HOUSTON (ICIS)–Although the Canadian railroad labor strife is poised to carry on further, US fertilizer participants are not growing overly concern as this action comes at a slower time of the year for domestic applications and fresh buying. With it being late August most of the attention of domestic growers are either on advancing harvesting campaigns or commencing those efforts soon, with some locations still tending to mature crops. There were also strong summer refilling efforts, which together is overall keeping the pull for nutrients light for most products although volume of nitrogen, phosphate and potash have continued to move over August on barges and terminals. As a source said they had zero concerns so far and not hearing that the situation is concerning customers either, “I assume if it persists there will be. It’s just happening at a time of year that it isn’t impactful enough to our industry.” The railroad strike appeared to have been resolved on 22 August when the government directed the matter to the Canada Industrial Relations Board (CIRB) for binding arbitration, with Canadian National (CN) and Canadian Pacific Kansas City (CPKC) having said they were preparing to begin running. Then on Friday labor union Teamsters Canada Rail Conference (TCRC) issued a strike notice for 26 August, against railroad Canadian National (CN) with approximately 6,500 unionized employees set to withdraw their service starting Monday. As there was prior to the start of this strike activity, there is also optimism from some that this will not be a protracted dispute. The US is about to enter a period of what has been anticipated to be good post-harvest demand, with a source saying a work stoppage “could be an issue then but generally these things resolve quickly.” Earlier this week industry group Fertilizer Canada said disruptions to rail services across the country will cost the fertilizer industry millions per day in lost sales revenue, with an average of 69,000 tonnes of fertilizer product transported per day. 75% of all fertilizer produced and used in Canada is moved by rail, with minimal transportation alternatives, with 90% of those volumes which are destined for the US market delivered by rail.

TORONTO (ICIS)–Labor union Teamsters Canada Rail Conference (TCRC) on Friday issued a strike notice for Monday, 26 August, against railroad Canadian National (CN). The move surprises as railroads CN and Canadian Pacific Kansas City (CPKC) said earlier they were preparing to resume operations after a government order on Thursday that referred the labor dispute between TCRC and the railroads to the Canada Industrial Relations Board (CIRB) for binding arbitration. The country’s labor minister issued the order after the railroads locked out about 9,300 workers and shut down operations on Thursday, 22 August, 00:01 Eastern Time. In Friday’s strike notice, TCRC said that about 6,500 unionized CN workers would withdraw their service starting Monday, 26 August, 10:00 Eastern Time. However, it added that its differences with CN were not “insurmountable” and that it remained available for discussions to avoid a further work stoppage at CN. TCRC’s strike notice also surprises because the union said earlier that it took down picked lines again CN and that unionized CN workers would start returning to work on Friday. Picket lines at CPKC, however, would remain in place, the union said. Teamsters president Francois Laporte said in remarks to public broadcaster CBC/RDI on Friday that the union was looking at its legal options and would “use our constitutional rights” to “fight” for workers’ interests. He also confirmed that despite the referral to the CIRB, the industrial action at CPKC was continuing. Political commentators said that the union may seek to challenge the constitutionality of the minister’s referral of the dispute to the CIRB for binding legislation. There is legal precedent that deems the right to strike and to collective bargaining as a constitutional right. Bottomline: Despite earlier hopes that binding arbitration would end the dispute and trains would run again soon, freight rail service remains disrupted and it is unclear when it will resume. CHEMICALS AND RAIL 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. Chlorine plants in Canada may have to shut down if reliable rail service does not resume soon, CIAC CEO Bob Masterson said. (Map by Miguel Rodriguez Fernandez) Meanwhile, LyondellBasell on Thursday declared force majeure on all rail shipments to Canada and industrial chemical producer Chemtrade Logistics warned about the impact of the rail disruption on its financial results. 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: With additional reporting by Adam Yanelli and Nurluqman Suratman Thumbnail photo source: CN

TORONTO (ICIS)–Freight railroads Canadian National (CN) and Canadian Pacific Kansas City (CPKC) are preparing to restart operations after the federal government stepped in to end a labor dispute with workers – although it remains unclear on Friday when exactly a full freight rail service will resume. Following the lockout of about 9,300 rail workers and the shutdown of operations at both railroads effective Thursday, 22 August, 00:01 Eastern Time, Canada’s federal labor minister ordered binding arbitration to settle the dispute between the railroads and labor union Teamsters Canada Rail Conference (TCRC). The arbitration process will be conducted by the Canada Industrial Relations Board (CIRB), an independent, quasi-judicial labor tribunal. The CIRB is expected to act quickly, and trains should be running again “within days”, labor minister Steven MacKinnon said. CN said it was “satisfied” that the labor conflict has ended CPKC said it remains prepared to resume service as soon as it is ordered to do so by the CIRB TCRC said it has taken down picket lines at CN and workers would return on Friday, but at CPKC the work stoppage “remains ongoing”, pending an order from the CIRB In the chemical industry, trade group Chemistry Industry Association of Canada (CIAC) said that going by past experience, for each day of a rail disruption it could take three days or more to return to service once labor issues are resolved. “Things will continue to be tight and will need monitoring” going forward, said CIAC president Bob Masterson. The trade group is particularly concerned about the supply of chlorine and derivatives for drinking water treatment. For safety reasons, chlorine can only be shipped by rail. Although the rail shutdown lasted less than a day, the railroads had stopped accepting chlorine and other hazardous materials for shipment before 22 August as they prepared for the shutdown. 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) Meanwhile, LyondellBasell on Thursday declared force majeure on all rail shipments to Canada and industrial chemical producer Chemtrade Logistics warned about the impact of the rail disruption on its financial results. 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: With additional reporting by Adam Yanelli and Nurluqman Suratman Thumbnail photo source: CN

Additional reporting by Anna Coulson UK energy price cap for October-December set at £1,717 Q4 cap is £149 higher than the Q3 cap, but has fallen £117 year on year Higher wholesale energy prices for Q1 2025 suggest a price cap rise compared to Q4 2024 LONDON (ICIS)–The UK energy price cap for October-December will increase compared to the previous quarter, energy regulator Ofgem said on 23 August, but remains lower than in the same period one year ago. Introduced in January 2019, the price cap sets the maximum price that energy suppliers can charge end-users for each unit of energy. Ofgem sets the cap based on supplier operating costs, including ICIS wholesale energy price assessments, as well as VAT and network costs. Looking ahead, if forward prices for delivery in the first quarter of 2025 continue at current levels, the wholesale component of the cap for the period January-March is expected to be higher than for the preceding three months. FALLING PRICES ICIS assessed the British NBP gas Q4 ’24 contract at an average 97.069p/th from 20 May to 15 August – the period used by Ofgem to calculate wholesale energy costs for the upcoming cap. This is 17.026p/th lower than the Q4 ’23 contract average over equivalent dates. The year-on-year difference comes as a result of several factors, including a gradual fall from a peak in prices after the Russian invasion of Ukraine and the trade sanctions which followed. Fears of strikes at Australian LNG refineries also pushed up gas prices during 2023, whereas LNG markets were generally more settled in 2024. Due to its significant role in power generation, gas is a key price driver for the UK power market. This means that UK power prices have moved with a similar bearish trend to NBP Q4 ’24 prices, at a discount to Q4 ’23 prices. ICIS assessed the UK power Baseload Q4 ’24 contract at an average £85.65/MWh between 20 May and 15 August, 28% lower than the Q4 ’23 over equivalent dates. The Q4 ’24 power contract is at a premium to its European counterparts which indicates that the UK is likely to import power from neighbouring countries, including France, through the front-quarter. Data from French utility EDF shows that nuclear output is set to average 48.1GW in the period 1 October to 31 December, 7.1GW above the 2019-23 average. Both gas and power Q1 ‘25 prices are currently at a premium to Q4 ’24 prices, which will likely result in a larger wholesale component of the cap for the first quarter of 2025 than for October-December. CAP OUTLOOK On 22 August, ICIS assessed the NBP Q1 ‘25 contract at 7.025p/th above the Q4 ’24 contract and the UK power Baseload Q1 ‘25 contract was £7.10/MWh above the Q4 ’24 contract. Yearly energy prices generally peak around February, when the coldest months of the year increase energy demand for heating. In these months, gas storage facilities start to deplete and disruptions to supply cause larger price rises than at other times of the year. Given the increasing European reliance on LNG, higher prices also attract LNG shipments to Britain ensuring stability of supply. On the power side, French nuclear availability is another key driver for UK power prices through the first quarter. The UK power Q1 ‘25 Baseload contract was €109.47/MWh on 22 August, which is €5.22/MWh above its French counterpart, indicating that the UK is likely to import power from France through the first quarter of 2025. ICIS Power Foresight indicates that French nuclear generation could total 98.6TWh in the period 1 January to 31 March. However, unplanned outages, downward revisions in nuclear availability, and cold weather through the first quarter of 2025 would be potential bullish drivers for French and UK power prices.

LONDON (ICIS)–Senior Editor for Recycling, Matt Tudball, discusses the latest developments in the European recycled polyethylene terephthalate (R-PET) market, including: Blue flake prices rise at the low end in eastern Europe Wide range of views on eastern Europe bale prices Mixed coloured flake demand remains poor September price talks getting underway

LONDON (ICIS)–Business activity in the eurozone rose in August, driven by the services sector, which grew at the fastest pace in four months. Growth in services was largely due to the strongest expansion in France since May 2022 as the Olympics took place in Paris, according to S&P Global’s latest Purchasing Managers Index (PMI) data. This drove the flash services August PMI index to 53.3, up from 51.9 in July, which in turn helped push the HCOB (Hamburg Commercial Bank) composite PMI index to a three-month high of 51.2. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, warned, however, that the uplift could be temporary. “The boost largely comes from a surge in services activity in France, with the Business Activity Index jumping by almost five points, likely linked to the buzz surrounding the Olympic Games in Paris,” he said. “It’s doubtful this momentum will carry over into the coming months, however. Meanwhile, the overall pace of growth in the services sector has slowed down in Germany, and the eurozone’s manufacturing sector remains in rapid decline.” S&P’s August eurozone manufacturing PMI was at an eight-month low of 45.6, down slightly from July. An index figure above 50 indicates expansion and below 50 contraction. Elsewhere, the latest PMI data for the UK showed a significant increase in private sector business activity, with the composite index rising to a four-month high of 53.4. “August is witnessing a welcome combination of stronger economic growth, improved job creation and lower inflation, according to provisional PMI survey data,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

TORONTO (ICIS)–Canada’s federal labor minister has decided to refer the labor dispute between the country’s two freight railroads and labor union Teamsters Canada Rail Conference (TCRC) to the Canada Industrial Relations Board (CIRB) for binding arbitration, he said in a webcast media briefing on Thursday. Steven MacKinnon expects the CIRB to act “with dispatch” and rail services at railroads Canadian National (CN) and Canadian Pacific Kansas City (CPKC), which shut down effective Thursday morning, 00:01 eastern time, should resume within a couple of days, he said. With the decision, the minister reversed his previous position. Just hours before the shutdown took effect, he had said the government would not intervene but leave it to the parties to settle the dispute through the collectives bargaining process, and last week he rejected CN’s call for binding arbitration. However, in Thursday’s press briefing MacKinnon said that he came to the conclusion that the negotiations between the railroads and the union were at an impasse and that collective bargaining was not working to settle the dispute. He therefore decided to direct the CIRB to settle the dispute through final binding arbitration; to extend the terms of the existing collective agreements until new agreements are signed. The CIRB process was “generally a process that does not take longer than two days”, he said. However, he conceded that it was not yet quite clear when exactly rail service will resume, adding that the CIRB was an independent body that follows its own procedures. The CIRB is a quasi-judicial tribunal charged with keeping the industrial peace in Canada. The government has come under intense pressure from trade groups in Canada and the US and from Canadian provincial premiers (governors) to take quick action to end the shutdown, which threatened the economy and trade relations with the US. MacKinnon acknowledged the concerns raised by the chemical and fertilizer industries about supplies of chlorine to treat drinking water and the supply of potash fertilizer to farmers. It was up to the government to ensure that shipment of chlorine and fertilizer were not disrupted, the minister said. The railroads had stopped accepting shipments of chlorine and other hazardous materials well ahead of the 22 August shutdown. Meanwhile, LyondellBasell on Thursday declared force majeure on all rail shipments to Canada and industrial chemical producer Chemtrade Logistics warned about impacts from the rail disruption on its financial results. With additional reporting by Adam Yanelli Thumbnail photo source: CN 

HOUSTON (ICIS)–In light of the recent surge of ocean freight rates, US plastic scrap trade has slowed some to overseas destinations, but still remains robust within North American borders. Albeit lower this quarter, polyethylene terephthalate (PET) plastic scrap in particular continues to be strong in import and export volumes amid a moderate domestic market. US remains a net importer of plastic scrap US PET scrap imported decreased 11% Q2 2024 vs Q1 2024 US PET scrap exported increased 62% Q2 2024 vs Q2 2023 IMPORTS SLOW ON GLOBAL FREIGHT, PET REMAINS STRONG Q2 2024 trade data from the US Census Bureau shows US imports of plastic scrap – noted by the HS code 3915 – have fallen 10% quarter on quarter, but still having increased 7% year on year when comparing with Q2 2023. Plastic scrap imports include items such as used bottles, but also other forms of recycled feedstock such as purge, leftover pairings and now also flake material. Imports totaled 114,969 tonnes in Q2 with drops seen across the major polymer groups for US scrap import. Polyethylene (PE) scrap was down 13%, while polyethylene terephthalate (PET) scrap was down 11% quarter on quarter. Based on volume alone, the drop in PET imports by 6,857 tonnes is the largest contributing factor to the overall decrease. While imports from Canada and Mexico still dominate total volumes, when looking at PET specifically, imports from Mexico have dropped off significantly. Top sending countries for PET scrap are Canada, followed by Thailand, Ecuador, Japan, Indonesia and Honduras as of the 1H2024 data. This means less than 25% of US PET scrap imports came from North America, while over 43% of PET imports originated from Asian countries, a reversal of the statistics seen just two years prior. While down quarter on quarter, PET scrap imports are still elevated in comparison to previous years, up as much as 24% year on year. As of Q2 2024, PET makes up 50% of all US imported plastic scrap, followed by the “other” plastic scrap category at 29% and PE scrap at 13%. US recycled polyethylene terephthalate (R-PET) market participants confirm they have seen a notable rise in imported R-PET activity from Asia and Latin America, particularly due to their cost-competitive position when it comes to feedstock, labor and facility costs. Though towards the back half of Q2, ocean freight rates did substantially rise, likely curtailing the window of cost competitiveness for many. Typically, imports from these overseas locations must be ordered weeks, if not months, in advance, and so Q2 import volumes largely represent demand from one to two months prior. Even with higher ocean freight rates today, US converters and recyclers continue to buy imported flake and pellet to supplement operations, as it remains cost-competitive in most cases. R-PET demand on the East Coast has continued to strengthen during the summer months and is now looking solid through the end of the year, a deviation from the typical seasonal demand pattern. Though imports come with additional transportation and cost risk, players accept that international supply is now woven into the fabric of the market, much like with virgin PET. PET EXPORTS SURGING, OTHER PLASTICS SEE WEAK GLOBAL MARKETS Despite the desire for a growing domestic recycled plastics market, feedstock material continues to bleed out of the country, specifically PET bales. US exports of plastic scrap have increased 5% quarter on quarter to a total of 112,385 tonnes, while PET scrap exports have increased 18% quarter on quarter, and a whopping 62% year on year. Though the US has always exported a portion of domestic bale material to other countries, including Mexico and some in Asia,  exports to Mexico have surged in the last 10 months. This growing trade relationship is largely attributed to new capacity in Mexico, paired with strong local demand which has elevated local bale prices. As a result, Mexican recyclers have been purchasing US PET bales as a lower cost option with high availability. Overall, exports of other types of plastic scrap continue to slow, following the Chinese National Sword and Basel Convention adoption several years ago. PE continues to be a leading polymer type for US plastic scrap exports, coming in at 33,556 tonnes in Q2 2024. According to 1H24 total PE imports, India is the largest destination at 25%, followed by Indonesia at 15% Canada at 14%, and Malaysia and Vietnam tied at 13%. As of this past quarter, the US remains a net importer of plastic scrap.

HOUSTON–Global chemicals major LyondellBasell has declared force majeure on all rail shipments to Canada after that country’s two largest railroads shut down operations after negotiations for a new collective bargaining agreement stalled. The labor stoppage and embargoes already implemented by the rail companies could impact LyondellBasell’s ability to deliver polymers, it said in a 22 August customer letter. The company did not immediately reply to a request for comment. The shutdown at Canadian National Railway (CN) and Canadian Pacific Kansas City (CPKC) began at midnight eastern time on Thursday, with more than 9,000 workers locked out after failing to reach an agreement with their employees’ union. CN and CPKC have issued all-commodity embargoes, according to US railroad Norfolk Southern (NS) in a service alert. The embargos from CN and CPKC cover all NS originated traffic destined for Canada and all Canadian originated traffic destined for NS destinations for all commodities. US railroad CSX issued an embargo on all shipments to and from CN and CPKC that contain highly hazardous, toxic inhalation hazards and poisonous inhalation hazards such as chlorine gas, which is used for water treatment. Container shipping company Hapag-Lloyd told customers it has ships in various stages of loading and unloading in Vancouver, Canada but has three vessels on various services that are under review because of the rail disruption. On 21 August, the carrier said it is ceasing taking new rail bookings originating in the US and loading via a Canadian gateway. Following is a map of the rail network and main chemical production hubs in Canada. BACKGROUND The simultaneous rail disruption at CN and CPKC has been looming over the chemical and other industries for months. Canada’s chemical production is heavily geared towards export, with 80% destined for foreign markets – primarily the US, accounting for 80% of exports. Rail transportation plays a crucial role, handling over 70% of Canadian chemical producers’ shipments, with some relying entirely on rail. Officials from the chemical and other industries have repeatedly warned about the impacts simultaneous disruptions at both railroads could have on Canada’s already weak economy and on trade with the US. (Recasts, adds force majeure details in paragraph 2) With additional reporting by Nurluqman Suratman and Stefan Baumgarten Thumbnail photo: A Canadian National train. (Photo by Shutterstock)