SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson: Understanding chemicals and polymers demand during the 1992-2021 Chemicals Supercycle was easy, firstly, because demand always boomed and secondly,  because these were the dominant factors shaping markets: Lots of young people moving to the cities in China to make goods for export followed by China’s enormous debt and speculation bubble from 2009 onwards, which was mainly centered on real estate. Now, as the future of demand growth is in the Developing World ex-China, we need to understand hundreds of different countries. Before you get carried away with excitement, ICIS analysis suggests this: Developing World ex-China demand cannot do anything over as long as perhaps the next seven years to substantially absorb all-time high levels of oversupply. Why the oversupply? Because too many people missed the build-up of demographic and debt challenges in China and didn’t react quickly enough when the 2021 Evergrande Moment arrived. This is a lesson for how we analyze the Developing World ex-China. Focusing on polypropylene (PP) as an example: Despite the Developing World ex-China’s much bigger population of around six billion versus China’s population of some 1.4 billion, ICIS still expects that by 2030, Developing World ex-China’s demand will be some 8 million tonnes lower than China’s. The ICIS base case assumes that global PP capacity exceeding demand will average 25 million tonnes a year in 2021-2024. This compares with just 5 million tonnes a year during the 1992-2021 Chemicals Supercycle. Global operating rates averaged 87% in 1992-2023. But given this oversupply, our forecast for 2024-2030 is 77%. To achieve 87%, assuming our base case assumption for production is right (the same as demand), capacity would have to grow by an average 2.2m tonnes a year versus our base case of 4.8 million tonnes. As feedstock-advantaged producers such as those in the Middle East are likely to press ahead with projects, and as China may continue to add more capacity, capacity growth of 2.2 million tonnes a year implies closures of plants elsewhere. The ICIS base assumes 4% average annual PP demand growth in China in 2024-2030 when 2%, in my view, is more likely. If 2% growth were to happen, and demand growth in the other regions was the same as our base case, capacity growth would need to be just 1.4 million tonnes year to achieve an 87% operating rate in 2024-2030. Let’s next take 2% off Chinese growth and add this to our base case forecast for the Developing World ex-China. Capacity would still have to grow by just 1.9 million tonnes a year to achieve an 87% operating rate in 2024-2030 compared with, as mentioned earlier, our base case assumption of capacity growth of 4.8 million tonnes. While, as I said, the Developing World ex-China offers long-term big opportunities, we should keep in mind the words of Mark Twain: “History doesn’t repeat itself, but it often rhymes”. 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.

HOUSTON (ICIS)–Fertilizer producer Atlas Agro announced it has signed a memorandum of understanding (MOU) with renewable energy company Casa dos Ventos with a goal of utilising wind and solar projects to supply renewable energy for green fertilizer produced using green hydrogen. The company said the partnership seeks to combine the competitiveness of Casa dos Ventos’ renewable portfolio and solutions to produce hydrogen at Atlas Agro’s Uberaba fertilizer plant, contributing to the expansion of the renewable energy matrix and the sustainability of Brazilian agriculture. The Atlas Agro project is expected to start commercial operations in 2028 with the capacity to produce approximately 530,000 short tons/year of green ammonium nitrate, considered essential for reducing carbon emissions in agricultural production. The plant will require an average of 300 megawatt of renewable energy, which will be supplied by Casa dos Ventos. The project aims not only to produce a more sustainable input, but also to reduce Brazil’s dependence on imports as the country is currently the largest global importer with an estimated 41 million short tons arriving in 2023. “Atlas Agro’s mission is to decarbonize global nitrogen production. Cost-competitive and reliable energy is the basis for producing sustainable nitrogen fertilizers at affordable prices for local farmers,” said Knut Karlsen, Atlas Agro Brazil president. “We are excited to partner with Casa dos Ventos to bring green and locally produced nitrogen fertilizers to Brazilian agriculture.”

HOUSTON (ICIS)–Australian Kore Potash announced it has finalised the agreement on the engineering, procurement and construction (EPC) contract for the Kola project with PowerChina International Group Limited (PowerChina) on 28 October. Kore Potash and PowerChina are now working towards convening a date which is currently set for 19 November for the signing ceremony with the Minister of Mines and other officials in the Republic of Congo-Brazzaville. In an update on financing, the company said it continues to work with the Summit Consortium to provide for the construction cost and is intended to be based on royalty and debt finance. Kore Potash added that the financing parties have confirmed their ongoing strong interest and has advised that the term sheet will be provided within three months of the execution of the EPC contract. The company does plan to conduct a small capital fund raise in November to finance working capital. Kola is expected to be designed with the capability to produce 2.2 million tonnes/year of granular muriate of potash (MOP) over an initial 31-year life.

BARCELONA (ICIS)–More chemical industry leaders are making bold strategic decisions to combat a multi-year downturn, driving their companies to focus on areas where they can seize a competitive advantage. China-driven overcapacity could imbalance global supply/demand until 2030 Need for large-scale capacity closures to balance market Industry has reached turning point Companies can choose to focus on commodities or become specialty/low carbon players CEOs waking up to the need for a radical examination of their assets and strategies A trickle of announcements about closures and restructurings turning into a flood leaders such as BASF, Dow, LyondellBasell, Versalis take bold steps to reduce their commodity footprint in Europe In this Think Tank podcast, Will Beacham interviews ICIS Insight Editor Nigel Davis, ICIS Senior Consultant Asia John Richardson and Paul Hodges, chairman of New Normal Consulting. This is the audio version of a special ICIS Think Tank Live webinar (see below) recorded on 30 October. Editor’s note: This podcast is an opinion piece. The views expressed are those of the presenter and interviewees, and do not necessarily represent those of ICIS. ICIS is organizing regular updates to help the industry understand current market trends. Register here. Read the latest issue of ICIS Chemical Business. Read Paul Hodges and John Richardson’s ICIS blogs.

SINGAPORE (ICIS)–Thailand’s Siam Cement Group (SCG) will invest $700 million to pave the way for Vietnam’s first integrated petrochemical complex to use US ethane as feedstock for production. Project completion slated in end-2027 Ethane to account for as much as two-thirds of LSP cracker feedstock Bulk of investments go toward handling/storage of ethane The project, which will mean increased feedstock diversification for its wholly owned Vietnamese subsidiary Long Son Petrochemicals (LSP), is expected to be completed by the end of 2027, SCG said in a bourse filing on 30 October. LSP is currently working with Vietnamese authorities to acquire necessary certificates and permits to build storage and supporting facilities at the complex in Bah Ria-Vung Tao province in southeastern Vietnam. The cracker at the site can produce 950,000 tonnes/year of ethylene, 400,000 tonnes/year of propylene, and 100,000 tonnes/year of butadiene (BD). Once the ethane enhancement project is completed, LSP will be able to utilize ethane for as much as two thirds of its total feedstock, in addition to propane and naphtha. By utilizing imported ethane from the US as raw material, “LSP can significantly enhance its competitiveness through lower feedstock cost and flexibility, while also lowering carbon emissions”, SCG said. Majority of the investment will go toward handling and storage of the ethane feedstock, which requires temperature as low as minus 90-degree Celsius, it said. LSP was completed at a cost of $5.2 billion whose commercial operations began on 30 September 2024 “following a comprehensive test period”, SCG said. The Thai conglomerate first announced the plan to use US ethane as feedstock for LSP in September, noting that over the past three years, its average price has been lowered by around 40% compared with those of naphtha and propane. Most crackers in Asia use naphtha as feedstock whose prices track highly volatile upstream crude movement. “In light of the existing petrochemical trough with historical low margin, and current volatile global economic environment, LSP is closely monitoring the market situation and will adjust the run rate of its operation during this challenging period for petrochemical business,” SCG said. Focus article by Pearl Bantillo (adds details throughout) Initial reporting by Fanny Zhang Thumbnail image: Container cargo ships unload at a port in Hai Phong, Vietnam on 25 May 2015. (Minh Hoang/EPA/Shutterstock)

SINGAPORE (ICIS)–State-owned energy companies Saudi Aramco and Vietnam Oil and Gas Group (Petrovietnam) will explore opportunities in storage, supply and trading of energy and petrochemical products. The two companies signed a collaboration framework agreement during a state visit of Vietnam Prime Minister Pham Minh Chinh to Saudi Arabia on 30 October, Aramco said in a statement. “This agreement lays the foundation for potential collaboration across the hydrocarbon value chain,” Aramco downstream president Mohammed Al Qahtani said. “We look forward to exploring multiple opportunities with Petrovietnam that complement Aramco’s global downstream ambitions, contribute to Petrovietnam’s own strategy, and reinforce Asia’s importance in global energy and petrochemicals markets,” he said. Saudi Aramco, which is the world’s biggest crude exporter, has been diversifying its business by heavily investing in petrochemicals. Vietnam is one of the fast-growing emerging economies in southeast Asia. It recently started up its first integrated petrochemical complex, which is operated by Long Son Petrochemical – a wholly owned subsidiary of SCG (Siam Cement Group) Chemicals.

HOUSTON (ICIS)–CF Industries said in its latest nitrogen fertilizer market outlook global pricing was supported in the third quarter of 2024 by strong global demand, lower supply availability due to natural gas shortages, China’s absence in urea exports and planned maintenance activities in the Middle East. The US fertilizer producer said that in the near-term their management expects the global supply-demand balance to remain constructive, as inventories globally are believed to be below average and energy spreads continue to be significant between North America and high-cost production in Europe. CF said for North America that while grains prices are under pressure from expected high crop production it is their belief that the fall ammonia application season for the US and Canada will be positive if weather is favorable. US crop returns for 2025 are forecast at similar levels to 2024, which is expected to support stable planted corn acres year on year. The producer said 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, CF believes the global nitrogen cost structure will remain supportive of strong margin opportunities for low-cost North American producers. Looking at Brazil the producer said through September 2024 that urea imports to the country were 5.4 million tonnes, 13% higher than through the same period in 2023. CF said Brazil is expected to import 2.0-2.5 million tonnes of urea in the fourth quarter due to forecast higher planted corn acres and nominal domestic production. For India the company feels there is significant urea import requirements remaining through March 2025 due to favorable weather for rice, wheat and other crop production as well as lower-than-targeted domestic urea production driving greater import need. Regarding Europe CF said there is approximately 20% of ammonia and urea capacity which was reported in shutdown or curtailment modes as of September 2024. The company said management believes that ammonia operating rates and overall domestic nitrogen product output in Europe will remain below historical averages over the long-term given the region’s status as the global marginal producer. For China the producer noted that the ongoing urea export controls by the government continues to limit urea export availability from the country. Through September 2024, China has exported 254,000 tonnes of urea, 91% lower than the same period in 2023. In Russia the company said the urea exports have increased by 5% this year due to the start-up of new urea granulation capacity and the willingness of certain countries to purchase Russian fertilizer, including Brazil and the US. Exports of ammonia are expected to rise with the completion of the country’s Taman port ammonia terminal though CF noted that annual ammonia export volumes are projected to remain below pre-war levels. Looking at the longer-term view of nitrogen the producer is expecting the global supply-demand balance to tighten as global capacity growth over the next four years is not projected to keep pace with expected global lift in demand of approximately 1.5% per year. As far as global production CF said it is expected to remain constrained by continued challenges related to cost and availability of natural gas.

HOUSTON (ICIS)–SI Group completed another debt exchange, which led Fitch Ratings to determine that the company defaulted again, the ratings agency said on Wednesday. Fitch considered SI Group’s offering a distressed debt exchange and found that the company was once more in restricted default. Fitch has since rated SI Group CCC, which is four notches above default. During the first half of 2024, SI Group saw declines in sales and earnings before interest, tax, depreciation and amortization (EBITDA), Fitch said. The declines were caused by weak demand, destocking in 2023 and increased competition from new plants in China. Sales volumes should remain low and free cash flow should remain negative throughout Fitch’s forecast horizon. SI Group could face a liquidity crisis, and it may need fresh third-party support within the next 24 months, Fitch said. SI Group makes specialty chemicals used in coatings, adhesives, sealants and elastomers (CASE) as well as in lubricants, fuels, surfactants and polymers. Other chemical companies are also coming under increased stress from low-cost imports. INEOS Styrolution plans to shut down a plant in Addyston, Ohio state, US, that makes acrylonitrile butadiene styrene (ABS) and styrene acrylonitrile (SAN). Decommissioning will start in the second quarter of 2025. INEOS Styrolution is also permanently shutting down a styrene plant in Sarnia, Ontario province, Canada. That plant was idled earlier this year after complaints about benzene emissions, which led to a dispute with regulators. In addition, China, once a key outlet for North American styrene, has added significant styrene capacity over the past three years. Additional reporting by John Donnelly

HOUSTON (ICIS)–US LSB Industries said it was able to complete a successful turnaround of their Pryor, Oklahoma, fertilizer facility. The company said in a third quarter update that the investments at Pryor were focused not only on improving its reliability and daily ammonia production volume, but also included the debottlenecking of the facility’s urea plant. LSB expects this effort will result in an incremental of 75,000 short tons annually of UAN output. At the El Dorado, Arkansas, facility the producer said it completed the construction of an additional 5,000 short tons of nitric acid storage which is providing the ability to capitalize on incremental sales opportunities not previously available. A turnaround at the Cherokee, Alabama, facility will take place this November and a turnaround at El Dorado is scheduled for the third quarter of 2025, with the primary goal being increased volumes. LSB said it continues to make progress on its two energy transition projects and is expecting to start producing low carbon products at El Dorado beginning in 2026 pending regulatory approval. Regarding the Houston Ship Channel project, the company said it has completed the pre-front end engineering design and is working through the results as well as engaging with potential customers and preparing to select an engineering contractor for the final study. It expects to start that effort during the first half of 2025 with completion by mid-2026. Looking at fertilizer market conditions the producer said the ammonia market is healthy, and pricing has been strong driven by many factors including tight US supply dynamics along with geopolitical concerns and extended turnarounds and outages reducing global inventories LSB also cited the delayed start-up of new production capacity in the US Gulf and an export terminal in Russia For UAN the producer said pricing remains solid due to low inventories in the distribution channel following both spring applications and summer fill program with there being historically low imports and strong exports As it looks ahead it feels there is potential pent-up demand at the retailer and producer level which could lead to favorable order volumes and pricing in the first half of 2025.