LONDON (ICIS)–Senior editor for recycling, Matt Tudball, discusses the latest developments in the European recycled polyethylene terephthalate (R-PET) market, including: Italian bale prices drop month on month Blue bale prices rise in eastern Europe Downward pressure on UK colourless flake More demand emerging for food-grade pellets in H2

LONDON (ICIS)–Maritime security issues along the Red Sea and geopolitics-led macroeconomic challenges dominated supply-demand dynamics within the European acrylonitrile-butadiene-styrene (ABS) and acrylonitrile (ACN) markets in the first half of 2024. In this latest podcast, Europe ABS report editor Stephanie Wix and her counterpart on the Europe ACN report, Nazif Nazmul, share the latest developments and expectations for what lies ahead. Macroeconomic challenges continue to constrain ABS and ACN demand Europe-origin ABS partly supported by imports suffering from logistical issues Cautious optimism surrounds 2025 demand outlook despite geopolitical uncertainty ABS is the largest-volume engineering thermoplastic resin and is used in automobiles, electronics and recreational products. ACN is used in the production of synthetic fibres for clothing and home furnishings, engineering plastics and elastomers. Click here to open in a new window

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. Here are my three scenarios for China’s long-term chemicals and polymers demand growth with percentage weighting – i.e. how likely I view each of the scenarios. China chemicals demand grows is in the low single digits – 40%: Demand growth turns negative – 55%: The market returns to previous levels of growth – 5%. And I am becoming more convinced that we are entering a period of declining global chemicals growth as well as in China. It is what it is. This is what the demographics, debt, climate change and geopolitical factors seem to be telling us. This direction of travels appears to be supported by the latest China polypropylene ((PP) data. The 1992-2021 Petrochemicals Supercycle is receding further into the past. Saudi Arabia on a year-on-year basis saw its China PP sales turnover in China fall by an estimated $85m in January-June 2024. This followed $168m tonnes lower turnover in 2023 versus 2022. South Korea’s January-June 2024 turnover fell by $35m following a $377 decline in 2023 versus 2022. Meanwhile, China’s PP exports are in line to reach 2.5m tonnes in 2024, up from 1.3m tonnes in 2023. Companies need to respond to these secular and long-term shifts in markets by deciding whether they can continue to compete in commodity chemicals. 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.

SINGAPORE (ICIS)–SABIC’s net profit surged by 84.7% year on year to Saudi riyal (SR) 2.18 billion in the second quarter, supported by higher margins amid improved average selling prices, the chemicals giant said on Thursday. in Saudi riyal (SR) billions Q2 2024 Q2 2023 % Change H1 2024 H1 2023 % Change Sales 35.72 34.1 4.8 68.4 70.53 -3.0 Operational profit 2.1 1.64 28.0 3.31 3.4 -2.6 Net profit 2.18 1.18 84.7 2.43 1.84 32.1 “The global economy experienced a slight decline in the second quarter of 2024, primarily due to unexpected downturns in the recent economic indicators of major countries,” said Abdulrahman Al-Fageeh, SABIC’s CEO and executive board member. However, PMI data continued to indicate improvement in global economic conditions, while global trade showed signs of recovery, driven by higher exports, inventory restocking and increased financial activities, Al-Fageeh noted. “As inflationary pressures ease, some central banks have begun reducing interest rates, potentially providing additional stimulus to the global economy.” Q2 KEY POINTS – Q2 sales growth primarily attributed to the improvements of the average selling prices and a slight increase in sales volume. – Gross profit rose by SR1.76 billion due to improved profit margins for key products, partially offset by increased operating expenses from non-recurring charges. – A reversal of zakat provision, which is a mandatory Islamic tax on wealth, resulted in a non-cash benefit of SR545 million in Q2 2024, compared to a zakat expense of SR440 million in Q2 2023, due to updated regulations. – The petrochemicals segment’s revenue increased by 10% quarter-over-quarter to SR 33.33 billion in Q2, driven by higher methanol sales volume. – EBITDA rose 37% to SR 4.88 billion in Q2, compared to SR 3.56 billion in Q1, due to higher sales volume and average selling prices. Market trends on quarter-on-quarter basis: – Methyl tertiary butyl ether (MTBE) prices remained stable, supported by summer demand. – Methanol prices held steady, driven by tight supply and low inventories in China, as well as strong demand from Asia. – Monoethylene glycol (MEG) prices were flat, due to higher supply and stable demand. – Polyethylene (PE) prices increased slightly, due to delayed Middle East deliveries and tightened Southeast Asian supplies. – Polypropylene (PP) prices rose, supported by tight container and vessel supply. – Polycarbonate (PC) prices slightly increased, despite global oversupply, with high freight rates adding pressure to subdued demand in automotive and construction sectors. Separately, SABIC has successfully commissioned its new hydrotreater plant in Geleen, the Netherlands.  This facility plays a crucial role in SABIC’s advanced recycling process, transforming pyrolysis oil derived from post-consumer mixed plastic waste into high-quality alternative feedstock. This feedstock is then used to produce the SABIC’s TRUCIRCLE circular polymers. H1 KEY POINTS – The company’s revenue decreased by 3% year on year primarily due to a decline in sales volume. – Net profit rose on the back of an 18% increase in gross profit (SR1.96 billion) due to improved margins, partially offset by increased operating expenses from non-recurring charges. – Earnings were also supported by a SR245 million increase in the share of results from associates and non-integral joint ventures. OUTLOOK”Looking ahead, a global GDP growth of 2.7% is expected in 2024. At SABIC, our long-term focus remains on strategic portfolio optimization, restructuring of underperforming assets, and prioritizing sustainability and innovation,” the company said. “We maintain a disciplined approach in managing our CAPEX, projecting a spending at the lower range of $4.0 to 5.0 billion for 2024.” SABIC is 70%-owned by energy giant Saudi Aramco. Thumbnail shows a SABIC production facility (Source: SABIC)

HOUSTON (ICIS)–National Oceanic and Atmospheric Administration (NOAA) supported scientists announced that this year’s Gulf of Mexico “dead zone” is approximately 6,705 square miles, the 12th largest zone on record in 38 years of measurement. This equates to more than 4 million acres of habitat potentially unavailable to fish and bottom species, an area roughly the size of New Jersey. Scientists at Louisiana State University and the Louisiana Universities Marine Consortium led the annual dead zone survey from 21-26 July. The Gulf’s hypoxic (low oxygen) and anoxic (oxygen-free) zones are caused by excess nutrient pollution, which researchers attribute to being primarily from human activities such as agriculture and wastewater occurring in the watershed. First documented in 1985 off the coast of Louisiana, many researchers have primarily placed blame on farmland fertilizer run-off as being the main culprit of the dead zone. Yet evidence also shows that urban areas, human waste treatment, precipitation and atmospheric dust as well as natural sources also contribute large amounts. With excess nutrients there is an overgrowth of algae, which sinks and decomposes causing low oxygen levels which are insufficient to support most marine life and habitats. The Mississippi River/Gulf of Mexico Hypoxia Task Force, a state and federal partnership, has set a long-term goal of reducing the five-year average extent of the dead zone to fewer than 1,900 square miles by 2035. The five-year average size of the dead zone is now 4,298 square miles, more than two times larger than their target. “It’s critical that we measure this region’s hypoxia as an indicator of ocean health, particularly under a changing climate and potential intensification of storms and increases in precipitation and runoff,” said Nicole LeBoeuf, NOAA’s National Ocean Service assistant administrator. “The benefit of this long-term data set is that it helps decision makers as they adjust their strategies to reduce the dead zone and manage impacts to coastal resources and communities.” In June the agency had predicted an above-average sized dead zone of 5,827 square miles, based primarily on Mississippi River discharge and nutrient runoff data from the US Geological Survey. “The area of bottom-water hypoxia was larger than predicted by the Mississippi River discharge and nitrogen load for 2024, but within the range experienced over the nearly four decades that this research cruise has been conducted,” said Nancy Rabalais, Louisiana State University professor. “We continue to be surprised each summer at the variability in size and distribution.”

LONDON (ICIS)–The Eurozone manufacturing sector remained in deep contraction in July, with a steep decline in new orders leading to further contractions in output, and producers unable to pass on higher costs to customers The purchasing mangers’ index (PMI) for the sector stood at 45.8 in July, unchanged from June, while input prices saw the fastest increase in a year and a half, according to data from S&P Global. New orders are shrinking at the fastest rate in three months, while job shedding has continued for four months, with workforce reductions accelerating to the fastest pace since last December. A PMI above 50.0 indicates growth, while below 50 signals contraction. Hopes for overcoming the production slump have faded, prompting Hamburg Commercial Bank chief economist Cyrus de la Rubia to suggest a likely reduction in the GDP growth forecast from 0.8%. Greece and Spain, previously strong performers, saw growth slow to seven- and six-month lows of 53.2 and 51.0, respectively. Ireland’s manufacturing sector remained broadly in growth territory, at 50.1, while the Netherlands, Italy, France, Germany and Austria were all in contraction territory . However, purchasing activity trimmed more gently in July compared to June, and supplier performance improved. Factory goods prices remain stable, suggesting firms are absorbing costs. This, along with weakening demand, is expected to shrink profit margins and investments, potentially keeping inflationary pressures in check. The manufacturing sector faces challenging months ahead with no signs of improvement.

MADRID (ICIS)–EU measures to prop up its industrial fabric are going in the right direction, with some key demands of the chemicals industry now worked into regulation. Still, more is needed if the 27-country bloc is to salvage what remains of its thriving industrial region, according to Juan Labat, director general at Spain’s chemicals trade group Feique. Labat said moves to slow the implementation of the Green Deal are not destined to kill the plan in all but name. He said chemicals remain fully behind the spirit of the Deal, but pointed out that some of its time frames are too tight. In Spain, the cabinet is preparing an Industrial Policy regulation to be passed after the summer recess in Parliament: Labat praised the law – if anything, because it is the first of its nature in four decades, he said. In the second part of this interview to be published on 2 August, Labat expands on good fortune favoring Spain’s chemicals. The industry is displaying robust growth, despite the many challenges the global economy has faced in the past four tumultuous years, with Spanish unemployment falling and consumer spending strong. The second part will also touch on Feique’s relationship with the main chemicals trade unions. Chemicals is in Spain almost an exception in which entrepreneurs and their workers tend to largely agree on collective bargaining as well as demands they take to the government as a sector. There was an exception this year where a small dispute on wages ended in the National Court with the judge ruling in favor of workers. THE EU UMPTEEMTH INDUSTRIAL PLANThose who follow the EU’s industrial policies – admittedly, not an attention catching topic for most Europeans but such an important one as the region is aiming to lead the green economy in coming decades – may recall how in 2022 when the US passed the Inflation Reduction Act (IRA). This move by the US threw its EU neighbour across the Atlantic off guard. At the stroke of a pen at the Oval Office and a budget of slightly more than $300 billion dollars – small compared to some of the EU’s plans in the past four years – the US swung its doors open to large green investments. The US, of course, also benefits from lower energy costs thanks to its renewed status as a global producer of crude oil and natural gas. The US’s IRA and China’s focus to heavily subsidize sectors such as solar energy and electric vehicles (EVs), making them world leaders, forced the EU to wake up to the fact that its Green Deal, a decent attempt at least on paper to fight climate change, needed some tweaks here and there. One big tweak, long demanded by the industry, has been the so-called contracts for difference, which Labat praised as they contemplate state support for companies while they drop old polluting technologies and adopt new ones, where costs are still much higher. But Labat was not that positive about the overall implementation of the Green Deal which, as so many EU stories before it, kept being changed by Members of the European Parliament (MEPs) or even by the European Commission which had approved the initial Green Deal in its role as the EU’s executive branch. Labat is sanguine about, for example, changes to the deadlines in which polluting technologies must be phased out by, which overall creates high uncertainty for many businesses which want to go greener but are fearful of failing along the way if the public authorities and their regulations are unstable. “What we saw, for example, with Green Deal targets for certain technologies to be phased out by 2035, which soon after the Deal’s passing were changed to 2033: that is simply not serious and the opposite of legal certainty,” said Labat. “We want to go greener, but it would help if the authorities understood the huge undertaking this will mean. And, obviously, companies in our sector don’t work out their capex plans with just a short or medium term in mind: those assets are planned for several decades.” In perhaps a sign the pendulum is swinging, the EU or some of its members at least find itself mulling the delay of some of those initially very ambitious targets. After years in which the chemicals’ lobbying in Brussels seem to fall on deaf ears, trade group Cefic and its national association feel vindicated, finally. Labat was asked, however, if delaying targets – which potentially could be delayed again and again, according to the circumstances – is not pure and simple giving up on the Green Deal, which foresaw a net-zero EU economy by 2050. “Absolutely not – we are still very much behind the Green Deal. But I think the world of 2020 looks very different to the one now, just four years in, and more and more people are agreeing that some short timeframes to face out technologies were impossible and, in the end, could hurt the industry in the EU more than benefit it,” said Labat. “The Green Deal is a good framework, but for it to succeed it cannot be changed practically every month: that only creates uncertainty and I fear if that’s the norm, more and more may decide to set camp elsewhere with their green capital expenditures [capex]. We have a Green Deal, with clear objectives, let’s work on it, let’s develop it – but don’t keep changing it all the time.” The Green Deal did look very good on paper – less good seem to have been the implementation policies linked to it, said Labat. The ‘contracts for difference’ apart, Labat said the EU still must understand the industry needs better and work on energy costs, which remain the highest among the large world’s chemicals producers. SPAIN NOVELTY: AN INDUSTRIAL POLICYThe Spanish governments in office in the 1990s and 2000s did not have industry as a key sector to protect and prop up, the world’s own dynamics not helping either as many companies thought at the time moving production to cheaper Asian countries – China – was simply too good of a business plan. Spain rested on its laurels in industrial policy, while witnessing and ripping the benefits of its services-heavy economy: its tourism prowess being the prime example and a sector which, year after year, hits records. Over the past 30 years, the tourism sector has more than doubled. In 1995, 33 million visitors visited Spain. By 2023, 85 million did so. This news story by Spanish financial newspaper Expansion shows the data. But many in Spain see tourism also as a curse. Many economists say that for a country’s economy to be successful, its manufacturing sectors should account for 20% of its output. Many countries in the EU – France and Spain two of them – have seen their industrial sectors fall to levels of around 10-13% in the past three decades. There comes in the current coalition cabinet of the center-left Socialist Party and the far-left Sumar party: industrial workers are supposed to be one of its main constituencies, so scoring goals on that front is in their own interest. The cabinet and chemicals are on the same page on this one, although Labat recognized the fact that an Industrial Policy in itself is a novelty and, because of that, the way it is implemented will be key and success is not guaranteed. Overall, Feique likes what he is hearing. “There have been so many Industrial Policies which ended up literally not being worth the paper they were written on. And I think that’s linked that many of them generated frustration among those they were aimed at. Also, many of them seemed to fail to grasp that an ‘industrial policy’ worth the name must be transversal and practically have involved all ministries and authorities: it cannot be small, scattered measures here and there,” said Labat. “It must look and energy and its costs, at employment, and many other issues. The current thinking in the government is indeed for the regulations not to finance or implement specific measures. Instead, it will create government agencies which will oversee the policy’s implementation. “It contemplates a six-year industrial policy, split in three-year plans, and it’s in those plans where specific and sectorial measures will be implemented. Overall, we are liking what we are hearing. But we are also pragmatic, and past experiences tell us Spain has not precisely been an example of industrial policy success. Touch wood this time it is – chemicals would benefit so much if the things described above end up being implemented and, crucially, they work for everyone involved. “Finally – we are talking about a draft proposal for now: we will need to see what the law looks like and, more importantly, what resources are allocated to the specific measures set to be announced.” Interview article by Jonathan Lopez  

SINGAPORE (ICIS)–In 2012-2023, China’s hydrogen production more than doubled, with 80% of its 2023 output derived from coal and natural gas. With refineries playing a crucial role in the country’s overall hydrogen production, the ongoing shift toward chemical production is set to further boost demand. This trend is expected to accelerate the adoption of cleaner blue and renewable hydrogen sources in refineries. Join ICIS Asia deputy news editor Nurluqman Suratman, ICIS hydrogen analysts Patricia Tao and Anita Yang as they discuss the increasing importance of hydrogen in China’s refining sector.

SINGAPORE (ICIS)–South Korea’s petrochemical exports rose by 18.5% year on year by value to $4.19 billion in July, supporting the overall growth in total shipments abroad, official data showed on Thursday. The country’s total exports rose by 13.9% year on year to $57.5 billion in July, following a revised 5.1% gain in June, the Ministry of Trade, Industry and Energy (MOTIE) said in a statement. South Korea’s export growth streak has now reached 10 months, but a rebound in imports has trimmed the trade surplus, potentially weighing on GDP growth in the current quarter. South Korea’s economy posted a slower Q2 annualized growth of 2.3% compared with the 3.3% pace set in the preceding quarter amid sluggish domestic consumption. Imports were up by 10.5% at $53.9 billion, reversing the 7.5% drop in June, resulting in a July trade surplus of around $3.6 billion. South Korea’s trade balance from January to July ballooned by $51.2 billion, hitting a record high not seen since 2018. Exports to China reached $11.4 billion in July, a 14.9% year-on-year increase and the highest in 21 months, driven by growing demand for semiconductors, wireless communication devices, and other IT items as the industry’s recovery continues. This marks the fifth consecutive month that exports to China have exceeded $10 billion. As a result, South Korea’s total exports to China from January to July this year reached $74.8 billion, a 6.7% increase and the highest among all export destinations for the period. The country’s exports to the US set a new record for July at $10.2 billion, a 9.3% increase. South Korea’s exports to southeast Asia reached $9.9 billion in July, a 12.1% increase, driven by strong demand for major export items such as IT products, petroleum products, and petrochemicals. This marks the fourth consecutive month of growth in exports to ASEAN nations. Exports to India increased by 13.4% to $1.6 billion, while those to the Middle East jumped by 50.6% to $2.2 billion for the second consecutive month and exports to Japan rose by 10.1% to $2.6 billion. South Korea’s energy imports in July rose by 11.9% year on year to $10.9 billion, fueled by a 16.1% increase in crude oil shipments and a 23.8% rise in gas imports. MANUFACTURING DIPS Separately, the S&P Global South Korea manufacturing purchasing managers’ index (PMI) released on Thursday declined from 52.0 in June to 51.4 in July, indicating a slowdown in the sector. Although output and new orders continued to grow, rates of expansion eased to their lowest levels in three months. A surge in new product launches drove up orders, particularly from overseas clients, as domestic demand remained sluggish. Consequently, new export orders continued to grow for the seventh consecutive month, fueled by robust demand from southeast Asia, the US and Japan. “Together with today’s weaker-than-expected exports and softened business surveys, we are wary of a possible moderation in exports in the near future,” Dutch banking and financial information services provider ING said in a note. “However, export details – by product and by destination – are quite encouraging so far, thus it is still too early to conclude that export momentum is trending down.”