SAO PAULO (ICIS)–The Brazilian government’s decree changing natural gas regulations could potentially overhaul the market and, along the way, benefit the chemicals industry by providing it with cheaper energy and eventually with ethane-based feedstocks. The job of a lobbyist may be well paid, but it must be a hard one most of the time. For years, Brazil’s chemicals trade group Abiquim had been lobbying for the government to pass regulations which would allow the natural gas which comes as a byproduct from crude oil production to stay within the economy, and not be just reinjected into the ground again. To make common cause on that lobbying, Brazil’s polymers major Braskem has also been saying for years that it stands ready to expand its Duque de Caxias facilities, in the state of Rio de Janeiro, as soon as the necessary gas and derivatives were available. For years, those demands had fallen in deaf ears. Until 26 August, when the cabinet presided by Luiz Inacio Lula da Silva passed a decree contemplating, among other measures, higher powers for the oil and gas regulator ANP to set up the amount of gas which is reinjected into the system, for instance. If fully implemented, the decree could completely change the natural gas market in Brazil, and ultimately benefit the chemicals industry via lower energy costs and, potentially, having more ethane, rather than crude-based naphtha, as a raw material. In a written response to ICIS, Abiquim’s director general Andre Passos celebrated the decree and did not share the fears of some analysts, who see in giving regulators more power than traditional willingness to basically intervene the market. REINJECT OR NOT TO REINJECT – AND WHO PAYS THE BILLActing on natural gas in Brazil had almost become an imperative since the US shale gas revolution changed that country’s energy landscape, making it again a net exporter and reviving the petrochemicals industry to an extent no-one could imagine just two decades ago. In the US and Brazil, the two largest chemicals producers in the Americas, the contrast is stark: natural gas prices in the southern neighbor are around four times higher than in the US. However, some analysts have said they are concerned about the type of action taken, arguing that giving regulators such as the ANP more power could lead to more government interventionism in the oil and gas sector, potentially denting Brazil’s crude sector attractiveness to invest. However, lest not forget that Brazil’s crude sector is mostly dominated by one player, Petrobras, and this player is majority owned by the state: its CEO is appointed or dismissed as the President sees fit, and the crude major is effectively one more arm of the cabinet – a ministry of energy bis, so to speak. Still, Brazil’s crude sector was meant to go towards more liberalization, not less. And this is where the decree on natural gas passed in August overreaches, according to critics, the scope of what a government should do or should not do to encourage certain economic activity. According to the decree, the ANP will be able to mandate to crude oil players the levels of natural gas they can reinject back into the system during their crude oil extraction operations, and how much they should make available for companies and households. In simpler words: crude producers will have to go from reinjecting most of the gas – at a very low cost – to create an infrastructure to transport that gas onshore. For now, crude oil majors operating in Brazil have, for the most part, kept quiet about the decree. In a written response to ICIS on 29 August, Shell said it was “analyzing” the decree, without any further comment, a response it has not updated as of 3 September. Petrobras and Equinor had not responded to a request for comment at the time of writing. Equally, Braskem did not respond either to questions about potential petrochemicals expansions or how the decree could affect investments in crude oil and, ultimately, affect the industrial sectors if that was to happen. Petrobras’ CEO, Magda Chambriard, said, however, the company would do “everything possible” to reinject as much gas as it is able to, but also reminded how this reinjection will only be possible in the production platforms to be started up in the future. “On the platforms that are already there [in operation] and on those that are already being delivered, this [reinjecting more gas] will not be possible,” said Chambriard, quoted by specialized publication Offshore Energy. Abiquim’s Passos is not concerned at all and said that the powers given to ANP is a natural step for “an aspect of oil and gas production” that was not previously covered by the regulators. “The power to regulate will be used considering the interests of producers, consumers, and the state and, obviously, without implying a disincentive or a halt to new investments. In any case, given the magnitude of investments in oil, new investments specifically for gas would not significantly alter the competitiveness of oil exploration and production (E&P) in Brazil,” said Passos. “Abiquim is confident that the costs associated with E&P in Brazil’s oil sector are sufficiently low to cover any additional costs that may arise.” And to the fears about higher intervention from the government, Passos said it was a “global characteristic” of the crude oil and gas sectors to be highly regulated. CHEMICALS CHEERS, FINALLYAbiquim’s Passos is well aware of Petrobras’ CEO warning about the slowness in the natural gas market, and how it may take years for the changes benefiting chemicals to take place. But, after years of unsuccessful lobbying, Passos is a happy man who says the authorities have finally a vision of what chemicals should be and what its problems are. With that, he is ready to wait. “Nothing will be immediate. However, there is a compatibility between the time needed for greater availability of natural gas, improving the competitiveness of this raw material in Brazil, and the time required for petrochemical projects to mature – we should consider that this is a structural action with medium- and long-term impacts,” said Passos. However, after years of lobbying for a decree like the one just passed, the trade group was understandably exultant, not least because this comes just two months after another success. In June, Abiquim and Passos as its representative were part of Lula’s entourage when he went on a state visit to gas-rich Bolivia in June. During the visit, Brazil and Bolivia signed agreements to expand natural gas supplies, in a long-running business relationship which has made Bolivia the key supplier to the Brazil’s most populous, industrious and wealthiest states in the south via the pipeline Gasbol, the longest natural gas pipeline in South America at 3,150 kilometers (1,960 miles). At the time, Abiquim described the agreements inked in Bolivia as a “historic” step for Brazil’s chemicals and which, together with the latest natural gas moves, could pave the way for a truly competitive sector in the global stage, said the trade group. Agreements on fertilizers were also signed as Brazil, already one of the world’s bread baskets, continues to post a large trade deficit in that field. According to Brazil’s government, the deals in Bolivia and the decree on the regulatory environment for natural gas could unleash investments of Brazilian reais (R) 96 billion ($17 billion) in natural gas, biomethane, and fertilizer plants, as cited by Abiquim in its statement following the decree’s passing. SEVERAL DEALS, LITTLE RESULTSAbiquim’s lobbying has been directed where it could make the most difference: the government and Petrobras, admittedly achieving more success with the former than the later. In its quest for expanding natural gas supplies and lower prices, Abiquim knocked on Petrobras’ door in 2023 and formed a working group to explore solutions to the “critical situation” the chemicals industry was in. Nothing was heard about that working group, so this year the two parties gave it another shot and singed a memorandum of understanding (MoU) aiming for the same: to find ways of making the petrochemicals industry more competitive. So far, nothing concrete has been communicated, while chemicals remains with its operating rates at record lows as imports continue flooding Brazil and the wider Latin America, with an increase in import tariffs later this year one of the elements which, according to Abiquim, could start fixing the beleaguered Brazilian domestic chemicals production. “Over the last few months, both teams (Petrobras and Abiquim) have been concerned about handling anonymized data from the sector. Creating a safe environment for members to access competitive natural gas is Abiquim’s focus,” said Passos. “The high volume of natural gas consumption for the sector justifies the continuation of the negotiations. We are very pleased with the technical capacity and fairness of the process and how it has been handled by both parties.” Front page picture: Abiquim’s director general Andre Passos (second from the right) in Brasilia on 26 August, when the new national energy and natural gas policies were signed  Picture source: Brazil’s Ministry of Mines and Energy  ($1 = R5.64) Insight by Jonathan Lopez

BARCELONA (ICIS)–New analysis suggests the chemical industry may face a more rapidly aging and shrinking population in key markets such as China, while the subsequent drag on demand means new business models will be required. China-driven petrochemicals supercycle is over China’s population may be aging and shrinking more quickly than previously thought China may switch to become net exporter of many synthetic resins Demographic shifts will shrink demand for chemicals throughout developed world Developing world faces challenges which may slow growth New business models will be required to create opportunities from these trends In this Think Tank podcast, Will Beacham interviews Nigel Davis and John Richardson from the ICIS market development team and Paul Hodges, chairman of New Normal Consulting. Editor’s note: This podcast is an opinion piece. The views expressed are those of the presenter and interviewees, and do not necessarily represent those of ICIS. ICIS is organising regular updates to help the industry understand current market trends. Register here . Read the latest issue of ICIS Chemical Business. Read Paul Hodges and John Richardson’s ICIS blogs.

MUMBAI (ICIS)–Several ports across India’s western state of Gujarat have resumed normal operations even as heavy rains are projected to continue throughout the week. Operations at some ports had suffered some disruptions since late August because of inclement weather. In a note dated 2 September, shipping and logistics firm GAC Shipping, Logistics & Marine Services said that activities at Kandla port had been severely impacted due to the heavy rainfall since 26 August and cargo operations had slowed down. Operations have now resumed at the port, it added. At Mundra port, vessel movements and cargo operations have also restarted and are now back to normal. Dahej port has also resumed operations after suspending berthing operations at several terminals due to heavy rainfall and wind on 29 August. The same was true for Pipavav port, which halted operations on 28 August. Sikka and Hazira ports, on the other hand, have continued normal operations. On Tuesday afternoon, the Indian Meteorological Department said that isolated extremely heavy rainfall is likely over parts of Gujarat between 3 September and 4 September. There is a risk of low-to-moderate flash floods occurring in parts of Gujarat over the next 24 hours, it added.

SAO PAULO (ICIS)–Brazil’s manufacturing PMI index for August sharply slowed down from July on the back of output falling for the first time in several months due to subdued sales, and elevated cost pressures, analysts at S&P Global said on Monday. At 50.4 points in August, the manufacturing PMI stood just above the 50.0 point mark which separates expansion from contraction. It also represented a sharp slowdown from July’s 54.0 points. Brazil manufacturing August July June May April March February January December 2023 November October September PMI index 50.4 54.0 52.5 52.1 55.9 53.6 54.1 52.8 48.4 49.4 48.6 49.0 Source: S&P Global While the fall in production was described as slight, it marks a reversal from the growth trend seen earlier in the year. New business growth slowed to a multi-month low, though some firms noted a shift from imported to domestic goods due to high shipping fees, suggesting a complex demand environment where domestic producers may be benefiting from import challenges, but overall demand remains subdued. Export sales growth also softened, with improved demand from Asia and the Middle East offset by lower orders from the US and Mercosur countries. Cost pressures intensified significantly, reaching a multi-year high. Companies reported increased prices for chemicals, fabrics, foodstuffs, packaging, plastics and transportation, often attributing these rises to currency depreciation. Despite these challenges, manufacturers showed increased optimism about the year-ahead outlook. This positive sentiment was attributed to plant expansion plans, product diversification efforts, investment intentions, and forecasts of a potential pick-up in demand. Employment continued to rise, albeit at a slower pace than earlier in the year. The moderation in job creation was linked to shortages of skilled job seekers and cost-cutting measures at some units. Nevertheless, the continued growth in employment allowed firms to reduce their backlogs of work. “The Brazilian manufacturing sector suffered a loss of momentum in August, with surging cost pressures hampering firms’ ability to secure new business. Manufacturers even took the step of scaling back production and softened the pace of hiring in a bid to limit costs,” said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence. “Firms will be hoping for an improvement in the real exchange rate soon to help relieve some of the pressure on costs and lead to a revitalization of growth in the months ahead.” Front page picture: Facilities operated by Brazilian polymers major Braskem in the state of Sao Paulo Source: Braskem

HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 30 August. ICIS Economic Summary: US economy slowing, not falling off a cliff 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. IPEX: Global spot index slips on lower prices in northeast Asia, US Gulf The global spot ICIS Petrochemical Index (IPEX) slipped by nearly one-percentage point in the week ending 23 August, on the back of price falls in northeast Asia and the US Gulf. Outages, demand supporting US ethylene prices at two-year highs US ethylene spot prices have begun to decline but remain at two-year highs in both Texas and Louisiana after a series of cracker outages and improvement in derivative demand. Argentina petchems to take time to feel benefits from cut to import tariffs Argentina’s petrochemicals players are in a wait-and-see mode about the effects a cut to import tariffs announced this week could have in the market and whether it will lower prices which, for many materials, remain higher than global prices. RAIL: US rail companies strike deals with unions months ahead of next bargaining round US railroads Norfolk Southern (NS) and BNSF have reached tentative, five-year collective bargaining agreements with several labor unions four months ahead of the opening of the next collective bargaining round, the companies announced on Friday.

LONDON (ICIS)–Click here to see the latest blog post on Chemicals & The Economy by Paul Hodges, which looks at the major changes underway in the auto market and how they are set to transform the chemicals business. 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. Paul Hodges is the chairman of consultants New Normal Consulting.

LONDON (ICIS)–Here are some of the top stories from ICIS Europe for the week ended 30 August. Europe OX post-summer restocking intentions unclear as weak demand lingers Restocking operations after the summer were once common practice in the European orthoxylene (OX) market, but this year could be different. BASF to shut down adipic acid production at Ludwigshafen next year BASF is to end production of adipic acid and several downstream units at Ludwigshafen, Germany, as part of structural changes underway at the site, the company said on Thursday. Rising costs, outages fail to rattle sluggish propylene oxide market in Europe Outages at domestic suppliers, a local unit being flagged for a potential sale and rising production costs have failed to rattle a sluggish European propylene oxide (PO) market. Europe August nylon 6,6 contract prices soften in a slow market European nylon 6,6 contract prices for August softened from July levels, posting highly varied monthly deltas. Global spot index slips on lower prices in northeast Asia, US Gulf The global spot ICIS Petrochemical Index (IPEX) slipped by nearly one-percentage point in the week ending 23 August, on the back of price falls in northeast Asia and the US Gulf.

MUMBAI (ICIS)–India’s economic growth slowed down to 6.7% in the April-June 2024 on reduced government capital expenditure during the national elections and an uneven monsoon season, official data showed. The fiscal Q1 growth was the lowest GDP growth in 15 months, according to the Ministry of Statistics and Programme Implementation (MoSPI) on 30 August. The country’s fiscal year ends in March. The number was lower than the 7.8% growth posted in the previous quarter and the 8.2% pace set in April-June 2023. The growth was also lower than the Reserve Bank of India’s (RBI) forecast of 7.2% for the quarter. For current fiscal year ending March 2025, the central bank is projecting a GDP growth of 7.2%, with Q2 at 7.2%, Q3 at 7.3% and Q4 at 7.2%. The slowdown in GDP growth occurred due to reduced government spending during the election period, RBI governor Shaktikanta Das said at a press conference on 31 August. India’s general elections were held from 19 April to 1 June 2024. “Domestic economic activity continues to be resilient on positive trends in agriculture, and an anticipated increase in government expenditure. Manufacturing activity continues to gain ground on the back of improving domestic demand,” he added. An anticipated increase in government expenditure over the next few months would provide the required support to economic growth, Das said. India’s economic growth has been robust, with an average growth rate of 8.3% over the last three years, he added.

SINGAPORE (ICIS)–China’s August official manufacturing purchasing manager index (PMI) dropped to a six-month low of 49.1, while a private survey by Caixin gives an expansion print of 50.4 from 49.8 in July. The official PMI published by the National Bureau of Statistics (NBS) had been in contraction territory for four consecutive months, pointing to persisting weakness in factory activity. The sub production index fell to 49.8 in August from 50.1 in July, while new order index declined to 48.9 in August from 49.3 in the previous month, NBS said. High temperatures, intensive rain and seasonal lull in combine dragged the PMI figures, according to NBS. For Caixin, the private firm said there was a slight uptick in production index and strong rebounding in new order index, which is mainly driven by improving basic demands and all types of promotions.