CHARLOTTE, North Carolina (ICIS)–August started with reports of high weekly initial unemployment claims, a weak manufacturing PMI reading and a lackluster payroll report. Equity markets did not react well to this as evidenced by a three-day sell off. But the panic ended, a rebound ensued and we are back to where we were on 31 July as the underlying economic fundamentals of a late-phase business cycle remain. The economy is slowing, not falling off a cliff. Job creation continues, even after the softer showing in July and the unemployment rate ticking up to 4.3%, largely the result of Hurricane Beryl. In the latest JOLTS (Job Openings and Labor Turnover) report, there are 1.2 job openings per unemployed, which is down from a year ago. Overall labor market supply and demand relationships appear to be moving back towards pre-pandemic levels. With a still positive labor market, incomes are holding up for consumers and providing support for the US economy. The headline July Consumer Price Index (CPI) was up 2.9% year on year, the lowest comparison since March 2021. Progress on disinflation continues and inflation is heading back towards the Fed’s target. Economists expect inflation to average 3.1% this year, down from 4.1% in 2023 and 8.0% in 2022. This is still above the Fed’s target. Inflation should soften to 2.4% in 2025 and 2026. As a result, interest rate futures overwhelmingly expect the Fed to cut rates in September. Turning to the production side of the economy, the July ISM US Manufacturing Purchasing Managers’ Index (PMI) registered 46.8, down 1.7 points from June and a reading that was below expectations. A March expansionary reading had ended 16 months of contraction in manufacturing, but since then the readings have been contractionary. Overall manufacturing production contraction deepened. New orders slipped further into contraction, and order backlogs and inventories contracted at a faster pace. Only five of the 18 industries expanded. The ISM Services PMI rebounded 2.6 points to 51.4, a slightly expansionary reading. The Manufacturing PMI for Canada remained in contraction (15 months and counting) during July while that for Mexico contracted slightly after nine months of expanding. Brazil’s manufacturing PMI expanded for a seventh month. Euro Area manufacturing has been in contraction for 24 months. The UK PMI, however, expanded for a third month. China’s manufacturing PMI retreated below breakeven levels, ending eight months of positive readings. This is indicative of a stalling recovery. Turning to the demand side of the economy, light vehicle sales rose in July and although inventories have moved up in recent months, they still remain low. We expect light vehicle sales of 15.7 million this year before improving to 16.2 million in 2025. We expect sales of 17.2 million in 2026. This would bring activity back to the last cyclical peak in 2018. Housing activity continues to be tepid amid affordability issues and low builder confidence. We expect that housing starts will average 1.39 million in 2024 and 1.45 million in 2025. We expect housing activity to improve to 1.50 million in 2026. Demographic factors will support housing activity during the next five or more years. There is significant pent-up demand for housing and a shortage of inventory. Affordability continues to be an issue. Retail sales have been lackluster so far this year, but the July results were positive, aiding to the strength in equity markets. Sales at food services and drinking places remain positive. Consumers are taking on more debt. Overall consumer spending may be slowing but remains positive. Business fixed investment, led by a need to boost productivity and reshoring initiatives, will take over from consumer spending as a driver of the US economy. This is typical of a late-stage business cycle. Taking all of these demand and supply considerations together, it appears that downstream activity is improving and that the severe destocking cycle is ending. A restocking cycle for major resins is emerging. US real GDP rose 5.8% in 2021 and then slowed to a 2.5% gain in 2022. The much-anticipated recession failed to emerge for a variety of reasons, and in 2023 the economy expanded 2.5% again. US economic growth in H1 2024 has been strong but is likely to slow, and when it is all said and done, 2024 growth will likely be another 2.5% gain. This pace is well above long-term growth potential. The slowdown in quarterly economic activity suggests that in 2025, the economy should rise 1.8% over average 2024 levels, followed by a modest 2.0% gain in 2026. The US is once again outpacing the other advanced nations. Led by the UK and the Mediterranean nations, Europe’s economic prospects appear to be improving. China struggles with soft economic activity and appears to be exporting its way out of its stalled recovery.

HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 23 August. SHIPPING: Panama Canal adds additional transit slot, raises maximum draft allowance As the water level in the freshwater lake that feeds the Panama Canal’s locks continues to rise, the Panama Canal Authority (PCA) has increased the maximum allowable draft to 50ft (15.25m), effective immediately, and will add an additional transit slot beginning 1 September. Canada needs to act on rail stoppage, now – chem group CIAC Canada’s federal government needs to exercise its authority and act quickly on the complete freight rail stoppage, set to start midnight at 00:01 Eastern Time, trade group Chemistry Industry Association of Canada (CIAC) said. Canada government reluctant to intervene as freight rail shutdown begins As the unprecedented work stoppage at both of Canada’s freight railroads began on Thursday at 00:01 Eastern Time, it remains unclear how or when it may end as the government is reluctant to intervene. LyondellBasell declares FM on rail shipments to Canada amid CPKC, CN work stoppage Global chemicals major LyondellBasell has declared force majeure on all rail shipments to Canada after that country’s two largest railroads shut down operations after negotiations for a new collective bargaining agreement stalled. Canadian freight railroads prepare to resume operations after brief shutdown Freight railroads Canadian National (CN) and Canadian Pacific Kansas City (CPKC) are preparing to restart operations after the federal government stepped in to end a labor dispute with workers – although it remains unclear on Friday when exactly a full freight rail service will resume. Canada rail dispute: Union issues fresh strike notice, despite government order for binding arbitration -Labor union Teamsters Canada Rail Conference (TCRC) on Friday issued a strike notice for Monday, 26 August, against railroad Canadian National (CN).

MADRID (ICIS)–Sentiment among Germany’s petrochemicals-intensive manufacturing sectors worsened in August to its lowest level since February, research institute Ifo said on Monday. Sentiment among construction companies remained stable at low levels, while overall sentiment deteriorated as the German economy is “increasingly” falling into crisis, said the analysts. “In manufacturing, the index fell considerably. Companies were significantly less satisfied with the current business situation. Expectations fell to the lowest level since February,” said Ifo. “[Manufacturing] companies once again reported declining order backlogs. The situation for investment goods manufacturers, in particular, is difficult.” Sentiment among petrochemicals-intensive construction companies remained stable but low due to, on the one hand, companies being slightly more satisfied with the current business situation but, on the other, reporting declining expectations about future business conditions. The overall Ifo’s Business Climate Index fell from 87.0 points in July to 86.6 points in August. “Companies assessed their current situation as worse. In addition, expectations were more pessimistic. The German economy is increasingly falling into crisis,” said Ifo. Earlier in August, Ifo reported that sentiment among chemicals companies is also falling, with operating rates declining further. ‘MARGINALLY’ GOOD NEWSAnalysts at Oxford Economics said the fall in the Ifo Business Climate Index came as no surprise but added it could be seen as a positive after a string of negative indicators in past weeks, not least last week’s flash manufacturing PMI index for August, which showed Germany and eurozone’s manufacturing still in contraction territory. The downturn in Germany’s manufacturing sector, the largest in the eurozone, weighed greatly on the index. “Although this [Ifo Business Climate Index] marks the fourth consecutive decline after the index peaked in April, it is marginally good news as other surveys had pointed to a sharper deterioration,” said Oxford Economics on Monday. “We think it will take Germany’s manufacturing sector until end of this year to emerge from the economic slump but the deterioration in the services sector highlights the broad weakness in the German economy.” The analysts went on to say the road ahead for Germany’s economic recovery will be a “bumpy” one, adding they still expect the economy to expand in the third quarter, although “cannot exclude” a contraction at this point. However, the analysts said they are more upbeat about the coming quarter, with a recovery potentially taking place towards the end of 2024 in Germany’s economy after the shock suffered in the past two years related to the energy crisis and high interest rates. “We maintain that a recovery will ensue towards the end of this year on the back of a turning industrial cycle and easing financial conditions,” concluded Ifo. “Last week’s data on negotiated wage growth and our expectations of falling inflation data for this week, pave the way for the ECB [European Central Bank] to cut rates twice this year followed by a series of cuts next year.” Front page picture: Chemical plants in Moers, Germany Source: Jochen Tack/imageBROKER/Shutterstock

MUMBAI (ICIS)–India will continue imposing antidumping duties (ADDs) on chlorinated polyvinyl chloride (CPVC) imports originating from China and South Korea. The ADDs apply to CPVC resins as well as compounds, with rates ranging from $593/tonne to $792/tonne, depending on origin and producer, according to India’s Ministry of Finance. They are set for five years and can be revoked or amended, if necessary. S.No Country of origin Country of export Producer Type Amount in ($/tonne) 1 China Any country including China Any CPVC resin 790 2 China Any country including China Any CPVC compound 605 3 Any country other than China and Korea China Any CPVC resin 790 4 Any country other than China and Korea China Any CPVC compound 605 5 Korea Any country including Korea Hanwha Solutions Corp CPVC resin 593 6 Korea Any country including Korea Hanwha Solutions Corporation CPVC compound 792 7 Korea Any country including Korea Any producer other than mentioned above CPVC resin 593 8 Korea Any country including Korea Any producer other than mentioned above CPVC compound 792 9 Any country other than China and Korea Korea Any CPVC resin 593 10 Any country other than China and Korea Korea Any CPVC compound 792 Source: India Ministry of Finance India’s anti-dumping duties on CPVC imports from China and South Korea were initially imposed on 26 August 2019 for a period of five years. These measures have been extended following recommendations by the designated authority to protect the domestic industry. It was determined that dumping and injury to Indian manufacturers were likely if the existing measures were not extended.

LONDON (ICIS)–Here are some of the top stories from ICIS Europe for the week ended 23 August. Aviation fuel prices hit new lows amid growing bearishness European spot jet fuel quotations plunged to 14-month lows towards mid-week, bearing the brunt of tepid demand and ongoing upstream softness, with the short-term outlook unclear as the peak travel season winds down. Europe SAN contract prices increase double digits in August August contract prices have increased €70/tonne in the European styrene acrylonitrile (SAN) market, the first price increase since April 2024, mainly driven by composite costs of the €78/tonne contract price increase for upstream styrene, and the €36/tonne contract price increase for secondary feedstock acrylonitrile (ACN). EU plans up to 36.3% definitive tariffs on EV imports from China The European Commission (EC) has announced a draft decision to impose up to 36.3% definitive countervailing duties on imports of battery electric vehicles (EVs) from China. Quantafuel cancels pyrolysis-based chemical recycling project in Sunderland, UK Quantafuel Sunderland Limited, part of UK recycling major Viridor, has halted the development of its planned pyrolysis-based chemical recycling plant in Sunderland, a company spokesperson confirmed late on Monday. IPEX: Global index down on softer prices in NW Europe, NE Asia Lower chemical prices in northwest Europe and northeast Asia drove the global spot ICIS Petrochemical Index (IPEX) down by 0.2% in the week ending 16 August.

TORONTO (ICIS)–Labor tribunal Canada Industrial Relations Board (CIRB) on 24 August ordered Canada’s two freight railroads and about 9,300 unionized workers to resume rail service at 0:01 eastern time on 26 August. Freight rail service on both Canadian National (CN) and Canadian Pacific Kansas City (CPKC) was shut down on Thursday, 22 August amid a protracted labor dispute. With the order, the CIRB follows directions Canada’s federal labor minister issued shortly after the shutdown began. The dispute between railroads and workers would be settled through binding arbitration, in line with the minister’s directions, the CIRB said. The board said that “the current circumstances and impact of work stoppages involving Canada’s two main rail companies” were reasons for its decision. The board will provide detailed reasons later, it said. UNION, RAILROADS WILL COMPLY Labor union Teamsters Canada Rail Conference (TCRC) and the railroads said they would comply with the board’s decision. CPKC asked workers to return to work for the day shift on Sunday, 25 August, in order to restore service as quickly as possible and avoid further disruptions to supply chains. TCRC added that while it would comply with the CIRB’s decision, it would appeal the ruling in court. In Canada’s chemical industry, trade group Chemistry Industry Association of Canada (CIAC) has said that going by past experience, for each day of a rail disruption it could take three days or more to return to service once labor issues are resolved. CIAC is particularly concerned about the supply of chlorine and derivatives for drinking water treatment during rail disruptions. For safety reasons, chlorine can only be shipped by rail. Although the rail shutdown began on 22 August, the railroads stopped accepting chlorine and other hazardous materials for shipment before that date. The disruption in rail service prompted fears that Canadian chlorine plants could be forced to curtail or stop production. Canada-based chemical producers rely on rail to deliver more than 70% of their products, with some exclusively using rail. About 80% of Canada’s chemical production goes into export, with about 80% of those exports going to the US, according to CIAC. (Map by Miguel Rodriguez Fernandez) Meanwhile, LyondellBasell declared force majeure on all cargo movements by rail to Canada and industrial chemical producer Chemtrade Logistics warned about the impact of the rail disruption on its financial results. The following table by the American Association of Railroads (AAR) shows Canadian freight rail traffic, including chemicals, for the week ended 17 August and the first 33 weeks of 2024: Additional reporting by Adam Yanelli and Nurluqman Suratman

SINGAPORE (ICIS)–Here are the top stories from ICIS News Asia and the Middle East for the week ended 23 August 2024. INSIGHT: Asia BD capacity growth to accelerate to 10% in 2025 By Ann Sun 23-Aug-24 10:35 SINGAPORE (ICIS)–The Asian butadiene (BD) market is anticipated to experience large-scale capacity expansion between Q4 this year and end-2025, with nine projects scheduled to begin operations. Asia BDO market demand unable to reduce inventories, oversupply persists By Corey Chew 22-Aug-24 11:16 SINGAPORE (ICIS)–The Asian 1,4-butanediol (BDO) market has been going through a downtrend that started about a month ago, mainly due to the falling domestic China market. INSIGHT: China’s EVA capacity expected to exceed 2.6 million tonnes in 2024 By Amy Yu 20-Aug-24 17:12 SINGAPORE (ICIS)–China’s EVA capacity is forecast to exceed 2.6 million tonnes in 2024, a year-on-year growth rate of 17%, considering Jiangsu Hongjing New Material a new plant with 200,000 tonnes/year is scheduled to come on stream in Q4. INSIGHT: China plasticizer alcohols’ supply growth accelerating By Lina Xu 19-Aug-24 17:08 SINGAPORE (ICIS)–China’s plasticizer market is diversifying, leading the supply expansion of feedstock alcohols amid high requirements for end-products and growing emphasis on sustainability in operations in recent years. Asia naphtha back in the black within a day; volatility to stay By Li Peng Seng 19-Aug-24 11:06 SINGAPORE (ICIS)–Asia’s naphtha intermonth spread returned to the positive zone on 16 August, after slipping into the red the day before for the first time this year, with volatile trades expected to persist amid uncertainties over supply balances. INSIGHT: China’s MEG export market changes amid volatile global fundamentals By Cindy Qiu 22-Aug-24 14:00 SINGAPORE (ICIS)–China’s monoethylene glycol (MEG) exports have been on an uptrend in recent years due to the rapid expansion of domestic capacity. MEG exports totalled around 93,000 tonnes in January-June 2024 and are expected to exceed 150,000 tonnes for the year as a whole. India’s BPCL to invest Rs1.7 trillion on capacity growth over five years By Priya Jestin 20-Aug-24 12:58 MUMBAI (ICIS)–India’s state-owned Bharat Petroleum Corp Ltd (BPCL) plans to invest rupee (Rs) 1.7 trillion ($20.3 billion) over the next five years to grow its refining and fuel marketing business, as well as expand its petrochemicals and green energy businesses.

HOUSTON (ICIS)–Although the Canadian railroad labor strife is poised to carry on further, US fertilizer participants are not growing overly concern as this action comes at a slower time of the year for domestic applications and fresh buying. With it being late August most of the attention of domestic growers are either on advancing harvesting campaigns or commencing those efforts soon, with some locations still tending to mature crops. There were also strong summer refilling efforts, which together is overall keeping the pull for nutrients light for most products although volume of nitrogen, phosphate and potash have continued to move over August on barges and terminals. As a source said they had zero concerns so far and not hearing that the situation is concerning customers either, “I assume if it persists there will be. It’s just happening at a time of year that it isn’t impactful enough to our industry.” The railroad strike appeared to have been resolved on 22 August when the government directed the matter to the Canada Industrial Relations Board (CIRB) for binding arbitration, with Canadian National (CN) and Canadian Pacific Kansas City (CPKC) having said they were preparing to begin running. Then on Friday labor union Teamsters Canada Rail Conference (TCRC) issued a strike notice for 26 August, against railroad Canadian National (CN) with approximately 6,500 unionized employees set to withdraw their service starting Monday. As there was prior to the start of this strike activity, there is also optimism from some that this will not be a protracted dispute. The US is about to enter a period of what has been anticipated to be good post-harvest demand, with a source saying a work stoppage “could be an issue then but generally these things resolve quickly.” Earlier this week industry group Fertilizer Canada said disruptions to rail services across the country will cost the fertilizer industry millions per day in lost sales revenue, with an average of 69,000 tonnes of fertilizer product transported per day. 75% of all fertilizer produced and used in Canada is moved by rail, with minimal transportation alternatives, with 90% of those volumes which are destined for the US market delivered by rail.

TORONTO (ICIS)–Labor union Teamsters Canada Rail Conference (TCRC) on Friday issued a strike notice for Monday, 26 August, against railroad Canadian National (CN). The move surprises as railroads CN and Canadian Pacific Kansas City (CPKC) said earlier they were preparing to resume operations after a government order on Thursday that referred the labor dispute between TCRC and the railroads to the Canada Industrial Relations Board (CIRB) for binding arbitration. The country’s labor minister issued the order after the railroads locked out about 9,300 workers and shut down operations on Thursday, 22 August, 00:01 Eastern Time. In Friday’s strike notice, TCRC said that about 6,500 unionized CN workers would withdraw their service starting Monday, 26 August, 10:00 Eastern Time. However, it added that its differences with CN were not “insurmountable” and that it remained available for discussions to avoid a further work stoppage at CN. TCRC’s strike notice also surprises because the union said earlier that it took down picked lines again CN and that unionized CN workers would start returning to work on Friday. Picket lines at CPKC, however, would remain in place, the union said. Teamsters president Francois Laporte said in remarks to public broadcaster CBC/RDI on Friday that the union was looking at its legal options and would “use our constitutional rights” to “fight” for workers’ interests. He also confirmed that despite the referral to the CIRB, the industrial action at CPKC was continuing. Political commentators said that the union may seek to challenge the constitutionality of the minister’s referral of the dispute to the CIRB for binding legislation. There is legal precedent that deems the right to strike and to collective bargaining as a constitutional right. Bottomline: Despite earlier hopes that binding arbitration would end the dispute and trains would run again soon, freight rail service remains disrupted and it is unclear when it will resume. CHEMICALS AND RAIL Canada-based chemical producers rely on rail to ship more than 70% of their products, with some exclusively using rail. About 80% of Canada’s chemical production goes into export, with about 80% of those exports going to the US, according to CIAC. Chlorine plants in Canada may have to shut down if reliable rail service does not resume soon, CIAC CEO Bob Masterson said. (Map by Miguel Rodriguez Fernandez) Meanwhile, LyondellBasell on Thursday declared force majeure on all rail shipments to Canada and industrial chemical producer Chemtrade Logistics warned about the impact of the rail disruption on its financial results. The following table by the American Association of Railroads (AAR) shows Canadian freight rail traffic, including chemicals, for the week ended 17 August and the first 33 weeks of 2024: With additional reporting by Adam Yanelli and Nurluqman Suratman Thumbnail photo source: CN