BARCELONA (ICIS)–Chemical companies can expect to pay even more for container space along the Asia to Europe route as attacks against shipping persist, port congestion grows, and demand rises. Shipping rates soar amid congestion, rising demand, echoing post-pandemic era Shipping reliability, customer service levels have fallen Shippers reorganizing routes, focusing on big ports like Singapore Global container shipping capacity growing by 20% year on year Container fleet utilization over 90% despite rising supply End of Houthi Red Sea attacks would cause freight rates to collapse Demand rising for containers even though industrial demand is flat Huge investment in port, road, rail infrastructure especially in Asia Logistics problems leave oversupply trapped in Asia More trade barriers may protect regional markets In this Think Tank podcast, Will Beacham interviews Thomas Cullen, chief analyst at Transport Intelligence, ICIS Business Solutions Group senior executive Nigel Davis, ICIS senior consultant Asia John Richardson 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)–Inflation in the eurozone resumed its downward trend in June, falling to 2.5% from 2.6% in the previous month, according to official data on Tuesday. The rate of inflation has been ticking down consistently over the past few months, with the exception of May which saw a 0.2 percentage point increase from April. June’s annual inflation was mainly driven by services, followed by food, alcohol & tobacco, non-energy industrial goods and energy, statistics agency Eurostat said in its flash estimate, which is subject to revision. The European Central Bank (ECB) cut its key interest rates for the first time since 2019 on 6 June as inflationary pressures broadly eased.

UPDATED: On 27 June 2024, ICIS updated this analysis to include a review of the impact that manifesto pledges could have on UK power prices On 24 June 2024, ICIS updated this analysis to include a review of the renewable capacity pledges from manifestos and their likelihood of being met On 21 June 2024, ICIS updated this analysis to include a breakdown of the impact of new gas licenses on British gas supply On 20 June 2024, ICIS updated this analysis to include the Scottish National Party’s manifesto plans for energy. The manifesto table now includes these details Initial analysis published with detailed table reviewing energy policies from announced manifesto pledges, original analyses covering nuclear power and gas-fired power generation, a UK election special episode of the ICIS Hydrogen Insights podcast LONDON (ICIS) — On 4 July 2024 the UK public will elect a new government, but what do the different parties have in store for energy? The following analysis reflect core pledges from manifestos and reviews those pledges in detail using ICIS data and insights. This analysis of UK political pledges and announcements will be continuously updated by the ICIS energy editorial team. Lead authors include: UK power reporter Anna Coulson, British gas reporter Matthew Farmer. UK ELECTION PLEDGES UNLIKELY TO IMPACT POWER PRICES UK power prices out to 2030 could remain relatively unchanged regardless of which party wins the UK election ICIS analytics forecasts UK power prices to range between £46-85/MWh in 2030 LONDON (ICIS)–UK power prices could remain relatively unchanged to 2030 regardless of which political party wins in the UK’s general election on 4 July, ICIS analysis shows. The development of the power market and new capacity faces continued hurdles, despite numerous parties intending to rein in energy prices according to their manifestos. An analysis of the Conservative, Labour, Liberal Democrat, Green Party, Reform UK, Scottish National Party (SNP) and Plaid Cymru manifestos shows that all parties present different policies aimed at helping manage energy bills. Some policies presented by the main parties suggest direct consumer initiatives, such as Labour’s plan to issue grants and loans for insulation, or the Green Party policy pledge to develop an insulation scheme, or the SNP’s financial relief for consumers in the Highlands and Islands of Scotland. However, some policies seek to address the wholesale power market through measures such as new licenses for gas-fired power generation or the build-out of renewable capacity. Renewables, volatility and risk Broadly speaking, energy policies proposed by UK parties present three different paths. Firstly, there are policies focused primarily on expanding renewable capacity as ageing gas-fired and nuclear power plants are decommissioned. Such policies would lead to periods of lower power prices, but balancing this would drive more volatility across short-term power prices. This pathway is most closely resembled by the Green Party, which has ambitious targets for renewable deployment by 2035. As the party plans to phase out existing nuclear power and stop the development of new plants, this would increase price volatility as nuclear would no longer operate as a baseload source of generation. The Green Party’s manifesto did not specify a timeline for the nuclear plans; therefore, it is difficult to determine when this could affect UK power prices. However, the party states it would rapidly expand energy storage capacity, which would balance renewable energy intermittency, although more detailed plans are not specified in the party’s manifesto. The SNP also intends to develop renewable energy, outlining “significant growth” in renewables alongside expansion in storage for energy. The Liberal Democrats also lean towards renewable development but present a decentralized approach when considering solar. The party would seek to build solar panels on new homes, therefore reducing power demand for residential offtake. A more central approach can be seen from both the Conservative and Labour parties, which both present clear plans for renewable growth, but also consider building new nuclear capacity or, in the case of Labour, also extending the life of the existing nuclear fleet. Furthermore, the Labour party intends to maintain a strategic reserve of gas-fired power plant which could limit price volatility but would result in higher power prices linked to natural gas prices. The Conservatives plan to build new gas power stations which would also reduce price volatility but would create an even stronger link to gas prices. However, the party’s manifesto did not state how much capacity would be added and when, therefore it is hard to determine when this could impact prices. Finally, the third pathway is presented by Reform UK, which presents plans to fast-track small-modular reactor (SMR) build out for nuclear capacity while reviewing the potential for tidal power, both baseload generation-supporting activities. Further, with the party’s intention to explore new UK gas field licenses, gas-fired power supply could remain in the mix into the future. ICIS analyst view Despite multiple power market pledges, the potential for manifesto points to translate into price movements appears limited, according to ICIS analyst Robbie Jackson-Stroud. Jackson-Stroud notes that the development and construction of new capacity, such as gas-fired power plants, requires time to agree upon at a policy level, plan and then construction. Adding to this, “cost constraints in the current climate are the driver of investment in renewable capacity, and a change of party does not shift that,” he added. Regardless of the party to come out as winner of the 4 July elections, there may simply not be enough time to deploy new capacity for wholesale power prices to ease, be that renewables or fossil-fuel based generation. Considering the challenges facing parties in delivering power-market change ahead of 2030, it is unlikely that they would present notable shifts to forecasted power prices before the next decade. ICIS long-term power data indicates that in 2030, depending on the development of the carbon price, UK power prices are expected to range between £46-85/MWh. In comparison, ICIS price assessments show that the UK power front-month baseload price averaged £66.62/MWh between January to June this year, which is £49.34/MWh lower than the same period last year. The drop in price is due to more stable market conditions this year in the UK and on the continent. UK PARTIES COULD STRUGGLE TO MEET RENEWABLE CAPACITY ELECTION PLEDGES – Added to analysis 24 June 2024 UK parties unlikely to meet capacity targets Key to onshore wind would be change to regulation Offshore wind could struggle following recent CfD round LONDON (ICIS)–For the UK general election, Labour, the Conservatives and the Green Party are the only three of the main parties to present outright capacity targets for renewable energy deployment across their manifestos. However, ICIS data and analyst insight suggests that meeting such targets could face difficulties due to recent setbacks in the UK’s Contracts for Difference (CfD) bidding process and restrictive regulation for onshore wind. The Labour party manifesto states it will double onshore wind, triple solar power, and quadruple offshore wind by 2030. To present an idea of this, ICIS has multiplied its forecasted capacity for these technologies in the UK by the end of 2024 by their respective factors according to Labour’s pledges. Actual intended capacity may vary. ICIS had contacted the Labour party for comment but received no response by the time of publication. Onshore wind Labour plans to double onshore wind capacity by 2030, while the Green Party would deploy 53GW of capacity by 2035. The Liberal Democrats would ‘remove the Conservative’s unnecessary restrictions on new wind power’, likely referring to the requirements the current government introduced in 2015 and changes to the law in 2016. Planning policies were updated in September 2023 to allow locations suitable for new wind farms to be identified in several ways, rather than only in the area’s development plan. However, decisions continue to be made by local planning authorities which differs to the process for other infrastructure projects where decisions on major projects are made by the Secretary of State. The current government does not have an onshore wind capacity target and the Conservative’s manifesto has no mention of one however, it does state that the party will ensure democratic consent for onshore wind. ICIS analytics forecasts 25.85GW of onshore wind capacity in 2030 and in 2035, under a base case scenario, which is below Labour and the Green Party’s targets. ICIS analyst, Robbie Jackson-Stroud, stated that planning permission is one of the main challenges onshore wind projects face. “Costs for turbines have also risen and so they are then squeezed into a CfD funding pot where they have to compete with solar”, he added. Jackson-Stroud noted that onshore wind could be a key component to the development of renewable capacity in the UK, changes to regulation permitting. “One aspect that is likely to change is regulation and approval of onshore wind projects, which require less budget and time to build. However, it is difficult to envisage a new government being timely enough to sufficiently improve the approval process and have enough projects apply to shift onshore capacity before 2030. It should be noted, however, how much potential a change to regulation would have to long term capacities, and you can expect more capacity in the 2030s”, Jackson-Stroud said. Offshore wind The Conservatives, Labour and the Green party all position offshore wind as a key technology to support the decarbonization of the UK’s power system. However, achieving such targets appears difficult following an unsuccessful fifth auction of the CfD scheme in 2023, in which there were no bids for offshore wind amid a low strike price. The current government increased the strike price for the upcoming sixth auction round, raising the maximum strike price from £44/MWh to £73/MWh. Jackson-Stroud highlighted the difficulty facing the next wave of auctions when considering 2030 targets. “Both parties [Labour and the Conservatives] have pledged unachievable targets without a huge budget increase for the CfD. Taking into account the time it takes to build offshore wind sites (that are getting increasingly larger on average) there are only two CfD auctions at most that can fund capacity to come online by 2030. “There is roughly 27GW of offshore wind already under CfD, under construction or operational, suggesting the need for a further 23GW across two auctions, which would be a record at a time where costs are higher than they have ever been. While the budget for the latest round has been raised to an all-time high of £800m for offshore and £1.2bn total, this would still procure only 12GW of wind in even the most conservative estimates. “This means regardless of Labour increasing 2030 targets for offshore, even the 50GW already in place will not be met, and a change of party doesn’t change the blockers to this,” Jackson-Stroud said. ICIS analytics forecasts that offshore wind capacity will be 39GW in 2030 under a base case scenario, therefore falling short of the Conservative and Labour party targets. Similarly, offshore wind capacity is forecast to be 48.04GW in 2035 under a base case scenario, well below the Green Party’s target. Solar Labour plan to triple solar capacity by 2030, while the Green Party and Conservatives have set targets for 2035, 100GW and 70GW respectively based on manifesto and recent policy announcements. However, reaching such targets may prove challenging based on recent CfD results. ICIS analyst Matthew Jones previously noted that for the UK to meet its 70GW by 2035 target, CfD capacity awards would need to average 4.5GW/year. However, over the last two CfD rounds, just 2.2GW was awarded in each. Further, ICIS analytics forecasts 42.97GW of solar capacity by 2030, and 48.54GW by 2035, under a base case scenario, therefore missing the Labour, Conservative and Green Party targets. Since the closure of the renewable obligation and feed-in tariff schemes, the CfD scheme is the only subsidized route to market for solar. The forecast models cited in this story are available as part of ICIS Power Foresight. If you would like to learn more about ICIS Power Foresight, please contact head of power analytics Matthew Jones at Matthew.Jones@icis.com UKCS LICENSING – Added to analysis 21 June 2024 Several parties have committed to end the issuing of new licenses for extraction of oil and gas on the UK continental shelf (UKCS), however ICIS analysis shows the inclusion of new licenses may have a minimal impact in mitigating output decline. Gas production on the UKCS started declining in 2000, but held steady during the 2010s. It currently accounts for approximately 40% of Britain’s gas supply mix, with the bulk of remaining volumes coming through Norwegian imports and LNG. From the late 2020s, UKCS production is expected to decline by approximately 6% per year. Licenses on new discoveries would not reverse the decline in British production expected in coming years. However, they would have accounted for another 0.80 billion cubic meters (bcm) of British gas production in 2030, increasing to 1.5bcm in 2035. In contrast to the other parties, the Conservatives and Reform UK have committed to annual licensing rounds and “fast-track” licenses, respectively. Both have done so with a justification of maintaining British energy independence, citing the rising price of energy caused by the full-scale Russian invasion of Ukraine. GAS-FIRED POWER DEMAND LIKELY UNMOVED Both the Conservatives and the Labour party show support for the continued use of gas for power generation, bolstering a key area of demand for British gas market participants. However, of the two parties, the Conservatives presented a more bullish mentality by noting intensions for new gas plants, aligning with previous announcements to support new capacity. Labour meanwhile take a muted approach, noting the need for a strategic reserve of gas for power generation. Both Labour and the Conservatives have therefore presented policy that could reduce power-market price volatility as renewable capacity grows, with gas offering baseload generation at periods of low renewable output. Gas demand for power to remain From a gas-market perspective, the use of gas for power amounts to a large share of overall demand. In 2023, gas offtake for power accounted for 26% of total gas demand. The UK is heavily reliant on gas-fired power generation, with it contributing 26% of the UK’s electricity mix in the period 1 January to 31 May 2024, according to data from National Grid. Similarly, gas-fired generation provided an average 36.3% of the mix over the 2019-23 period, therefore making a significant contribution to the UK’s electricity stack. While the capacity of new gas generation is not mentioned in the Conservative party’s manifesto, ICIS analytics forecast data indicates that gas capacity is set to increase through to 2026, under a base case scenario. This would suggest that offtake for power generation could well remain a key share of overall gas demand under either a Conversative or a Labour government. Further, ICIS data shows that there will be 7.92GW of gas capacity in 2050 under a base case scenario, which itself raises uncertainty around the prospect of pledges to decarbonize power grids by around the 2030s. NUCLEAR Nuclear power represented a large focus for the Labour, Conservative and Reform UK parties, which each announced plans to increase nuclear capacity through a mix of measures, such as plant life extensions, new large-scale projects, or Small Modular Reactors (SMRs). Despite this, the overall pledges presented for the election suggests need for further capacity build-out in the run up to 2050 in order to meet the government’s target. While the Conservative’s manifesto did not mention a specific nuclear capacity target, the current government has a target to reach 24GW of nuclear capacity by 2050. ICIS analytics forecasts that, under a base case scenario, nuclear capacity will be 12.76GW by 2050. Plant life extensions Although Labour’s manifesto did not provide details on which nuclear plants it intended to focus on for life extensions, or for how long, the intension is in line with former market announcements from EDF, which stated plans in January 2024 to extend the lives of five UK nuclear plants. EDF plans to invest an additional £1.3bn in these power stations over 2024-26, with the aim to maintain output from the four advanced gas-cooled reactors (AGR) for as long as possible, and for the Sizewell B plant to operate for an additional 20 years. The lifetimes of the four AGR stations would be reviewed by the end of 2024. New capacity From a new capacity perspective Labour pledged to get the 3.2GW Hinkley Point C project over the line and that new nuclear power stations, such as the 3.2GW Sizewell C project, will play a key role in helping the UK to achieve energy security and clean power. In January, the Conservatives announced plans for a new large-scale nuclear power plant, which would be as large as Hinkley Point C or Sizewell C, which are both 3.2GW in capacity. The current government announced in May that Wylfa would be the preferred site for this new plant however, a commissioning date is still to be confirmed. This aligns with the party’s manifesto pledge to deliver a new gigawatt power plant at the same location. The new plant in Wales could well boost UK nuclear capacity, but it would still present a capacity gap between the current ICIS forecast for 2050 and the government’s target of 24GW. Small modular reactors Labour, the Conservatives, and Reform UK all mention SMRs in their manifestos however, the Conservatives will approve two new fleets of SMRs within the first 100 days of the next parliament. This is likely through the competitive process that Great British Nuclear (GBN) launched in 2023 to select SMR technologies best placed to be operational by the mid-2030s. GBN plans to announce successful bidders for the competition by the end of 2024 and to take two SMR projects to a final investment decision by 2029. However, it must be noted that SMRs are a new technology, and none are commissioned yet in Europe.    HYDROGEN In this UK general election special, ICIS hydrogen editor speaks with Rob Dale, founder and director of UK consultancy Beyond2050, which aims at supporting market participants in achieving their energy and sustainability goals. Over the course of the episode, Jake and Rob review which parties have committed to hydrogen for the election and what makes this election the biggest for hydrogen so far.

HOUSTON (ICIS)–Hurricane Beryl, already a major Category 4 storm, is making its way toward Mexico, but it remains too early to tell where it will ultimately make landfall. Beryl is now the earliest Category 4 storm on record in the Atlantic. The previous earliest was Hurricane Dennis on 8 July 2005. The US National Hurricane Center (NHC) said as of 1900 GMT Beryl was about 60 miles (100km) west northwest of Carriacou Island with maximum sustained winds of 150 miles/h and moving west-northwest at 20 miles/h. Source: National Hurricane Center (NHC) Late-cycle track guidance from the Tropical Cyclone Guidance Project (TCGP) shows the different tracks based on various models in the image below. Source: Tropical Cyclone Guidance Project (TCGP) If the storm continues to move to the west, it could threaten Mexican facilities in Veracruz state, which is in the south of the Bay of Campeche. Also in the region are the major port city of Coatzacoalcos and Braskem Idesa’s integrated polyethylene (PE) Ethylene XXI complex. Beryl could also make landfall near Altamira, which has been experiencing a drought and could provide the area with much-needed rain but could also impact operations at the multitude of chemical facilities in the area. Another scenario would be if the storm swings to the north, which could threaten oil and gas production in the US Gulf as well as Gulf Coast petchem operations. Beryl is expected to pass near Jamaica on Wednesday but the storm is unlikely to affect the chlor-alkali chain. Jamaica is home to a number of large alumina refineries that consume significant volumes of US caustic soda, used to refine alumina from bauxite, or aluminium ore. ACTIVE HURRICANE SEASON The early activity in the Atlantic Ocean is in line with forecasts calling for a busier-than-usual hurricane season. The US National Oceanic and Atmospheric Administration (NOAA) is predicting the greatest number of hurricanes in the agency’s history. NOAA forecasters with the Climate Prediction Center said that the hurricane season – which started on 1 June and runs through 30 November – has an 85% chance to be above normal, a 10% chance of being near normal and only a 5% chance of being below normal. The prediction of 17-25 named storms is the highest ever, topping the 14-23 predicted in 2010. A storm is named once it has sustained winds of 39 miles/h. Saffir-Simpson Hurricane Wind Scale Category Wind speed 1 74-95 miles/h 2 96-110 miles/h 3 111-129 miles/h 4 130-156 miles/h 5 157+ miles/h Damage from hurricanes can lead to increased demand for chemicals, but hurricanes and tropical storms can also disrupt the North American petrochemical industry because many of the nation’s plants and refineries are along the US Gulf Coast in the states of Texas and Louisiana. In 2022, oil and natural gas production in the Gulf of Mexico accounted for about 15% of total US crude oil production and about 2% of total US dry natural gas production, according to the US Energy Information Administration (EIA). Even the threat of a major storm can disrupt oil and natural gas supplies because companies often evacuate US Gulf platforms as a precaution. Additional reporting by Al Greenwood, Kelly Coutu, Bill Bowen

HOUSTON (ICIS)–Sowings of corn and soybean have concluded and there is now 11% of the corn acreage silking with 20% of soybeans blooming, according to the latest US Department of Agriculture (USDA) weekly crop progress report. The recent wet conditions followed then by warmer-than-normal temperatures have helped initially push crop development forward, with the agency reporting 11% of corn has reached the critical silking phase. This current pace is ahead of the 7% achieved in 2023 and the five-year average of 6%. For corn conditions, there is currently 3% of the crop listed as very poor with 6% as poor. There is 24% of the crop considered fair, with 52% labeled as good and 15% as excellent. For soybeans, there is 95% of the crop which has emerged. This is less than the 97% from 2023 but it is higher than the five-year average of 93%. 20% of the acreage has reached the blooming phase, which equals the 2023 rate but is ahead of the five-year average of 15%. In the first update of soybeans setting pods, the weekly report said there is 3% of the crop at this stage, matching the 3% achieved last year and easing just above the five-year average of 2%. For soybean conditions, there is 2% of the crop seen as very poor with 6% listed as poor. There remains 25% of the crop considered fair, with 55% counted as good and 12% as excellent. For the other key crops, the USDA said cotton plantings have reached 97% completed with sorghum at 96%.

SAO PAULO (ICIS)–Here are some of the stories from ICIS Latin America for the week ended on 28 June. NEWS Brazil Unigel falls short of tolling deal for ammonia plants – Petrobras Petrobras has alleged that Unigel has failed to meet the terms of their tolling agreement for the production of ammonia at two idled plants, the Brazilian state-controlled energy producer said on Friday. Brazil’s Cibra inaugurates new plant in Matopiba Cibrafertil Companhia Brasileira de Fertilizantes (Cibra) has inaugurated a greenfield plant in Sao Luís, Maranhao, the Brazilian fertilizer company has announced. Saudi Arabia, South America offer promising opportunities for base oils Markets such as Saudi Arabia and countries in South America hold potential for growth in the years ahead, industry sources said on Friday. Mexico’s central bank keeps rates unchanged at 11% as inflation ticks up The Banco de Mexico kept on Thursday the main interest rate benchmark unchanged at 11% after the annual rate of inflation has increased since February. Argentina GDP down 5.1% in Q1 but sentiment rises again in May Argentina’s recession may have bottomed out in the first quarter, with a GDP fall of 5.1% year on year, as a leading indicator for economic activity rose in May for the third month. Plant status: Chemours resumes TiO2 production at Mexico plant US producer Chemours has resumed operations at its Altamira, Mexico titanium dioxide (TiO2) facility after it was forced to reduce them due to water shortages in the area. PRICING LatAm PE domestic prices lower in Argentina on weak demand Domestic polyethylene (PE) prices were assessed as lower in Argentina while being unchanged in other Latin American countries.

HOUSTON (ICIS)–Australian BCI Minerals announced it has signed a 21-year transhipment services agreement with CSL Australia for its Mardie salt and potash project in Western Australia. The producer said undertaking transhipment operations at Mardie provides a cost-effective alternative to a deep-water port as it eliminates the need for towage and pilots and is expected to perform well in the local weather conditions. As planned, the transhipper will travel 12-15 nautical miles from a jetty loadout facility to fill ocean-going vessels with a deadweight of up to 207,000 tonnes, which BCI said gives a significant strategic advantage over regional competitors, which cannot load vessels of this size. This agreement, valued at Australian dollars (A$) 598 million ($398.7 million) will be delivered in two phases, with the first portion done under a 12-month time charter agreement using an existing transhipment vessel. At the same time, CSL will construct a new vessel to use at Mardie, which is targeting output of 5 million tonnes/year of salt and 140,000 tonnes/year of sulphate of potash (SOP). It is anticipated this new transhipment vessel will be constructed in approximately 36 months. BCI said phase two will begin upon commissioning of their vessel and completion of a 20-year services agreement which will contain two five-year extension options. “BCI Minerals is very pleased to sign this major contract with CSL for a vessel specifically designed for the Mardie salt and potash project, which will provide us with a secure and cost-effective shipping solution providing real benefits to our operations and our customers,” said David Boshoff, BCI Minerals managing director. “CSL’s market leading reputation for delivering transhipment solutions and their commitment to safety and reliability make them an ideal long-term partner for BCI Minerals.” $1 = A$1.50

RIO DE JANEIRO (ICIS)–US manufacturing activity remained in contraction territory in June but output in the chemicals sector was healthy on the back of healthy new orders, the Institute of Supply Management’s (ISM’s) purchasing managers’ index (PMI) survey showed on Monday. The PMI stood at 48.5% in June, down from 48.7 points in May. The contraction in June was the third consecutive monthly one, and the 19th in the last 20 months. Chemicals, however, posted healthy activity with one chemicals player reporting in the ISM survey “high volumes of customer orders”. In plastics and rubber, a respondent described increased orders on the back of seasonal restocking, but the sector overall remained in contraction territory. “Demand was weak again, output declined and inputs stayed accommodative. Demand slowing was reflected by the New Orders Index improving to marginal contraction, New Export Orders Index returning to contraction, Backlog of Orders Index dropping into stronger contraction territory and Customers’ Inventories Index moving into the low side of the ‘just right’ range, neutral for future production,” said Timothy R Fiore, chair of the ISM’s committee compiling the PMI index. “Output (measured by the Production and Employment indexes) declined compared to May, with a combined 3.5-percentage point downward impact on the Manufacturing PMI calculation. Panelists’ companies reduced production levels month over month as head count reductions continued in June.” According to ISM, eight manufacturing industries reported growth in June: printing and related support activities; petroleum and coal products; primary metals; furniture and related products; paper products; chemical products; miscellaneous manufacturing; and nonmetallic mineral products. Nine industries reported contraction: textile mills; machinery; fabricated metal products; wood products; transportation equipment; plastics and rubber products; food, beverage and tobacco products; electrical equipment, appliances and components; and computer and electronic Products. ICIS VIEWKevin Swift, economist at ICIS, highlighted how both new orders and order backlogs fell compared with May. “The reading came below expectations of improvement. The expansionary reading in March ended 16 months of contraction in manufacturing but since then, the trend has been soft. June marks a third contractionary reading and was disappointing… The chemical industry gained for the sixth month after 16 months of decline.” “New orders and order backlogs, when combined with the reading on inventories, are good indicators of future activity. Inventories contracted at faster pace as well. An uptick in orders could translate into higher production.” Earlier on Monday, analysts at S&P Global said manufacturing in Brazil – the Americas’ second largest economy – had recovered slightly from floods-hit May, although some economic challenges such as the depreciation of the Brazilian real were putting a cap on growth prospects, they added. US MANUFACTURING June 2024 Index Series Index Jun Series Index May Percentage Point Change Direction Rate of Change Trend* (Months) Manufacturing PMI 48.5 48.7 -0.2 Contracting Faster 3 New Orders 49.3 45.4 +3.9 Contracting Slower 3 Production 48.5 50.2 -1.7 Contracting From Growing 1 Employment 49.3 51.1 -1.8 Contracting From Growing 1 Supplier Deliveries 49.8 48.9 +0.9 Faster Slower 4 Inventories 45.4 47.9 -2.5 Contracting Faster 17 Customers’ Inventories 47.4 48.3 -0.9 Too Low Faster 7 Prices 52.1 57.0 -4.9 Increasing Slower 6 Backlog of Orders 41.7 42.4 -0.7 Contracting Faster 21 New Export Orders 48.8 50.6 -1.8 Contracting From Growing 1 Imports 48.5 51.1 -2.6 Contracting From Growing 1 Thumbnail shows an automobile manufacturing line. Image by Anna Szilagyi/EPA-EFE/Shutterstock)

RIO DE JANEIRO (ICIS)–Sales growth in Brazil’s manufacturing is being dented by challenging economic conditions, currency depreciation and order postponements after the floods crisis, analysts at S&P Global said on Monday. S&P Global’s manufacturing PMI Index for Brazil recovered nearly half a percentage point at 52.5 points, remaining in expansion territory. Any reading above 50.0 points shows expansion. Brazil manufacturing June May April March February January December 2023 November October September August July PMI index 52.5 52.1 55.9 53.6 54.1 52.8 48.4 49.4 48.6 49.0 50.1 47.8 Source: S&P Global REAL DEPRECIATION The Brazilian real has been weakening for weeks, and it was already mentioned by the PMI survey respondents as one key challenge they faced in June, via higher prices for imports. Crop losses resulting from the floods in the southernmost state of Rio Grande do Sul added to the issues. As a result, inflation rates for both input costs and output charges reached 23-month highs. “A sharper deterioration in suppliers’ delivery times, which is inverted before entering the PMI calculation, also boosted the headline figure. The latest improvement in the health of the sector was solid by historic standards,” said S&P Global. “Underlying data showed that backlog clearing supported output growth in June, with some firms also noting better demand for certain goods. The rise in production was moderate, but this represented an improvement from the flood-related stagnation seen in May.” Manufacturers also faced rising cost pressures driven by real weakness and crop losses, with prices for several items including coffee, cotton, dairy, fabrics, oil, pulp, rice, steel, wheat and zinc higher. The overall inflation rate reached its highest in nearly two years. Factory gate charges similarly rose to the greatest extent since mid-2022, as firms passed additional costs onto their clients. Employment in the manufacturing sector continued to rise in June, attributed to investment in technology departments, new plant openings and efforts to increase production capacities. Despite the challenges, investment in additional equipment, new product releases and forecasts of better sales fueled business optimism in June. “The PMI survey showed that cost inflation, which ran at the highest since mid-2022, curbed growth of sales and production in June. Companies sought to protect margins by lifting selling prices to a substantial extent and tried to keep a lid on expenses by restricting input purchases and job creation,” said Pollyanna De Lima, economics associate director at S&P Global. “Although exchange rate depreciation could have bolstered exports, the increase in prices seems to have eroded international competitiveness. External orders still rose, but only marginally.”