LONDON (ICIS)–Gas In Focus deputy editor Marta Del Buono and Global Hydrogen Editor Jake Stones discuss UK parties’ pledges for the general elections and what do they mean for the energy market. Labour and the Greens and Conservatives favor renewables while Reform UK is going as far as scrapping Net Zero policies, fast tracking North Sea licenses and embracing fracking. Click here to watch

LONDON (ICIS)–The European Commission is to move forward with proposed plans to impose tariffs of nearly 40% in some cases to China-manufactured battery electric vehicles (BEVs), citing a level of state subsidy it terms as “unfair”. Following an investigation launched in October 2023, the Commission determined that the level of support provided for electric vehicle production in China was substantial enough to pose a “threat of economic injury” to EU producers. Discussions between Commission and China government representatives have “intensified” in recent weeks, and discussions continue around reaching a solution compatible with World Trade Organization (WTO) rules, the EU executive body added. Those talks have resulted in a slight reduction in overall tariffs being levied on some of China’s largest electric vehicle manufacturers compared to the rates set out in a 12 June pre-disclosure. Manufacturer BYD will face fresh tariffs of 17.4%, Geely 19.9% compared to earlier plans for 20%, and SAIC 37.6% compared to earlier plans for 38.1%. Other China BEV producers that co-operated with the investigation are subject to weighted duties of 20.8%, while the duties for non-co-operating companies will be set at 37.6%. The duties apply from 5 July for a minimum of four months, with a decision to be taken on whether to implement the levies long-term. If a final decision is taken to impose definitive duties, the tariffs will remain in place for five years, the Commission added. “Based on the investigation, the Commission has concluded that the BEV value chain in China benefits from unfair subsidisation, which is causing a threat of economic injury to EU BEV producers,” the European Commission said in a statement. “The investigation has also examined the likely consequences and impact of these measures on importers, users and consumers of BEVs in the EU.” The French government has backed the move to investigate the impact of China subsidies on European BEV markets, while German Chancellor Olaf Scholz has warned against the move. Germany is one of Europe’s key auto manufacturers, with large global players in the sector such as BMW and Audi deriving a substantial portion of their international business from China. The German Association of the Automotive Industry (VDA) on Wednesday issued fresh public criticism for the plans, claiming that the tariffs will slow the growth of the electromobility sector and slow carbon reduction target progress. “The anti-subsidy tariffs would make electric vehicles more expensive on the European market or prevent them from being offered on the market at all,” the trade group said. Thumbnail photo: A dealership operated in Moscow, Russia, by Geely, one of the producers facing intensified sanctions. Source: Maxim Shipenkov/EPA-EFE/Shutterstock

One US judge states that LNG project pause should be pushed aside Ruling may have limited impact but has gained significant attention Focus shifting to later in the year as election countdown continues HOUSTON (ICIS)–A US federal judge attempted to disrupt the pause on federal US LNG export licenses this week, but his decision may not accelerate project permitting or investment decisions. The Department of Energy should begin approving licenses for LNG plants to export to countries outside the US Free Trade Agreement, Judge James Cain of the Western District of Louisiana decided on 1 July. Cain’s decision was the result of a lawsuit filed in March by 16 Republican-controlled US states, including Texas and Louisiana, whose attorneys general argued that the LNG permitting pause would impact their economies. President Joe Biden’s administration placed what it calls a pause on approving the key LNG permits, which are issued by the Department of Energy, in January, saying the department required time to update its analysis of whether additional LNG exports fall within the public interest. The decision borrowed language from Biden’s opponents, who call the situation an export ban. In a memorandum, Cain agreed with the plaintiffs’ argument that the DOE did not provide an adequate reason to halt new approvals while updating the analysis. The 8.4 mtpa Commonwealth LNG in Louisiana; Venture Global’s CP2 LNG, also in Louisiana; and the second phase of Sempra Infrastructure’s Port Arthur LNG in Texas, adding 13.5mtpa in capacity, are considered the most advanced export projects requiring DOE approval. While some of these companies applauded the apparent regulatory victory, the direct impact of Cain’s decision is uncertain, as the DOE falls directly under Biden’s purview. In the days following the 1 July decision – which was given the week of a US federal holiday – the DOE did not specify whether or how it would re-start non-FTA license approvals. If the DOE holds true to the remarks of Secretary Jennifer Granholm in March, the LNG permitting pause could already be near the halfway point: Granholm said then that she expects the review process to wrap up entirely by March 2025. As Biden considers the votes of vocal environmentalists in the November election, even without an explicit pause, it was unlikely that regulators would move quickly on pending projects in 2024, executives said in January. If Republican opponent Donald Trump wins the election, non-FTA license approvals would likely re-start soon after his January inauguration. During the DOE pause, the Federal Energy Regulatory Commission (FERC) has continued to approve another key federal LNG permit. The long-pending application by Venture Global’s CP2 LNG was approved by FERC in late June. No US LNG export projects have announced final investment decisions so far in 2024, with Canada’s Cedar LNG being the only project to secure adequate commercial support and financing to move ahead.

SINGAPORE (ICIS)–A consortium consisting of four Asian petrochemical producers have agreed to establish a sustainable polyester fiber supply chain. Japan’s Mitsubishi Corp, South Korea’s SK geo centric, Thailand’s Indorama Ventures Ltd (IVL), and India Glycols along with three other companies are part of the consortium, the companies said in a joint statement on Thursday. Japanese sports apparel firm Goldwin is the project owner of the initiative, while Finnish refiner Neste is also part of the consortium alongside Japan-based engineering firm Chiyoda Corp. Financial details of the project were not disclosed. The project aims to utilize renewable and bio-based materials as well as materials produced via carbon capture and utilization (CCU) to manufacture polyester fibers for THE NORTH FACE brand in Japan. Outdoor apparel and equipment brand THE NORTH FACE is operated by Goldwin in Japan. “After that, the launch of further products and brands of Goldwin will be considered,” Chiyoda said in the statement. The polyester fiber produced from the project is planned to be used by Goldwin for a part of THE NORTH FACE products, including sports uniforms in July this year. Chiyoda will supply CCU-based paraxylene (PX) to the supply chain, while Thai polyester producer IVL will contribute renewable CCU-based purified terephthalic acid (PTA). In March 2022, Chiyoda started producing carbon dioxide (CO2)-based PX at its pilot plant at the company’s Koyasu Research Park in Kanagawa prefecture as part of a project linked with Japan’s New Energy and Industrial Technology Development Organization (NED). SK geo centric and Neste will be supplying renewable PX and renewable naphtha, respectively. India Glycols, which produces monoethylene glycol (MEG), will supply bio-ethylene glycol made mainly from sugarcane. Toyobo MC Corporation (TMC) – a joint venture between Toyobo Co and Mitsubishi Corp – will be supplying renewable bio-CCU polyethylene terephthalate (PET). Details on supply volumes from each of the consortium partners were not disclosed. Thumbnail photo: A generic polyester clothing label (Sandvik/imageBROKER/Shutterstock)

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