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Speciality Chemicals06-Sep-2024
HOUSTON (ICIS)–A strike by union dock workers
at East Coast and US Gulf ports seems more
likely after International Longshoremen’s
Association (ILA) Wage Scale Delegates voted
unanimously at the end of their two-day meeting
to support leadership’s intentions to walk off
the job if a new labor deal is not agreed to
when the contract expires on 30 September.
The ports, represented by the United States
Maritime Alliance (USMX), contend that the
offer on the table “demonstrates a willingness
by our members to reach a new deal before the
end of this month,” and that it remains
committed to reaching a new deal before the
current agreement expires.
Last week, both parties submitted documents
with the US Federal Mediation and Conciliation
Service (FMCS) informing the agency of a
dispute between the parties, as required by
law.
The looming work stoppage would have major
impacts on the US economy, and the National
Retail Federation (NRF) has urged both sides to
resume negotiations.
Union delegates from the 13 port areas included
in the current agreement received a strike
mobilization plan from ILA Executive Vice
President Dennis A Daggett during the two-day
meeting that will be implemented if a new
agreement is not reached in time.
USMX said in a statement posted to its website
that “the ILA continues to strongly signal it
has already made the decision to call a strike
and we hope the ILA will reopen dialog and
share its current contract demands so we can
work together on a new deal, as we have done
successfully for nearly 50 years”.
USMX said its offer includes industry-leading
wage increases, retention of the existing
technology language in the current agreement,
which already formalizes that there will be no
fully automated terminals and no implementation
of semi-automated equipment or
technology/automation without agreement by both
parties to workforce protections and staffing
levels, increases to retirement account
contributions, higher starting wages and
continuation of premier health care coverage.
The ILA is seeking better pay, including
container royalty.
Market participants have said a strike by
dockworkers would not have much of an impact on
liquid chemical tankers.
One reason is that most terminals that handle
liquid chemical tankers are privately owned and
do not necessarily use union labor.
Also, tankers do not require as much labor as
container or dry cargo vessels, which must be
loaded and unloaded with cranes and require
labor for forklifts and trucks.
But more liquid chemicals are being moved on
container ships in isotanks.
CONTAINER RATES
Rates for shipping containers from east Asia
and China to the US fell again this week and
global average rates continued to fall at a
faster rate, according to multiple analysts.
Supply chain advisors Drewry in its World
Container Index showed average rates down by
8%, as shown in the following chart.
The decrease in rates from China to both US
coasts is shown in the following chart from
Drewry.
Despite the looming threat of a port strike in
the US, transpacific Eastbound freight rates
have seen a slight dip this week, Drewry said.
Judah Levine, head of research at online
freight shipping marketplace and platform
provider Freightos, said the looming strike may
be pushing more volumes to the West Coast,
supporting some rebound in rates since
mid-August, but prices are nonetheless 15%
below their high for the year reached in
mid-July.
“Some of this rate decline is likely also due
to capacity increases, including from
opportunistic carriers who launched
transpacific services when rates were spiking
earlier in the summer,” Levine said.
Container ships and costs for shipping
containers are relevant to the chemical
industry because while most chemicals are
liquids and are shipped in tankers, container
ships transport polymers, such as polyethylene
(PE) and polypropylene (PP), are shipped in
pellets.
They also transport liquid chemicals in
isotanks.
LIQUID CHEM TANKER RATES
STABLE
Rates for chemical tankers ex-US Gulf were
unchanged this week on trade lanes assessed by
ICIS.
Rates firmed on the USG to Mediterranean,
and to Mexico’s East Coast.
The firming is due to a lack of available
tonnage amid more inquiries and fixtures along
these trade lanes.
However, rates to both Asia and India
are facing downward pressure, especially for
stainless steel vessels. The downward
pressure is likely to hold into next week.
Overall, throughout September the spot market
should remain soft as there is open
partial space in the US Gulf and as most owners
continue to depend on contract tonnage.
Bunker fuels in the USG were slightly lower
following the weaker energy complex.
PANAMA CANAL MAINTENANCE
The Panama Canal will be conducting maintenance
from 10-25 September on the center wall culvert
of the Gatun Locks but is not expected to limit
transits, according to the Panama Canal
Authority (PCA).
Although the culvert maintenance will increase
the time required to fill and empty the chamber
in both lanes at Gatun Locks, this should not
affect significantly the capacity of the
Panamax Locks to warrant a booking condition
change.
Since the culvert outage is at Gatun Locks,
Neopanamax vessels should not be affected as
result of this maintenance.
The PCA added an additional booking slot
effective 1 September, bringing the total
number of passages allowed per day to 36,
almost at par with the 36-38 transits/day seen
before a drought forced the PCA to limit
transit for the first time in its history.
There are 10 slots for Neopanamax vessels, 20
for supers and six for regular vessels.
The better conditions at the canal are likely
to improve transit times for vessels traveling
between the US Gulf and Asia, as well as
between Europe and countries on the west coast
of Latin America.
This should benefit chemical markets that move
product between regions.
Wait times for non-booked southbound vessels
ready for transit are 2.6 days for northbound
vessels and 0.4 days for southbound vessels on
6 September, according to the PCA vessel tracker.
Additional reporting by Kevin Callahan
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).
Polyethylene Terephthalate06-Sep-2024
HOUSTON (ICIS)–US recycled plastics Senior
Editor, Emily Friedman and Americas recycled
plastics Analyst, Josh Dill, dive deeper into
the challenges chemical recyclers face,
following Josh’s recent webinar, Chemical
Recycling Growth: Accelerating Progress Towards
Meeting Recycling Targets (view the
recording here). While the
webinar primarily highlighted legislative
uncertainties, this discussion expands on the
other hurdles including:
Technological difficulties faced by
chemical recyclers as a nascent industry
Challenges in securing adequate feedstock
which is financially sustainable
Overall economic headwinds as many
recyclers look to startup new plants
Recycled Polyethylene Terephthalate06-Sep-2024
LONDON (ICIS)–Senior editor for recycling Matt
Tudball discusses the latest developments in
the European recycled polyethylene
terephthalate (R-PET) market, including:
Further narrowing of the colorless flake
range in eastern Europe
Latest Italian bale auctions see colorless
and blue bales drop
More bullish sentiment displayed by some
sellers in September
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Speciality Chemicals06-Sep-2024
LONDON (ICIS)–Chemicals production in the EU
has continued to firm through 2024, but weak
demand is keeping output growth below recovery
levels, with energy prices still substantially
above US levels in the region, trade body Cefic
said.
Sector output increased for the fourth
consecutive quarter in the April-June period,
increasing 1.2% compared to the first three
months of the year and 4.3% from the same
period in 2023.
The second quarter last year may stand as the
low point for chemicals production going back
to before the pandemic, Cefic added, but the
4.3% annual improvement for the same period
this year does not yet represent a pronounced
recovery. Second-quarter 2023 productivity had
plummeted over 12% compared to the same period
in 2022.
“Given the lack [of] demand growth, the
European chemical industry production volumes
are still far from the pre-COVID levels,” the
group said.
Despite gradually firming output, demand
remains depressed, and capacity utilisation
declined slightly during the quarter, to 75.2%,
with that trend continuing into July.
Despite capacity rates substantially below the
long-term average of 81%, the longstanding
destocking trend in the sector may have come to
an end in March, with July standing as the
fourth consecutive month of increasing stocks.
The sector outperformed general industrial
productivity in the first six months of 2024,
Cefic said, which saw a 3.6% decline year on
year.
This is having a knock-on effect on chemical
company order books, while energy prices
continued to be 4.7 times higher than in the US
in July. Gas prices in the first half of the
year were 70% above the 2014-2019 average in
Europe, Cefic added.
Thumbnail photo: Part of BASF’s
Ludwigshafen, Germany, site on the banks of the
River Rhine
(Source:
Lilly/imageBROKER/Shutterstock)
Polycarbonate06-Sep-2024
SINGAPORE (ICIS)–Click here to see the
latest blog post on Asian Chemical Connections
by John Richardson: If this wasn’t so
critically important, I’d be getting bored by
now in telling the same old story. As today’s
blog confirms it is the same story in the
engineering or higher-value polymer
polycarbonate (PC), as it is many other in
chemicals and polymers.
In 1992, China, with a 22% share of the global
population accounted for 3% of global demand.
By the end of this year, we expect China to be
responsible for 47% of global demand from an
18% share of the global population.
Here we go again: Events in China
(demographics, debts, its geopolitical
relationship with the West and the rise in
China’s chemicals and polymers capacity) mean
that today’s chemicals world is very different
from the past.
Are you still not convinced? Then consider
these ICIS PC data points:
During the1992-2021 Chemicals Supercycle,
China’s demand growth averaged 17% per in year.
In 2022-2030 we are forecasting this will drop
to 3%.
In 1992-2023, China accounted for 76% of
global net imports of PC among the regions and
countries that imported more than they
exported. China’s percentage shares of global
net imports have been falling since 2021, the
year of the Evergrande Moment.
The ICIS base case predicts China’s net PC
imports will average just 460,000 tonnes a year
in 2024-2030 compared with 1.1 million tonnes
during the peak years of 2010-2023.
But 460,000 tonnes assume an operating rate of
just 47% compared with the long-term average of
68%. Raise operating rates closer to 68% and
you end up with China as a net exporter.
There is, however, a scenario where China
struggles to directly export chemicals and
polymers where it is not already an established
player. This could apply to PC.
In 2023, 83% of Taiwan’s PC production, 41% of
Thailand’s production, 34% of South Korea’s
production and 26% of Japan’s production was
dependent on exports to China. A valid question
therefore seems to be: What should these
countries do next?
What would it take to return to the very
healthy average global PC operating rate of 83%
in1992-2023?
Assuming no change to our base case assumption
on production (the same as demand), global
capacity would have to fall by an average
138,000 tonnes per year versus our forecast
that capacity will instead grow by 153,000
tonnes each year.
What might be the answer for producers in
countries such as South Korea? Becoming more
differentiated than their Chinese competitors
as they emerge as winners in the fourth
industrial revolution: Sustainability.
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.
Crude Oil06-Sep-2024
SINGAPORE (ICIS)–Transportations of chemical
cargoes in southern China’s Hainan province
were halted since 5 September ahead of the
landfall of Typhoon Yagi.
Operations at ports, trains and highways were
closed to brace for the typhoon, which is
expected to make landfall at Wenchang in Hainan
or in the adjacent Guangdong province on Friday
afternoon or evening, according to China
Meteorological Administration (CMA).
It will then move west to Guangxi province and
is expected to make another landfall in
northern Vietnam before weakening, it said.
The storm will bring in super strong winds with
speed of 60-65 meters per second and heavy
rainfalls, CMA said.
In the island province of Hainan, Sinopec has
mobilized all staff to stand by for any
emergency caused by Yagi on Friday morning, a
company source said.
Hainan has evacuated more than 410,000 people
as of 9:00 hours (01:00 GMT) on Friday and
authorities targeted to compete evacuation of
thousands more by 11:00am, according to the
provincial government.
In Guangdong, the direct hit is expected to be
in Zhanjiang City, where schools, shopping
malls, construction works and ports in the city
were ordered shut since 10:00 hours on 5
September.
Elsewhere in the province, only light rains are
expected.
A Foshan-based petrochemical trader, meanwhile,
said that cargoes continued to be delivered on
Friday.
Recycled Polyethylene Terephthalate06-Sep-2024
SINGAPORE (ICIS)–The weakening of the US
dollar against major currencies in Asia since
August will continue to strain exports of
recycled polyethylene terephthalate (R-PET),
recycled polyethylene (R-PE), and recycled
polypropylene (R-PP).
Fewer September deals expected as buyers
resist changes in currency conversion
Importers of recycling feedstock benefit
from weakening of US dollar
Asian recyclers wary of interest cuts by
the US Fed
Asian recyclers were largely relieved to see
downward correction on container freight costs
in August, but the ease in transportation costs
were countered by foreign exchange
fluctuations.
Exporters of recycled polymers from key markets
such as Japan, Thailand, Indonesia and Malaysia
have struggled to close deals for September
loading.
Buyers were resisting the strengthening of
major Asian currencies against the US dollar,
resulting in an impasse in spot negotiations.
A strong currency makes exports less
competitive as buyers continue to use the US
dollar for transactions in both term and spot
commitments.
As of 02:05 GMT, the Thai baht and the
Indonesian rupiah registered the biggest
month-on-month gains against the US dollar
among four currencies of major Asian exporters.
Exchange rates versus $1
Currencies
6 Sept (As of 02:05 GMT)
% appreciation (month on month)
Japanese yen (Y)
143.29
2.5
Thai baht (Bt)
33.56
5.8
Indonesian rupiah (Rp)
15,389.10
4.6
Malaysian ringgit (M$)
4.34
3.4
Source: www.xe.com
Recyclers, on the other hand, have been
unwilling to lower their prices amid high
production costs and eroded margins.
Due to this, majority of recyclers in the
region expect September spot negotiations to be
lower than that of August.
“Our buyers [of R-PET flakes] within Asia were
strongly resisting higher prices and they
prefer to halt negotiations than to shoulder
the foreign exchange fluctuations,” a
Thailand-based R-PET producer said.
A few buyers hedging their exposure to foreign
exchange volatility were still able to secure
spot quantities, but majority of buyers are not
hedged.
On the other hand, Asian recyclers which
purchase US dollar-denominated feedstock
benefited from the exchange rate fluctuations.
Asian recyclers expect export volumes to remain
dampened and are concerned about interest rate
cuts by the US Federal Reserve.
As regional recyclers continue to position
themselves as net exporters of R-PET, R-PE and
R-PP, currency fluctuations and decisions by
the Federal Reserve retain great implications
to overall trade from Asia.
Focus article by Arianne Perez
Thumbnail image: A 10,000-Japanese yen note
and $1 US dollar notes, 3 July 2024. (Taidgh
Barron/ZUMA Press Wire/Shutterstock)
Ammonia05-Sep-2024
TORONTO (ICIS)–Canada’s Liberal-led minority
government under Prime Minister Justin Trudeau
is paying a heavy price for its decision last month
to end the labor dispute at freight railroads
Canadian National (CN) and Canadian Pacific
Kansas City (CPKC) through binding arbitration.
The left-leaning New Democratic Party (NDP) on
Thursday confirmed that it cancelled a “supply
and confidence agreement” from 2022 under which
it supported the Liberals, which hold only a
minority of parliamentary seats.
The NDP is close to labor trade unions and had
warned Trudeau repeatedly not to intervene in
the dispute.
In a televised press conference on Thursday,
NDP leader Jagmeet Singh said the government’s
intervention added to “mounting evidence” that
the Liberals were “too beholden to corporate
interests”, making it impossible for the NDP to
continue supporting them.
Singh alleged the railroads had “colluded” to
set up a scenario in which both companies were
in a labor dispute at the same time, and that
they had negotiated in “bad faith”.
Instead of allowing the dispute to be settled
through the collective bargaining process, the
government, by ordering binding arbitration,
awarded the companies for their conduct, he
said.
After a four-day freight rail shutdown at both
CN and CPKC last month, the government directed
a labor tribunal to end the shutdown and settle
the dispute through binding arbitration.
Freight rail service resumed on 26 August.
From now on, the NDP’s voting in parliament
would be case-by-case, based on what the party
deems best for workers and families, Singh
said.
Voting non-confidence would be “on the table”
and an early election was now more likely, he
said.
If the NDP joins the Conservatives and other
opposition parties in voting against the
government on the next confidence measure, the
government will fall and an election has to be
held.
Seats in parliament (total:
338):
Liberals
Conservatives
Bloc Quebecois
NDP
Others
154
119
32
24
9
Political commentators said that the NDP
cancelled the agreement as it needed to
distance itself from the Liberals, who after
nine years in government are unpopular and are
far behind the Conservatives in opinion polls.
Singh rejected suggestions that by ending the
agreement with the Liberals he was opening the
door to a Conservative government.
The NDP would be running against both Liberals
and Conservatives, he said.
Trudeau would “always cave to corporate greed”,
and the Conservatives, if elected, would be
worse, he said.
The Conservative Party, which is supportive of
Canada’s oil and gas industry, has pledged that
if elected it would immediately abolish the
consumer carbon tax implemented by the
Liberals.
There is a possibility that the Liberals may
now look to opposition party Bloc Quebecois
(BQ) for support – the BQ is advocating for
Quebec to secede from Canada and become an
independent nation.
Rail labor union Teamster Canada welcomed the
NDP’s decision to stop supporting the Liberals.
The union has filed court
challenges against the government decision
to end the labor dispute through binding
arbitration.
Meanwhile, total Canadian freight rail traffic
– intermodal and railcars – fell 5.8% year on
year for the week ended 31 August.
Industry officials have said it may take weeks
for supply chains to normalize after last
month’s shutdown.
The following table by the AAR shows total
Canadian freight rail data for the week ended
31 August and for the first 35 weeks of 2024:
In Canada’s chemical industry, producers rely
on rail to ship more than 70% of their
products, with some exclusively using rail.
Thumbnail photo of Prime Minister Justin
Trudeau meeting students at college in Ontario
in May; photo source: Government of Canada
Gas05-Sep-2024
European traders asked to pay difference
for capacity booked prior to a sharp tariff
increase
The increase could wipe out transit on
Trans-Balkan route
Ukrainian TSO GTSOU says the latest
increase could lead to a revenue reduction for
Moldova
LONDON (ICIS)–Traders have lashed out at the
Moldovan gas grid operator Vestmoldtransgaz
(VMTG) for being asked to pay higher
transmission tariffs for capacity booked prior
to the
price hike on 1 September.
At least ten companies active regionally and
local traders who booked monthly or quarterly
capacity for gas sourced in southern Europe and
transiting Moldova to Ukrainian storage have
been asked to pay the difference between the
old and the new tariffs.
Traders say the increase is wiping out the
competitiveness of one of the most attractive
regional transit routes and will block Moldova
and Ukraine’s access to non-Russian gas
supplies in southern Europe.
An international trader told ICIS that beyond
hurting the economic viability of the route the
decision would also put a major burden on
Moldovan consumers, who will have to face ever
soaring bills.
Another trader said the increase would hit the
entire region.
He questioned why VMTG increased tariffs by 50%
since it hadn’t made any recent investments and
the transmission assets it now operates have
long been amortised.
MOLDOVAN LOSSES
In a letter sent to the Moldovan regulator, the
ministry of energy, VMTG and the Energy
Community and seen by ICIS, the Ukrainian gas
grid operator GTSOU said reverse flows along
the Trans-Balkan route linking southern Europe
to Ukraine had ‘significantly facilitated
cross-border trading opportunities in the
region.’
VMTG, a company majority-owned by the Romanian
grid operator, Transgaz, took over Moldova’s
transmission operations in September 2023
following a government and regulator push to
divest transmission from incumbent Moldovagaz.
The transfer of operations via the lease
agreement
was pushed through after Gazprom,
Moldovagaz’ majority owner, repeatedly
requested the delay of transmission unbundling.
Immediately after the switchover, VMTG
requested a tariff increase, which was approved
by the Moldovan regulator.
This year VMTG has requested a further rise,
with entry tariffs
increasing from Moldovan Lei 20.9/MWh/h
(€1.08/MWh/h) to Moldovan Lei 30.7/MWh/h
(€1.59/MWh/h) on 1 September. Exit tariffs have
also risen from Moldovan Lei 22.3/MWh/h to
Moldovan Lei 35.5/MWh/h (€1.85/MWh/h).
GTSOU said in the letter that the sharp tariff
increase requested by VMTG combined with an
increase in transmission tariffs in
neighbouring transit country Romania has led to
utilisation rates for the route dropping from
83% in 2023, prior to VMTG’s takeover, to 10%
in 2024.
The Ukrainian operator calculated that prior to
the first VMTG tariff transit costs to ship gas
from Greece to the Grebenyky on the border with
Ukraine were around €3.00/MWh.
Following the first rise, the overall cost rose
by 67% to €5.00/MWh, while now it has increased
to €6.7/MWh, with Moldova being the most
expensive transit country in the region and
possibly across Europe, traders say.
The Ukrainian grid operator said the latest
increase would ‘worsen’ the situation and lead
to a revenue reduction for Moldova.
A source close to GTSOU said VMTG could
alleviate the situation by introducing
comparatively cheaper short-haul tariffs
bridging cross-border points.
ANRE, Transgaz and VMTG did not reply to
questions by publication.
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