ICIS Chemical Foresight

HOUSTON (ICIS)–SI Group completed another debt exchange, which led Fitch Ratings to determine that the company defaulted again, the ratings agency said on Wednesday. Fitch considered SI Group's offering a distressed debt exchange and found that the company was once more in restricted default. Fitch has since rated SI Group CCC, which is four notches above default. During the first half of 2024, SI Group saw declines in sales and earnings before interest, tax, depreciation and amortization (EBITDA), Fitch said. The declines were caused by weak demand, destocking in 2023 and increased competition from new plants in China. Sales volumes should remain low and free cash flow should remain negative throughout Fitch's forecast horizon. SI Group could face a liquidity crisis, and it may need fresh third-party support within the next 24 months, Fitch said. SI Group makes specialty chemicals used in coatings, adhesives, sealants and elastomers (CASE) as well as in lubricants, fuels, surfactants and polymers. Other chemical companies are also coming under increased stress from low-cost imports. INEOS Styrolution plans to shut down a plant in Addyston, Ohio state, US, that makes acrylonitrile butadiene styrene (ABS) and styrene acrylonitrile (SAN). Decommissioning will start in the second quarter of 2025. INEOS Styrolution is also permanently shutting down a styrene plant in Sarnia, Ontario province, Canada. That plant was idled earlier this year after complaints about benzene emissions, which led to a dispute with regulators. In addition, China, once a key outlet for North American styrene, has added significant styrene capacity over the past three years. Additional reporting by John Donnelly

30-Oct-2024

LONDON (ICIS)—The UK government will support the use of mass balance for chemical recycling under the UK plastic packaging tax using a fuel-exempt accounting approach at site-level, it published in a consultation response late on Wednesday. The original consultation on “Plastic Packaging Tax – chemical recycling and adoption of a mass balance approach” was conducted from 18 July-10 October 2023. “Chemical recycling can complement the use of mechanical recycling technologies by enabling more types of plastic to be recycled and by producing a higher grade of recycled plastic, which can be used in regulated sectors such as food contact packaging. Chemical recycling therefore has the potential to help increase rates of plastic recycling,” the UK government said in its consultation response. As part of the consultation response, the government also announced that it will phase out the use of pre-consumer material as contributing towards recycled content thresholds in tax calculations. Under the UK Plastic Packaging tax, any packaging which is predominantly plastic by weight, and that does not contain at least 30% recycled material is subject to a charge of £217.85/tonne on the total weight of the packaging. When the tax was introduced, both chemical and mechanical recycling were accepted as contributing toward the target, but there was no decision on the acceptance of mass balance. In mass-balance, a certified volume of renewable or recycled material is input across a production run but may not be evenly distributed across each individual product. For example, a plant may use 30% recycled material overall, but one piece of produced packaging could contain 100% recycled material, and the next 100% virgin material, or any mix between those two extremes. Via this method, market players are able to state that they use a certain percentage of recycled or renewable material in their products, without having to prove that percentage in each individual product produced. Mass-balance is widely used in a number of industries and is not exclusive to either mechanical or chemical recycling. There have been different proposed accounting rules for mass-balance, all of which alter the possible recycled polymer output allocations, and therefore profitability throughout the chain, pyrolysis oil’s competitive position against mechanical recycling, and the sector’s attractiveness to investors. Under fuel exempt mass balance accounting rules, volumes used in fuel applications would not be attributable as recycled material, but material not ending up in fuels would be freely attributable across the value chain. Given that pyrolysis oil  – the dominant form of chemical recycling in Europe – is used as a naphtha substitute in a cracker, many see acceptance of mass-balance as an essential enabler for chemical recycling to count towards recycling content thresholds. The UK government will not adopt definitions of chemical recycling under ISO standard 15270:2008, arguing that definitions of chemical recycling must be process and technology neutral. “The government intends to introduce a definition of chemical recycling in line with the proposed definition by the European Coalition for Chemical Recycling, for the purpose of the tax. This will enable businesses to use a mass balance approach to account for recycled material produced from any technology or process that meets the definition of chemical recycling,” the government stated. The government also said that differing units of measurement may be used at different parts of the supply chain. For example, mass being used at polymer and packaging level, and a Lower Heating Value approach used at refinery level. The government further stated that accredited certification schemes will be necessary to audit and certify the mass balance volumes, and it intends to accredit multiple certification schemes. The government also signaled that while it is not currently making changes to medical exemptions under the tax at present it intends to remove this exemption once more chemically recycled plastic is available. “Producers and importers of medical packaging are encouraged to start considering how to include more recycled plastic in their packaging as chemical recycling capacity, feedstock levels, recyclate availability increase, and advancements in technology are developed,” it stated. There was no timeframe announced for when these changes would take place. Clarity on the UKs approach to mass balance will be welcomed by the market. Despite structural tightness of pyrolysis oil in Europe, buying interest in 2024 to date has been lower than that seen in 2023 largely due to ongoing legal uncertainty over approaches to mass balance accounting.  Legal uncertainty was one of the factors cited by Quantafuel in August for the cancellation of its 100,000 tonne/year pyrolysis-based chemical recycling project in Sunderland. On 16 July the British Plastics Federation (BPF) submitted a joint letter it had coordinated to the incoming Exchequer Secretary James Murray MP, calling for an urgent response to the previous government’s mass balance consultation. ICIS covers 3 grades of pyrolysis oil in its Mixed Plastic Waste and Pyrolysis Oil Europe pricing service . ICIS also offers mechanical recycling, waste bale, biodiesel, hydrogen, and virgin price coverage, giving you the complete picture across the sustainability value chain. For more information, please contact Mark Victory at mark.victory@icis.com.

30-Oct-2024

SINGAPORE (ICIS)–Sumitomo Chemical trimmed its fiscal H1 to September 2024 net loss to Japanese yen (Y) 6.5 billion ($42 million), aided by sales growth of about 5%, while it seeks to rationalize operations to boost profitability. Return to profit expected for year-to-March 2025 IT-related chemicals' fiscal H1 core operating profit more than doubles Chiba Works LDPE output to fall by 20,000 tonne/year in billion yen (Y) Apr-Sept 2024 Apr-Sept 2023 % change Yr-to-March 2025 (revised forecast) Yr-to-March 2024 (actual) Sales revenue     1,241.4     1,186.9             4.6 2,600.0 2,446.9 Core operating profit           29.5        -96.7 – 100.0 -149.0 Operating income         121.2      -133.7 – 180.0 -488.8 Net income           -6.5         -76.3 – -25.0 -311.8 Revenues for the period increased on higher selling prices of synthetic resins,  methyl methacrylate (MMA) and various industrial chemicals due to higher raw material prices, the company said in a statement. Sumitomo Chemical's Essential Chemicals & Plastics segment posted a lower core operating loss of Y36.7 billion, with sales up by 3.3% year on year to Y403 billion, it said. However, it noted that earnings were weighed down by a deterioration in the financial performance of its 37.5%-owned affiliate Saudi Arabia's Rabigh Refining and Petrochemical Co. Meanwhile, IT-related chemicals posted a 10% increase in sales to Y224.3 billion, with core operating income more than doubling to Y37.5 billion, on the back of strong demand for display-related materials and processing materials for semiconductors, it said. For the whole of fiscal year ending March 2025, Sumitomo Chemical lowered its sales forecast by Y70 billion to Y2.6 trillion, but raised its net profit forecast by Y5 billion to Y25 billion. The forecast marks a return to profitability for Sumitomo Chemicals, which incurred a Y312 billion net loss in the previous fiscal year. LDPE OUTPUT CUT BY END-MARCH 2025In a separate statement on 29 October, the company announced plans to reduce its low density polyethylene (LDPE) production at Chiba Works by 20,000 tonnes/year, citing declining domestic demand. Operations at a portion of the company’s LDPE facilities at the site will be suspended by March 2025 – the end of its current fiscal year. Sumitomo Chemical has an LDPE plant in Chiba prefecture with a 172,000 tonne/year capacity, according to ICIS Supply and Demand Database. “The company expects this measure, combined with the various rationalization efforts that it has implemented thus far, to lead to improving the overall operating rate of the remaining facilities,” Sumitomo Chemical said. Japan’s LDPE demand “is not anticipated to have significant future growth”, it said, citing a declining population and an ageing society with a low birth rate. Sumitomo Chemical said that it is “accelerating business restructuring as part of its short-term intensive performance improvement measures”. Other measures include improving the company’s product portfolio “to cater to high value-added areas”, as well as working on fixed cost reduction at its remaining facilities, including a joint study with Maruzen Petrochemical to optimize operations of their joint venture Keiyo Ethylene. The Japanese producer said that it “will steadily advance these measures to ensure a V-shaped recovery in fiscal 2024, while also carrying out fundamental structural reforms”. Focus article by Pearl Bantillo ($1 = Y153.3) (adds paragraphs 8-15 with recasts throughout)

30-Oct-2024

SINGAPORE (ICIS)–Sumitomo Chemical trimmed its fiscal first-half net loss to Japanese yen (Y) 6.5 billion, aided by about a 5% growth in sales, the Japan-based producer said on Wednesday. in billion yen (Y) Apr-Sept 2024 Apr-Sept 2023 % change Yr-to-March 2025 (revised forecast) Yr-to-March 2024 (actual) Sales revenue     1,241.4     1,186.9             4.6 2,600.0 2,446.9 Core operating profit           29.5        -96.7 – 100.0 -149.0 Operating income         121.2      -133.7 – 180.0 -488.8 Net income           -6.5         -76.3 – -25.0 -311.8 Revenues for the period increased on higher selling prices of synthetic resins, methyl methacrylate (MMA) and various industrial chemicals increased due to higher raw material prices, the company said in a statement. Its essential chemicals & plastics segment posted a lower core operating loss of Y36.7 billion, with sales up by 3.3% year on year to Y403 billion, it said. However, it noted that earnings were weighed down by a deterioration of financial performance by its 37.5%-owned affiliate Saudi Arabia's Rabigh Refining and Petrochemical Co. Meanwhile, IT-related chemicals posted a 10% increase in sales to Y224.3 billion, with core operating income more than doubling to Y37.5 billion, on the back of strong demand for display-related materials and processing materials for semiconductors, it said. For the whole of fiscal year ending March 2025, Sumitomo Chemical lowered its sales forecast by Y70 billion to Y2.6 trillion, but raised its net profit forecast by Y5 billion to Y25 billion. The forecasts mark a return to profitability for Sumitomo Chemicals, which had incurred a Y312 billion net loss in the previous fiscal year. ($1 = Y153.3)

30-Oct-2024

SINGAPORE (ICIS)–China has extended its antidumping duties (ADD) on imports of ethanolamines from four countries, for another five years from 30 October. The extension was necessary to prevent potential dumping activities from damaging the country's domestic industries, China's Ministry of Commerce said on 29 October 2024. China's ADDs on ethanolamines from the US, Saudi Arabia, Malaysia and Thailand first came into effect on 29 October 2018. The ADD quantum remains unchanged as below: Country Company ADD rates US The Dow Chemical Company 76.0% US INEOS Americas LLC 97.1% US Huntsman Petrochemical LLC 97.1% US All Others 97.1% Saudi Arabia Saudi Basic Industries Corporation 10.1% Saudi Arabia All Others 27.9% Malaysia PETRONAS CHEMICAL DERIVATIVES SDN BHD/ PETRONAS CHEMICALS MARKETING(LABUAN) LTD 18.3% Malaysia All Others 20.3% Thailand TOC GLYCOL COMPANY LIMITED 37.6% Thailand All Others 37.6% In late October 2023, when the ADD period was due to expire, the ministry announced that it would conduct a year-long review following requests by Chinese participants. (adds table, with recasts throughout) Thumbnail image: At a container terminal at Nantong port in Jiangsu province in east China on 19 October 2024.(Xinhua/Shutterstock)

30-Oct-2024

Industry figures have warned of the vast challenge facing the transmission grid as the UK seeks to deploy more renewable generation The UK has an ambitious target to decarbonize the power system by 2030 LDES could be a solution to overcome grid bottlenecks and reduce curtailment costs LONDON (ICIS) – As the UK awaits the delivery of the Labour government’s first budget on 30 October, industry figures have warned of the scale of the challenge facing the transmission grid as it seeks to integrate rising volumes of intermittent renewables. National Grid CEO John Pettigrew told the Financial Times Energy Transition Summit in London on 24 October that the UK faced a “Herculean effort” to transform the grid, requiring changes to planning rules, regulatory frameworks, supply chains and skills training. GRID CONNECTIONS National Grid proposed applying a ‘first ready, first connected’ approach to all projects in the grid connection queue in April, which would enable earlier connection dates for viable projects. Pettigrew confirmed that this process would be implemented by the end of the first quarter of 2025 and that National Grid would prioritize technologies needed to meet the UK’s 2030 targets. These targets aim to double onshore wind, triple solar, and quadruple offshore wind capacity to decarbonize the power system by 2030. With up to 1GW/day awaiting connection at points in 2023, according to Pettigrew, streamlining the queue is a positive step, but grid constraints present another key issue. CURTAILMENT COSTS Many wind farms in the UK are located far from demand centers, and the electricity generated needs to be transported around the network. However, grid bottlenecks and a lack of storage solutions can force capacity curtailments when there is excess generation. Carolina Tortora, head of innovation, AI transformation and sector digitalization at National Energy System Operator (NESO), told delegates that capacity curtailments in the UK cost £1.4bn a year and that a solution is needed quickly. Two new 2GW-capacity interconnectors between Scotland and England, the Eastern Green Link 1 and 2, are not set to be operational until 2029. Tortora said that long duration electricity storage (LDES) could help manage the situation and reduce curtailment costs, pointing to Italian grid operator Terna’s success at using batteries to help manage congestion. LONG DURATION ELECTRICITY STORAGE LDES technologies store renewable energy and release it onto the grid when required, providing flexibility in the system often met by gas generation. The UK government launched a cap and floor investment scheme for LDES on 10 October, which could help developers overcome high upfront project costs for storage systems with a duration of 4 hours or above. Rubina Singh, senior investment manager at Foresight Ventures, told the summit that the mechanism reduced risk for revenue generation and debt security, but more still needed to be done. Laura Sandys, chair of the Green Alliance think tank suggested a move to blended incentives such as coupling a contracts for difference (CfD) agreement with LDES, to spur development of a wind farm and co-located battery. NESO estimates that 11.5GW-15.3GW of LDES will be required by 2050 to achieve net zero. However, pumped hydro storage is the only established LDES in the UK, with 2.8GW of capacity across four existing projects. Other technologies under development include compressed air storage, liquid air storage and flow batteries. Tortora told the event that caverns from extracted oil and gas could be used for compressed air, a technology that also contributes to inertia. Inertia is produced by the rotation of large generators, making it abundant in the power system underpinned by fossil fuels. This movement can temporarily cover a gap in power lost by a failing generator and allow the operator to respond. Inverter-based renewables, such as wind and solar, do not synchronize with the grid in a way that provides inertia, making compressed air a potential method to provide stability.

29-Oct-2024

SINGAPORE (ICIS)–China’s major isocyanate producer Wanhua Chemical reported a 29% year-on-year decrease in Q3 profit as falling prices of some products and rising cost eroded margins, the company said on Tuesday. Turnarounds at its production units at Yantai in China, and in Hungary also dragged down earnings for the period. million CNY Q3 2024 Q3 2023 % change Jan-Sept 2024 Jan-Sept 2023 % change Revenue 50,536.79 44,927.77 12.5% 147,604.15 132,554.14 11.4% Operating profit 3,985.81 5,316.14 -25.0% 14,556.54 15,592.67 -6.6% Net Profit 2,918.95 4,134.95 -29.4% 11,093.32 12,703.18 -12. 7% Key points: – Q3 demand for pure methylene diphenyl diisocyanate (MDI) sluggish amid high inventory and fierce competition – For polymetric MDI, demand from the fridge sector as well as from the construction sector increased, while exports were stable in July-September 2024. – For toluene diisocyanate (TDI), demand was weak amid mounting inventories in downstream home furnishing industry. – Demand of polyols also slumped by poor needs from home furnishing and car sectors. – On cost side, Q3 prices of benzene and liquefied petroleum gas (LPG) – two of Wanhua Chemica’s key raw materials – increased by 13%-25% on year, although coal prices dropped by about 2%.

29-Oct-2024

HOUSTON (ICIS)–Union dock workers and US East Coast port operators will resume negotiations on a new master agreement in November, according to a joint statement from both parties. The International Longshoremen’s Association (ILA), representing the dock workers, and the United States Maritime Alliance (USMX), which represents the ports, reached a tentative agreement on 3 October that ended a three-day strike. The strike was paused until 15 January after parties agreed on the salary portion of the agreement, essentially meeting in the middle. But the union remains adamant against any full or partial automation at ports that could threaten union jobs. The respective negotiating committees will meet in New Jersey, where they will look to agree on terms for a new contract that can be presented to the full ILA Wage Scale Committee for approval, and later, to ILA membership for ratification, the statement said. “The ILA and USMX welcome the opportunity to return to the bargaining table and get a new agreement in place as soon as possible,” the parties said. The two sides will not discuss details of negotiations with the media prior to these meetings. IMPACTS TO CHEM MARKETS The short strike had some impact on the US chemicals industry, with polyethylene (PE) exports to Brazil being put on hold in the lead up to the work stoppage. The polyvinyl chloride (PVC) industry was concerned as all US Gulf PVC exports move out of one of the impacted East Coast ports. In the polyethylene terephthalate (PET) market, imports of PET resins were diverted to the US West Coast in anticipation of the work stoppage. The dock workers do not handle liquid chemical tankers, as 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 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. Visit the ICIS Logistics – impact on chemicals and energy topic page Thumbnail image shows a container ship. Photo by Shutterstock

28-Oct-2024

LONDON (ICIS)–Click here to see the latest blog post on Chemicals & The Economy by Paul Hodges, which highlights how NVIDIA is effectively carrying US stock markets. 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.

28-Oct-2024

LONDON (ICIS)–Here are some of the top stories from ICIS Europe for the week ended 25 October. Sentiment in Europe jet fuel market dented by crude instability and soaring stocks Bearing the brunt of low demand and a supply overhang, sentiment in the European jet kerosene spot market has been further dulled by upstream Brent crude fluctuations and soaring regional stock levels hitting their highest since August 2021. Eni to close Versalis crackers, PE plant as it pivots to low carbon, specialty production with €2 billion investment Italy’s Eni plans to close its Versalis crackers at Brindisi and Priolo, plus a polyethylene (PE) site at Ragusa as it refocuses on low carbon and specialty chemical production through a €2 billion investment over the next five years. Dow to review Europe polyurethanes amid ‘increasing challenges’ of regulation Dow is set to review the competitiveness of several assets in Europe, particularly around its polyurethanes operations, amid “increasing challenges” presented by the region’s regulatory environment, CEO Jim Fitterling said in a Q3 results statement. Europe ECH prices dip for first time since January as raw material costs ease Europe epichlorohydrin (ECH) freely negotiated contract prices have softened in October for the first time since January 2024 as propylene feedstocks costs ease in a muted and well supplied ECH market. INSIGHT: ‘Bridge’ countries bring new opportunities as global trade flows fragment – Bertschi Changing trade flows driven by increasing friction between China, the US and their allies mean there will be demand for new chemical logistics routes and infrastructure, according to the executive chairman of chemical logistics group Bertschi. Europe PE/PP October contracts down on monomer and stagnant demand European polyethylene (PE) and polypropylene (PP) contracts have been agreed down slightly beyond the monomer drop for October.

28-Oct-2024