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Polyethylene18-Jul-2024
MADRID (ICIS)–Supply of ethane from Pemex to
polyethylene (PE) producer Braskem Idesa is now
more stable after a renegotiation of the
contract – but the global PE market remains in
the doldrums, according to an executive at the
Mexican firm.
Sergio Plata, head of institutional relations
and communications at Braskem Idesa, said a
recovery in global PE prices could start in the
second half of 2025 as the market is expected
to remain oversupplied in the coming quarters.
Plata explained how Braskem Idesa had to
renegotiate the terms of an agreement with
Pemex, Mexico’s state-owned crude oil major,
for the supply of natural gas-based ethane, one
of the routes to produce PE, to its facilities
in Coatzacoalcos.
Supply is now more stable and in the quantities
agreed, he said.
Braskem Idesa operates the Ethylene XXI complex
in Coatzacoalcos, south of the industrial state
of Veracruz, which has capacity to produce 1.05
million tonnes/year of ethylene and downstream
capacities of 750,000 tonnes/year for
high-density polyethylene (HDPE) and 300,000
tonnes/year for low-density polyethylene
(LDPE).
Braskem Idesa is a joint venture made up of
Brazil’s polymers major Braskem (75%) and
Mexican chemical producer Grupo Idesa (25%).
ETHANE FLOWING, TERMINAL IN Q1
2025
Pemex agreed with Braskem Idesa to supply the
PE producer with a minimum volume of 30,000
barrels/day of ethane until the beginning of
2025, when Braskem Idesa plans to start up an
import terminal in Coatzacoalcos to allow it to
tap into exports out of the US Gulf Coast.
However, both parties sat to renegotiate that
agreement after Pemex’s supply proved to be
unstable, with credit rating agencies such as
Fitch warning in 2023 of the
“operational risk” such a deal with the
state-owned major represented for Braskem
Idesa.
The outcome of the renegotiation is starting to
bear fruit, explained Plata diplomatically,
without providing any details. He conceded,
however, that to outsiders, Pemex’s businesses
could look rather odd.
“We understand the positions of a public entity
such as Pemex, and we understand its methods
could look questionable to eyes outside our
relationship,” said Plata.
“However, at Braskem Idesa we were confident
that if we sat down with them to renegotiate,
clearly stating what we require from each
other, we could reach a point in the
renegotiation which worked for us as a company
and for the Mexican petrochemicals sector as a
whole.”
Together with more stable supply from Pemex,
Braskem Idesa also adopted the so-called Fast
Track to import ethane while its own import
terminal starts up. The terminal, known as
Terminal Quimica Puerto Mexico (TQPM),
closed the last financing details at the
end of 2023.
Plata said the terminal would start up “without
a doubt” by the beginning of 2025, adding that
construction was 70% complete by the beginning
of July.
According to Plata, with Pemex’s more stable
ethane supply and the Fast Track system,
Braskem Idesa is operating at 70-75% capacity
utilization.
Braskem Idesa (in $
million)
Q1 2024
Q1 2023
Change
Q4 2023
Change Q1 2024 vs Q4
2024
Sales
229
234
-2%
199
15%
Net profit/loss
-85
1
N/A
-101
-16%
EBITDA
36
26
36%
26
39%
PE sales volumes (in
tonnes)
205,500
195,100
5.4%
174,500
17.8%
“We have had a very complex environment, with
increased capacities in the US or China and
with the war in Ukraine raising our production
costs. We are undoubtedly in a down cycle and
as a company we have tried to take care of our
margins by controlling our costs and look
closely at our investments,” said Plata.
He said he “would not have the answer” about
what to do with China’s dumping of product
around the world, a fact that in Brazil, the
largest Latin American economy, has prompted
chemicals trade group Abiquim to
lobby hard for higher import tariffs in
polymers,
as well as dozens of other chemicals.
“Market analysts predict the current cycle may
come to an end in the second half of 2025.
Let’s hope so… This has been such a long
crisis, aggravated by external factors such as
wars and global convulsions, which undoubtedly
also affect the industry, and the environment
remains very uncertain.”
Front page picture: Braskem Idesa’s
facilities in Coatzacoalcos
Source: Braskem Idesa
Interview article by Jonathan
Lopez
Next week, ICIS will publish the second
part of the interview with Plata, with his
views on the challenges and opportunities for
the chemicals and manufacturing sectors under
the upcoming Administration led by
President-Elect Claudia Sheinbaum amid the
nearshoring trend
Isocyanates18-Jul-2024
SHANGHAI (ICIS)–In this podcast, markets
reporter Shannen Ng discusses how northeast
Asia’s methylene diphenyl diisocyanate (MDI)
supply is expected to remain tight as Q3
progresses. However, poor demand expectations
in the Asian import markets for the rest of
this quarter remain.
Polymeric MDI sentiment in SE Asia, India
supported by tight supply
Monomeric MDI particularly sluggish and
expected to remain so
Weak demand outlook for China’s downstream
construction and automotive sectors
Polypropylene18-Jul-2024
LONDON (ICIS)–Europe’s run up to holiday
season has been unusually busy for polyethylene
(PE) and polypropylene (PP) markets, including
some spot prices reversing for the first time
since March 2024.
In this ICIS podcast, European PE and PP senior
editors Vicky Ellis and Ben Lake pick out
July’s big themes, from logistics (hurricane
Beryl and still-spiked Asian freight rates) to
the mismatch between how local suppliers and
converters are experiencing demand this month.
They also highlight what to watch for August.
Editing by Damini Dabholkar
Global News + ICIS Chemical Business (ICB)
See the full picture, with unlimited access to ICIS chemicals news across all markets and regions, plus ICB, the industry-leading magazine for the chemicals industry.
Crude Oil18-Jul-2024
SINGAPORE (ICIS)–Shipping disruptions
affecting Maersk’s container shipping
operations because of the Red Sea crisis have
extended beyond the Far East-Europe routes to
its entire global network, the shipping and
logistics giant said.
The fallout of the Red Sea crisis is continuing
to cascade across the world, forcing
vessels to temporarily divert and take longer
routes around the Cape of Good Hope, thereby
causing unprecedented challenges for global
supply chains.
The disruptions now extend beyond the primary
affected routes, causing congestion at
alternative routes and transshipment hubs
essential for trade with Far East Asia, West
Central Asia, and Europe, Maersk said in a
statement on 17 July.
Ports across the Asia Pacific, including
Singapore, Australia, and China, are
experiencing delays due to congestion.
The coming months will be challenging for
carriers and businesses alike, as the Red Sea
situation stretches into the third quarter of
this year, Maersk CEO Vincent Clerc said.
Maersk operates around 740 ships across its
various divisions, including container ships,
tankers, and other specialized vessels.
Extending rotations to travel the longer route
around Africa takes two to three ships,
depending on the trade in question, he said.
“We are going to have in the coming month
missing positions or ships that are sailing
that are significant different size from what
we normally would have on that string, which
will also imply reduced ability for us to carry
all the demand that there is,” Clerc said.
The availability of additional capacity was low
to begin with and, across the industry,
carriers’ ability to bring in extra tonnage has
been limited, he said, adding that at the same
time, demand for container transport has
remained strong.
ASIA EXPORTERS’ WOES TO
CONTINUE
For Asia, the impact of the ongoing Red Sea
Crisis is more on exports rather than imports,
Maersk said.
This is primarily because Asian countries are
major global exporters. China, Asia’s biggest
economy and the second-biggest in the world, is
also the largest exporter to many Asian
countries.
Routes between the Far East – which spans east
southeast Asia – and Europe via the Suez Canal
have been directly impacted, with disruptions
in the Red Sea affecting most trade routes.
“First, hubs in Asia are being impacted with
congestion across key ports, causing delays and
bottlenecks to ripple through the entire
system,” Maersk said.
“Second, ocean networks have been reorganised
with vessels being moved to different regions
to better meet demand for capacity.”
This has led to a widening global impact that
has affected regions that weren’t originally
directly affected by the Red Sea disruption.
Intra-Asia shipping routes are also facing
equipment shortages, especially out of China,
impacting the entire industry.
Initially affecting long-haul routes, the
scarcity now extends to shorter regional
routes.
This leaves carriers like Maersk with a
difficult choice: prioritize returning empty
containers to China or shipping full containers
to other destinations, both options translate
to increased costs and contributing to further
supply chain disruptions.
“We are also approaching typhoon season, which
is expected to impact East China and South
China, creating further risks of congestion,”
the shipping giant said.
Focus article by Nurluqman
Suratman
Ethylene18-Jul-2024
SINGAPORE (ICIS)–In this podcast, Asia
ethylene editor Josh Quah and analyst Aliena
Huang discuss the factors impacting arbitrage
flows of ethylene from the US to Asia.
Spot arbitrage window between US and Asia
closed but term arrivals for July remain
healthy
Storm Beryl, low affordability in Asia, may
keep spot arbitrage trades closed into Aug
Panama Canal traffic levels expected to
return to pre-congestion levels by Oct
Hydrogen18-Jul-2024
SINGAPORE (ICIS)–In this podcast, ICIS
analysts Patricia Tao, Lewis Unstead and Aliena
Huang delve into how the upcoming CBAM (Carbon
Border Adjustment Mechanism) will impact
China’s export-oriented manufacturing sectors
and hydrogen’s crucial role in its low-carbon
economy.
China’s national energy law draft includes
hydrogen, marks shift toward low-carbon
industry
Move comes ahead of EU’s CBAM
CBAM to affect global trade, particularly
for high-emission products
Crude Oil18-Jul-2024
SINGAPORE (ICIS)–SK Innovation, the parent
company of battery maker SK On and
petrochemicals producer SK Geo Centric, has
agreed to merge with its energy affiliate SK
E&S in an overhaul to improve its
profitability.
The two companies are merging in a proactive
effort to navigate the challenging external
business landscape, characterized by a
prolonged global economic downturn, increased
volatility in the energy and chemical
industries, and a slowdown in the electric
vehicle (EV) market, SK Innovation said in a
statement on 17 July.
“By integrating assets and capabilities across
both energy and electrification sectors, the
merged company will bolster its core
competitiveness and profitability,” it said.
Additionally, the merger aims to secure
competitiveness in future energy business
areas.
Upon merging, the combined entity will
transform into an energy firm with assets
totaling Korean won (W) 100 trillion ($72.4
billion) and revenues of W88 trillion,
“positioning itself as the largest private
energy company in the Asia-Pacific region”, SK
Innovation said.
The merged firm will also increase earnings
before interest, taxes, depreciation and
amortization (EBITDA) to W5.8 trillion, up from
pre-merger levels of W1.9 trillion, it said.
The two companies expect that by 2030, the
synergies from the integration alone will add
over W2.1 trillion to EBITDA, which is targeted
to hit W20 trillion by the end of the decade.
“Notably, the merged company will be able to
mitigate the high profit volatility of the
petrochemical business, which has served as a
reliable cash cow, with the stable profit
generation capabilities of the LNG [liquefied
natural gas], power, and city gas businesses,”
SK Innovation said.
The management boards of both SK Innovation and
SK E&S approved the proposed merger on 17
July, subject to shareholders’ approval on 27
August.
The merged corporation is expected to be
officially launched on 1 November.
“The merged company will develop a
comprehensive portfolio that spans all areas,
including energy sources (such as oil,
chemicals, LNG, city gas, power, renewable
energy, batteries, ESS [energy storage system]
hydrogen, SMR, ammonia, and immersion cooling),
energy carriers, and energy solutions,” SK
Innovation said.
“Currently, global oil majors are also
currently pursuing balanced portfolios across
the energy sector through various mergers and
acquisitions.”
SK Innovations’ business portfolio includes
petrochemicals, lubricants, and oil
exploration.
It is now diversifying into future energy
sectors such as electric vehicle batteries,
small modular reactors (SMR), ammonia, and
immersion cooling.
SK E&S was spun off from SK Innovation in
1999 as a city gas holding company and is
transitioning into a green portfolio that
organically integrates its four core businesses
– city gas, low-carbon LNG value chain,
renewable energy, and hydrogen and energy
solutions, to create synergies.
Separately, SK On’s board has approved a merger
with sister companies – crude oil and petroleum
products trading firm SK Trading International
and energy logistics firm SK Enterm to improve
raw material purchasing efficiency and expand
trading, helping improve SK On’s profit
structure.
“Through the merger of these three companies,
SK On will be able to further strengthen its
competitiveness in securing raw materials
($1 = W1,380)
Speciality Chemicals17-Jul-2024
HOUSTON (ICIS)–Liquid chemical tanker rates
from the US Gulf to Asia are plunging this week
as plant shutdowns and delays in the aftermath of
Hurricane Beryl have led to “gaping large holes
of space”, shipping brokers said on Wednesday.
Hurricane Beryl made landfall in Texas on 8
July between Corpus Christi and Houston, which
is a key region for US petrochemical
production.
Some plants took precautionary measures and
shut down ahead of the storm, while others
sustained damage or lost power or other
utilities to their sites, leading to shutdowns
and force majeures.
A shipping broker said the outages and delays
left shipowners without contract cargoes that
are typically the base volumes for vessels.
“As a result, there are gaping large holes of
space available for prompt loading,” a broker
said.
The broker expects the trend to continue for
the next week or two.
A different broker said it is seeing part cargo
space for the rest of this month and into
August across MOL and Odfjell vessels.
Rates have also softened this week along the
USG-Brazil trade lane as some partial space has
opened.
Beryl has led to a “wait and see” sentiment for
players on this trade lane, a broker said.
PANAMA CANAL
A broker said that Stolt has joined MOL and
Odfjell in resuming transits through the Panama
Canal.
Restrictions have gradually eased at the canal
after the Panama Canal Authority (PCA) began
limiting transits in July of last year because
of low water levels at the freshwater lake that
feeds the locks because of an ongoing drought.
Water levels have improved because of the onset
of the rainy season and conservation efforts
enacted by the PCA to better use the freshwater
available to them.
The PCA will limit transits on 3-4 August for
planned maintenance at the Miraflores locks.
Visit the ICIS Logistics – impact on
chemicals and energy topic
page.
Visit the ICIS Hurricane
Beryl topic
page.
Thumbnail image shows a container ship
moving through the Panama Canal. Photo courtesy
of the PCA.
Power17-Jul-2024
UK government does not rule out increasing
budget for offshore wind in next auction
Capacity would need to average 16.60GW in
the next two auctions to procure the capacity
needed to reach revised 2030 target
But only 10.6GW of offshore projects have
the required development consent to enter the
auction
LONDON (ICIS)–The UK government has left the
door open to a possible budget increase for
offshore wind at an upcoming renewable capacity
auction under the Contracts for Difference
(CfD) scheme, after it said it intends to
quadruple installed capacity for the technology
by 2030.
But ICIS calculations show that, depending on
the strike price, the budget would have to
increase between 2.3-5.4 times in order to
allow for a capacity award consistent with
meeting the revised target. And even if it did,
planning hurdles are set to prevent this, with
the pressure shifting on subsequent auction
rounds.
The budget for offshore wind in the upcoming
round is currently £800m and the maximum strike
price has been set at £73/MWh.
A spokesperson for the department for energy
security and net zero told ICIS that
applications for the sixth allocation round are
currently being assessed. “The Secretary of
State will then carefully consider whether to
increase the budget,” they said.
The government did not confirm an exact figure
for the revised offshore wind target. To
present an idea of how much quadrupling
offshore wind capacity by 2030 would translate
into, ICIS quadrupled its forecast for
installed capacity by the end of 2024,
resulting in 61.08GW by 2030. Actual intended
capacity may vary.
A trader said: “I suspect they will increase
the budget; we have had people backing out of
projects and these will be the people saying
they need better returns so the budget will
need to be higher for the amount of capacity
the government wants.”
CFD BUDGET
ICIS Analytics calculated that, in the next two
CfD rounds, capacity will need to average
16.60GW per auction to obtain the amount needed
to reach the 2030 target. This is to allow
construction time which is usually between six
to eight years.
ICIS calculated that, if the auction cleared at
a strike price of £60/MWh, a budget of £800m
will be able to finance 4.2GW of capacity.
If the auction cleared at the maximum strike
price of £73/MWh, the budget would only be able
to fund 3GW.
If the budget was increased to £1bn, 5.3GW of
capacity could be obtained with a clearing
price of £60/MWh.
Similarly, if the auction cleared at the
maximum strike price of £73/MWh, 3.9GW could be
obtained.
SHORTFALL
While an increase in budget to £1bn would
procure more offshore wind capacity, a larger
budget is required to obtain the capacity
needed to meet the 2030 target.
ICIS Analytics calculated a budget of nearly
£1.8bn is needed to obtain 16.60GW of capacity
in the sixth auction if it cleared at the
lowest price of £44.1/MWh.
This was modelled as the lowest figure as it is
just above the maximum clearing price of the
fifth auction round, which was £44/MWh and
was too low to attract bids ,
If the auction cleared at £60/MWh, which is a
base case scenario, the budget would need to be
nearly £3.2bn.
Furthermore, if the auction cleared at the
maximum strike price, a £4.3bn budget is
required.
However, according to ICIS analyst Robbie
Jackson-Stroud, there are too few entrants to
obtain 16.60GW for the auction, as only 10.6GW
of offshore projects have the required
development consent to proceed to auction.
This therefore puts increasing pressure on the
seventh auction round, due to be held in 2025,
to obtain offshore wind capacity needed to meet
the 2030 target.
As things currently stand, ICIS analytics
forecasts only 39GW of offshore wind capacity
by 2030 under a base case scenario, therefore
falling short of the ambitious target.
.
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