HOUSTON (ICIS)–So far in the earnings season, US chemical producers have given up on a second half recovery and will rely on their own actions to increase earnings while they wait for interest rates to fall. US-based chlor-alkali producer Olin and specialty chemicals producer Eastman were the latest to abandon the prospect of a second-half recovery. Excluding the effects of Hurricane Beryl, Olin expects the second half of 2024 to resemble its first half in terms of adjusted earnings before interest, tax, depreciation and amortization (EBITDA). Eastman does not expect any improvement in primary demand in its key markets and geographies. US-based paints and coatings producer Sherwin-Williams flat-out said that it did not expect to get any help from the market during the company’s second half. Improvements will have to come from within Sherwin-Williams. Similarly, RPM International said it will rely on its margin achievement plan (MAP) to increase earnings in what it has called a no-growth and low-growth economy. Such self-help measures led Evonik to raise its guidance even though it noted the absence of any broad-based macroeconomic recovery. PPG lowered its full-year guidance because of lower auto production and uneven industrial production. However, PPG did break from the trend, in that it expected US economic activity to improve as the second half progressed. Growth should continue in Mexico. In China, PPG said growth should continue for the company during the second half but at a slower pace. Demand in Europe is uneven but stabilizing. Dow, meanwhile, expects a slower pace of recovery for some of its end markets for 2024. In an interview with ICIS, Dow’s CFO said consumer durables and building and construction will likely remain weak through the rest of the year. In North America, volumes for architectural coatings will not return to pre-pandemic levels until 2025, Dow said. HIGHER INTEREST RATES HOLD BACK KEY CHEM END MARKETSFor many key chemical end markets, elevated interest rates continue to suppress demand. The Federal Reserve has maintained the nation’s benchmark federal funds rate at a multiyear high of 5.25-5.50% as part of a campaign to lower inflation to its target of 2%. The elevated federal funds rate has raised interest rates throughout the US economy, making big-ticket items like homes, automobiles, appliances and furniture more expensive. The higher rates have had an additional effect on the existing home market. Consumers who have cheap mortgages are reluctant to sell their houses and assume a new 30-year loan with a much higher rate. These homeowners are hanging on to their houses, and this trend has battered the nation’s existing home market, bringing sales to a 30-year low. The slowdown in existing home sales has lowered demand for architectural coatings, furniture, mattresses and appliances. For these end markets to recover, Dow said that 30-year mortgage rates need to fall to about 5%. Right now, they are at 6.78%. SIGNS OF CONSUMER STRAINSherwin-Williams noted some signs of strain among US consumers. It is not just inflation, which remains above the Fed’s target of 2%. They have depleted savings and taken on debt. Business from insurance claims declined because consumers were reluctant to pay deductibles, the company said. It noted weakness in its do-it-yourself (DIY) products sold to consumers through third-party retail stores. These customers tend to be more sensitive to price than those that shop at Sherwin-Williams’ paint stores. Dow noted that sales to contractors were stronger than those to DIY consumers. RPM also warned of uncertain DIY demand. Companies outside of the chemical industry are also seeing signs of weakening consumer demand. The fast-food chain McDonald’s also noted consumer weakness. In the second quarter, global same-store sales fell by 1.0% and US same-store sales fell by 0.7%. The broadcaster CNBC said it was the first time that same-store sales fell since the fourth quarter of 2020. McDonald’s said that consumers have become more careful about how they spend their money. Real disposable incomes in the US barely grew in June following an increase of 0.3% the previous month. Growth in consumer spending also slowed down in June. RATE CUTS BECOME MORE LIKELYConsumers could get some relief in the upcoming months. The Federal Reserve could indicate that it is ready to start lowering the benchmark interest rate during its next meeting on 31 July. Inflation is showing signs of falling to its target of 2%. Many expect that the first rate cut will happen during the Federal Reserve’s meeting on 18 September. The anticipation of future rate cuts would trickle through the economy and lower rates for mortgages and other forms of debt. If the inflation continues to cool and if the Federal Reserve continues lowering rates, then mortgages could reach the 5% threshold that Dow said could lead to a sustained recovery for several key end markets. MORE CHEMS SCHEDULED TO DISCUSS OUTLOOKSMany more companies should reveal their guidance and outlook during the next two weeks as earnings season continues. So far, it looks like the industry will have to continue waiting for a sustained recovery. Insight article by Al Greenwood Thumbnail shows a torn dollar. Image by Shutterstock.

HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 26 July. INSIGHT OUTLOOK: Next US president may upend EV policies, trade, regulations The US election could see Donald Trump return as president with majorities in both legislative chambers, which could bring a reduction in excessive red tape, weaker support for electric vehicles (EVs) and impose even more ponderous tariffs and trade restrictions. OUTLOOK: Red Sea diversions, tight capacity to pressure rates higher, but could ease in August Tight capacity as vessels continue to divert away from the Red Sea and Suez Canal for the longer voyage around the Cape of Good Hope is likely to keep upward pressure on ocean freight rates, but an early start and end to the typical peak season could provide some relief. INSIGHT: US chemical exports more exposed to China today as potential new trade war looms – ICIS analysis As campaigns heat up heading towards the US elections in November, trade wars and tariffs are now front and center in the minds of global chemical players. Producers and customers must brace for the prospects of higher tariffs, particularly on Chinese imports, as well as retaliatory tariffs by China. Dow sees B&C, consumer durables weakness persisting through 2024, rate cuts needed – CFO Weakness in building and construction, and consumer durables demand is expected to persist through 2024, likely pushing out a meaningful earnings recovery to 2025, Dow’s chief financial officer said on Thursday. INSIGHT: Venezuela’s petchems may finally get a chance – but unlikely to be under Maduro Venezuelans go to the polls on Sunday with the hope of a free and fair election, in which case President Nicolas Maduro is widely expected to lose office in a country where the economy has been battered by years of mismanagement, corruption, and US sanctions.

LONDON (ICIS)–Click here to see the latest blog post on Chemicals & The Economy by Paul Hodges, which looks at warning signs around the oil market. 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. Paul Hodges is the chairman of consultants New Normal Consulting.

LONDON (ICIS)–Here are some of the top stories from ICIS Europe for the week ended 26 July. BASF sees slowing electric vehicle sector, pauses Tarragona refinery plans BASF is moving to “de-risk” its exposure to the electric vehicles sector in response to slowing market dynamics, CEO Markus Kamieth said on Friday, pausing or deciding against several investments connected to the industry. Dow sees B&C, consumer durables weakness persisting through 2024, rate cuts needed – CFO Weakness in building and construction, and consumer durables demand is expected to persist through 2024, likely pushing out a meaningful earnings recovery to 2025, Dow’s chief financial officer said on Thursday. Eurozone private sector momentum slows further in July Eurozone private sector momentum almost slowed to a standstill in July, dropping to a five-month low as new orders fell and business confidence ebbed. Africa PE/PP demand to remain flat, supply picture difficult to predict Little is certain when it comes to African economics but it appears a fairly safe bet that underlying demand in the polymer markets will remain subdued for the second half of the year across the continent. EU announces provisional ADDs on biodiesel imports from China The EU has implemented provisional antidumping duties (ADDs) on biodiesel from China after deciding that a recent surge in imports has harmed the competitiveness of Europe-based operations. The European Commission has suggested a provisional tariff between 12.8% to 36.4% starting in mid-August.

SINGAPORE (ICIS)–Here are the top stories from ICIS News Asia and the Middle East for the week ended 26 July 2024. Typhoon Gaemi makes landfall in southern China; hits port operations By Nurluqman Suratman 26-Jul-24 10:36 SINGAPORE (ICIS)–Typhoon Gaemi slammed into Fujian province in southern China on the evening of 25 July, bringing heavy rains as it continues to move inland on Friday, with the strong downpour expected to last three days. PODCAST: Typhoon Gaemi to delay propane, butane cargo arrivals in China By Zhou Shihao 25-Jul-24 14:49 SINGAPORE (ICIS)–Typhoon Gaemi will test the resilience of the liquefied petroleum gas (LPG) supply chain, causing temporary shipment delays and port closures, but market prices and arrival schedules are expected to remain stable and manageable. PODCAST: Hydrogen – the critical blend for decarbonizing gas power in China By Yu Yunfeng 25-Jul-24 09:47 SINGAPORE (ICIS)–China’s installed capacity of gas power generation is projected to surpass 150 GW by 2025, representing roughly 6% of the country’s total installed power generation capacity. VIDEO: China’s LDPE market weakens as supply tightness eases By Joanne Wang 24-Jul-24 14:35 SINGAPORE (ICIS)–Watch ICIS senior industry analyst Joanne Wang discuss the driving factors behind the China’s low density polyethylene (LDPE) price fluctuations this year and briefly discuss prospects for the second half of this year. India cuts MDI import duty; plans six-month review of overall tariff structure By Nurluqman Suratman 23-Jul-24 18:04 SINGAPORE (ICIS)–India will cut import duties for methylene diphenyl diisocyanate (MDI) by 2.5 percentage points to 5.0% effective 24 July, with plans to review the country’s overall tariff structure in the next six months. OUTLOOK: China’s H2 refinery throughput to be weighed by economic slowdown, fuel substitution By Patricia Tao 23-Jul-24 11:21 SINGAPORE (ICIS)–China’s crude throughput is forecast to edge lower to 15.05 million barrels/day in the second half of 2024, about 0.4% lower year on year amid continued sluggishness of the domestic economy and the growing competition from alternative fuels. INSIGHT: China PE demand growth for 2024 to be slowed by weak consumer confidence By Amy Yu 22-Jul-24 17:41 SINGAPORE (ICIS)–China polyethylene (PE) demand is expected to shift to the traditional off-season in July, due to the impact of high temperatures and flood season.

HOUSTON (ICIS)– Producer Agrimin Limited said their Mackay Potash project in Western Australia is now advancing towards a final investment decision. In an update on quarterly activities the company said it continues to focus on their project which is planned to be able to manufacture standard and granular sulphate of potash (SOP) products. Current activities include efforts towards project funding and strategic partnerships, design works, environmental approvals as well as product marketing. The Mackay project is set to undertake sustainable extraction of brine from Lake Mackay using a network of shallow trenches, which will be transferred along trenches into a series of solar evaporation ponds. Raw potash salts will crystallize on the floor of the ponds and be collected by wet harvesters and pumped as a slurry to the processing plant that will refine harvested salts into high quality finished SOP ready for direct use by customers. SOP volumes will be hauled by a dedicated fleet of road trains to a purpose-built storage facility at Wyndham Port. At the port it will be loaded via an integrated barge loading facility for shipment to customers. The project’s definitive feasibility study (DFS) was completed in July 2020 and demonstrated that once in operation it could be the world’s lowest cost source of seaborne SOP. The independent technical review of the DFS was completed in April 2021. The company has signed three binding offtake agreements with Sinochem Fertilizer Macao Limited for the supply of 150,000 tonnes/year, Nitron Group for 115,000 tonnes/year and with MacroSource for 50,000 tonnes/year. Agrimin has already completed site-based testing for the salt harvesters, geotechnical sampling and for the sealed haul road. Additionally, the company has worked with its proposed power contractor to refine the project’s site power station design which has resulted in a hybrid diesel, solar, wind and battery solution. Regarding environmental clearance the company said the project is being assessed by the Western Australian Environmental Protection Authority (EPA) and during the quarter it resubmitted the environmental impact assessment response, which included revised management and monitoring plans. It is still expected that the EPA approval will come during the second half of 2024. Agrimin said it is also progressing other secondary approvals, licenses and agreements which included coverage for mining operations project safety and water regulations.

The infographic for this story was initially developed by ICIS hydrogen policy and regulation analyst Aayesha Pathan LONDON (ICIS)–On 17 July the government of the Czech Republic approved an update to its hydrogen strategy. The update follows a wide array of European policy developments such as targets for the use of renewable hydrogen in transport and industry, as well as alternative fuels infrastructure regulation on hydrogen refuelling stations. The strategy indicates a three phased-approach to the development of the market, focusing initially on localized production and offtake through hydrogen valleys, moving towards large-scale hydrogen imports towards the end of the decade and into the 2030s. ICIS has produced the following infogram to reflect some of the core principles of the strategy update.

LONDON (ICIS)–Senior Editor for Recycling Matt Tudball discusses the latest developments in the European recycled polyethylene terephthalate (R-PET) market, including: Eastern Europe bale bullishness eases Some northwest Europe flake sellers’ views on August offers vary Swedish deposit return scheme (DRS) introduces R-PET cap from May 2025

LONDON (ICIS)–Venezuelans go to the polls on Sunday with the hope of a free and fair election, in which case President Nicolas Maduro is widely expected to lose office in a country where the economy has been battered by years of mismanagement, corruption, and US sanctions. In the crude oil-rich country – Venezuela holds the world’s largest reserves – petrochemicals could naturally develop given the raw materials advantage. Back in the 1990s, with crude oil output at highs, petrochemicals were tilted as a growing sector in the country. The industry never took off. Since 2001, Venezuela has been run by the socialist PSUV party, first under the late President Hugo Chavez, who died in 2013, and later under his appointee successor, Nicolas Maduro, who won an election in 2018 widely seen as not free: the PSUV-led coalition won 256 out of 277 seats in the National Assembly. Venezuela’s demise has been rapid and deep: practically no institution in the country has been spared from the PSUV taking over it, and the election on Sunday has several times been postponed as Maduro tries to cling onto power for as long as he can. The powerful military are still for the most part rallying behind him. A state of terror has been the norm in the past few years, and the economy took a turn for the worse in the late 2010s and pushed around 7.5 million Venezuelans to flee, mostly to neighboring countries or, those with the means, to countries such as the US or Spain. Sunday’s election is momentous because it has been tilted as one in which Maduro could allow a free vote – but many still fear that is not his nature. But independent opinion polls have consistently showed him trailing behind the unity opposition candidate, Edmundo Gonzalez, a 74-year-old diplomat who managed to avoid, like other opposition candidates before him, being banned from running. PETROCHEMICALSBefore North America renewed its status as a global energy power with the advent of the shale gas boom, crude oil derivatives were – and continue to be in most Latin American countries – the only game in town when it comes to petrochemicals raw materials. In the past 30 years, crude oil output peaked in 2000 at slightly more than 3 million barrels/day, stayed mostly stable under Chavez’s rule at around 2.5 million barrels/day, but has been on a downward trend since, according to data from the US Energy Information Administration (EIA). VENEZUELA CRUDE OIL PRODUCTIONJanuary 2000-July 2023 Million barrels/day Source: US’ Energy Information Administration Currently, Venezuela produces around 700,000 barrels/day. The reserves continue to be there, underground, but the facilities to extract that wealth have also been victims mismanagement and have had little maintenance. In 2023, as the world’s energy sector reeled from Russia’s attack against Ukraine, the US softened some of its sanctions on Venezuela – its crude oil was now more needed than ever – and signed the Barbados Accords, which would imply lifting sanctions in exchange for a free and fair electoral process. Maduro backtracked from his word earlier in 2024 – as he kept banning candidates from the opposition to run in the process – and the US reimposed the sanctions which, in the abyss the country is in, are used by the government as the excuse for Venezuela’s malaise. Amid this backdrop over the past decades, the 1990s talk about petrochemicals being a sector which could potentially be a powerful exporter of downstream materials to the rest of the world has all but died. In June, the Venezuelan government said it was mulling building production facilities for petrochemicals and fertilizers together with Turkey’s industrial conglomerate Yildirim, but without giving much detail about timelines or budgets. However, such deals have been signed before and nothing came to fruition out of them. Yildrim had not responded to a request for comment at the time of writing. Meanwhile, in an interview with ICIS in May, an executive at chemicals distributor Manuchar – Belgium-headquartered but focused on emerging markets, with strong presence in Latin America – told the sad fate the company was victim of in the late 2010s. By then, the economy worsened sharply and, with it, insecurity created a dangerous country to live in, from Caracas to the provinces. The government’s terror state has included paramilitary groups which have had little regard for their own people. Most of Manuchar’s employees fled the country while they still had the means, and the human resources problem forced the company to basically idle all its facilities there, which remain dormant to this day, said Manuchar’s head for South America, Stefan Van Loock. “We still have a legal entity in Venezuela, although it is dormant, and we do not have any sales there since the end of the 2010s. During our last months there, the situation had become untenable: we could not import materials, there were hardly any dollars available, so even if you got the imports, you could not pay for them most times…,” he said. “It was also becoming a human resources problem. I saw many Manuchar colleagues resign: ‘I cannot stay in Venezuela any longer, it has become too dangerous, and I am leaving’. It was a combination of all those factors that made us decide to wind down our operations there. We can only hope things improve.” It is interesting to read this piece published on ICIS in 2013 when Chavez died. At the time, there were still hopes petrochemicals could be developed as the country’s crude oil sector was still worth the name. Little we knew how much the country would quickly deteriorate in the next five years, although the article already hinted at constrains which would only become much bigger later. “Venezuela potentially could attract significant petrochemical industry investment although major industry players have tried and failed in the past to establish footholds in the country,” the article’s author, ICIS expert Nigel Davis, wrote at the time. “State-controlled producer Pequiven has plans to nearly triple its plastics production capacity to 1.86 million tonnes/year in 2016 from 694,000 tonnes/year, although its ability to do so is questioned against the backdrop of feedstock, power, and financing constraints.” And looking further back into the archives, even with Chavez in power, companies across the world such as major ExxonMobil wanted to tap into Venezuela’s petrochemicals. In this agreement from 2004, the US energy major and Pequiven were mulling a 50:50 joint venture to build a $2.5-3 billion petrochemicals complex. Once again, the project never broke ground. HOPE LAST THING TO LOSEMillions of Venezuelans abroad are following the electoral campaign and, for the most part, are hoping their compatriots at home go and vote em masse on Sunday. The polls have consistently and overwhelmingly showed Maduro behind, so if a free election is held, the Chavismo may be coming to and in a few months. The structures it leaves behind will take years to dismantle, anyway, and success in building a fairer and freer Venezuela is not guaranteed if the opposition wins on Sunday. Even this week, as he sees his position threatened, Maduro rallied supporters with a violent rhetoric which raised alarms across Latin America: he said that if his party does not win the election, there could be a bloodbath. Even Brazil’s President Luiz Inacio Lula da Silva, normally shy in openly criticizing Maduro as he has a worrying tendency to flirt with far left and authoritarian leaders in the region, was blunt about his feelings. “I was shocked by Maduro’s statement that if he loses the election, there will be a bloodbath … Maduro has to learn that when you win, you stay; when you lose, you leave and prepare to run again in the next election,” said Lula, quoted by Brazil’s public news agency Agencia Brasil. Lula has sent to Venezuela his personal adviser on foreign policy, Celso Amorim, as part of international delegations who are to be observers in the election. Jose Marquez, a Venezuelan journalist exiled in Buenos Aires, said Sunday’s election could be the last chance to put Maduro out of office, calling on his compatriots to vote em masse against him. “There are people who emigrated who are right now traveling to Venezuela just to vote on Sunday. The fact that there are people in the country who decide not to vote, perhaps in the last opportunity to remove Maduro from power, is disappointing but, above all, very sad,” said Marquez. Front page picture: Facilities operated by PDVSA Source: PDVSA Insight by Jonathan Lopez