SINGAPORE (ICIS)–Typhoon Yagi is steadily intensifying and tracking northwestward across the South China Sea on Wednesday, with landfall expected on Guangdong province in southern China on 6 September. The China Meteorological Administration (CMA) issued on Wednesday an orange typhoon warning – the second highest level in a four-tier scale. Strong winds, heavy rainfall and rough seas are forecast over the central and southern coastal areas of Fujian and the central and eastern coastal areas of Guangdong province. Yagi, which intensified into a typhoon early on Wednesday, was centered some 60 kilometers (37.28 miles) east of Wenchang city, Hainan province at 02:00 GMT, according to CMA. It is forecast to move in a west-northwest direction at a speed of about 10 kilometers per hour, and its intensity will gradually increase before making landfall on the coast Wanning, Hainan, and Dianbai in Guangdong on the afternoon of 6 September. Guangdong houses the Shenzhen Special Economic Zone (SEZ), a major hub for industries such as electronics, telecommunications, and logistics. The typhoon will then move into the Gulf of Tonkin in the early morning of 7 September, and then move towards the China-Vietnam border before gradually weakening. Yagi previously made landfall as a tropical storm in the northern Aurora province of the Philippines on 2 September, killing 14 people. It comes in the wake of Typhoon Shanshan, which crossed Japan late last month. Shanshan had brought record-breaking rainfall triggered widespread flooding and landslides in Japan, particularly in the western and eastern regions. Over 1,000 domestic flights and several international flights in Japan have had to be canceled due to Shanshan, affecting thousands of passengers. Rail operators had suspended Shinkansen bullet trains and other services.

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. Alice asked the Chesire cat perched in a tree, “what road do I take?” to which the cat asked, “where are you going?” Alice admitted, “I don’t know.” The cat’s response was, “then it doesn’t matter. If you don’t know where you are going, any road will get you there”. Lewis Carroll’s Alice in Wonderland, published in 1865, has always been more than just a fabulous children’s story. Such is the plight of some chemicals companies as they recognize the need for change, but don’t know exactly what change looks like as they struggle to decide which road to take. I see the problem here as being bogged down in the details, getting stuck in the weeds, when the details are simply unknowable right now. But what we do know and must determine at the C-suite level – and this would then trickle down to every level of organization – is the overall direction. The details will sort themselves out later. See today’s blog for a reminder of the ten interconnected reasons why I believe that the Chemicals Supercycle is over. Click on the links in the slide for the relevant background. The first question each commodity chemicals company needs to answer is this: “Can we continue to compete in the global commodity chemicals space, or do we instead need to become a niche, higher-value player?” There will be many, many shades of grey between these two extremes. But C-suites should start with a binary choice as I believe that: The truly global and ever-expanding commodity players are likely to be in the Middle East, the US and Canada only because of feedstock advantages – and connected to feedstocks, the push to convert more oil into chemicals. We don’t know whether China can be a major global export player in commodity chemicals (maybe in some value chains where it is already the dominant player) because of geopolitics. What seems clearer is that by itself, and with its geopolitical partners, it is likely to continue its push to greater commodity chemicals self-sufficiency. This leaves the rest of the world – barring a few state-owned oil-to-gas-and-chemicals majors in regions such as Southeast Asia – facing the challenge of becoming more niche. So, you are Alice.  You have returned to the tree, having decided where you want to go. You ask the Cheshire cat, me, what route to take. All I will say here is “meow”. For more details, contact john.richardson@icis.com. 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.

SINGAPORE (ICIS)–Asian petrochemical shares tumbled in early trade on Wednesday as regional bourses tracked Wall Street’s rout overnight following lackluster manufacturing data from both the US and China, with crude prices extending declines. Major US equity indexes suffer worst session since 5 August China August export orders decline for first time in eight months Crude benchmarks fall amid easing Libya supply concerns At 03:20 GMT, Mitsui Chemicals was down close to 2% and Sumitomo Chemical tumbled by more than 3% in Tokyo, as the benchmark Nikkei 225 shed 3.83% to 37,405.59. In Seoul, LG Chem fell by more than 2%, with South Korea’s KOSPI Index slumping 2.48%. In Hong Kong, PetroChina was down more than 4% as the Hang Seng Index slipped 0.69%. In Kuala Lumpur, PETRONAS Chemicals Group (PCG) slipped by 0.36% with the stock market index slipped 0.25%. Major US equity indexes overnight posted their worst session since the global sell-off on 5 August this year, as financial markets evaluated economic data from the US and China. The Dow Jones Industrial Average tumbled by 1.51%, the S&P 500 fell by 2.12%, and the Nasdaq Composite closed 3.26% lower. US, CHINA DATA STOKE SLOWDOWN WORRIES  In the US, the Institute for Supply Management (ISM) monthly survey of purchasing managers showed a reading of 47.2, below the 50 breakeven point for expansion of activity for the fifth straight month. Separately, the final S&P Global US manufacturing PMI reading for August was at 47.9, down from 49.6 in July. The latest reading was the lowest since last December and signaled a second consecutive month of deteriorating manufacturing conditions. Meanwhile, China released economic data on 31 August indicating a decline in export orders, the first such decrease in eight months. China’s factories remained in contraction mode, with August official manufacturing PMI posting a reading of below 50 for the fourth consecutive month. Additionally, data on 1 September showed that China’s new home prices increased at their slowest pace of the year during August. The average price for new homes across 100 cities in the country edged up 0.11% from July, slowing from the 0.13% rise in June this year, according to data from property researcher China Index Academy. OIL PRICES CONTINUE LOWER Crude benchmarks continued lower on Wednesday after falling to their lowest this year in the previous session on signs of a deal to resolve a dispute that has stopped Libyan crude production and exports. Libya’s move to appoint a new central bank governor signals progress in resolving recent challenges, but this development, coupled with the resumption of Libyan oil production and OPEC+’s planned output increase, could lead to an oversupply of oil, putting downward pressure on crude prices. Focus article by Nurluqman Suratman Thumbnail image: At Yantai Port in China on 2 September 2024. (Source: Costfoto/NurPhoto/Shutterstock)

SAO PAULO (ICIS)–Brazil’s GDP growth in the second quarter stood at 1.4%, surprising on the upside, in what is starting to become an overheating compounded by rising inflation which could lead to hikes in interest rates, according to analysts. On Tuesday, Brazil’s statistical office IBGE said growth in the second quarter had stood nearly 50% stronger than analysts consensus estimates, which were at 0.9%. In Q1, already a healthy month due to the peak of the agricultural season, GDP growth stood at 1%. Year on year, GDP in the second quarter rose by 3.3%, compared with Q2 2024. GROWTH ACROSS THE BOARD All subsectors posted growth in the second quarter, said IBGE. In the petrochemicals-intensive industrial sectors, the best performer was electricity and gas, water, sewage, and waste management activities (output up 4.2% quarter on quarter), followed by construction (3.5%) and manufacturing industries (1.8%), which offset a fall of 4.4% in extractive industries. Within services, all subcomponents posted growth in the second quarter. Spending by households and public institutions both rose by 1.3%, while gross fixed capital formation rose by a healthier 2.1%, quarter on quarter. Exports rose by 1.4%. but imports rose at a much faster 7.6%, something the chemicals industry is well aware of and thus is demanding hefty import tariff increases to protect domestic producers market share. OVERHEATING Even if the economy slowed down considerably in the second half of 2024, which is a pattern for the agricultural-intensive Brazilian economy when the main harvests take place in H1, GDP would be on course to grow by 3% in 2024. “The flip side is that it will heighten the central bank’s concerns about inflation and the probabilities have probably now tilted towards a 25 basis points hike in the Selic rate at the Copom [monetary policy committee] meeting later this month,” said on Tuesday analysts at London-based Capital Economics. The Selic main interest rate benchmark stands at 10.50% after three consecutive Copom meetings leaving rates unchanged due to a late uptick in inflation. Brazil’s annual rate of inflation stood in July at 4.50% and marked its fourth consecutive increase as the Brazilian real depreciated against major currencies and investors showed skepticism Lula’s cabinet is going to keep fiscal discipline going forward. IBGE is due to publish August inflation figures on 10 September. “Based on the outturns for the first half of the year, the economy looks set to expand by around 3% over this year as a whole. But this is above Brazil’s potential rate and is going to add fuel to the debate about whether Copom will raise interest rates,” concluded Capital Economics. “We’ll firm up our forecast after the release of the August inflation figures. But as things stand, we think the balance of probabilities has now tilted towards a modest increase in the Selic rate, beginning at this month’s Copom meeting.”

SAO PAULO (ICIS)–The Brazilian government’s decree changing natural gas regulations could potentially overhaul the market and, along the way, benefit the chemicals industry by providing it with cheaper energy and eventually with ethane-based feedstocks. The job of a lobbyist may be well paid, but it must be a hard one most of the time. For years, Brazil’s chemicals trade group Abiquim had been lobbying for the government to pass regulations which would allow the natural gas which comes as a byproduct from crude oil production to stay within the economy, and not be just reinjected into the ground again. To make common cause on that lobbying, Brazil’s polymers major Braskem has also been saying for years that it stands ready to expand its Duque de Caxias facilities, in the state of Rio de Janeiro, as soon as the necessary gas and derivatives were available. For years, those demands had fallen in deaf ears. Until 26 August, when the cabinet presided by Luiz Inacio Lula da Silva passed a decree contemplating, among other measures, higher powers for the oil and gas regulator ANP to set up the amount of gas which is reinjected into the system, for instance. If fully implemented, the decree could completely change the natural gas market in Brazil, and ultimately benefit the chemicals industry via lower energy costs and, potentially, having more ethane, rather than crude-based naphtha, as a raw material. In a written response to ICIS, Abiquim’s director general Andre Passos celebrated the decree and did not share the fears of some analysts, who see in giving regulators more power than traditional willingness to basically intervene the market. REINJECT OR NOT TO REINJECT – AND WHO PAYS THE BILLActing on natural gas in Brazil had almost become an imperative since the US shale gas revolution changed that country’s energy landscape, making it again a net exporter and reviving the petrochemicals industry to an extent no-one could imagine just two decades ago. In the US and Brazil, the two largest chemicals producers in the Americas, the contrast is stark: natural gas prices in the southern neighbor are around four times higher than in the US. However, some analysts have said they are concerned about the type of action taken, arguing that giving regulators such as the ANP more power could lead to more government interventionism in the oil and gas sector, potentially denting Brazil’s crude sector attractiveness to invest. However, lest not forget that Brazil’s crude sector is mostly dominated by one player, Petrobras, and this player is majority owned by the state: its CEO is appointed or dismissed as the President sees fit, and the crude major is effectively one more arm of the cabinet – a ministry of energy bis, so to speak. Still, Brazil’s crude sector was meant to go towards more liberalization, not less. And this is where the decree on natural gas passed in August overreaches, according to critics, the scope of what a government should do or should not do to encourage certain economic activity. According to the decree, the ANP will be able to mandate to crude oil players the levels of natural gas they can reinject back into the system during their crude oil extraction operations, and how much they should make available for companies and households. In simpler words: crude producers will have to go from reinjecting most of the gas – at a very low cost – to create an infrastructure to transport that gas onshore. For now, crude oil majors operating in Brazil have, for the most part, kept quiet about the decree. In a written response to ICIS on 29 August, Shell said it was “analyzing” the decree, without any further comment, a response it has not updated as of 3 September. Petrobras and Equinor had not responded to a request for comment at the time of writing. Equally, Braskem did not respond either to questions about potential petrochemicals expansions or how the decree could affect investments in crude oil and, ultimately, affect the industrial sectors if that was to happen. Petrobras’ CEO, Magda Chambriard, said, however, the company would do “everything possible” to reinject as much gas as it is able to, but also reminded how this reinjection will only be possible in the production platforms to be started up in the future. “On the platforms that are already there [in operation] and on those that are already being delivered, this [reinjecting more gas] will not be possible,” said Chambriard, quoted by specialized publication Offshore Energy. Abiquim’s Passos is not concerned at all and said that the powers given to ANP is a natural step for “an aspect of oil and gas production” that was not previously covered by the regulators. “The power to regulate will be used considering the interests of producers, consumers, and the state and, obviously, without implying a disincentive or a halt to new investments. In any case, given the magnitude of investments in oil, new investments specifically for gas would not significantly alter the competitiveness of oil exploration and production (E&P) in Brazil,” said Passos. “Abiquim is confident that the costs associated with E&P in Brazil’s oil sector are sufficiently low to cover any additional costs that may arise.” And to the fears about higher intervention from the government, Passos said it was a “global characteristic” of the crude oil and gas sectors to be highly regulated. CHEMICALS CHEERS, FINALLYAbiquim’s Passos is well aware of Petrobras’ CEO warning about the slowness in the natural gas market, and how it may take years for the changes benefiting chemicals to take place. But, after years of unsuccessful lobbying, Passos is a happy man who says the authorities have finally a vision of what chemicals should be and what its problems are. With that, he is ready to wait. “Nothing will be immediate. However, there is a compatibility between the time needed for greater availability of natural gas, improving the competitiveness of this raw material in Brazil, and the time required for petrochemical projects to mature – we should consider that this is a structural action with medium- and long-term impacts,” said Passos. However, after years of lobbying for a decree like the one just passed, the trade group was understandably exultant, not least because this comes just two months after another success. In June, Abiquim and Passos as its representative were part of Lula’s entourage when he went on a state visit to gas-rich Bolivia in June. During the visit, Brazil and Bolivia signed agreements to expand natural gas supplies, in a long-running business relationship which has made Bolivia the key supplier to the Brazil’s most populous, industrious and wealthiest states in the south via the pipeline Gasbol, the longest natural gas pipeline in South America at 3,150 kilometers (1,960 miles). At the time, Abiquim described the agreements inked in Bolivia as a “historic” step for Brazil’s chemicals and which, together with the latest natural gas moves, could pave the way for a truly competitive sector in the global stage, said the trade group. Agreements on fertilizers were also signed as Brazil, already one of the world’s bread baskets, continues to post a large trade deficit in that field. According to Brazil’s government, the deals in Bolivia and the decree on the regulatory environment for natural gas could unleash investments of Brazilian reais (R) 96 billion ($17 billion) in natural gas, biomethane, and fertilizer plants, as cited by Abiquim in its statement following the decree’s passing. SEVERAL DEALS, LITTLE RESULTSAbiquim’s lobbying has been directed where it could make the most difference: the government and Petrobras, admittedly achieving more success with the former than the later. In its quest for expanding natural gas supplies and lower prices, Abiquim knocked on Petrobras’ door in 2023 and formed a working group to explore solutions to the “critical situation” the chemicals industry was in. Nothing was heard about that working group, so this year the two parties gave it another shot and singed a memorandum of understanding (MoU) aiming for the same: to find ways of making the petrochemicals industry more competitive. So far, nothing concrete has been communicated, while chemicals remains with its operating rates at record lows as imports continue flooding Brazil and the wider Latin America, with an increase in import tariffs later this year one of the elements which, according to Abiquim, could start fixing the beleaguered Brazilian domestic chemicals production. “Over the last few months, both teams (Petrobras and Abiquim) have been concerned about handling anonymized data from the sector. Creating a safe environment for members to access competitive natural gas is Abiquim’s focus,” said Passos. “The high volume of natural gas consumption for the sector justifies the continuation of the negotiations. We are very pleased with the technical capacity and fairness of the process and how it has been handled by both parties.” Front page picture: Abiquim’s director general Andre Passos (second from the right) in Brasilia on 26 August, when the new national energy and natural gas policies were signed  Picture source: Brazil’s Ministry of Mines and Energy  ($1 = R5.64) Insight by Jonathan Lopez

BARCELONA (ICIS)–New analysis suggests the chemical industry may face a more rapidly aging and shrinking population in key markets such as China, while the subsequent drag on demand means new business models will be required. China-driven petrochemicals supercycle is over China’s population may be aging and shrinking more quickly than previously thought China may switch to become net exporter of many synthetic resins Demographic shifts will shrink demand for chemicals throughout developed world Developing world faces challenges which may slow growth New business models will be required to create opportunities from these trends 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.

MUMBAI (ICIS)–Several ports across India’s western state of Gujarat have resumed normal operations even as heavy rains are projected to continue throughout the week. Operations at some ports had suffered some disruptions since late August because of inclement weather. In a note dated 2 September, shipping and logistics firm GAC Shipping, Logistics & Marine Services said that activities at Kandla port had been severely impacted due to the heavy rainfall since 26 August and cargo operations had slowed down. Operations have now resumed at the port, it added. At Mundra port, vessel movements and cargo operations have also restarted and are now back to normal. Dahej port has also resumed operations after suspending berthing operations at several terminals due to heavy rainfall and wind on 29 August. The same was true for Pipavav port, which halted operations on 28 August. Sikka and Hazira ports, on the other hand, have continued normal operations. On Tuesday afternoon, the Indian Meteorological Department said that isolated extremely heavy rainfall is likely over parts of Gujarat between 3 September and 4 September. There is a risk of low-to-moderate flash floods occurring in parts of Gujarat over the next 24 hours, it added.

SAO PAULO (ICIS)–Brazil’s manufacturing PMI index for August sharply slowed down from July on the back of output falling for the first time in several months due to subdued sales, and elevated cost pressures, analysts at S&P Global said on Monday. At 50.4 points in August, the manufacturing PMI stood just above the 50.0 point mark which separates expansion from contraction. It also represented a sharp slowdown from July’s 54.0 points. Brazil manufacturing August July June May April March February January December 2023 November October September PMI index 50.4 54.0 52.5 52.1 55.9 53.6 54.1 52.8 48.4 49.4 48.6 49.0 Source: S&P Global While the fall in production was described as slight, it marks a reversal from the growth trend seen earlier in the year. New business growth slowed to a multi-month low, though some firms noted a shift from imported to domestic goods due to high shipping fees, suggesting a complex demand environment where domestic producers may be benefiting from import challenges, but overall demand remains subdued. Export sales growth also softened, with improved demand from Asia and the Middle East offset by lower orders from the US and Mercosur countries. Cost pressures intensified significantly, reaching a multi-year high. Companies reported increased prices for chemicals, fabrics, foodstuffs, packaging, plastics and transportation, often attributing these rises to currency depreciation. Despite these challenges, manufacturers showed increased optimism about the year-ahead outlook. This positive sentiment was attributed to plant expansion plans, product diversification efforts, investment intentions, and forecasts of a potential pick-up in demand. Employment continued to rise, albeit at a slower pace than earlier in the year. The moderation in job creation was linked to shortages of skilled job seekers and cost-cutting measures at some units. Nevertheless, the continued growth in employment allowed firms to reduce their backlogs of work. “The Brazilian manufacturing sector suffered a loss of momentum in August, with surging cost pressures hampering firms’ ability to secure new business. Manufacturers even took the step of scaling back production and softened the pace of hiring in a bid to limit costs,” said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence. “Firms will be hoping for an improvement in the real exchange rate soon to help relieve some of the pressure on costs and lead to a revitalization of growth in the months ahead.” Front page picture: Facilities operated by Brazilian polymers major Braskem in the state of Sao Paulo Source: Braskem

HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 30 August. ICIS Economic Summary: US economy slowing, not falling off a cliff 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. IPEX: Global spot index slips on lower prices in northeast Asia, US Gulf The global spot ICIS Petrochemical Index (IPEX) slipped by nearly one-percentage point in the week ending 23 August, on the back of price falls in northeast Asia and the US Gulf. Outages, demand supporting US ethylene prices at two-year highs US ethylene spot prices have begun to decline but remain at two-year highs in both Texas and Louisiana after a series of cracker outages and improvement in derivative demand. Argentina petchems to take time to feel benefits from cut to import tariffs Argentina’s petrochemicals players are in a wait-and-see mode about the effects a cut to import tariffs announced this week could have in the market and whether it will lower prices which, for many materials, remain higher than global prices. RAIL: US rail companies strike deals with unions months ahead of next bargaining round US railroads Norfolk Southern (NS) and BNSF have reached tentative, five-year collective bargaining agreements with several labor unions four months ahead of the opening of the next collective bargaining round, the companies announced on Friday.