NASHVILLE (ICIS)–Unfavorable farming fundamentals, including weaker grain prices, high cost of credit, and weather issues will continue to hit demand for fertilizers, said market participants on the sidelines of the Southwestern fertilizer conference (14-18 July). Grain prices have slumped to the lowest level since December 2020 as Tropical Storm Beryl was expected to bring rains to the Midwest. This could boost yields at a time when prices are already under downward pressure due to ample availability. “The US farmer is in the worst shape that I have seen in my career, and this is concerning,” said a trader with over 15 years of experience. Urea prices in the US are the cheapest in the world right now, as expected for this time of the year due to it being the offseason. Some market players believe prices are low domestically to discourage more imports. Importers may even look at re-exports to Brazil and Latin America if urea prices in New Orleans decline below $290-295/short ton FOB Nola. The level of $290/short ton FOB Nola is equivalent to $360/tonne CFR (cost & freight). For now, the urea level in Nola is in the mid $300s/short ton FOB Nola for July shipment. The phosphates market is getting more attention than urea in the US given the lack of availability for monoammonium phosphate (MAP) due to countervailing duties (CVD) on product arriving from Russia and Morocco. The lack of MAP availability is seeing prices trade at around $120/tonne premium to diammonium phosphate (DAP), when usually the premium is $20/tonne. There is more demand for triple phosphate (TSP) as some players are forced to switch due to the lack of MAP supply. The CVD rate for Russian producer PhosAgro is currently at 28.50%, while for Morocco the process is under review and could result in an increase in CVDs from 2.12% to 14.21% in October/November. Thumbnail shows crops being grown at a farm. Image by Shutterstock.

BARCELONA (ICIS)–Rampant overcapacity in China may change as limits to refinery expansions and new plants stifle feedstock availability. Big structural reforms needed to improve China’s economy China petrochemical trends become more complicated Country plans to cap refinery capacity at 1 billion tonnes/year from 2027-2040 China forging closer relations with Saudi Arabia Swift rise in China electric vehicles threatens petrochemical feedstocks Zero carbon rules limit future plant construction in China Europe needs to act fast to protect its industry In this Think Tank podcast, Will Beacham interviews ICIS Insight editor Nigel Davis, ICIS senior consultant Asia John Richardson 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.

MADRID (ICIS)–Colombia’s single-use plastic ban, which affects a wide range of products, kicks off amid some industry reluctance after a hurried implementation, and with provisions to revise the legislation after a one year trial period. The law that came into force on 7 July implemented a ban on eight plastics: carrier bags for packing supermarket purchases; bags for fruits and vegetables; plastic packing for magazines and newspapers; bags for storing clothes coming out of the laundry; plastic holders for balloons; cotton swabs; straws; and stirrers. The regulation establishes that those plastic products must be replaced by sustainable alternatives, such as biodegradable and compostable materials or recycled materials, or reusable non-plastic materials. It is a wide-ranging ban approved in parliament in 2022, although the plastics industry has criticized that details about the implementation of the law were only published at the end of June, barely two weeks before the kick-off date. Environmental groups have welcomed the measure, hoping more countries in Latin America will implement similar legislation in a region where plastics are omnipresent. MORE TO COMEApart from the eight plastic products banned from 7 July, the ban has set a transition period ranging from two to eight years, depending on the type of plastic, to allow merchants time to adapt to the new regulations. By 2030, plastics to be eliminated or transformed into reusable materials include containers, packaging, and bags for non pre-packaged liquids; disposable plates, trays, and cutlery; confetti, tablecloths, and streamers; containers, packaging, and bags for deliveries; sheets for serving or packaging foods for immediate consumption; wrappers for fruits and vegetables; stickers for fruits; handles for dental floss; and straws for containers of up to three liters. The law establishes exceptions for single-use plastics in certain cases, including exceptions for plastics used for medical purposes; packaging of biological or chemical waste; food products of animal origin; and those made with 100% recycled plastic raw material sourced from national post-consumer material. The regulation also mandates that public entities cannot acquire prohibited single-use plastics if sustainable alternatives are available, and these entities must implement reduction campaigns. Colombia’s National Environmental Licensing Authority (ANLA in its Spanish acronym) will oversee and enforce these measures. Among the measures included in the law, there is a request from distributors of plastic bags to submit reports on the rational use and recycling of bags in their inventory and must submit an Environmental Management Plan for packaging waste by 31 December. The law clearly will put an administrative burden on companies, not least distributors and the role they have been assigned as guardians of the law. In an interview with ICIS, the CEO of QuimicoPlasticos, a chemicals distributor in Colombia, said he thinks many aspects of the law will have to be reversed, not least points such as the nationally sourced recycled plastics as substitutes, given that recycling is in its infancy in the country and there will not be enough supply for years. QuimicoPlastics is a family-run distributor founded in 1982 and employs 80 people. It imports raw materials which distributes to the plastic packaging sectors (rigid and flexible) with end markets such agriculture, construction, food, and hygiene. The company was founded by the father of the current CEO, Federico Londoño, who has been on the post for 12 years. He has got low opinions about the law. “The law goes much further than a country like Colombia can afford. Moreover, globally and here in Colombia there are investments companies have made which are researching alternatives to, say, trays made of EPS [expandable polystyrene], but with laws like this the burden on companies grows and incentives for investment diminish,” said Londoño. It is a criticism shared across Latin America. In an interview with ICIS in June, the head of Chile’s plastics trade group Asipla also said parliamentarians push for sustainability was at times detached from the country’s reality. Before QuimicoPlasticos’ Londoño, the head of Colombia’s plastics trade group Acoplasticos also showed skepticism in an interview with ICIS about the law banning such wide range of single-use plastics. Before the law on single-use plastics, Colombia had already approved a tax on plastics production, which was marred with confusion in its initial stages of implementation. The moves around plastics have been welcome by environmental groups, some of them with the support of major consumer goods producers such as Washington-based Ocean Conservancy; in its website, it says some of its partners include Coca-Cola, Ikea, or Garnier, among many others. “With over 11 million tonnes of plastics entering the ocean each year, this law [banning single-use plastics] is a huge win for Colombia and the ocean,” said in a statement Edith Cecchini, director of international plastics at Ocean Conservancy. “Single-use plastic bags, straws, and stirrers are among the top ten most commonly found items polluting beaches and waterways worldwide by Ocean Conservancy’s International Coastal Cleanup. Ocean Conservancy applauds Colombia for this important step to prevent plastic pollution and protect marine life, and we hope that other countries will follow suit.” EXPANDING PUBLIC SERVICESThe push for sustainability by the left-leaning cabinet presided over by Gustavo Petro goes hand in hand with plans to increase tax receipts to finance the expansion in the welfare state Petro campaigned for. The cabinet has been under pressure to put the public accounts in order after posting fiscal deficits for most of Petro’s term. In June, the government published its fiscal plan for the coming years, hoping to quell fears among investors. Most analysts argued that the cabinet’s plans are too optimistic. For instance, it forecasts crude oil prices at around $90/barrel on average for the coming years, as a big chunk of Colombia’s income comes from its state-owned oil major Ecopetrol. To reassure investors, Finance Minister Ricardo Bonilla announced spending cuts worth Colombian pesos (Ps) 20 trillion ($5.1 billion, equivalent to 1.2% of GDP) to meet the target set out by the new fiscal plan 2024. “Even so, there’s reason for concern. For one thing, the government made clear that there would be no cuts to social spending; instead, a lot of the adjustment (around one third) will come in the form of cuts to public investment,” said Capital Economics at the time. Manufacturing, meanwhile, has been in the doldrums for much of 2023 and 2024, except for a positive spell in the first quarter. According to QuimicoPlasticos’ CEO, the government’s economic policy is deterring investments and creating uncertainty. “The economy is not going well. Industrial companies are suffering a high degree of uncertainty, because the fiscal burden on them continues to increase. This is no surprise, of course, when some public official within the cabinet have publicly said companies ‘steal from the people’ and they should be taxed more,” said Londoño. “Treating industrial companies as cash cows is wrong: these are the companies which need large sums in capital investments, and increasing taxes on them only deters that. If we add to that, for example, that the cabinet wants to reduce the role of fossil fuels in the country’s exports due to environmental reasons, you get a worrying picture for the coming years.” ($1 = Ps3,946) Insight by Jonathan Lopez

LONDON (ICIS)–Strong service sector performance and robust exports through 2024 amid cooling inflation points to the eurozone economy bottoming out following the emergence of tentative green shoots during the first quarter of the year, the IMF said. The organisation upped its forecast for eurozone growth to 0.9% for 2024, a 0.1 percentage point increase from the previous forecast in April, on the back of growing evidence that the bloc may have put the low point of the economic cycle behind it. Wage growth is expected to drive consumption, while loosening monetary policy could drive an uptick in investment, the IMF said, although players in sectors such as construction see the impact of rate cuts being slow to ripple through the market. With manufacturing still underperforming compared to services, as highlighted by Eurostat data on Monday showing that EU industrial output shrank month on month in May on the back of productivity declines across all most sub-sectors. Eurozone industrial activity was stagnant in April, with March the only month to see output increase month on month, according to Eurostat data. This slower manufacturing sector recovery is likely to drag on economic escape trajectory in countries like Germany, which the IMF projects will see GDP growth of 0.2% this year. Other member states such as Spain are likely to see considerably stronger growth, the agency added, increasing its 2024 GDP growth forecast for the country by 0.5 percentage points to 2.4%. Investment analysts have projected greater political stability in the UK after a general election delivering a strong mandate to the Labour Party and five years until the next election, and the IMF has upped its forecast for the country. UK GDP is now expected to stand at 0.7% this year a 0.2 percentage point increase from the IMF’s April outlook. The impact of cyclical factors buffeting global markets has receded, despite still-high shipping costs due to the ongoing Red Sea disruption, and overall economic activity is shifting closer to actual potential, according to the IMF. “Despite gloomy predictions, the global economy remains remarkably resilient, with steady growth and inflation slowing almost as quickly as it rose,” said IMF chief economist Pierre-Olivier Gourinchas. Global growth is expected to have bottomed out at 2.3% in 2022 following an inflation spike to 9.4% that year, and growth is expected to stand at 3.2% this year and 3.3% in 2025. Inflation has come down since then, allowing for a modest rate cut by the European Central Bank, but the pace of disinflation has slowed, the IMF noted, with the service sector momentum buoying European growth also propping up inflation. The European Central Bank cut rates by 25 basis points in June, but markets are not projecting another when its monetary policy committee convenes on Thursday. The US Federal Reserve is yet to cut rates, with officials guiding for just one reduction this year. US central bank caution is feeding through to emerging market central banks, the IMF noted. “A number of central banks in emerging market economies remain cautious in regard to cutting rates owing to external risks triggered by changes in interest rate differentials and associated depreciation of those economies’ currencies against the dollar,” it said. Europe is showing fewer signs of economic overheating than the US, which is likely to see slightly slower than expected growth this year as the labour market slows and consumption drops. US GDP is expected to be 2.6% this year, according to the IMF. “Unlike in the United States, there is little evidence of overheating [in the eurozone], and the European Central Bank will need to carefully calibrate the pivot toward monetary easing to avoid an inflation undershoot,” Gourinchas said. Economic scarring also remains more apparent in the developing world, with many nations still struggling to turn the page from the aftermath of the pandemic compared to economies like the US, which has already moved past pre-COVID growth levels. Focus article by Tom Brown. Thumbnail photo: Outside the IMF’s Washington, DC headquarters (Source: Gripas Yuri/ABACA/Shutterstock)

LONDON (ICIS)–Caprolactam (capro) availability in Europe has been very tight until recently, following a shortage of sulphur and low downstream demand. However, slow capro demand has helped to balance the market. Senior capro editor Marta Fern joins senior fertilizer editors Julia Meehan and Sylvia Traganida to discuss current developments and what lies ahead for the market.

SINGAPORE (ICIS)–The US overtook the Middle East for the first time as China’s largest supplier of propane and butane in the first half of 2024. US, Mideast account for 90% of China’s propane, butane imports in past two years US’ share to China’s LPG imports at 49.4% in H1 China H1 propane imports up 18%; butane imports down 15% Listen to ICIS LPG analysts Yan Wang and Shihao Zhou as they discuss the drivers behind the changes in data and the preferences of major Chinese importers.

SINGAPORE (ICIS)–In a bid to achieve its ambitious emissions targets, China is ramping up efforts to boost low-carbon hydrogen production through regulatory reforms. While hydrogen production and demand in China have steadily increased in recent years, renewable hydrogen – a crucial element in decarbonizing hard-to-abate industries – still makes up less than 2% of the country’s total hydrogen output. China has committed to peaking carbon emissions by 2030 and achieving carbon neutrality by 2060. ICIS Asia deputy news editor Nurluqman Suratman and ICIS analyst Yu Yunfeng delve into the latest developments in China’s hydrogen industry on this podcast. China’s 2023 Hydrogen Production: 37 million tonnes, 4.5% year-on-year growth Trade Tensions: EU concerns about unfair competition Emerging Trend: Transportation sector to be second largest hydrogen user

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson: Understanding what was going to happen to petrochemicals capacity additions in China used to be easy as all you had to do was read the state-run press. I am referring to comments in the local media way back in 2014 that China was going to push much harder towards petrochemicals self-sufficiency. This helps explain why in products such as polypropylene (PP), China’s percentages of capacity over demand could this year exceed 100%. But conversations with industry sources indicate that interpreting what will happen next to China’s capacity growth has become way more complex. Let’s start with the decision to cap China’s refinery capacity at some 1 billion tonnes a year from 2027 onwards up to at least 2040. This is a huge change from 2000-2026 when capacity is forecast to increase by more than 250%. The reason for the cap on refinery capacity is that China wants 40% of its car fleet to comprise electric vehicles (EVs) by 2030. It also wants all new car sales to be EVs by that year. At first glance, this indicates that China won’t have sufficient local petrochemicals feedstock to maintain its aggressive self-sufficiency push. One could thus reach the conclusion that deficits or imports will rise given the weaker economics of importing feedstocks. But local refineries may be turned into petrochemicals feedstock centers. As local transportation fuels demand declines, maintaining good refinery operating rates may hinge on China’s ability to export increasing quantities of gasoline and diesel which in a world of increasing trade tensions may be difficult. I had thought that China’s push towards peak carbon emissions by 2030 and carbon neutrality before 2060 would make it difficult to get approval for heavy industrial projects for start-up after 2030. Now, though, I’ve been told that the push to reduce carbon emissions is already making it hard to win approvals. Each province in China has reportedly been given a carbon budget. If a province wants to make room in its budget for a heavy industrial project, it might have to shut down an existing plant. Combine this with the small scale of some petrochemicals plants in China and we will or already are seeing closures of older plants to make way for new facilities, I’ve been told. This especially applies to the more developed provinces with high carbon output. If all of this is true, do not assume that this is automatically good news for all petrochemicals exporters to China because of the demographic-driven demand slowdown, China’s sustainability push and the country’s closer relationship with Saudi Arabia. As I’ve been stressing over the last three years, events in China point to a much more confused and blurred picture. Don’t panic and embrace confusion as this is the only sensible response. 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)–US crops continue to be making steady progress despite the recent stormy weather and elevated temperatures persisting with there now being 41% of corn silking and 51% of soybeans blooming, according to the latest US Department of Agriculture (USDA) weekly crop progress report. For the corn crop, this current pace of silking is above the 40% rate achieved in 2023 as well as the five-year average of 32%. Corn reaching the dough stage is now at 8% of the crop, which is ahead of the 6% achieved last year and the five-year average of 4%. For corn conditions, the USDA showed them as unchanged week on week with there still being 3% of the crop rated as very poor and 6% as poor, with 23% considered fair, 52% labeled as good and 16% as excellent. For soybeans, there is 51% of the acreage which has reached blooming, which is equal to the 51% mark from 2023 but the current pace of the crop is ahead of the five-year average of 44%. Soybean acreage which is setting pods increased to 18%, which is slightly above the 17% level seen last season and is higher than the five-year average of 12%. For soybean conditions, there continues to be 2% of the crop viewed as very poor with 6% remaining as poor, with 24% still considered fair. The USDA now lists 56% of the acreage as good with there now being 12% viewed as excellent. In harvesting updates, the crop report reflects that winter wheat is now 71% completed, which is farther along than 53% achieved in 2023 and above the five-year average of 62%. Currently, Arkansas and Oklahoma have finished their acreage, followed closely by several states now at 97% completed, including Missouri and Texas.