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Crude Oil19-Jul-2024
SINGAPORE (ICIS)–Malaysia’s economy grew by
5.8% year on year in the second quarter, driven
by stronger exports and an expansion in the
services sector, official advance estimates
showed on Friday.
The second-quarter GDP print follows the
stronger-than-expected annual growth of 4.2% in
the first quarter of 2024, the Department of
Statistics said in a statement.
Manufacturing for the period posted a stronger
annualized growth of 4.7% compared with the
1.9% pace set in the first quarter.
On a quarter-on-quarter basis, Malaysia’s
economy grew by 0.7% in April-June, reversing
the 3.1% contraction registered in Q1.
Q2 exports grew faster by 5.8% year on year to
ringgit (M$) 368.8 billion ($84 billion),
compared with the 2.0% growth in the previous
quarter.
Malaysia’s services sector expanded
by 5.6% year on year in the second
quarter, accelerating from the 4.7% expansion
in the first three months of 2024.
In H1, the country’s GDP growth averaged 5.0%,
stronger than the 4.1% growth posted in the
same period last year.
Malaysia is southeast Asia’s fifth-largest
economy and a net exporter of polyolefins.
The country is also one of the largest
producers and exporters of oleochemical
products worldwide, contributing about 20% to
global capacity, according to the Malaysian
Petrochemicals Association (MPA).
($1 = M$4.67)
Thumbnail image: Petronas Towers in Kuala
Lumpur, Malaysia (Source:C F
Tham/AP/Shutterstock)
Polyethylene19-Jul-2024
SINGAPORE (ICIS)–Click
here to see the latest blog post on Asian
Chemical Connections by John Richardson.
The slide in today’s post is an updated version
of the slide I first published late last year.
Note that there is a new scenario added to the
original two, A Bi-polar World.
I could be wrong, of course. I might have given
the wrong weightings to each of the scenarios,
or more simply have chosen the wrong scenarios
entirely. But today’s events point to very
different outcomes than we saw during the
1992-2021 Petrochemicals Supercycle.
Supermajors – 25%
probabilityA small number of
oil-and-gas-to-petrochemicals players dominate
the business as they have increasingly turned
oil and natural-gas liquids into petrochemicals
at competitive costs. This is in response to
the decline in crude-oil demand into
transportation fuels because of the
electrification of vehicles.
Non-integrated petrochemical producers in
Europe, South Korea, Singapore, Taiwan and
Southeast Asia consolidate. Large swathes of
capacity closes-down in these countries and
regions to balance markets.
A Bi-Polar World – 50%
probabilityThe split between
China and the US, and possibly the EU as well,
widens.
The rest of the developed world, including
major petrochemical players in countries such
as South Korea, Singapore and Japan, will need
to decide where they stand: With the US and its
partners or with China and its partners. They
are at risk of losing access to the China
market.
Petrochemicals trade is largely confined to
between China and its partners and between the
US and its partners.
No one scenario will be completely right. We
could end up at any of many points between each
of these three extreme outcomes.
This is the case with Supermajors and A
Bi-polar World. It could be that the closer
relationship between Saudi Arabia and China
allows Saudi Arabia to supply more of China’s
petrochemicals deficits, allowing the Kingdom
to perhaps realise some of its
crude-oil-to-chemicals ambitions.
A De-globalised World – 25%
probabilityMarkets are in
general much more regional. Instead of just a
bi-polar world, we end up with
beggar-thy-neighbour trade barriers similar in
scale to the ones which led to the Great
Depression.
Petrochemical companies become much more “local
for local”. Governments put up barriers to
protect jobs and to ensure refineries don’t
shut down along with uncompetitive
petrochemical plants, thereby by protecting
local supplies of transportation fuels.
While extreme outcomes help push people out
their comfort zones, supporting local
petrochemical companies might instead fit at
some mid-way point between all the scenarios.
And “local for local” shouldn’t be viewed as
automatically a bad thing. One can argue that
because of today’s highly uncertain
geopolitical world, local supplies of at least
some petrochemicals are essential.
Calling all senior management teams out there:
You need to prepare your teams for the world
after the Petrochemicals Supercycle.
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.
Ammonia18-Jul-2024
LONDON (ICIS)–On 11 July the first auction
results from the German H2Global programme were
released, providing the European hydrogen
market critical information on the green
premium across the supply side as ammonia
participants switch to lower-carbon, cleaner
products.
H2Global is a double auction system that
procures international volumes of hydrogen and
re-sells them domestically, providing a subsidy
based on how low the sell price of the market
is against how high the buy price is.
ICIS has produced the following infographic to
contextualise the update.
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Speciality Chemicals18-Jul-2024
LONDON (ICIS)–Ursula von der Leyen on Thursday
secured her re-election to a second five-year
term as President of the European Commission,
and identified competitiveness as the most
pressing issue facing the EU.
Following a June European parliamentary
election season that saw liberal and centrist
political blocs hold on to majority power but
cede ground to right-wing and Eurosceptic
parties, von der Leyen’s position as leader of
the bloc was reaffirmed on 18 July.
A total of 401 Ministers of European Parliament
(MEPs) backed von der Leyen’s candidacy,
equating to roughly the number of members
linked to the centrist European People’s Party,
left-wing Progressive Alliance of Socialists
and Democrats, and liberal group Renew
Europe.
A total of 360 votes in favour of von der Leyen
were necessary to secure a majority. Of the 719
total MEPs, 284 voted against her, and 22
submitted blank or invalid votes, according to
European Parliament.
Chemicals sector representatives have expressed
hopes that the next term of the European
Parliament will feature a stronger focus on
industrial competitiveness, in light of the
impact of high energy prices on the long-term
viability of some sectors.
““If you read the State of the Union, there are
a number of statements which clearly indicate
industry policy is back, that it will get, if
not the deepest political priority, as there
are issues like Ukraine, it will get political
priority in the next commission,” Cefic
director general Marco Mensink said, speaking in
October 2023.
The impact of higher energy prices on operating
costs and the rollout of more cash-heavy
subsidy frameworks elsewhere, such as the US
Inflation Reduction Act, have intensified
pressure on European industry.
“Our competitiveness needs a major boost,” von
der Leyen said, addressing MEPs earlier on
Thursday.
“The fundamentals of the global economy are
changing. Those who stand still will fall
behind. Those who are not competitive will be
dependent. The race is on and I want Europe to
switch gear,” she added.
This push on competitiveness is likely to be
focused on reducing the administrative burden
on companies in the region and prioritising
faster permitting, she added.
Von der Leyen also intends to launch a Clean
Industrial Deal within the first 100 days of
her new term, she added, to channel investment
in infrastructure and industry decarbonisation,
particularly for energy-intensive sectors.
Germany-based chemicals trade group VCI
welcomed von der Leyen’s re-election, but
warned that Europe is at a crossroads in terms
of its future trajectory.
“We are at a turning point that will decide the
future of Europe. Will we manoeuvre ourselves
further into the side lines as a business
location or back on the road to success? The
new Commission must act decisively to balance
sustainability and industrial competitiveness,”
said VCI CEO Wolfgang Grosse Entrup.
No deviation is expected in the bloc’s 2030 and
2050 decarbonisation goals, despite growing
murmurs that the EU is not on track to meet the
2030 targets with just over six years still
remaining to build out infrastructure.
“So I want to be clear. We will stay the course
on our new growth strategy and the goals we set
for 2030 and 2050. Our focus now will be on
implementation and investment to make it happen
on the ground,” von der Leyen added.
Focus article by Tom
Brown.
Thumbnail photo: Ursula von der Leyen,
speaking in Strasbourg, France, after winning
re-election as European Commission President on
18 July 2024. (Source: Ronald
Wittek/EPA-EFE/Shutterstock)
Speciality Chemicals18-Jul-2024
HOUSTON (ICIS)–The US chemical industry could
see the return of some popular trade and
chemical-safety programs later this year, and
customers of the major railroads could get
their first chance to switch carriers if they
get bad service.
The year is turning out to be a busy and
potentially productive one despite the
presidential election
Key trade and security bills for the
chemical industry could pass during the lame
duck session, which falls between the November
5 election day and the January 20 inauguration
Globally, the final round of negotiations
for the UN plastics treaty should take place
near the end of the year
UN PLASTICS TREATYThe
concern of the chemical industry is that the
ratified plastic treaty could include caps or
curbs on the production of plastic.
Companies such as BASF have advocated that
the treaty should focus on curbing pollution
instead.
Chemical companies have noted
a growing consensus around the industry’s
views, leading them to be optimistic about
the upcoming negotiations.
The next round of talks is scheduled for
November 25 through December 1 in Busan, South
Korea.
Formal ratification could take place in early
2025.
RECRIPROCAL SWITCHING MAY GET FIRST
TRIALReciprocal switching in the
US will become effective in September, which
will allow chemical companies to switch rail
carriers if they can demonstrate substandard
service.
Reciprocal switching will be limited to Class 1
railroad companies, which are the biggest
carriers.
Redress for bad service is not automatic, and
the process will require time, effort and legal
fees on the part of chemical companies.
“The question is how laborious and costly will
that process be when you file a complaint?”
said Eric Byer, president of the Alliance for
Chemical Distribution (ACD) the new name for
the National Association of Chemical
Distributors (NACD).
Still, it is possible that a chemical company
upset with its rail service takes the plunge
and files the first request for reciprocal
switching.
NEW RAIL BILL AND POSSIBLE TANK CAR
BANA
rail safety bill that passed the Senate
shortly after the Norfolk Southern train
derailment in Ohio state has recently received
momentum that could push it into law.
That momentum is coming from
HR 8996, a sister bill that was introduced
in the House of Representatives by Troy Nehls
(Republican-Texas) and Seth Moulton
(Democrat-Massachusetts).
Related to the bill is a possible ban on DOT
111 tank cars. The ban is also connected to the
derailment, since
it is part of a settlement agreement
between the US and Norfolk Southern.
The agreement proposes that Norfolk Southern
stop using its own DOT-111 tank cars and that
it encourages its customers to do the same.
The ACD is concerned that the agreement could
be the first step in an outright ban of DOT 111
tank cars.
Such a ban could take place before the industry
has time to replace the tank
cars. Hazardous materials would then be
shipped by truck, which is more dangerous.
A ban would also disrupt the movement of
chemicals if it happens too quickly.
REVIVAL OF CHEM SECURITY
PROGRAMLegislators could revive
the nation’s main anti-terrorism program for
chemical sites, which is known as the Chemical
Facility Anti-Terrorism Standards (CFATS).
CFATS has been inactive for about a year, after
a bill that would have re-authorized it was
blocked by US Senator Rand Paul
(Republican-Kentucky).
While CFATS has lost its authorization, it has
not lost funding. Were Congress to re-authorize
CFATS, employees who were associated with the
program could be reassigned to it.
Senators could attempt to revive CFATS through
an amendment to the National Defense
Authorization Act (NDAA), Byer said.
That could happen later in September or during
the lame duck legislative session, Byers said.
Another tactic would add an amendment to the
appropriations bill, he said.
Congress will likely consider the
appropriations bill during the lame duck
session.
REVIVAL OF TRADE
PROGRAMSTwo trade programs
popular with the chemical industry could also
be revived during the lame duck session.
The Generalised System of
Preferences (GSP) expired
at the end of 2020, and it eliminated duties on
thousands of products from more than a 100
developing countries. Prior to its expiration,
the GSP had existed for decades.
Byer said a bill could bring back the GSP
program and make it retroactive to January 1,
2021. If such a bill becomes law, companies
would receive rebates for the taxes they paid
while the GSP program was inactive.
The GSP has typically been coupled with another
expired trade program, known as the
Miscellaneous Tariff Bill (MTB),
Byer said. The MTB temporarily reduced or
suspended import tariffs on specific products,
and it could be packaged with any other
legislative action that would revive the GSP.
ELECTION SEASON TO LIMIT NEW BILLS,
POLICIESOutside of the trade and
security bills, Byer does not expect a lot of
new legislation because of the elections.
Similarly, the pace of new policies and
rulemaking at federal agencies should slow
down.
Any regulatory relief would be a welcomed
change because the first half of 2024 was the
worst regulatory climate that the chemical
industry has ever seen, Byer said.
The regulatory climate could change after the
elections on November 5. Otherwise, the
chemical industry may have to turn to the
courts to challenge policies that have a
questionable basis and a harmful effect on
companies.
Insight article by Al
Greenwood
Thumbnail shows plastic waste. Image
by HOTLI
SIMANJUNTAK/EPA-EFE/Shutterstock
Polyethylene18-Jul-2024
MADRID (ICIS)–Supply of ethane from Pemex to
polyethylene (PE) producer Braskem Idesa is now
more stable after a renegotiation of the
contract – but the global PE market remains in
the doldrums, according to an executive at the
Mexican firm.
Sergio Plata, head of institutional relations
and communications at Braskem Idesa, said a
recovery in global PE prices could start in the
second half of 2025 as the market is expected
to remain oversupplied in the coming quarters.
Plata explained how Braskem Idesa had to
renegotiate the terms of an agreement with
Pemex, Mexico’s state-owned crude oil major,
for the supply of natural gas-based ethane, one
of the routes to produce PE, to its facilities
in Coatzacoalcos.
Supply is now more stable and in the quantities
agreed, he said.
Braskem Idesa operates the Ethylene XXI complex
in Coatzacoalcos, south of the industrial state
of Veracruz, which has capacity to produce 1.05
million tonnes/year of ethylene and downstream
capacities of 750,000 tonnes/year for
high-density polyethylene (HDPE) and 300,000
tonnes/year for low-density polyethylene
(LDPE).
Braskem Idesa is a joint venture made up of
Brazil’s polymers major Braskem (75%) and
Mexican chemical producer Grupo Idesa (25%).
ETHANE FLOWING, TERMINAL IN Q1
2025
Pemex agreed with Braskem Idesa to supply the
PE producer with a minimum volume of 30,000
barrels/day of ethane until the beginning of
2025, when Braskem Idesa plans to start up an
import terminal in Coatzacoalcos to allow it to
tap into exports out of the US Gulf Coast.
However, both parties sat to renegotiate that
agreement after Pemex’s supply proved to be
unstable, with credit rating agencies such as
Fitch warning in 2023 of the
“operational risk” such a deal with the
state-owned major represented for Braskem
Idesa.
The outcome of the renegotiation is starting to
bear fruit, explained Plata diplomatically,
without providing any details. He conceded,
however, that to outsiders, Pemex’s businesses
could look rather odd.
“We understand the positions of a public entity
such as Pemex, and we understand its methods
could look questionable to eyes outside our
relationship,” said Plata.
“However, at Braskem Idesa we were confident
that if we sat down with them to renegotiate,
clearly stating what we require from each
other, we could reach a point in the
renegotiation which worked for us as a company
and for the Mexican petrochemicals sector as a
whole.”
Together with more stable supply from Pemex,
Braskem Idesa also adopted the so-called Fast
Track to import ethane while its own import
terminal starts up. The terminal, known as
Terminal Quimica Puerto Mexico (TQPM),
closed the last financing details at the
end of 2023.
Plata said the terminal would start up “without
a doubt” by the beginning of 2025, adding that
construction was 70% complete by the beginning
of July.
According to Plata, with Pemex’s more stable
ethane supply and the Fast Track system,
Braskem Idesa is operating at 70-75% capacity
utilization.
PE MARKET WOES
As a PE producer, Braskem Idesa remains exposed
to the global downturn in polymers prices due
to oversupplies. Plata said the downturn has
been a “very hard” period for polymers
producers, who may still face 12 more months of
downturn.
In its latest financial statement for the first
quarter, Braskem Idesa’s sales fell by 2%, year
on year, and the company posted a net loss.
Earnings before interest, taxes, depreciation,
and amortization (EBITDA) rose.
Braskem Idesa (in $
million)
Q1 2024
Q1 2023
Change
Q4 2023
Change Q1 2024 vs Q4
2024
Sales
229
234
-2%
199
15%
Net profit/loss
-85
1
N/A
-101
-16%
EBITDA
36
26
36%
26
39%
PE sales volumes (in
tonnes)
205,500
195,100
5.4%
174,500
17.8%
“We have had a very complex environment, with
increased capacities in the US or China and
with the war in Ukraine raising our production
costs. We are undoubtedly in a down cycle and
as a company we have tried to take care of our
margins by controlling our costs and look
closely at our investments,” said Plata.
He said he “would not have the answer” about
what to do with China’s dumping of product
around the world, a fact that in Brazil, the
largest Latin American economy, has prompted
chemicals trade group Abiquim to
lobby hard for higher import tariffs in
polymers,
as well as dozens of other chemicals.
“Market analysts predict the current cycle may
come to an end in the second half of 2025.
Let’s hope so… This has been such a long
crisis, aggravated by external factors such as
wars and global convulsions, which undoubtedly
also affect the industry, and the environment
remains very uncertain.”
Front page picture: Braskem Idesa’s
facilities in Coatzacoalcos
Source: Braskem Idesa
Interview article by Jonathan
Lopez
Next week, ICIS will publish the second
part of the interview with Plata, with his
views on the challenges and opportunities for
the chemicals and manufacturing sectors under
the upcoming Administration led by
President-Elect Claudia Sheinbaum amid the
nearshoring trend
Isocyanates18-Jul-2024
SHANGHAI (ICIS)–In this podcast, markets
reporter Shannen Ng discusses how northeast
Asia’s methylene diphenyl diisocyanate (MDI)
supply is expected to remain tight as Q3
progresses. However, poor demand expectations
in the Asian import markets for the rest of
this quarter remain.
Polymeric MDI sentiment in SE Asia, India
supported by tight supply
Monomeric MDI particularly sluggish and
expected to remain so
Weak demand outlook for China’s downstream
construction and automotive sectors
Polypropylene18-Jul-2024
LONDON (ICIS)–Europe’s run up to holiday
season has been unusually busy for polyethylene
(PE) and polypropylene (PP) markets, including
some spot prices reversing for the first time
since March 2024.
In this ICIS podcast, European PE and PP senior
editors Vicky Ellis and Ben Lake pick out
July’s big themes, from logistics (hurricane
Beryl and still-spiked Asian freight rates) to
the mismatch between how local suppliers and
converters are experiencing demand this month.
They also highlight what to watch for August.
Editing by Damini Dabholkar
Crude Oil18-Jul-2024
SINGAPORE (ICIS)–Shipping disruptions
affecting Maersk’s container shipping
operations because of the Red Sea crisis have
extended beyond the Far East-Europe routes to
its entire global network, the shipping and
logistics giant said.
The fallout of the Red Sea crisis is continuing
to cascade across the world, forcing
vessels to temporarily divert and take longer
routes around the Cape of Good Hope, thereby
causing unprecedented challenges for global
supply chains.
The disruptions now extend beyond the primary
affected routes, causing congestion at
alternative routes and transshipment hubs
essential for trade with Far East Asia, West
Central Asia, and Europe, Maersk said in a
statement on 17 July.
Ports across the Asia Pacific, including
Singapore, Australia, and China, are
experiencing delays due to congestion.
The coming months will be challenging for
carriers and businesses alike, as the Red Sea
situation stretches into the third quarter of
this year, Maersk CEO Vincent Clerc said.
Maersk operates around 740 ships across its
various divisions, including container ships,
tankers, and other specialized vessels.
Extending rotations to travel the longer route
around Africa takes two to three ships,
depending on the trade in question, he said.
“We are going to have in the coming month
missing positions or ships that are sailing
that are significant different size from what
we normally would have on that string, which
will also imply reduced ability for us to carry
all the demand that there is,” Clerc said.
The availability of additional capacity was low
to begin with and, across the industry,
carriers’ ability to bring in extra tonnage has
been limited, he said, adding that at the same
time, demand for container transport has
remained strong.
ASIA EXPORTERS’ WOES TO
CONTINUE
For Asia, the impact of the ongoing Red Sea
Crisis is more on exports rather than imports,
Maersk said.
This is primarily because Asian countries are
major global exporters. China, Asia’s biggest
economy and the second-biggest in the world, is
also the largest exporter to many Asian
countries.
Routes between the Far East – which spans east
southeast Asia – and Europe via the Suez Canal
have been directly impacted, with disruptions
in the Red Sea affecting most trade routes.
“First, hubs in Asia are being impacted with
congestion across key ports, causing delays and
bottlenecks to ripple through the entire
system,” Maersk said.
“Second, ocean networks have been reorganised
with vessels being moved to different regions
to better meet demand for capacity.”
This has led to a widening global impact that
has affected regions that weren’t originally
directly affected by the Red Sea disruption.
Intra-Asia shipping routes are also facing
equipment shortages, especially out of China,
impacting the entire industry.
Initially affecting long-haul routes, the
scarcity now extends to shorter regional
routes.
This leaves carriers like Maersk with a
difficult choice: prioritize returning empty
containers to China or shipping full containers
to other destinations, both options translate
to increased costs and contributing to further
supply chain disruptions.
“We are also approaching typhoon season, which
is expected to impact East China and South
China, creating further risks of congestion,”
the shipping giant said.
Focus article by Nurluqman
Suratman
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