ICIS Chemical Foresight

HOUSTON (ICIS)–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. The agreements cover about 30% of the unionized NS workforce and about 15% of BNSF union workers. The agreements are still subject to ratification by union membership. BNSF and NS reached agreements with the International Brotherhood of Boilermakers and Blacksmiths (IBBB) and the National Conference of Firemen and Oilers (NCFO). NS also separately reached tentative agreements with the American Train Dispatchers Association (ATDA), the Brotherhood of Maintenance of Way Employes Division (BMWED) and the International Association of Sheet Metal, Air, Rail and Transportation Workers – Transportation Division Yardmasters (SMART-TD Yardmasters). The tentative agreements provide a 3.5% average wage hike annually over the next five years and offer railroaders more vacation earlier in their career and make meaningful enhancements to an already robust suite of health care benefits. Over the past two weeks, NS has reached tentative agreements with nine of its 13 unions. BNSF reached tentative agreements with four other unions last week – the ATDA, the Brotherhood of Railway Carmen Division/TCU (BRC), International Association of Sheet Metal, Air, Rail and Transportation Workers – Mechanical Department (SMART-MD) and the Transportation Communications Union/IAM (TCU). Railroad CSX last week announced agreements with TCU, BRC, SMART-TD, BMWED, the International Association of Machinists & Aerospace Workers (IAM), the American Railway and Airway Supervisors Association (ARASA) and the B&O Joint Council (BOJC). CSX has now reached a total of 12 separate tentative agreements, covering more than 50% of its union employees. The progress on labor negotiations should offer some relief to chemicals markets in the US considering the recent four-day shutdown in Canada because of labor strife. Freight rail service at railroads Canadian National (CN) and Canadian Pacific Kansas City (CPKC) resumed on 26 August following an order by a labor tribunal that ended a complete shutdown that started on 22 August. Canada-based chemical producers rely on rail to ship more than 70% of their products, with some exclusively using rail. About 80% of Canada's chemical production goes into export, with about 80% of those exports going to the US. Railroads are vital to the chemicals industry as chemical railcar loadings represent about 20% of chemical transportation by tonnage in the US, with trucks, barges and pipelines carrying the rest. With additional reporting by Stefan Baumgarten Thumbnail shows railway tank cars. Image by Sergei Ilnitsky/EPA-EFE/Shutterstock

30-Aug-2024

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. Chemical companies, as my ICIS colleague Kevin Swift and I write in today’s blog, need “to write their own story”. This can only come from a much more rigorous approach to scenario planning from the C-Suite level down that needs to then permeate to every decision at every level of an organisation, from long-term investment planning right down to even month-by-month pricing and production- volume decisions. And key to building proper scenarios, now that the Chemicals Supercycle, is understanding demographics as demographics are chemicals demand destiny. Chemicals demand is of course the number of people multiplied by per capita consumption. Because of the increasing uncertainty about the rate at which most of the world’s population is going to age and shrink, one set of scenarios on future population levels makes no sense at all. Front and centre of the global demographics crisis is China given that in 2024, ICIS expects China to drive 40% of the world’s polymers demand from just 18% of the global population. There is a huge variance in estimates of China’s population decline that you simply must factor in. For example, China’s population may decline to 767 million by 2100 or just 373 million! Kevin’s scenario modelling on China’s demographics and its polymers demand is an important starting point for your boardroom discussions: Under the ICIS Base Case, major resins demand rises from 103.1 million tonnes in 2020 and starts to mature in the 2030s, reaching 188.6 million tonnes in 2050. After 2050, a falling population and evolving market/economic dynamics adversely affect demand, which falls to 89.3 million tonnes in 2100. This is a level consistent with pre-2020 demand. With a more pessimistic outlook on population and reduced economic dynamism under the Dire Demographics scenario, major resins demand rises from 103.1 million tonnes in 2020 and starts to mature in the 2030s, reaching 116.2 million tonnes in 2050. With a falling population and adverse economic dynamics, demand falls to 38.7 million tonnes in 2100, a level consistent with pre-2010 demand. Equally important is consideration of what these demand outcomes could mean for China’s polymers trade flows: The Base Case suggests China remains a net importer of major resins, but its net import position falls from 27.4 million tonnes in 2020 to 4.7 million tonnes in 2050. We only focus on the period to 2050. Under the Dire Demographics scenario, production is more than sufficient and by early-2030s China attains self-sufficiency in these resins and emerges as a net exporter of 3.6 million tonnes in 2035, 7.1 million tonnes in 2040, 9.7 million tonnes in 2045 and 11.6 million tonnes in 2050. Please write your own story by conducting the right kind of planning for a far more nuanced and uncertain chemicals world. 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.

30-Aug-2024

SINGAPORE (ICIS)–Saudi Arabian producer Methanol Chemicals Co's (Chemanol) specialty chemicals subsidiary Madarat Al-Dhara Chemicals Co has signed an agreement to secure a long-term supply of ethylene oxide (EO) from Sadara Chemical Company. The EO supply is intended for Madarat Al-Dhara's methyl diethanolamine (MDEA) and choline chloride projects, Chemanol said in a filing to the Saudi bourse, Tadawul, on 29 August. Details on cost and volume of the EO supply deal were not disclosed. "Chemanol aims to become one of the largest producers of specialty petrochemicals in the region given that all targeted products would be the first of their kind in the region," the company said. Financial and capacity details of the MDEA and chlorine chloride projects were not disclosed. "Such products would be used in many vital and strategic industries such as oil and gas Industry, nutrition additives industry, extraction of environmental harmful gases, carbon capture and storage technologies and others." MDEA is crucial for gas purification, while choline chloride plays roles in animal nutrition, chemical processes, and industrial applications. In May, Chemanol completed its Saudi riyal (SR) 80 million ($21 million) acquisition of an 80% stake in Global Company for Chemical Industries (GCI), a specialty and fine chemicals manufacturer. The company is aiming to expand its specialty chemicals market share and diversify its product offerings.

30-Aug-2024

SAO PAULO (ICIS)–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. Earlier this week, the Argentinian cabinet said it would cut the so-called PAIS tax from 17.5% to 7.5% from 2 September. Introduced in 2012, the PAIS acronym responds to the name Tax for an Inclusive and Solidary Argentina (Impuesto Para una Argentina Inclusiva y Solidaria) and was presented by the at the time left-leaning administration as a tax on purchases of foreign currency. In practice, given that most imports are priced in dollars, the tax ended being practically an import tariff and contributed to Argentina becoming one of the most closed economies to trade in the world. President Javier Milei, in office since December 2023, has promised to turn the system upside down and make the Argentinian economy a bastion of liberalism. The cabinet’s intention is to end import tariffs altogether. The minister for the economy, Luis Caputo, has been quoted in the Argentinian press as saying the country should be “moving forward in the elimination of all export duties, a perverse tax that we do not like and hinders” Argentina’s economic progress. PETROCHEMICALS MUST WAITThis week, sources in Argentina, who have been reporting higher prices for several materials compared to the rest of the world for months, were sceptical of any quick effect from the cut to the PAIS tax. Some estimated, however, that the lower rates could slash petrochemicals import prices, on average, by $200/tonne. Most sources also mentioned the example of Dow, which is the sole polyethylene (PE) producer in Argentina and has greatly benefited from the closed economy up to now. Petrochemicals and the wider industrial sectors, including construction, remain the hardest hit industries amid the country’s recession, which is trying to digest the ‘shock therapy’ being implemented by the government. Consumers are squeezed and few can afford the luxury of even thinking about purchasing the higher-priced, petrochemicals-intensive durable goods, which are the ones which could revive the beleaguered chemicals industry. Moreover, those with stocks of materials purchased in imports under the previous PAIS rates are unlikely to lower their prices until they sell them – that period could be a few weeks or a few months. “Plastic sales remain weak because people think prices will go down with the tax reduction. But I am not convinced the reduction will be immediate and all at once. Prices could only come down once the new imports under the new regime come into force,” said one source at a large distributor. “It will be slow process, over one or two months – we will have to see how petrochemicals producers react and whether they start lowering prices straight away or do it in phases.” This source and others said Dow announced to its customers in Latin America prices increases of around $100/tonne for most materials, although that increase was not applied in Argentina, said the distribution source. Dow is Argentina’s sole producer of polyethylene. It operates facilities at the Bahia Blanca petrochemicals hub, south of Buenos Aires. According to ICIS Supply & Demand, it has the capacity to produce 730,000 tonnes/year of ethylene, 307,000 tonnes/year of high density polyethylene (HDPE), 329,000 tonnes/year of linear low density polyethylene (LLDPE), and 40,000 tonnes/year propylene. As the sole PE producer in a country locked up to external trade, Dow has greatly benefited in the past two months. Sources reported earlier in the year the company was selling PE at $2,400/tonne, when global prices stood at around $1,200/tonne. The price increase announced earlier in the year added more doubts to the company pricing strategy. Dow had not responded to a request for comment at the time of writing. The source at the large distributor added, “Dow’s $100/tonne increase was not implemented it in Argentina as prices remain higher than global prices. “If the reduction in the PAIS tax brings a reduction of $200/tonne, for example, perhaps Dow first decides to raise prices by $100/tonne and then take the $200/tonne hit and see what the market’s reaction is. Right now, we do not know how it will play out.” STAYING PUTAnother source at a petrochemicals distributor, with decades of experience behind him, described the largest recession it has seen in its career. In such an environment, he went on to say, prices should go down to prop up demand, at least, according to economy theory. But Argentina, it added, has escaped economy theory often in past decades so nothing can be taken for granted. The source even added that it was mulling whether to attend an industry event next week in Buenos Aires, just in case a business opportunity is lost while it attends the conference. On 4 September, the Latin American Petrochemical and Chemical Association (APLA) is holding its annual conference on sustainability, which together with its logistics event and the annual event are the three highlights in the Latin American petrochemicals markets. “There is a strong, very strong recession, and we have to be very attentive to each business that emerges in order to be on the edge of not losing the opportunity or do a bad sale,” said the source. Font page picture source: Shutterstock Focus article by Jonathan Lopez

29-Aug-2024

LONDON (ICIS)–A "worrying" future lies ahead for the UK chemicals industry because there is no concrete roadmap in place to eliminate fossil fuels, the think tank Green Alliance said on Thursday. Researchers at the organization warned that up to 140,000 jobs in the industry are at risk in the long term if policymakers fail to plan for its decarbonization. The figure is far greater than the 33,700 workers currently employed by the steel industry,  the most recent subject of talk about job losses and decarbonization. The UK chemicals industry accounts for 19% of the UK's industrial emissions and is heavily dependent on fossil fuels for energy and feedstocks. It will also, however, play an important role in providing vital components for net-zero technologies, including batteries and wind turbines, the Green Alliance noted. Despite the chemical industry's strategic value, government support has been minimal so far because of its focus on carbon capture and storage (CCS) and hydrogen fuel. As a result, more important areas such as electrification and the substitution of fossil fuel feedstocks are in danger of being left behind, Green Alliance said. It pointed out that a new industrial strategy will provide an opportunity to secure the future of the industry and safeguard the resilience of the UK economy. “The government needs to develop a coherent vision for what a successful green chemical industry looks like," said Liam Hardy, senior policy analyst at Green Alliance.

29-Aug-2024

LONDON (ICIS)–Germany’s chemical industry trade group, VCI, has nominated Covestro CEO Markus Steilemann for a second term as its president. Steilemann has been VCI president since September 2022, succeeding Evonik chief Christian Kullmann. He originally took on the role during what he described at the time as a “serious and challenging” period for Germany’s chemical industry, which has been struggling with energy costs. The election is scheduled for the Chemistry & Pharma Summit in Berlin on 12 September 2024. Steilemann has worked in the industry for many years, starting his career at Bayer in 1999.

28-Aug-2024

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. So, you want to just sit back and wait for global chemicals and polymer markets to correct themselves, for the Old Normal to come back? As today’s post on styrene suggests, even assuming thins do eventually return to normal, you will be on for an awful long wait: I estimate that global styrene capacity would have to shrink by an average 174,000 tonnes a year between 2024 and 2030 for operating rates to reach their historic and very healthy long-term average of 88%. The ICIS base case assumes an average 2024-2030 operating rate of 75% as capacity expands by 811,000 tonnes a year. Clearly, and this is same across many other products, the commercial decisions necessary for a turnaround on this scale would take several years. But I anyway see hanging around and waiting for a return to the Old Normal as a waste of precious time, as the global chemicals landscape will never return to the way it was during the 1992-2021 Chemicals Supercycle. The data on styrene underlines the direction of travel including, as mentioned, the scale of global overcapacity and the collapse of Northeast Asian margins since the late 2021 “Evergrande Moment”. Also note the distorting impact of China dominance of global styrene demand. In 1992, China accounted for just 2% of global demand and 22% of the global population, but by the end of this year ICIS expects China to account for 46% of global demand from just 18% of the world’s population. And crucially, China’s demand growth is shrinking as its share of global capacity increase – again just 2% in 1992 rising to a forecast 53% in 2030. The numbers are similar across many other products. It is time for chemicals companies to think long and hard about where their future competitive advantages lie in the light of the ten interconnected forces that I believe are reshaping the global landscape. 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.

28-Aug-2024

TORONTO (ICIS)–Canada’s chemical industry is relieved that freight trains are running again following a four-day shutdown, officials said on Tuesday. Freight rail service at railroads Canadian National (CN) and Canadian Pacific Kansas City (CPKC) resumed on Monday, 26 August, following an order by a labor tribunal that ended a complete shutdown that started on 22 August. A prolonged rail disruption would have had “devastating impacts on Canadians and the broader economy,” said Greg Moffatt, executive vice president of trade group Chemistry Industry Association of Canada (CIAC). Canada’s chemical industry moves more than 500 railcars of product each day, he noted. CIAC’s immediate concern was for the rail shipment of chlorine to municipalities, for the treatment of drinking water. Both railroads had stopped accepting chlorine and other hazardous materials before the 22 August shutdown. Meanwhile, other chemicals manufactured in Canada are “essential building blocks” for the agriculture, agri-food, pharmaceuticals, manufacturing, construction, automotive, mining and forestry sectors in both Canada and the US, Moffatt said. COULD TAKE WEEKS FOR SUPPLY CHAINS TO NORMALIZE John Corey, president of the Freight Management Association of Canada, said it could take four weeks or more before supply chains get back to normal. The government should have intervened much earlier to prevent the shutdown, as the parties had been negotiating new collective deals since November last year, without success, he said. Although some commentators have suggested that freight rail was an essential service and the best way to prevent future shutdowns was to nationalize the railroads, Corey said that was not a solution. North American railroads used to be government-controlled or owned in the last century, but they became inefficient “dinosaurs” and had to be deregulated, Corey said. He pointed to the 1980 Staggers Act in the US and the 1995 privatization of CN in Canada. “Nationalization is the worst possible solution” to prevent future labor-related disruptions, he said, adding, “The government does not run many things well, as we know.” He noted that Canada was facing a further threat to its supply chains because of new labor issues at its ports. Last year, a 13-day strike shut down Canada’s West Coast ports. Canada-based chemical producers rely on rail to ship more than 70% of their products, with some exclusively using rail. About 80% of Canada's chemical production goes into export, with about 80% of those exports going to the US, according to CIAC. (Map by Miguel Rodriguez Fernandez) The following table by the American Association of Railroads (AAR) shows Canadian freight rail traffic, including chemicals, for the week ended 17 August and the first 33 weeks of 2024: Thumbnail photo source: CN

27-Aug-2024

HOUSTON (ICIS)–Canada plans to impose a 100% tariff on all electric vehicles (EVs) made in China, effective on 1 October, and on top of the 6.1% tariff it already imposes on such automobiles, the government said on Monday. The tariff includes electric and certain hybrid passenger automobiles, trucks, buses and delivery vans, the government said. In addition, the government plans to impose a 25% tariff on imports of steel and aluminum products from China, effective on 15 October. The tariffs will not apply to Chinese goods in transit on the day that the duties come into force. Canada could impose more tariffs against other Chinese imports following a 30-day review, it said. Those imports could include batteries and battery parts, semiconductors, solar products and critical minerals. For other countries, Canada plans to limit which ones are eligible to participate in its Incentives for Zero-Emission Vehicles (iZEV), Incentives for Medium and Heavy Duty Zero Emission Vehicles (iMHZEV) and Zero Emission Vehicle Infrastructure Program (ZEVIP). Eligibility would be limited to products made in countries with which Canada has negotiated free trade agreements. CANADA'S EV DUTIES FOLLOW THOSE BY US AND EUEVs made in China have become the target of punitive duties by a growing number of regulators. Earlier in the month, the European Commission announced plans to impose up to 36% countervailing duties on EVs from China. US tariffs on Chinese EVs were scheduled to reach 100% on 1 August. EVs typically consume more plastics on a per unit basis than automobiles powered by internal combustion engines (ICEs). EVs also pose different material challenges, which is increasing demand for different plastics and compounds. Policies that prolong the use of ICE-based vehicles could extend the operating life of the nation's refineries. Companies could be more willing to invest in maintenance and repairs if they are confident that they could recoup their investments. Refineries produce many building block chemicals, such as propylene, benzene, toluene and mixed xylenes (MX). Thumbnail shows an EV charging station. Image by Xinhua/Shutterstock

26-Aug-2024

HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 23 August. SHIPPING: Panama Canal adds additional transit slot, raises maximum draft allowance As the water level in the freshwater lake that feeds the Panama Canal’s locks continues to rise, the Panama Canal Authority (PCA) has increased the maximum allowable draft to 50ft (15.25m), effective immediately, and will add an additional transit slot beginning 1 September. Canada needs to act on rail stoppage, now – chem group CIAC Canada’s federal government needs to exercise its authority and act quickly on the complete freight rail stoppage, set to start midnight at 00:01 Eastern Time, trade group Chemistry Industry Association of Canada (CIAC) said. Canada government reluctant to intervene as freight rail shutdown begins As the unprecedented work stoppage at both of Canada’s freight railroads began on Thursday at 00:01 Eastern Time, it remains unclear how or when it may end as the government is reluctant to intervene. LyondellBasell declares FM on rail shipments to Canada amid CPKC, CN work stoppage Global chemicals major LyondellBasell has declared force majeure on all rail shipments to Canada after that country’s two largest railroads shut down operations after negotiations for a new collective bargaining agreement stalled. Canadian freight railroads prepare to resume operations after brief shutdown Freight railroads Canadian National (CN) and Canadian Pacific Kansas City (CPKC) are preparing to restart operations after the federal government stepped in to end a labor dispute with workers – although it remains unclear on Friday when exactly a full freight rail service will resume. Canada rail dispute: Union issues fresh strike notice, despite government order for binding arbitration -Labor union Teamsters Canada Rail Conference (TCRC) on Friday issued a strike notice for Monday, 26 August, against railroad Canadian National (CN).

26-Aug-2024