HOUSTON (ICIS)–Hurricane Beryl is on track to make landfall on Monday near the border of Mexico and the US on the Gulf Coast, although the path could change in the next few days. If Beryl holds to its forecasted path, it would spare the major refining and petrochemical hubs in the US and Mexico. In addition, few if any energy companies may choose to shut in US oil and gas wells in the Gulf of Mexico. Major US oil and LNG ports would escape the worst of the storm. The following map shows the forecasts path of Hurricane Beryl as of midday on Wednesday. The forecasted path puts Hurricane Beryl between the Mexican petrochemical hub of Altamira, Tamaulipas state and the US hub of Corpus Christi, Texas state. IF BERYL CHANGES COURSE, IT COULD THREATEN CORPUS CHRISTIIn addition to being a refining and petrochemical hub, Corpus Christi is a major oil-exporting port and hosts a terminal that exports liquefied natural gas (LNG). Were a storm to disrupt US LNG exports, it would have a knock-on effect on petrochemical prices by shutting down one of the eight LNG export terminals in the country. If the disruption lasted long enough, prices for natural gas would fall. Lower gas prices would drag down those for ethane, the main feedstock that US crackers use to produce ethylene. Petrochemical producers could benefit from lower feedstock costs. UPDATE ON HURRICANE BERYLHurricane Beryl is the first Category 5 hurricane to form so early in the season. Category 5 hurricanes have the strongest winds under the Saffir-Simpson Hurricane Wind Scale, with speeds exceeding 157 miles/hour (253 km/hour). Beryl is near Jamaica and it should weaken as it approaches the Yucatan peninsula in Mexico, where it should make landfall on Friday. It will cross the peninsula, enter the Bay of Campeche and remain north of the Mexican state of Veracruz, which is home to the petrochemical hub of Coatzacoalcos and the Ethylene XXI integrated polyethylene (PE) complex. It will swing north before making another landfall near Brownsville, Texas state and Matamoros, Tamaulipas state. BUSY HURRICANE SEASONMeteorologists have warned that this year’s hurricane season could be the most active ever, with 17-25 named storms. Out of those, 8-13 should be hurricanes and 4-7 should be major hurricanes. Major hurricanes are Category 3-5 storms with wind speeds of at least 111 miles/hour.

RIO DE JANEIRO (ICIS)–Brazil’s polymers major Braskem is still facing some logistical challenges at its facilities in Triunfo, in the floods-hit state of Rio Grande do Sul, according to a letter to customers seen by ICIS. Braskem was forced to shut down its Triunfo facilities after the severe flooding which affected the state in May. By the beginning of June, the producer said it hoped its operations would return to normality in a few days, according to a spokesperson in a written response to ICIS. However, according to the letter to customers, dated 28 June, Braskem’s operations at Triunfo are yet to return to normality, mostly due to logistical woes as many roads and key port operations at the Brazilian state were hit by the aftermath of the floods. “Specific challenges resulting from force majeure still persist in some logistics modes, leading to the partial receipt of inputs for the production of products derived from ethanol and green ethylene,” said the letter. “At the moment, there is no risk of interruption in the supply of these products, and we are implementing alternatives to return availability to normal levels.” At the end of June, an analyst said to ICIS most of the roads in Rio do Grande do Sul had reopened, although some of them were operating at reduced capacity. The Port of Porto Alegre, the largest city in the state and close to the Triunfo petrochemicals hub, only reopened in mid-June. TRIUNFO KEY FOR PLASTICS Braskem is Brazil’s sole manufacturer of polyethylene (PE) and polypropylene (PP), the most widely used polymers. Its market share in 2023 for PE stood at 56% and for PP at 70%, according to figures from the ICIS Supply & Demand database. The Triunfo complex, meanwhile, is key for the country’s polymers supply chain, accounting for nearly 37% of Brazil’s PP capacity and 40% of PE capacity. Brazil’s total PP production capacity is nearly 2 million tonnes/year. PE capacity is about 3 million tonnes/year, with 41% being high-density polyethylene (HDPE), 33% being linear low-density polyethylene (LLDPE) and 26% being low-density polyethylene (LDPE). Braskem’s Triunfo complex can produce 740,000 tonnes/year of PP, 550,000 tonnes/year of HDPE, 385,000 tonnes/year of LDPE and 300,000 tonnes/year of LLDPE. Additional reporting by Jonathan Lopez 

HOUSTON (ICIS)–US June sales of new light vehicles fell from May, but total sales in the second quarter showed a modest improvement over Q1, according to data from the US Bureau of Economic Analysis (BEA). While the June sales figures represented a sour end to the quarter, Kevin Swift, senior economist for global chemicals at ICIS, said he anticipates seeing modest sales growth through the rest of the year and into 2025 and 2026. June sales fell by 4% to a 15.29-million-unit pace, well below the forecast of 15.9 million for the full year from the National Automobile Dealers Association (NADA). Sales faced headwinds from the usual impediments – higher prices for new vehicles and higher interest rates – which may have prevented some from entering the market for new light vehicles. But a cyber-attack against software maker CDK Global that disrupted operations during the month may be the main reason sales fell as the higher costs and interest rates have been the norm so far this year. Software from CDK Global is widely used in US auto dealerships to process sales and other transactions. Declines were seen across all auto segments except for foreign light truck sales. Sales were flat when comparing the first six months of the year with the first six months of 2023, Swift said. Still, Jincy Varghese, ICIS demand analyst, expects sales to rise over the rest of the year. While protectionist trade policy and potential regulatory measures could affect auto sales, performance in all regions except Europe are likely to be better than expected in the second half of 2024. Global automotive value-added output in 2024 is expected to grow by 0.4% compared with 2023, Varghese said, with the third quarter of 2024 forecast to remain relatively flat compared with the third quarter of 2023, according to Oxford Economics. US auto sales in 2024 are expected to grow 6.4% compared with 2023, Varghese said. The third quarter of 2024 is forecast to grow by 2.6% year on year, according to Oxford Economics. US President Biden, in a statement released last month, directed his trade representative to increase tariffs on $18 billion of imports from China to protect American workers and businesses. The tariff rate on electric vehicles (EVs) under Section 301 will increase from 25% to 100% in 2024. According to the US Census Bureau, US light vehicle sales rose 0.8% month on month in May with total sales of 15.9 million units (up 2.5% year on year and 8.9% down from 2019). CHEMS USED IN AUTOS Demand for chemicals in auto production come from, for example, antifreeze and other fluids, catalysts, plastic dashboards and other components, rubber tires and hoses, upholstery fibers, coatings and adhesives, Swift said. Virtually every component of a light vehicle, from the front bumper to the rear taillights, features some chemistry. The latest data indicate that polymer use is about 423 pounds (192kg) per vehicle. Meanwhile, electric vehicles (EVs) and associated battery markets are an important growth opportunity for the chemical industry, with chemical producers separately developing battery materials, as well as specialty polymers and adhesives for EVs. Focus article by Adam Yanelli Please also visit the ICIS topic page Automotive: Impact on Chemicals Thumbnail image is of sports-utility vehicles at a Colorado dealership. Photo by David Zalubowski/AP/Shutterstock

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. China’s petrochemical markets might well respond positively to any new economic stimulus measures announced during the delayed Third Plenum government meeting that takes place on 15-18 July. But the scale of economic reforms required are such that I believe the more likely outcome is China remaining stuck with lower growth than during the 1992-2021 Petrochemicals Supercycle. Sourabh Gupta – Senior Fellow at the Institute for China-America Studies in Washington, DC – wrote in an article for the East Asia Forum that reforms needed include: Progressively lifting Hukou restrictions to make public services more equitable. Building a unified and portable social security net more in line with advanced economies. A shift from indirect to direct taxes. Individual income tax revenues comprised 33% of total revenues in OECD countries compared to 9% in China. The tax base must expand as four out of five Chinese households do not pay personal income tax. He cautioned that reform would not be easy in a country that preferred top-down capital-intensive approaches and was disdainful of high welfare spending. China appears to have doubled-down on its capital-intensive approach since the end of the property bubble through investing in export-focused manufacturing. This raises the issue of geopolitical threats to its GDP growth, such as the US and the EU recently raising tariffs on Chinese electric vehicles and batteries. “If China is to maintain growth rates of 4-5% per year, it can only do so if the rest of the world agrees to reduce its own investment and manufacturing levels to less than half the Chinese level” wrote Michael Pettis, Professor of Finance at Peking University, in an article for the Carnegie Endowment for International Peace. The Economist reported that as reshoring accelerated, governments had adopted over 1,500 policies to promote specific industries in both 2021 and 2022. This compared with almost none in the early 2010s. But this latest Third Plenum could be as significant as the ones cited by Reuters in 1978 and 1993. The 1978 Plenum opened China up to foreign investment. In 1993, the Plenum liberalised trading in the Yuan and launched “socialist market” reforms following Deng Xiaoping’s Southern Tour a year earlier. How will we know the outcomes? If China’s polyethylene (PE) and polypropylene (PP) price spreads return to their Supercycle levels over the six-to-12-months.  If this doesn’t happen, more reforms will be needed as too much supply will continue to chase too little demand. Despite recent rebounds in spreads, China CFR high-density PE (HDPE) spreads over CFR Japan naphtha costs remain 116% lower than during the Supercycle with low-density (LDPE) spreads 46% lower and linear-low density (LLDPE) spreads 80% lower. The story is very similar in China PP spreads over naphtha. 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.

HOUSTON (ICIS)–Hurricane Beryl continued to make its way west toward Mexico and the US Gulf on Tuesday afternoon, with landfall possible some time on Sunday. Meteorologists at the National Hurricane Center (NHC) said Beryl was about 125 miles (205 km) east southeast of Isla Beata, Dominican Republic, and moving west northwest at 22 miles/hour. Source: National Hurricane Center (NHC) The storm is going back and forth between a Category 4 and Category 5 hurricane as maximum sustained winds are at 155 miles/hour but had been at 165 mile/hour earlier in the day. According to the Saffir-Simpson Hurricane Winds Scale, a storm reaches Category 5 when maximum sustained winds reach 157 miles/hour. Saffir-Simpson Hurricane Wind Scale Category Wind speed 1 74-95 miles/hour 2 96-110 miles/hour 3 111-129 miles/hour 4 130-156 miles/hour 5 157+ miles/hour The most recent forecast indicates Beryl could miss southern Veracruz state in Mexico, where Braskem Idesa has its integrated polyethylene (PE) Ethylene XXI complex and where a lot of Mexico’s petchem capacity is located. Altamira is still in the projected path. The regions have been experiencing a drought and rainfall from Beryl could provide the area with much-needed rain but could also impact operations at the multitude of chemical facilities in the area. Another scenario would be if the storm swings to the north, which could threaten oil and gas production in the US Gulf as well as Gulf Coast petchem operations. A producer with capacity in the Corpus Christi area said it was still too early to decide on operations. ACTIVE HURRICANE SEASON The early activity in the Atlantic Ocean is in line with forecasts calling for a busier than usual hurricane season. The US National Oceanic and Atmospheric Administration (NOAA) is predicting the greatest number of hurricanes in the agency’s history. NOAA forecasters with the Climate Prediction Center said that the hurricane season – which started on 1 June and runs through 30 November – has an 85% chance to be above normal, a 10% chance of being near normal and only a 5% chance of being below normal. 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. Additional reporting by Mark Milam, Al Greenwood and Melissa Wheeler

HOUSTON (ICIS)–Although Trinidad and Tobago have seen tremendous rainfall and significant winds the last two days, the island nation and its fertilizer operations escaped the heaviest impacts of Hurricane Beryl. Rated at a category 4 as of late on Tuesday, the storm did cause some harm to surrounding island countries but for most of Trinidad and Tobago what was felt was an extended stretch of unfavorable weather, with fertilizers producers emerging unscathed. Produces Yara, which manufactures ammonia at its facilities, said they had been fortunate as the storm passed by yesterday afternoon with plants not suffering any damage or having any production interrupted. With plant operations also in the same vicinity on the island producer Nutrien reported similar positive outcomes with a spokesperson saying, “Happily, zero impact. All running as usual.” Going forward Beryl is now expected to be impacting Jamaica by Wednesday morning. For now, the domestic fertilizer market is carefully watching the track as there are considerable production, storage and transportation interests which stretch along the US Gulf Coast. The current forecast has the storm potentially downgrading slightly as travels more towards making an eventual strike in northern Mexico, or possibly landing further up in southern Texas by the end of this week.

RIO DE JANEIRO (ICIS)–US Group II base oils spot supply may stay tight through Q3 due to hurricane stock building, but could lengthen by year end, an expert at ICIS said on Tuesday. Amanda Hay, senior analyst for base oils in the Americas at ICIS, said the US manufacturing recession and high interest rates are likely to take their toll in Q4, with supply potentially lengthening. Apart from hurricane stock building, high interest rates in the US and elsewhere are causing that “no-one is building inventories” due to the high costs associated to it. Hay went on to say that only a few months ago most economists and analysts – including those at ICIS – were forecasting interest rates cuts by the US Federal Reserve (Fed) in 2024. However, that has now shifted to 2025 at the earliest, as the world’s major central bank seeks to make sure inflation falls towards its 2% target. The US’ annual rate of inflation stood at 3.3% in May. Hay was speaking to delegates at the 14th International Summit with the South American Market 2024 organized by specialized publication Lubes em Focus, which focuses on base oils. ICIS is a partner in the event. “As the US manufacturing recession continues, exports from that country continue to be widely available. Firm crude prices will also be a factor to keep in mind,” said Hay. “Meanwhile, major interest rates changes are not expected in 2024 anymore – as the year went by, rate cuts have become less and less likely. That, in turn, causes that no-one is really interested in building inventories given the high borrowing costs.” Base oils, also called lubricants, are used to produce finished lubes and greases for automobiles and other machinery. The 14th International Summit with the South American Market 2024 runs in Rio de Janeiro on 2-3 July. Clarification: Re-casts headline, introduction; adds paragraph 3

RIO DE JANEIRO (ICIS)–In just a few years, global automotive majors have switched their focus from an all-electric production to a more hybrid model, an executive at US crude oil major Chevron said on Tuesday. Chris Castanien, global industry liaison at Chevron and lubricant additive expert, said that most automotive majors who had set up targets to go all-electric or nearly all-electric by 2030 have dropped those plans as intake among consumers remains slow. This has happened even after authorities in North America or Europe have poured “tremendous amounts of money in trying to force everyone” into the energy transition. Castanien was speaking to delegates at the 14th International Summit with the South American Market 2024 organized by specialized publication Lubes em Focus, which focuses on base oils. ICIS is a partner in the event. BILLIONS – BUT THE JUMP IS NOT HAPPENINGAnyone in the lubricants industry would be pleased to see the initially quick transition to electric mobility some authorities had planned is not happening. At the end of the day, they are an interested party which would lose out much if ICE engines – combustion engines – went out of the market. Therefore, Castanien was somehow pleased to list the many plans in the EU and the US which had planned for a quick electric vehicles (EVs) implementation, including the US’ $1 trillion New Green Deal in 2021 or the consequent $67 billion investments contemplated in the CHIPS Act or the $369 billion of the Inflation Reduction Act (IRA). “The US’ EPA [Environmental Protection Agency] had forced a ruling that by 2032 around two thirds of cars should be EVs; the EU issued a ban on ICE engines by 2035 – well, I think those targets will not happen,” said Catanien. “Moreover, now we are seeing a lot of protectionist tariffs against Chinese EVs: we want people to make and use EVs, but we don’t want the Chinese to make them.” The Chevron executive went on to say that the US is still a “long way” to meet its own targets on charging points, for instance, which, added to the considerably higher cost of EVs, would be putting off consumers. And this consumers’ reluctance, he went on to say, is even happening when many jurisdictions are implementing fiscal incentives and rebates for EVs. “In the US, you even get the case of California, where HOVs [high occupancy vehicle lanes] are now allowing EVs even if it’s only the driver inside the car…” he said. Thus, the initial change planned by automotive majors – even with thousands of redundancies of ICE engines engineers – is giving way to a slower implementation of the EV push. Castanien mentioned the case of Germany’s major Mercedes. “Only a few years ago, Mercedes said they would be making all vehicles electric by 2030 – they don’t say that anymore. Their updated target is aiming to make 50% of its fleet electrical by that year,” he said. “[US major] Ford has said it is losing $64,000 every time they sell an EV. Tesla was planning a gigafactory in Mexico: they have dropped those plans. The shift towards more hybrid vehicles and not purely EVs is happening – this is a big change.” The automotive industry is a major global consumer of petrochemicals, which make up more than one-third of the raw material costs of an average vehicle. The automotive sector drives demand for chemicals such as polypropylene (PP), along with nylon, polystyrene (PS), styrene butadiene rubber (SBR), polyurethane (PU), methyl methacrylate (MMA) and polymethyl methacrylate (PMMA). Base oils, also called lubricants, are used to produce finished lubes and greases for automobiles and other machinery. The 14th International Summit with the South American Market 2024 runs in Rio de Janeiro on 2-3 July.

RIO DE JANEIRO (ICIS)–The US remains the largest exporter to the Brazilian base oils market, with the country’s lead widening in 2024, according to an expert on Tuesday. Pedro Nelson, editor-in-chief of the Brazilian specialized magazine Lubes em Foco, said Brazil deficit in base oils is set to continue for years to come due to the lack of homegrown supply. Lubes em Foco is the organizer of the 14th International Summit with the South American Market 2024, which focuses on base oils. ICIS is a partner in the event. In 2023, Brazil imported basic base oils worth $851 million, said Nelson, totaling 775,084 cubic meters (cbm). Of those, the US was the origin of 72.4% of all Brazil’s imports. Second on the list but well behind was South Korea, with 4.9%. Malaysia (4.7%), India (3.8%), Qatar (3.4%), Bahrein (3.3%), Singapore (1.9%) and Taiwan (1.0%, all of it coming from producer Formosa) complete the list of countries with over 1% of market share in the Brazilian import market for basic base oils. 2024: THE US INCREASES LEADThe US dominance in the market share of Brazil’s imports basic base oil is widening in 2024. According to Nelson, in the January-May period the US captured 76.2% of market share, followed by Malaysia (5.0%) and South Korea (3.5%). In the five-month period, Brazil imported basic base oils worth $372.4 million, said Nelson. “Brazil is likely to remain a net importer of base oils for years to come due to the country’s lack of capacity to produce them. The US is set to continue benefit also for years to come due geography,” he added. Despite is trade deficit in base oils, Brazil also exported 79,583 cbm of lubricants in 2023, worth $200.3 million, mostly to neighboring countries Paraguay, Argentina and Bolivia. Not surprisingly, Brazil’s southeast region was the highest consumer of base oils in 2023, with 44.8% of market share. That region includes the most industrialized states of Sao Paulo, Rio de Janeiro and Minas Gerais. Base oils, also called lubricants, are used to produce finished lubes and greases for automobiles and other machinery. The 14th International Summit with the South American Market 2024 runs in Rio de Janeiro on 2-3 July.