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Polyethylene28-Aug-2024
SINGAPORE (ICIS)–Click here to
see the latest blog post on Asian Chemical
Connections by John Richardson.
So, you want to just sit back and wait for
global chemicals and polymer markets to correct
themselves, for the Old Normal to come back?
As today’s post on styrene suggests, even
assuming thins do eventually return to normal,
you will be on for an awful long wait:
I estimate that global styrene capacity
would have to shrink by an average 174,000
tonnes a year between 2024 and 2030 for
operating rates to reach their historic and
very healthy long-term average of 88%. The ICIS
base case assumes an average 2024-2030
operating rate of 75% as capacity expands by
811,000 tonnes a year.
Clearly, and this is same across many other
products, the commercial decisions necessary
for a turnaround on this scale would take
several years.
But I anyway see hanging around and waiting for
a return to the Old Normal as a waste of
precious time, as the global chemicals
landscape will never return to the way it was
during the 1992-2021 Chemicals Supercycle.
The data on styrene underlines the direction of
travel including, as mentioned, the scale of
global overcapacity and the collapse of
Northeast Asian margins since the late 2021
“Evergrande Moment”.
Also note the distorting impact of China
dominance of global styrene demand. In 1992,
China accounted for just 2% of global demand
and 22% of the global population, but by the
end of this year ICIS expects China to account
for 46% of global demand from just 18% of the
world’s population.
And crucially, China’s demand growth is
shrinking as its share of global capacity
increase – again just 2% in 1992 rising to a
forecast 53% in 2030.
The numbers are similar across many other
products.
It is time for chemicals companies to think
long and hard about where their future
competitive advantages lie in the light of the
ten interconnected forces that I believe are
reshaping the global landscape.
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.
Potassium Chloride (MOP)27-Aug-2024
HOUSTON (ICIS)–Mining major BHP said after a
rough stretch for the global potash segment, it
appears it is heading now towards finding
renewed balance with improvements in both
demand and supply.
The company said it has also continued to
advance its construction efforts at the Jansen
potash project in Saskatchewan, Canada, with
stage one currently ahead of schedule.
In its economic and commodity outlook, BHP said
potash prices have been on a downward trend
over the last 18 months as the industry has
been resetting after dealing with stark price
movement and severe supply disruptions of
recent years.
The producer said one indicator that the market
was returning to normal pace was that the
magnitude of price movements in the first half
of 2024 was less pronounced compared to a year
ago.
Looking at regional demand performance, it said
a broad recovery has continued from the lows of
2022 with total muriate of potash (MOP)
deliveries expected to reach, or exceed, the
pre-Ukraine conflict levels during this year.
Supply also increased further with export
volumes from Russia and Belarus edging closer
to their 2021 peak with Laos adding 2-3 million
tonnes of capacity over the last few years.
BHP said Canadian volumes this year point to an
improved production level.
“Balanced though does not mean that the market
is at rest. The industry remains in the midst
of a significant disequilibrium, slowly
adjusting from the major shocks of recent
years,” said BHP.
“The compelling demand picture, rising
geopolitical uncertainty and the maturity of
the existing asset base collectively provide an
attractive, accelerated entry opportunity in a
lower–risk supply jurisdiction such as
Saskatchewan, Canada.”
It was also revealed that construction at the
Saskatchewan potash project is ahead of the
original schedule with Jansen stage 1 now 52%
completed.
The first production is targeted for late 2026
with this phasing having an annual output
projected around 4.15 million tonnes.
Jansen stage 2 is 2% complete with first
production from this segment anticipated in
2029.
Back in July the company had said Jansen had
reached a pivotal milestone with construction
having surpassed the 50% completion mark for
stage 1 and stage 2 underway.
Ammonia27-Aug-2024
TORONTO (ICIS)–Canada’s chemical industry is
relieved that freight trains are running again
following a four-day shutdown, officials said
on Tuesday.
Freight rail service at railroads Canadian
National (CN) and Canadian Pacific Kansas City
(CPKC) resumed on Monday, 26 August, following
an
order by a labor tribunal that ended a
complete shutdown that started on 22 August.
A prolonged rail disruption would have had
“devastating impacts
on Canadians and the broader economy,” said
Greg Moffatt, executive vice president of trade
group Chemistry Industry Association of Canada
(CIAC).
Canada’s chemical industry moves more than 500
railcars of product each day, he noted.
CIAC’s immediate concern was for the rail
shipment of chlorine to municipalities, for the
treatment of drinking water. Both railroads had
stopped accepting chlorine and other hazardous
materials before the 22 August shutdown.
Meanwhile, other chemicals manufactured in
Canada are “essential building blocks” for the
agriculture, agri-food, pharmaceuticals,
manufacturing, construction, automotive, mining
and forestry sectors in both Canada and the US,
Moffatt said.
COULD TAKE WEEKS FOR SUPPLY CHAINS TO
NORMALIZE
John Corey, president of the Freight Management
Association of Canada, said it could take
four weeks or more before supply chains get
back to normal.
The government should have intervened much
earlier to prevent the shutdown, as the parties
had been negotiating new collective deals since
November last year, without success, he said.
Although some commentators have suggested that
freight rail was an essential service and the
best way to prevent future shutdowns was to
nationalize the railroads, Corey said that was
not a solution.
North American railroads used to be
government-controlled or owned in the last
century, but they became inefficient
“dinosaurs” and had to be deregulated, Corey
said.
He pointed to the 1980 Staggers Act in the US
and the 1995 privatization of CN in Canada.
“Nationalization is the worst possible
solution” to prevent future labor-related
disruptions, he said, adding, “The government
does not run many things well, as we know.”
He noted that Canada was facing a further
threat to its supply chains because of new
labor issues at its ports. Last year, a
13-day strike shut
down Canada’s West Coast ports.
Canada-based chemical producers rely on rail to
ship more than 70% of their products, with some
exclusively using rail.
About 80% of Canada’s chemical production goes
into export, with about 80% of those exports
going to the US, according to CIAC.
(Map by Miguel Rodriguez Fernandez)
The following table by the American Association
of Railroads (AAR) shows Canadian freight rail
traffic, including chemicals, for the week
ended 17 August and the first 33 weeks of
2024:
Thumbnail photo source: CN
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Ammonia27-Aug-2024
LONDON (ICIS) –On 30 July 2024, MITECO (the
Spanish Ministry for the Ecological Transition
and the Demographic Challenge) published the
regulatory basis for allocating €1.2
billion to large renewable hydrogen valleys,
also known as hydrogen clusters. A competitive
bidding process will launch later this year,
with winners to be announced in 2025 and 2026.
The form of support comes as capital grants
awarded to hydrogen producers. ICIS has
produced the following infographic to explain
the core principles of the support scheme.
Petrochemicals27-Aug-2024
MUMBAI (ICIS)–India’s JPFL Films Pvt Ltd plans
to set up a new 60,000 tonne/year biaxially
oriented polypropylene (BOPP) film unit in the
western Maharashtra state, at a cost of rupee
(Rs) 2.5 billion ($30 million).
The company expects to begin operations at the
new unit to be built at its Nashik complex in
October 2025, its parent firm Jindal Poly Films
said in a filing to the Bombay Stock Exchange
(BSE) on 16 August.
“The new line will help the company strengthen
its market position and market share,” Jindal
Poly Films said, adding that funding for the
plant will be through internal accruals and
bank financing.
JPFL Films currently has a production capacity
of 294,200 tonnes/year of BOPP and 170,000
tonnes/year of biaxially oriented polyethylene
terephthalate (BOPET) at its Nashik facility.
($1 = Rs83.93)
Ammonia26-Aug-2024
HOUSTON (ICIS)–As summer draws to a close, the
US harvesting efforts are beginning to ramp,
but with crop prices still less favorable and
farmer economics now back in question, the
short-term fertilizer demand prospects continue
to be unclear.
The sights of combines rolling across fields
collecting up the various acres is usually a
sign that a return of applications is coming
soon as it is typical after crops are completed
for some growers to place another layer of
nutrients, especially for those who use
nitrogen products.
Yet the level of engagement in further
commitments over the next few weeks is not
certain, according to market sources.
What is more apparent is that increased demand
faces the obstacle of unfavorable crop prices
for farmers, projections of less income and a
potentially longer stretch of harvest because
of the challenging weather at spring
interrupting planting schedules.
As an industry participant said it really is
simply about price direction at this time and
how people are viewing market direction and
that “lower prices will stimulate demand.
Higher prices will lower demand.”
Currently US corn is at 84% of the reported
acreage in the dough stage with soybeans
setting pods having reached 89%. Both crops are
overall being reported as mostly fair to
excellent condition.
Recent crop tours have highlighted the
potential for there to be really strong yields
upcoming, especially for corn in certain
states, which would normally be a positive
aspect for farmers, but the projections of a
larger harvest this year has also added extra
weight upon corn prices.
Farmer economics have recently come under the
spotlight with US Department of Agriculture
having forecast a drop of net farm income for
2024 of $43 billion year on year with a total
income estimate of $116.1 billion.
In 2023, net farm income figure had a 16% drop
from 2022, so farmers are set to potentially
experience the most significant two-year farm
income decline in recent history.
That is one of the troubling factors for those
who are looking ahead at the domestic path
forward for fertilizer buying and values, with
a market participant saying, “I think overall,
demand will be low due to farmer economics and
poor sentiment in agriculture as a whole.”
Demand is also lagging because there were good
refilling efforts over the summer for many
products.
Although likely sitting in tanks on farms, or
in retail warehouse right now, there should be
a good portion of those volumes which will go
out over the next three to four weeks, or
longer if weather holds favorably.
As a market source said optimism for an uptick
is running very thin at the moment “so far it
continues to be dead on UAN, and nitrogen
demand in general. Maybe pre-river close demand
kicks in, but I’m not too hopeful for any
rally.”
Ammonia26-Aug-2024
HOUSTON (ICIS)–Crop maturity continues to make
steady strides with there now 84% of corn in
the dough stage with soybeans setting pods
having reached 89% according to the latest US
Department of Agriculture (USDA) weekly crop
progress report.
The current pace of corn into the dough phase
is slightly behind the 85% achieved last year
but is just above the five-year average of 83%.
Corn acreage within the dented stage is now at
46%, which is equal to the 46% in 2023 and is
ahead of the five-year average of 42%.
Corn reaching maturity has reached 11% of the
crop, which is above the 8% from last year as
well as the five-year average of 6%.
For corn conditions there is 5% rated very
poor, 8% as poor and 22% still listed as
fair. There is 49% deemed as good and 16%
remaining as excellent.
The amount of soybean acreage setting pods has
climbed to 89% but trails the 90% mark from
last year but is above the five-year average of
88%.
In the first update on soybeans dropping
leaves, the weekly update shows there is 6% of
the crop at this stage, which is ahead of both
the 4% level from 2023 and the five-year
average of 4%.
For soybean conditions there continues to be 2%
listed as very poor with 7% now as poor and 24%
continuing to be fair. There is still 54% seen
as good with there now being 13% as excellent.
In harvesting updates spring wheat harvest has
reached 51% completed, which ahead of the 50%
achieved last year but is behind the five-year
average of 53%.
In the first update on sorghum harvest there is
18% of the crop now completed, which is ahead
of the 2023 level of 16% but equal to the
five-year average of 18%.
Acrylonitrile Butadiene Styrene26-Aug-2024
HOUSTON (ICIS)–Canada plans to impose a 100%
tariff on all electric vehicles (EVs) made in
China, effective on 1 October, and on top of
the 6.1% tariff it already imposes on such
automobiles, the government said on Monday.
The tariff includes electric and certain hybrid
passenger automobiles, trucks, buses and
delivery vans, the government said.
In addition, the government plans to impose a
25% tariff on imports of steel and aluminum
products from China, effective on 15 October.
The tariffs will not apply to Chinese goods in
transit on the day that the duties come into
force.
Canada could impose more tariffs against other
Chinese imports following a 30-day review, it
said. Those imports could include batteries and
battery parts, semiconductors, solar products
and critical minerals.
For other countries, Canada plans to limit
which ones are eligible to participate in its
Incentives for Zero-Emission Vehicles (iZEV),
Incentives for Medium and Heavy Duty Zero
Emission Vehicles (iMHZEV) and Zero Emission
Vehicle Infrastructure Program (ZEVIP).
Eligibility would be limited to products made
in countries with which Canada has negotiated
free trade agreements.
CANADA’S EV DUTIES FOLLOW THOSE BY US
AND EUEVs made in China have
become the target of punitive duties by a
growing number of regulators.
Earlier in the month, the European Commission
announced plans to impose up to 36%
countervailing duties on EVs from China.
US tariffs on Chinese EVs
were scheduled to reach 100% on 1 August.
EVs typically consume more plastics on a per
unit basis than automobiles powered by internal
combustion engines (ICEs). EVs also pose
different material challenges, which is
increasing demand for different plastics and
compounds.
Policies that prolong the use of ICE-based
vehicles could extend the operating life of the
nation’s refineries. Companies could be more
willing to invest in maintenance and repairs if
they are confident that they could recoup their
investments.
Refineries produce many building block
chemicals, such as propylene, benzene, toluene
and mixed xylenes (MX).
Thumbnail shows an EV charging station.
Image by Xinhua/Shutterstock
Ethylene26-Aug-2024
CHARLOTTE, North Carolina (ICIS)–August
started with reports of high weekly initial
unemployment claims, a weak manufacturing PMI
reading and a lackluster payroll report. Equity
markets did not react well to this as evidenced
by a three-day sell off. But the panic ended, a
rebound ensued and we are back to where we were
on 31 July as the underlying economic
fundamentals of a late-phase business cycle
remain. The economy is slowing, not falling off
a cliff.
Job creation continues, even after the softer
showing in July and the unemployment rate
ticking up to 4.3%, largely the result of
Hurricane Beryl. In the latest JOLTS (Job
Openings and Labor Turnover) report, there are
1.2 job openings per unemployed, which is down
from a year ago.
Overall labor market supply and demand
relationships appear to be moving back towards
pre-pandemic levels. With a still positive
labor market, incomes are holding up for
consumers and providing support for the US
economy.
The headline July Consumer Price Index (CPI)
was up 2.9% year on year, the lowest comparison
since March 2021. Progress on disinflation
continues and inflation is heading back towards
the Fed’s target.
Economists expect inflation to average 3.1%
this year, down from 4.1% in 2023 and 8.0% in
2022. This is still above the Fed’s target.
Inflation should soften to 2.4% in 2025 and
2026. As a result, interest rate futures
overwhelmingly expect the Fed to cut rates in
September.
Turning to the production side of the economy,
the July ISM US Manufacturing Purchasing
Managers’ Index (PMI) registered 46.8, down 1.7
points from June and a reading that was below
expectations.
A March expansionary reading had ended 16
months of contraction in manufacturing, but
since then the readings have been
contractionary. Overall manufacturing
production contraction deepened. New orders
slipped further into contraction, and order
backlogs and inventories contracted at a faster
pace. Only five of the 18 industries expanded.
The ISM Services PMI rebounded 2.6 points to
51.4, a slightly expansionary reading.
The Manufacturing PMI for Canada remained in
contraction (15 months and counting) during
July while that for Mexico contracted slightly
after nine months of expanding. Brazil’s
manufacturing PMI expanded for a seventh month.
Euro Area manufacturing has been in contraction
for 24 months. The UK PMI, however, expanded
for a third month.
China’s manufacturing PMI retreated below
breakeven levels, ending eight months of
positive readings. This is indicative of a
stalling recovery.
Turning to the demand side of the economy,
light vehicle sales rose in July and although
inventories have moved up in recent months,
they still remain low.
We expect light vehicle sales of 15.7 million
this year before improving to 16.2 million in
2025. We expect sales of 17.2 million in 2026.
This would bring activity back to the last
cyclical peak in 2018.
Housing activity continues to be tepid amid
affordability issues and low builder
confidence. We expect that housing starts will
average 1.39 million in 2024 and 1.45 million
in 2025. We expect housing activity to improve
to 1.50 million in 2026.
Demographic factors will support housing
activity during the next five or more years.
There is significant pent-up demand for housing
and a shortage of inventory. Affordability
continues to be an issue.
Retail sales have been lackluster so far this
year, but the July results were positive,
aiding to the strength in equity markets. Sales
at food services and drinking places remain
positive. Consumers are taking on more debt.
Overall consumer spending may be slowing but
remains positive.
Business fixed investment, led by a need to
boost productivity and reshoring initiatives,
will take over from consumer spending as a
driver of the US economy. This is typical of a
late-stage business cycle.
Taking all of these demand and supply
considerations together, it appears that
downstream activity is improving and that the
severe destocking cycle is ending. A restocking
cycle for major resins is emerging.
US real GDP rose 5.8% in 2021 and then slowed
to a 2.5% gain in 2022. The much-anticipated
recession failed to emerge for a variety of
reasons, and in 2023 the economy expanded 2.5%
again.
US economic growth in H1 2024 has been strong
but is likely to slow, and when it is all said
and done, 2024 growth will likely be another
2.5% gain. This pace is well above long-term
growth potential.
The slowdown in quarterly economic activity
suggests that in 2025, the economy should rise
1.8% over average 2024 levels, followed by a
modest 2.0% gain in 2026. The US is once again
outpacing the other advanced nations.
Led by the UK and the Mediterranean nations,
Europe’s economic prospects appear to be
improving. China struggles with soft economic
activity and appears to be exporting its way
out of its stalled recovery.
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