Triunfo
are yet to return to normality, mostly due to
logistical woes as many roads and key port
operations at the Brazilian state were hit by
the aftermath of the floods.
“Specific challenges resulting from force
majeure still persist in some logistics modes,
leading to the partial receipt of inputs for
the production of products derived from ethanol
and green ethylene,” said the letter.
“At the moment, there is no risk of
interruption in the supply of these products,
and we are implementing alternatives to return
availability to normal levels.”
At the end of June, an analyst said
to ICIS most of the roads in Rio do Grande
do Sul had reopened, although some of them were
operating at reduced capacity.
The Port of Porto Alegre, the largest city in
the state and close to the Triunfo
petrochemicals hub, only reopened in mid-June.
TRIUNFO KEY FOR PLASTICS
Braskem is Brazil’s sole manufacturer of
polyethylene (PE) and polypropylene (PP), the
most widely used polymers. Its market share in
2023 for PE stood at 56% and for PP at 70%,
according to figures from the ICIS Supply &
Demand database.
The Triunfo complex, meanwhile, is key for the
country’s polymers supply chain, accounting for
nearly 37% of Brazil’s PP capacity and 40% of
PE capacity.
Brazil’s total PP production capacity is nearly
2 million tonnes/year. PE capacity is about 3
million tonnes/year, with 41% being
high-density polyethylene (HDPE), 33% being
linear low-density polyethylene (LLDPE) and 26%
being low-density polyethylene (LDPE).
Braskem’s Triunfo complex can produce 740,000
tonnes/year of PP, 550,000 tonnes/year of HDPE,
385,000 tonnes/year of LDPE and 300,000
tonnes/year of LLDPE.
Additional reporting by Jonathan
Lopez
Speciality Chemicals03-Jul-2024
HOUSTON (ICIS)–US June sales of new light
vehicles fell from May, but total sales in the
second quarter showed a modest improvement over
Q1, according to data from the US Bureau of
Economic Analysis (BEA).
While the June sales figures represented a sour
end to the quarter, Kevin Swift, senior
economist for global chemicals at ICIS, said he
anticipates seeing modest sales growth through
the rest of the year and into 2025 and 2026.
June sales fell by 4% to a 15.29-million-unit
pace, well below the forecast of 15.9 million
for the full year from the National Automobile
Dealers Association (NADA).
Sales faced headwinds from the usual
impediments – higher prices for new vehicles
and higher interest rates – which may have
prevented some from entering the market for new
light vehicles.
But a cyber-attack against software maker CDK
Global that disrupted operations during the
month may be the main reason sales fell as the
higher costs and interest rates have been the
norm so far this year.
Software from CDK Global is widely used in US
auto dealerships to process sales and other
transactions.
Declines were seen across all auto segments
except for foreign light truck sales.
Sales were flat when comparing the first six
months of the year with the first six months of
2023, Swift said.
Still, Jincy Varghese, ICIS demand
analyst, expects sales to rise over the
rest of the year.
While protectionist trade policy and potential
regulatory measures could affect auto sales,
performance in all regions except Europe are
likely to be better than expected in the second
half of 2024.
Global automotive value-added output in 2024 is
expected to grow by 0.4% compared with 2023,
Varghese said, with the third quarter of 2024
forecast to remain relatively flat compared
with the third quarter of 2023, according to
Oxford Economics.
US auto sales in 2024 are expected to grow 6.4%
compared with 2023, Varghese said.
The third quarter of 2024 is forecast to grow
by 2.6% year on year, according to Oxford
Economics.
US President Biden, in a statement released
last month, directed his trade representative
to increase tariffs on $18 billion of imports
from China to protect American workers and
businesses.
The tariff rate on electric vehicles (EVs)
under Section 301 will increase from 25% to
100% in 2024.
According to the US Census Bureau, US light
vehicle sales rose 0.8% month on month in May
with total sales of 15.9 million units (up 2.5%
year on year and 8.9% down from 2019).
CHEMS USED IN AUTOS
Demand for chemicals in auto production come
from, for example, antifreeze and other fluids,
catalysts, plastic dashboards and other
components, rubber tires and hoses, upholstery
fibers, coatings and adhesives, Swift said.
Virtually every component of a light vehicle,
from the front bumper to the rear taillights,
features some chemistry.
The latest data indicate that polymer use is
about 423 pounds (192kg) per vehicle.
Meanwhile, electric vehicles (EVs) and
associated battery markets are an important
growth opportunity for the chemical industry,
with chemical producers separately developing
battery materials, as well as specialty
polymers and adhesives for EVs.
Focus article by Adam Yanelli
Please also visit the ICIS
topic page Automotive: Impact on Chemicals
Thumbnail image is of sports-utility
vehicles at a Colorado dealership. Photo by
David Zalubowski/AP/Shutterstock
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Polyethylene03-Jul-2024
SINGAPORE (ICIS)–Click
here to see the latest blog post on Asian
Chemical Connections by John Richardson.
China’s petrochemical markets might well
respond positively to any new economic stimulus
measures announced during the delayed Third
Plenum government meeting that takes place on
15-18 July.
But the scale of economic reforms required are
such that I believe the more likely outcome is
China remaining stuck with lower growth than
during the 1992-2021 Petrochemicals Supercycle.
Sourabh Gupta – Senior Fellow at the Institute
for China-America Studies in Washington, DC –
wrote in an article for the East Asia
Forum that reforms needed include:
Progressively lifting Hukou restrictions to
make public services more equitable.
Building a unified and portable social
security net more in line with advanced
economies.
A shift from indirect to direct taxes.
Individual income tax revenues comprised 33% of
total revenues in OECD countries compared to 9%
in China.
The tax base must expand as four out of
five Chinese households do not pay personal
income tax.
He cautioned that reform would not be easy in a
country that preferred top-down
capital-intensive approaches and was disdainful
of high welfare spending.
China appears to have doubled-down on its
capital-intensive approach since the end of the
property bubble through investing in
export-focused manufacturing.
This raises the issue of geopolitical threats
to its GDP growth, such as the US and the EU
recently raising tariffs on Chinese electric
vehicles and batteries.
“If China is to maintain growth rates of 4-5%
per year, it can only do so if the rest of the
world agrees to reduce its own investment and
manufacturing levels to less than half the
Chinese level” wrote Michael Pettis, Professor
of Finance at Peking University, in an article
for the Carnegie Endowment for International
Peace.
The Economist reported that as
reshoring accelerated, governments had adopted
over 1,500 policies to promote specific
industries in both 2021 and 2022. This compared
with almost none in the early 2010s.
But this latest Third Plenum could be as
significant as the ones cited by
Reuters in 1978 and 1993. The
1978 Plenum opened China up to foreign
investment. In 1993, the Plenum liberalised
trading in the Yuan and launched “socialist
market” reforms following Deng Xiaoping’s
Southern Tour a year earlier.
How will we know the outcomes? If China’s
polyethylene (PE) and polypropylene (PP) price
spreads return to their Supercycle levels over
the six-to-12-months. If this doesn’t
happen, more reforms will be needed as too much
supply will continue to chase too little
demand.
Despite recent rebounds in spreads, China CFR
high-density PE (HDPE) spreads over CFR Japan
naphtha costs remain 116% lower than during the
Supercycle with low-density (LDPE) spreads 46%
lower and linear-low density (LLDPE) spreads
80% lower. The story is very similar in China
PP spreads over naphtha.
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.
Caustic Soda02-Jul-2024
HOUSTON (ICIS)–Hurricane Beryl continued to make its
way west toward Mexico and the US Gulf on
Tuesday afternoon, with landfall possible some
time on Sunday.
Meteorologists at the National Hurricane Center
(NHC) said Beryl was about 125 miles (205 km)
east southeast of Isla Beata, Dominican
Republic, and moving west northwest at 22
miles/hour.
Source: National Hurricane Center
(NHC)
The storm is going back and forth between a
Category 4 and Category 5 hurricane as maximum
sustained winds are at 155 miles/hour but had
been at 165 mile/hour earlier in the day.
According to the Saffir-Simpson Hurricane Winds
Scale, a storm reaches Category 5 when maximum
sustained winds reach 157 miles/hour.
Saffir-Simpson Hurricane Wind
Scale
Category
Wind speed
1
74-95 miles/hour
2
96-110 miles/hour
3
111-129 miles/hour
4
130-156 miles/hour
5
157+ miles/hour
The most recent forecast indicates Beryl could
miss southern Veracruz state in Mexico, where
Braskem Idesa has its integrated polyethylene
(PE) Ethylene XXI complex and where a lot of
Mexico’s petchem capacity is located.
Altamira is still in the projected path. The
regions have been experiencing a drought and
rainfall from Beryl could provide the area with
much-needed rain but could also impact
operations at the multitude of chemical
facilities in the area.
Another scenario would be if the storm swings
to the north, which could threaten oil and gas
production in the US Gulf as well as Gulf Coast
petchem operations.
A producer with capacity in the Corpus Christi
area said it was still too early to decide on
operations.
ACTIVE HURRICANE SEASON
The early activity in the Atlantic Ocean is in
line with forecasts calling for a busier than
usual hurricane season.
The US National Oceanic and Atmospheric
Administration (NOAA) is predicting the
greatest number of hurricanes in the agency’s
history.
NOAA forecasters with the Climate Prediction
Center said that the hurricane season – which
started on 1 June and runs through 30 November
– has an 85% chance to be above normal, a 10%
chance of being near normal and only a 5%
chance of being below normal.
Damage from hurricanes can lead to
increased demand for chemicals, but hurricanes
and tropical storms can also disrupt the North
American petrochemical industry because many of
the nation’s plants and refineries are along
the US Gulf Coast in the states of Texas and
Louisiana.
In 2022, oil and natural gas production in the
Gulf of Mexico accounted for about 15% of total
US crude oil production and about 2% of total
US dry natural gas production, according to the
US Energy Information Administration (EIA).
Even the threat of a major storm can disrupt
oil and natural gas supplies because companies
often evacuate US Gulf platforms as a
precaution.
Additional reporting by Mark Milam, Al
Greenwood and Melissa Wheeler
Ammonia02-Jul-2024
HOUSTON (ICIS)–Although Trinidad and Tobago
have seen tremendous rainfall and significant
winds the last two days, the island nation and
its fertilizer operations escaped the heaviest
impacts of Hurricane Beryl.
Rated at a category 4 as of late on Tuesday,
the storm did cause some harm to surrounding
island countries but for most of Trinidad and
Tobago what was felt was an extended stretch of
unfavorable weather, with fertilizers producers
emerging unscathed.
Produces Yara, which manufactures ammonia at
its facilities, said they had been fortunate as
the storm passed by yesterday afternoon with
plants not suffering any damage or having any
production interrupted.
With plant operations also in the same vicinity
on the island producer Nutrien reported similar
positive outcomes with a spokesperson saying,
“Happily, zero impact. All running as usual.”
Going forward Beryl is now expected to be
impacting Jamaica by Wednesday morning.
For now, the domestic fertilizer market is
carefully watching the track as there are
considerable production, storage and
transportation interests which stretch along
the US Gulf Coast.
The current forecast has the storm potentially
downgrading slightly as travels more towards
making an eventual strike in northern Mexico,
or possibly landing further up in southern
Texas by the end of this week.
Base Oils02-Jul-2024
RIO DE JANEIRO (ICIS)–US Group II base oils
spot supply may stay tight through Q3 due to
hurricane stock building, but could lengthen by
year end, an expert at ICIS said on Tuesday.
Amanda Hay, senior analyst for base oils in the
Americas at ICIS, said the US manufacturing
recession and high interest rates are likely to
take their toll in Q4, with supply potentially
lengthening.
Apart from hurricane stock building, high
interest rates in the US and elsewhere are
causing that “no-one is building inventories”
due to the high costs associated to it.
Hay went on to say that only a few months ago
most economists and analysts – including those
at ICIS – were forecasting interest rates cuts
by the US Federal Reserve (Fed) in 2024.
However, that has now shifted to 2025 at the
earliest, as the world’s major central bank
seeks to make sure inflation falls towards its
2% target.
The US’ annual rate of inflation
stood at 3.3% in May.
Hay was speaking to delegates at the 14th
International Summit with the South American
Market 2024 organized by specialized
publication Lubes em Focus, which
focuses on base oils.
ICIS is a partner in the event.
“As the US manufacturing recession continues,
exports from that country continue to be widely
available. Firm crude prices will also be a
factor to keep in mind,” said Hay.
“Meanwhile, major interest rates changes are
not expected in 2024 anymore – as the year went
by, rate cuts have become less and less likely.
That, in turn, causes that no-one is really
interested in building inventories given the
high borrowing costs.”
Base oils, also called lubricants, are used to
produce finished lubes and greases for
automobiles and other machinery.
The 14th International Summit with the South
American Market 2024 runs in Rio de Janeiro on
2-3 July.
Clarification: Re-casts
headline, introduction; adds paragraph 3
Base Oils02-Jul-2024
RIO DE JANEIRO (ICIS)–In just a few years,
global automotive majors have switched their
focus from an all-electric production to a more
hybrid model, an executive at US crude oil
major Chevron said on Tuesday.
Chris Castanien, global industry liaison at
Chevron and lubricant additive expert, said
that most automotive majors who had set up
targets to go all-electric or nearly
all-electric by 2030 have dropped those plans
as intake among consumers remains slow.
This has happened even after authorities in
North America or Europe have poured “tremendous
amounts of money in trying to force everyone”
into the energy transition.
Castanien was speaking to delegates at the 14th
International Summit with the South American
Market 2024 organized by specialized
publication Lubes em Focus, which
focuses on base oils. ICIS is a partner in the
event.
BILLIONS – BUT THE JUMP IS NOT
HAPPENINGAnyone in the
lubricants industry would be pleased to see the
initially quick transition to electric mobility
some authorities had planned is not happening.
At the end of the day, they are an interested
party which would lose out much if ICE engines
– combustion engines – went out of the market.
Therefore, Castanien was somehow pleased to
list the many plans in the EU and the US which
had planned for a quick electric vehicles (EVs)
implementation, including the US’ $1 trillion
New Green Deal in 2021 or the consequent $67
billion investments contemplated in the CHIPS
Act or the $369 billion of the Inflation
Reduction Act (IRA).
“The US’ EPA [Environmental Protection Agency]
had forced a ruling that by 2032 around two
thirds of cars should be EVs; the EU issued a
ban on ICE engines by 2035 – well, I think
those targets will not happen,” said Catanien.
“Moreover, now we are seeing a lot of
protectionist tariffs against Chinese EVs: we
want people to make and use EVs, but we don’t
want the Chinese to make them.”
The Chevron executive went on to say that the
US is still a “long way” to meet its own
targets on charging points, for instance,
which, added to the considerably higher cost of
EVs, would be putting off consumers.
And this consumers’ reluctance, he went on to
say, is even happening when many jurisdictions
are implementing fiscal incentives and rebates
for EVs.
“In the US, you even get the case of
California, where HOVs [high occupancy vehicle
lanes] are now allowing EVs even if it’s only
the driver inside the car…” he said.
Thus, the initial change planned by automotive
majors – even with thousands of redundancies of
ICE engines engineers – is giving way to a
slower implementation of the EV push. Castanien
mentioned the case of Germany’s major Mercedes.
“Only a few years ago, Mercedes said they would
be making all vehicles electric by 2030 – they
don’t say that anymore. Their updated target is
aiming to make 50% of its fleet electrical by
that year,” he said.
“[US major] Ford has said it is losing $64,000
every time they sell an EV. Tesla was planning
a gigafactory in Mexico: they have dropped
those plans. The shift towards more hybrid
vehicles and not purely EVs is happening – this
is a big change.”
The automotive industry is a major global
consumer of petrochemicals, which make up more
than one-third of the raw material costs of an
average vehicle.
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).
Base oils, also called lubricants, are used to
produce finished lubes and greases for
automobiles and other machinery.
The 14th International Summit with the South
American Market 2024 runs in Rio de Janeiro on
2-3 July.
Base Oils02-Jul-2024
RIO DE JANEIRO (ICIS)–The US remains the
largest exporter to the Brazilian base oils
market, with the country’s lead widening in
2024, according to an expert on Tuesday.
Pedro Nelson, editor-in-chief of the Brazilian
specialized magazine Lubes em Foco,
said Brazil deficit in base oils is set to
continue for years to come due to the lack of
homegrown supply.
Lubes em Foco is the organizer of the
14th International Summit with the South
American Market 2024, which focuses on base
oils. ICIS is a partner in the event.
In 2023, Brazil imported basic base oils worth
$851 million, said Nelson, totaling 775,084
cubic meters (cbm).
Of those, the US was the origin of 72.4% of all
Brazil’s imports. Second on the list but well
behind was South Korea, with 4.9%.
Malaysia (4.7%), India (3.8%), Qatar (3.4%),
Bahrein (3.3%), Singapore (1.9%) and Taiwan
(1.0%, all of it coming from producer Formosa)
complete the list of countries with over 1% of
market share in the Brazilian import market for
basic base oils.
2024: THE US INCREASES
LEADThe US dominance in the
market share of Brazil’s imports basic base oil
is widening in 2024. According to Nelson, in
the January-May period the US captured 76.2% of
market share, followed by Malaysia (5.0%) and
South Korea (3.5%).
In the five-month period, Brazil imported basic
base oils worth $372.4 million, said Nelson.
“Brazil is likely to remain a net importer of
base oils for years to come due to the
country’s lack of capacity to produce them. The
US is set to continue benefit also for years to
come due geography,” he added.
Despite is trade deficit in base oils, Brazil
also exported 79,583 cbm of lubricants in 2023,
worth $200.3 million, mostly to neighboring
countries Paraguay, Argentina and Bolivia.
Not surprisingly, Brazil’s southeast region was
the highest consumer of base oils in 2023, with
44.8% of market share. That region includes the
most industrialized states of Sao Paulo, Rio de
Janeiro and Minas Gerais.
Base oils, also called lubricants, are used to
produce finished lubes and greases for
automobiles and other machinery.
The 14th International Summit with the South
American Market 2024 runs in Rio de Janeiro on
2-3 July.
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