SINGAPORE (ICIS)–Japan’s manufacturing sector contracted in July for the first time in three months after the preliminary purchasing managers’ index (PMI) fell to 49.2 from 50.0 in June, au Jibun Bank said on Wednesday. A PMI reading above 50 indicates expansion while a lower number denotes contraction. This decline signals a marginal deterioration in Japanese manufacturing business conditions in June, attributed to a reduction in both output and new orders, au Jibun Bank said in a statement on Wednesday. The fall in new orders was the most significant since February. Despite an increase in employment levels, sustained declines in new orders resulted in spare capacity within the sector, and backlogs of work decreased at the sharpest rate in four months. Input cost inflation remained high in July, accelerating to its fastest pace since April 2023. Japanese consumer inflation rose in June, putting pressure on the Bank of Japan to raise interest rates further, official data showed on 19 July. The Bank of Japan (BOJ) in March hiked interest rates for the first time in 17 years, ending eight years of negative interest rates. The BOJ expects that the recent rise in energy prices and the phased removal of government subsidies designed to control inflation will likely accelerate the consumer price index (CPI) increase throughout the fiscal year 2025, offsetting the fading impact of previous import cost increases on consumer prices. Core inflation excluding fresh food, the BOJ’s preferred measure, accelerated to 2.6% in June from 2.5% in May and from 2.2% in April. “Going forward, the government plans to renew energy subsidy programmes from August to October to counteract the heatwave during the summertime,” Dutch banking and financial services firm ING said in a statement. “This could lower the overall inflation figure, but as it is temporary, the Bank of Japan is not expected to be too concerned.”

HOUSTON (ICIS)–Mining major BHP announced the Jansen potash project in Saskatchewan has reached a pivotal milestone with construction having surpassed the 50% completion mark for stage 1, with stage 2 now underway. The company said the project should have first production in 2026 with it holding the potential to become a major source by the end of this decade as it could eventually increase Jansen’s total output to 16-17 million tonnes/year of muriate of potash (MOP). BHP total investment in Jansen is approximately Canadian dollars (C$) 14 billion ($10.2 billion) with the firm saying this marks the largest investment in its history, as well as the largest private investment in Saskatchewan. Having crossed the halfway mark, the focus now shifts towards the completion of the mill building and processing plant, port construction, finalizing infrastructure and gearing up to handover the project to operations. The company said efforts are also being intensified to prepare the workforce with an operations-ready mindset as the project gets closer to having its first ore. “Reaching the half-way milestone for JS1 is a testament to the dedication of our Team Jansen workforce, our contractors and procurement partners, and the local and Indigenous communities surrounding the Jansen area,” said Karina Gistelinck, BHP asset president potash. “Building one of the largest potash mines in the world requires an all-hands-on-deck approach, and the province has really come together to make a project of this magnitude possible. Delivering Jansen safely remains our top priority as we get ready for Jansen operations in 2026.” C$1.00 = $0.73

HOUSTON (ICIS)–Salt Lake Potash Limited (SO4) has reached a significant milestone in developing organic sulphate of potash (SOP) in Australia as it has produced its first volumes at its Lake Way project in Wiluna, Western Australia. With the project in development for over seven years, SO4 was acquired by Sev.en Global Investments in October 2022 and it has subsequently made significant investments in all aspects of the production process. This includes the installation of new flotation units in the process plant which has been fundamental to successfully managing the diverse feedstock from the pond network. The process plant remains in the commissioning phase, but officials said the production of SOP after years of effort provides significant proof of the operating ability of the system. “This important step confirms the capability of the SO4 team to conceptualize, design, construct and operate the SOP mining and production facilities and achieve world-class SOP quality parameters,” said Mark Sykes, Sev.en Global Investments, Australian country manager. “We are proud of the entire team, who have demonstrated a high level of commitment and endurance to reach a key milestone.” Sev.en Global said it is looking forward to bringing the project to full production and establishing itself in the market to supply Australian agriculture and global markets with high-quality sustainable fertilizer suitable for use in organic farming.

SAO PAULO (ICIS)–Brazil’s trade deficit in chemicals narrowed by 9% in H1 2024 to $21.7 billion on the back of lower priced imports entering the country, according to chemicals trade group Abiquim. In the January-June period, Brazil imported $28.8 billion of chemicals, down 7.5% year on year, while exports stood at $7.1 billion, down 4.8%. In H1 2023, the chemicals trade deficit stood at $23.7 billion and, for the full-year, it stood at $47.0 billion, the second highest figure in the past 35 years, according to Abiquim. Although the deficit narrowed, Abiquim was not pleased and linked the improvement to lower priced imports which, it said, continue denting domestic producers’ market share. “This apparent improvement in the chemicals trade deficit is directly related to imports with prices 15.3% lower than in the first half of 2023, leveraging purchases of products on the international market at prices largely below the production costs practiced in Brazil,” said the trade group. “These products come mainly from Asian countries, whose competitiveness has been sustained by Russian raw materials purchased at favorable prices due to the war in east Europe.” Abiquim has demanded high import tariffs on several chemicals for the past few months; in an interview with ICIS, its director general Andre Passos said higher tariffs were only one of the three legs of a wider plan to protect domestic producers’ market share. In June, Brazil’s chemicals trade unions joined Abiquim to demand higher tariffs. “To show the worrying sings, it is enough to highlight the volume in tonnes of these imports [entering Brazil] in the first half at 27.9 million tonnes, up 9.1% year on year. Highlights include the aggressive increases in thermoplastic resins imports (up 41.2%), thermosetting resins (26.8%), intermediates for thermosetting resins (35.8%), intermediates for synthetic fibers (22.1%) and other organic chemical products (15.2%),” said the trade group. “This scenario is a serious threat to the national production of chemical products and has, above all, deteriorated the level of utilization rates [which stood in May at a record low of 58%]. Some companies are considering hibernating plants, shutdowns, and even deactivation of units.”

SINGAPORE (ICIS)–India will cut import duties for methylene diphenyl diisocyanate (MDI) by 2.5 percentage points to 5.0% effective 24 July, with plans to review the country’s overall tariff structure in the next six months. MDI was among raw materials identified by the Indian government on which custom duties will be reduced. India’s finance minister Nirmala Sitharaman announced the changes to the country’s Basic Customs Duty (BCD) – a tax levied on imported goods at the time of their entry into the country – in her presentation of India’s national budget for the fiscal year ending March 2025 before parliament. HIGHER DUTIES FOR SOME PRODUCTSConversely, the minister said that the customs duty for polyvinyl chloride (PVC) flex films/flex banners will be raised to 25% from 10% currently starting 24 July, “to curb their imports”. Flex banners are commonly used for outdoor advertising as billboards. “PVC flex banners are non-biodegradable and hazardous for environment and health,” Sitharaman said. The customs duty on ammonium nitrate will also be raised to 10% from 7.5% from 24 July “to support existing and new capacities in the pipeline”, she said. EXEMPTIONS FOR CRITICAL MINERALSSitharaman also proposed full exemption of 25 critical minerals from import duties, a cut in duty rates for two other products in the same category. “Minerals such as lithium, copper, cobalt and rare earth elements are critical for sectors like nuclear energy, renewable energy, space, defense, telecommunications, and high-tech electronics,” she said. “This [cut in import duty] will provide a major fillip to the processing and refining of such minerals and help secure their availability for these strategic and important sectors,” Sitharaman said. As for the electronics sector, the finance minister proposed to remove the BCD on oxygen-free copper for the manufacture of resistors. GOV’T TO REVIEW CUSTOMS DUTY STRUCTUREOver the next six months, the Indian government will conduct a thorough review of its customs duty rate structure, Sitharaman said. “I propose to undertake a comprehensive review of the rate structure over the next six months to rationalise and simplify it for ease of trade, removal of duty inversion and reduction of disputes,” she said. “We will continue our efforts to simplify taxes, improve taxpayer services, provide tax certainty and reduce litigation while enhancing revenues for funding the development and welfare schemes of the government.” It was not immediately clear how the revised BCD structure will impact implementation of import certifications of various chemicals under the Bureau of Indian Standards (BIS). BIS certification for some chemicals has been extended many times since they were introduced in 2019-20 to allow domestic end-user industries more time to adhere to the quality-control orders (QCO). Focus article by Nurluqman Suratman Thumbnail image: At the Vallarpadam Terminal in Kochi, Kerala, India. 2014 (By Olaf Kruger/imageBROKER/Shutterstock)

SINGAPORE (ICIS)–India will cut import duties for methylene diphenyl diisocyanate (MDI) by 2.5 percentage points to 5.0% effective 24 July, the country’s finance minister Nirmala Sitharaman announced on Tuesday. MDI was among raw materials identified by the Indian government on which custom duties will be reduced. Sitharaman announced the changes to the country’s Basic Customs Duty (BCD) – a tax levied on imported goods at the time of their entry into the country – in her presentation before parliament of India’s national budget for the fiscal year ending March 2025. Conversely, the minister said that the customs duty for polyvinyl chloride flex films/flex banners will be raised sharply from 10% currently to 25% from 24 July “to curb their imports”. Flex banners are commonly used for outdoor advertising as billboards. “PVC flex banners are non-biodegradable and hazardous for environment and health,” Sitharaman said. For ammonium nitrate, the custom duty will be raised to 10% from 7.5% from 24 July “to support existing and new capacities in the pipeline”, she said. (adds paragraphs 4-7)

SINGAPORE (ICIS)–India will cut import duties for methylene diphenyl diisocyanate (MDI) by 2.5 percentage points to 5.0% effective 24 July, the country’s finance minister Nirmala Sitharaman announced on Tuesday. MDI was among the raw materials identified by the Indian government on which custom duties will be reduced. Sitharaman announced the changes to the country’s Basic Customs Duty (BCD) – a tax levied on imported goods at the time of their entry into the country – in her presentation before parliament of India’s national budget for the fiscal year ending March 2025.

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. Conventional wisdom suggests that the petrochemicals cycle may have bottomed out as the prospects of interest rate cuts increase. There are signs of recovery in the Europe. And even in a high inflationary environment, the US consumer kept on spending with unemployment at record lows. This, in my view, is a misreading of the data. Because of the disproportionate influence of China, what happens elsewhere doesn’t really matter in the short- to medium-term. China had a 22% share of the global population in 1992 and a 9% share of global polymers demand. By the end of this year, ICIS forecasts that China’s share of the global population will have slipped to 18%, but its share of global polymers demand will have risen to 40%. Too much global capacity was planned on the basis of China’s petrochemicals demand growth being at 6-8% per annum over the long term, whereas 1-4% now appears to be more likely. China’s petrochemicals capacity growth was underestimated because of cost-per-tonne economics used to assess projects. History teaches us is that national strategic objective also come into play. One can argue, as the Rhodium Group does in an 18 July 2024 research paper, that China’s economic growth may never return to previous levels. This would mean no return to the double-digit annual growth rates we saw in petrochemicals demand during the Petrochemicals Supercycle. In today’s main chart, I kept to our base case assumptions on global polypropylene (PP) virgin production growth between 2024 and 2030, which is almost the same as demand growth. I then manually reduced capacity growth until I got back to the historically very healthy operating rate of 87% (operating rates being production divided by capacity). (What applies to PP applies to other petrochemicals and polymers. The ICIS data for other products suggest similar steep reductions in capacity growth versus our base to get back to the long-term history of operating rates). This led me to the conclusion that global PP capacity growth would need to be just 1.6m tonnes a year versus 5m tonnes a year under our base case. Under our base case, we see global operating rates averaging just 76% in 2024-2030. Capacity growth of just 1.6m tonnes a year versus our base case would require substantial capacity closures in some regions. Closures are never easy and take considerable time because links with upstream refineries, environmental clean-up and redundancy costs – and the reluctance to be the “first plant out” in case markets suddenly recover. The sale of rationalisation suggested by just 1.6m tonnes a year of capacity growth therefore suggests no full recovery in PP and in other petrochemicals until, I am guessing, 2026. 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)–Railroad Canadian Pacific Kansas City (CPKC) confirmed it had a derailment incident involving a train carrying potash volumes on the evening of 21 July, but there were no injuries and no public safety threat. The company said multiple cars of a train carrying potash derailed around 5pm CST near Gull Lake, Saskatchewan, which is about 175 miles from Regina. CPKC through a spokesperson that there were approximately 18 cars involved which were carrying unknown quantities of potash. CPKC crews remain at the site working on the clean-up with the cause of the derailment currently under investigation. The accident had blocked access in and out of Gull Lake from the highway, but the company did say that the railroad crossing on Provincial Highway 37 was now open.