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.

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

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.

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

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.

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.

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.

HOUSTON (ICIS)–Meteorologists at Colorado State University (CSU) maintained their forecast of an active 2024 Atlantic hurricane season but slightly reduced the number of named storms they expect to see. The forecasters at CSU still expect 12 storms to reach hurricane strength this season, with six of them expected to reach major hurricane strength of Category 3 or higher. A Category 3 storm is one with maximum sustained winds of 111 miles/hour or faster. The only change from the July update is the expectations of 23 named storms, down from 25. Hurricanes Beryl and Debby, as well as tropical storms Alberto and Chris are included in the current forecast. Hurricane Beryl made landfall on the Texas Coast on 8 July and caused damage that led to several declarations of force majeure (FM) and multiple outages across petrochemical complexes and major hubs of production along the US Gulf Coast. Hurricane Debby made landfall on 5 August in northwestern Florida and weakened into a tropical storm before creeping slowly across Georgia and back into the Atlantic Ocean, where it was hovering near the coasts of Georgia and South Carolina. It is expected to make a second landfall in the Carolinas and then continue up the Eastern Seaboard. Terminals at the Port of Savannah were closed on Tuesday, but officials anticipate reopening on Wednesday once the US Coast Guard completes its waterway inspection and offshore wind analysis. The South Caroline Ports Authority is operating normal gate hours on Tuesday and will shift to reduced hours on Wednesday. Forecasters at AccuWeather are warning about extreme flooding risk in the next 72 hours from Debby with 2 feet of rainfall expected in parts of Georgia and South Carolina. IMPACT ON CHEMICAL PRODUCTION 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. IMPACT ON RECYCLING Severe weather, including tropical storms, heavy rain and winter weather, can easily disrupt curbside and deposit collection efforts, thus limiting the incoming supply of polyethyelene terephthlate (PET) and high density polyethylene (HDPE) bottles for recycling. If collection efforts are delayed, in some cases, material will be routed to landfill, as material recovery facilities (MRFs) have limits on input processing abilities and are unable to catch up. Additionally, MRFs must often dry out wet mixed recyclable material to optimize the sorting process, which can further delay processing.

HOUSTON (ICIS)–Avient has raised its 2024 guidance for adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) following stronger-than-expected Q2 results: New 2024 guidance Previous 2024 guidance 2023 Adjusted EBITDA $515-540 million $510-535 million $501.8 million In the second quarter, Avient saw broad-based 5% organic sales growth in both of its segments: Color, Additive & Inks (CAI), and Specialty Engineered Materials (SEM). Both segments gained market share and benefited from inventory restocking in certain end-markets, CEO Ashish Khandpur and CFO Jamie Beggs told analysts during Avient’s Q2 earnings call on Tuesday. Tight cost control and raw material price deflation helped expand the adjusted EBITDA margin by 100 basis points year on year to 16.9% in the second quarter, they said. The better-than-expected performance was led by CAI, which saw improved demand and favorable raw material costs. MARKETS In terms of end-markets, growing sales into two of Avient’s largest markets, packaging (+8%) and consumer (+10%), had the greatest impact in the second quarter, said Khandpur. Both markets benefited from “some restocking”, particularly in Europe, he added. Sales growth in buildings and construction and healthcare was also strong. Although the macroeconomic indicators for building and construction remained weak, both the SEM and CAI segments gained market share and won new business in the US and Canada, Khandpur said. Meanwhile, destocking in the healthcare market has finally run its course, with Avient’s sales into that market up 10% year on year in the second quarter. Sales into the defense end-market continued to be driven by the global conflicts and certain NATO programs, with full-year sales growth expected in the low double digits, he said. The telecommunications and energy markets, which together account for about 7% of Avient’s total sales, however, remained “challenged”, with sales down in the double digits in the second quarter as customers reduced inventories. Telecommunications should improve in the second half as demand in the US has started to improve more recently, Khandpur said. In energy, Avient is seeing improving trends in the third quarter, in particular for applications designed to improve the reliability of the electrical transmission grid, he said. Artificial intelligence (AI) was raising electricity consumption, driving demand for electricity generation and distribution, with positive derivative effects on the materials Avient supplies to energy markets, he noted. Electric mobility and electrification are happening, and Avient aims to “become part of those fast-growing markets”, he added. LATIN AMERICA OPPORTUNITY Avient’s sales in Latin America grew by 19% year on year in the second quarter, driven by sales into the region’s packaging market. That market saw strong demand in food & beverage and cleaning applications on the back of the recent floods in Brazil, as well as high temperatures and drought conditions in Mexico. Latin America currently accounts for only about 6% of the company’s total sales. However, going forward, Avient expects its Latin American packaging business to benefit from the near-shoring trend. The company’s position in the region is “strategic”, allowing it to serve original equipment manufacturers (OEMs) and brand owners who are looking to near-shore production and supply chains in light of global trade conflicts and political uncertainties, Beggs noted. RAW MATERIALS Avient realized about $35 million in raw material price deflation in the first half of 2024, Beggs said. However, the company does not expect this benefit to be repeated in the second half as it has started to see “modest levels of inflation” across the majority of its raw materials, including polyethylene (PE) and polypropylene (PP), as well as pigments and certain performance additives, she said. Primary raw materials used in Avient’s manufacturing operations include polyolefin and other thermoplastic resins, titanium oxide (TiO2), inorganic and organic pigments, specialty additives and ethylene. The executives did not comment on the current stock market turmoil and analysts on Tuesday’s call did not ask about this. Thumbnail photo of Avient CEO and president Ashish Khandpur; photo source: Avient