Week-long heatwave in gas production states Hot summer may intensify export-domestic supply debate Darwin and Broome temperatures soar SINGAPORE (ICIS)–Australian Bureau of Meteorology (BOM) has issued warnings for a severe-to-extreme heatwave in parts of Northern Territory (NT) and Western Australia (WA) from 30 September, close to LNG production hubs in Darwin and at the Woodside-operated North West Shelf. The extreme heatwave will last for six days starting 2 October over parts of northern NT, with a larger range of the region and areas near North West Shelf experiencing the severe heatwave from 30 September to 8 October, according to the BOM forecast. The weather data monitor said Darwin had the “hottest September in more than 100 years”. High temperatures pose risks to cooling facilities at liquefaction plants, which may curb LNG output. This has not yet happened to LNG facilities in the areas, according to operators. “We do not expect a significant impact to Ichthys LNG production as the heatwave is expected to last approximately 1 week and peaking today/tomorrow,” an Inpex spokesperson told ICIS 2 October. The Chevron-operated Gorgon and Wheatstone gas facilities are “not subject to a current heatwave assessment” due to their distance from the heat center Broome, Chevron’s spokesperson told ICIS. A Woodside spokesperson said that, “we are not experiencing any unusual weather in Karratha, where our operations are located.” SUPPLY TENSION Although the areas affected by the heatwave are not densely populated, hot weather ahead this upcoming southern hemisphere summer could lead to increased electricity use for air-conditioning and industrial cooling. Australia’s 2023/24 summer electricity demand was 776MW more than 2024 winter, according to Australian Energy Regulator data. Should the upcoming summer experience high temperatures, which is possible according to the BOM forecast, the summer-winter demand gap would further widen. Source: Australia Bureau of Meteorology Energy resource exports from Australia have been challenged because domestic electricity users pay premiums for local coal and gas. However, WA state recently eased an onshore gas export ban that had been in place since 2020. The government has been urging LNG exporters to secure domestic supplies in the context of growing demand in its east coast. Gas supply would fall short of domestic demand from 2027, the Australian Competition and Consumer Commission (ACCC) said in its latest report.

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. We now have 32 months of trade and pricing data since the end of the 1992-2021 Chemicals Supercycle and so it is worth taking stock of what the numbers are telling us. And as we have 32 months of information to draw on since the end of the Supercycle, which is from January 2022 until August 2024, it is worth making like-for-like comparisons with the 32-month period immediately before the end of the Supercycle – May 2019 until December 2021. Focusing just on polypropylene (PP) with the story the same in many other products: South Korea and Taiwan saw declines in PP sales turnover in China of $1.1 billion and $694 million respectively when this two 3-month periods are compared. Despite its feedstock advantages, Saudi Arabia saw its turnover fall by $681m followed by Singapore at $633m and Thailand at $613 million . Losses across China’s top ten trading partners totalled $4.6bn. The only winner was, not surprisingly, the Russian Federation with a turnover gain of $102 million. Another symptom of a chronically oversupplied market has been a collapse in margins as another chart in today’s post illustrates: In May 2019-December, the average of both naphtha and PDH-based PP margins was $281/tonne, but this fell to just $12/tonne in January 2022-September 2024. And this latter period has involved many weeks of negative margins. A pivotal turning point in global chemicals markets, the most important since 1992, was the Evergrande Moment. And yet far are too few references to this essential context. China’s debts and its demographics told us from as early as 2011 that a steep fall in economic growth had to happen. We also knew from 2014 onwards, thanks to a shift in government policy, that much-greater chemicals self-sufficiency was on the way. This gave producers plenty of time to build strategies that reduced their dependence on China. But how many companies took note of what the demographic and debt trends were telling us? How many took note of the threat to China’s exports from 2018 onwards as the geopolitical environment deteriorated? My suspicion is that far too few companies were ready for the changes now well underway, which are reflected in the above demand, supply, sales turnover and margins data. This was because people chose to believe misleading nonsense about the “rise of China’s middle class” when the numbers on China’s per capita incomes, the country’s birthrate and the rise in its debts exposed the myth. The chemicals industry is science and data driven except, seemingly, in one critical area:  Macroeconomics. 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)–Participants in the US chemical industry worry that a prolonged strike by US Gulf and East Coast dock workers will hurt exporters and lead to supply surpluses, and some carriers are already initiating port congestion surcharges that will add increased costs on top of delays to both imports and exports. As expected, dockworkers on the US East and Gulf Coasts went on strike early on Tuesday after labor union International Longshoremen’s Association (ILA) rejected the latest wage offer by employers’ group United States Maritime Alliance (USMX). While the US government has said it will not intervene, some analysts, including Peter Sand, chief analyst at ocean and freight rate analytics firm Xeneta, think government intervention will be required to bring the dispute to an end. “The latest statement by the ILA suggests there is very little prospect of the two sides reaching a mutually agreeable resolution,” Sand said. “To stop trade from entering the US on such a scale for a prolonged period of time is unthinkable so the Government will need to step in for the good of its people and economy.” Kevin Swift, ICIS Senior Economist for Global Chemicals, said the strike could cost the US economy up to $5 billion/day. “This will affect imports from Germany, the Netherlands and other European nations,” Swift said. “I think the effect is more on specialty chemicals than resins. Swift said the ultimate disruption and cost to the economy depends on how long the strike lasts. IMPACT TO CHEM MARKETSThe strike is already impacting US polyethylene (PE) exports. Container ships also transport polymers, such as PE and polypropylene (PP), which are shipped in pellets. A PE trader in South America told ICIS that they are halting sales of US material destined for Brazil until additional information is available since they are unable to inform clients of the estimated departure date. According to the trader, some cargoes could be delayed by 30 days. The US is the main origin of PE imports into Brazil. The polyvinyl chloride (PVC) Industry is concerned as all US Gulf PVC exports move out of one of the impacted East Coast ports. This could result in a long inventory situation and an increase in days of supply if producers and traders are unable to execute on export transactions due to the port strike. In the polyethylene terephthalate (PET) market, imports of PET resins have already been diverted to the US West Coast in anticipation of the work stoppage. But this places extra pressure on the rail and trucking industries which will need to move that material to destinations that were previously reached from the US Gulf or the East Coast. Imports of purified terephthalic acid (PTA), used to make PET, that typically come from South Korea and Mexico, could be affected by the strike. Even if some PTA gets delivered on the West Coast, it will still need to be transported to the East Coast where most PET plants are located. CARRIER SURCHARGES Market sources are telling ICIS they are seeing congestion surcharges between $1,000-3,000/FEU (40-foot equivalent unit), with some citing even higher surcharges. Sand said that extreme increases in container costs cited by ILA president Harold Daggett have not been seen yet. In a statement on 30 September, Daggett said carriers are charging $30,000/container. Sand cited Xeneta data, which is based on more than 450 million crowdsourced datapoints, showing average spot rates on the major fronthaul from Asia to US East Coast were at around $7,000/FEU on 1 October. “While average spot rates from north Europe to the US East Coast have increased 50% since the end of August, they are still only $2,800/FEU,” Sand said. Supply chain advisors Drewry also show rates from Asia to the USEC at $6,000/FEU, and rates from Asia to the USWC are at $5,500, although the rate of decline has slowed with more traffic heading that way because of the strike. Liquid chemicals that are largely transported by tankers are unlikely to be affected. But more liquid chemicals are being moved on container ships in isotanks. Focus story by Adam Yanelli Additional reporting by Stefan Baumgarten, Emily Friedman, Bruno Menini, Antulio Borneo and Kelly Coutu Visit the ICIS Logistics – impact on chemicals and energy topic page Thumbnail image shows a container ship carrying cargo on its way to Antwerp Harbour. (OLIVIER HOSLET/EPA-EFE/Shutterstock).

HOUSTON (ICIS)–As port operations along the East Coast and Gulf Coast came to a halt amid a union strike underway, the US fertilizer industry was carefully watching the labor developments but is not overly concerned about the situation having an immediate impact on activities or price direction. Part of this outlook on the port problem comes from a perspective of fertilizer participants that the work stoppage will be short in duration as the economic consequences will be severe if protracted. This latest labor disruption began when union International Longshoremen’s Association (ILA) rejected the latest wage offer by employers’ group United States Maritime Alliance (USMX). This commenced a strike at 36 ports stretching from Maine to Texas, and although the labor talks were said to be continuing there was no further progress reported as of late on 1 October. Also, the US fertilizer sector recently experienced the Canadian rail strike, which did provoke some steep concerns before it was quickly resolved so there is thought this situation could follow a similar course and end with a quick resolution. There are some thoughts this strike could be settled within a few days, although the government has indicated that it will not intervene in the situation. An industry participant echoed the overall outlook in saying “if the short term is like that, I do not expect any fertilizer related issues.” Domestic fertilizer prices should not see any immediate escalation because of this strike activity because demand is still fairly limited following the recent hurricanes and with the ongoing harvest progress. In addition, most of those volumes to be used in the coming weeks for end of the year applications, or stockpiled for next spring, saw the majority of movement over the last part of summer and now are mostly in place already. US producers did not immediately respond to a request for comment but Canadian fertilizer major Nutrien said that while the strike might not have any consequences directly for their operations, there is concern over the larger repercussion if this stoppage turns lengthy. “As the world’s largest supplier of crop inputs and services, Nutrien depends on reliable supply chains to serve North American and offshore customers,” said a Nutrien spokesperson. “While the East Coast port strike is not expected to materially impact our shipments, any extended disruption will be felt more broadly in the supply chain, and we urge parties to dispute to achieve a timely resolution.”

HOUSTON (ICIS)–Canadian fertilizer major Nutrien confirmed it is in the process of restarting its Augusta, Georgia, facility. The operation which produces several products including ammonia and urea was shut down after Hurricane Helene made landfall under safety protocols during storm induced power failures. “I can confirm that Augusta is in start-up and expected to be back online later in the week,” said a Nutrien spokesperson. The plant’s annual production capacity is listed at 765,000 tonnes of ammonia, 415,000 of ammonia nitrate, 400,000 tonnes of UAN and 260,000 tonnes of urea. The producer had said on 30 September all their colleagues were safe at their locations but that in many areas, the roads had remained closed due to downed power lines and flooding. Further Nutrien did expect that it could take several days before their full post storm assessment was completed.

BARCELONA (ICIS)–ADNOC’s agreement to buy Covestro ahead of next week’s European Petrochemical Association (EPCA) annual meeting highlights the challenges and opportunities facing Europe’s beleaguered chemical industry. Abu Dhabi National Oil Co (ADNOC) to acquire Covestro for equity value of €11.7 billion ADNOC diversifies downstream from oil and gas Covestro global leader in polycarbonate (PC) and polyurethanes (PU) PC and PU struggle with poor demand from automotive, construction Covestro operating profit slumped from around €3bn in 2021 to near €1bn in 2023 Covestro boasts strong sustainability-related product portfolio More M&A likely in Europe petrochemicals thanks to cheap bottom-of-cycle valuations Oil prices may collapse to $30/bbl if OPEC goes for market share In this Think Tank podcast, Will Beacham interviews Nigel Davis and John Richardson from the ICIS market development team 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.

LONDON (ICIS)–Abu Dhabi state oil and petrochemicals player ADNOC has launched a public takeover offer for Germany-based producer isocyanates, polycarbonates and adhesives specialist Covestro, representing an equity value of €11.7 billion. After over a year of reports of a possible deal between the players and concrete negotiations that have been underway since June this year, the Emirati company made a concrete public takeover offer of €62 per share. The price represents a 21% premium to Covestro’s per-share value at the close on 23 June, when the company announced the beginning of due diligence procedures between the two companies. ADNOC estimates the enterprise value of the deal, which also includes net debt and pension obligations that would be taken on as a result of a purchase, at €14.7 billion. The company will also subscribe to new shares representing a 10% increase of Covestro’s share capital at the offer price, which will result in proceeds of €1.17 billion to be used to further the Leverkusen-based producer’s growth strategy. The company had not responded for requests for comment on whether that sum is part of the offer price or in addition to it at the time of publication. The deal is subject to a minimum acceptance threshold of 50% of Covestro’s issued share capital plus one share, with Covestro’s management and supervisory boards backing the deal. The joint investment agreement, which would stand until the end of 2028 if the deal goes through, ADNOC has committed not to sell, close, or significantly reduce Covestro’s business activities, and to abide by existing works agreements. “We are convinced that the agreement reached today with ADNOC International is in the best interest of Covestro, our employees, our shareholders, and all other stakeholders,” said Covestro CEO Markus Steilemann. The deal will play into ADNOC’s plan to diversify and build out its chemicals platform, according to CEO Sultan Adhem Al-Jaber. “This strategic partnership is a natural fit and aligns seamlessly with ADNOC’s ongoing smart growth and future proofing strategy and our vision to become a top five global chemicals company,” he said. If the takeover deal closes, Covestro will continue to be managed as a stock corporation, the company added. (Update re-leads, adds detail throughout) Thumbnail photo source: Covestro

LONDON (ICIS)–Manufacturing output in the eurozone fell at its steepest rate this year in September to hit a nine-month low. Key measures of factory strength such as production, new orders, employment and procurement activity all declined at quicker rates, according to purchasing managers’ index (PMI) data on Tuesday. The HCOB (Hamburg Commercial Bank) eurozone manufacturing PMI fell to 45.0 in September from 45.8 in August, while manufacturing output declined to 44.9, also from 45.8 in the previous month. Both were at a nine-month low, said S&P Global which compiles the indexes. A figure above 50 indicates growth, and below 50 contraction. “Lower output volumes were a response to the prevailing demand environment, which deteriorated further during September,” the market intelligence group said in a statement. Growth in Spain and Greece was offset by weakness elsewhere, particularly in the eurozone’s largest manufacturing sector Germany, which recorded its most pronounced worsening of factory conditions for 12 months. Countries ranked by PMI: September Spain 53.0 4-month high Greece 50.3 12-month low Ireland 49.4 3-month low Italy 48.3 2-month low Netherlands 48.2 2-month high France 44.6 3-month high Austria 42.8 6-month low Germany 40.6 12-month low “While handling the global manufacturing downturn surprisingly well, Spain just does not have enough weight to lift the rest of the eurozone with it,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank. “The worsening industrial slump in Germany, for example, is too big for Spain’s momentum in September to make much of a difference.” In the UK, the picture was brighter as solid expansion in the sector continued in September. Although the manufacturing PMI declined to 51.5 from August’s 26-month high of 52.5, it has remained above 50 for five successive months. The main drivers of September expansion were the consumer and intermediate goods sectors, both of which recorded stronger increases in output and new business.

SINGAPORE (ICIS)–Denmark’s AP Moller Holding, the parent company of shipping company Maersk, plans to invest €1.5 billion to build a “fossil-free” plastics production plant in Antwerp, Belgium, via a new venture called Vioneo. “The Antwerp plant will benefit from the region’s expertise in the chemicals industry, strong export facilities and access to renewable energy,” AP Moller said in a statement on 30 September. The Vioneo plant is expected to use green methanol as feedstock to produce polypropylene (PP) and polyethylene (PE), with commercial operations slated to begin in 2028, the investment company said. “Fully operational, the plant will be able to produce … 300,000 tonnes of fossil-free plastics annually, corresponding to a reduction of 1.5 million tons of CO2 [carbon dioxide] emissions,” it said. The plant will be located within the Antwerp energy park of Dutch logistics firm Vopak, with support from Vopak Belgium and the Port of Antwerp-Bruges. Project plans will take place in phases, with front-end engineering design (FEED) to begin in Q4 2024, and with the final investment decision (FID) expected in 2025. In a separate statement, the Port of Antwerp-Bruges said that the project is expected to generate “significant job opportunities” during the construction phase and around 250 permanent positions when the plant is fully operational. ($1 = €0.90)