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Icis Ott Nov16
Icis Ott Nov16
Chemical Business
Making sense of chemical prices
earnings
COATINGS SECTOR
LOSES ITS SHINE
Sherwin-Williams disappoints in Q3, following PPGs
shortfall. Could more weakness be ahead for the group?
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Chemical Business
volume 290 number 15 31 October-13 November 2016
Chemical Business
Making sense of cheMical prices
earnings
coatings sector
loses its shine
Sherwin-Williams disappoints in Q3, following PPGs
shortfall. Could more weakness be ahead for the group?
Alamy
Cover story
Earnings shortfalls in the
coatings sector are taking
the shine off this once
favoured group. Is more
weakness ahead?
For the full story see P9
S
ales and earnings momentum in the
once booming coatings sector is coming
to a screeching halt, taking the gloss off
of one of the most favoured groups in the
chemical industry.
Earning shortfalls and weak guidance
from US-based coatings giants Sherwin-Williams and
PPG Industries slammed their stock prices, and Wall
Street analysts moved to slash profit estimates for 2017
(see story on page 9).
So what is going on? Why is the quarter-after-quarter
string of strong profits now tapering off?
Global GDP has been in low growth mode for some
time. Yet coatings companies have consistently out-
performed for years.
Alamy
paints an intriguing picture Financial results have taken the shine off coatings sector
briefing
americas though Beaumont City Manager
Hans Blossey/imageBROKER/REX/Shutterstock
Kyle Hayes said ExxonMobil has
DOW Q3 PROFITS UP 7.6% made no final decision yet.
ON 6% HIGHER VOLUMES
Dow Chemicals underlying Q3 US DISTRIBUTOR RIBELIN
net income rose 7.6% year on SETS NEW SAFETY RECORD
year to $1.03bn on 3.7% higher US-based chemical distributor
sales of $12.48bn. Underlying Ribelin has completed 10 years
volumes gained 6% on broad- without a lost day at its Ribelin
based consumer-driven demand Distribution Centers. In those 10
across all regions, it said. Dow years, Ribelin has shipped mil-
CEO Andrew Liveris pointed out lions of pounds of product. The
the company has achieved 16 guys in the Distribution Centers
consecutive quarters of year-over- have done an amazing job at pay-
year operating earnings growth ing attention to the little things
and margin expansion in the face that make a record like this possi-
of a persistently slow-growth ble. It is a great example of our
global economic environment. commitment to the NACD RDP
and our accountability to each
LYONDELLBASELL US GULF other promotes a safe work envi-
DRAWS BIDS, DENIAL pic of the week ronment, said Andy Lovenduski,
Saudi Aramco is denying media
reports that it bid $1.5bn on a Ly-
Ludwigshafen restart confirmed Ribelins Distribution Manager.
Ribelin is part of Azelis Americas.
ondellBasell refinery in Houston, BASF on 27 October confirmed that its two steam crackers at
Texas, US. The Saudi Arabia state Ludwigshafen in Germany have resumed production after the fire and europe
oil giant issued a news release in explosion at the site on 17 October, which killed three people.
response to a wire services story BASF suffers steep falls
posted on 21 October that said Ar- in Q3 chemicals earnings
amco, US-based Valero and Cana- of. The company will keep the He added he would not comment BASFs Chemicals suffered falls in
da-based Suncor were all bidding market informed of any develop- on market rumours about which sales and earnings before interest,
on the Texas refinery. A Lyondell- ments regarding this matter, businesses may potentially be di- taxes, depreciation and amortisa-
Basell spokesperson said the com- Cosan said in a statement to the vested or what other remedies tion (EBITDA) during the third
pany is continuing to explore all Securities and Exchange Com- Dow and DuPont may provide. quarter of 7% and 10% year on
options for the refinery but would mission of Brazil. Raizen produc- year, respectively, to 3.4bn and
not comment on speculation. es approximately 2.1bn litres/ SHERWIN-WILLIAMS 776m as the segment continued
year of ethanol. The joint venture ANTICIPATES HEADWINDS suffering from less pricing power
Belgium cant yet support was launched in 2011. Despite third-quarter growth, due to lower raw materials costs,
EU-Canada trade deal US-based Sherwin-Williams an- especially in the Petrochemicals
The Prime Minister of Belgium, DOW CONDUCTS ticipates seasonal headwinds and Intermediaries subdivisions.
Charles Michel, said his country MAINTENANCE ON PIPELINE through the end of the year, the For the group, third-quarter net
could not support, at this time, the Dow Chemical is conducting paint maker said. The compa- profit declined 27% year on year
pending EU-Canada Comprehen- maintenance on a propane pipe- nys outlook for residential coat- to 888m, largely on account of
sive Economic and Trade Agree- line at its Freeport 8 cracker in ings remains positive in the ap- the divestment of its gas trading
ment (CETA) in the European Texas, according to a 24 October proaching quarters, but demand and storage business, the German
Council. CETA, which would re- filing with the Texas Commis- has diminished sequentially. company said on 27 October.
move nearly all tariffs in the EUs sion on Environmental Quality Sherwin-Williams outlook for Sales for the three months to Sep-
trade with Canada, was due to be (TCEQ). Emissions are expected residential markets remains tember fell 20% to 14.0bn, with
signed 27 October, at an EU-Cana- during the maintenance, the positive, CEO John Morikis said operating income down 22%.
da summit. Michels announce- filing said. Operations and pro- in a call with analysts.
ment came as efforts to address duction within the unit will con- BASF FORCE MAJEURE
concerns by Belgiums Wallonia tinue as normal. TEXAS CITY PLANS FOR PE REMAINS ON OXO-ALCOHOLS
region about CETA failed. PLANT EXPANSION BASFs force majeure on oxo-al-
DOW, DUPONT DEEP INTO A zoning change in Beaumont, cohols supply from its Ludwig-
COSAN, SHELL DISCUSS REMEDIES FOR APPROVALS Texas, regarding a possible Exx- shafen, Germany, site is still in
TERMS OF RAIZEN JV DuPont and Dow Chemical are onMobil polyethylene (PE) plant place, a company spokesperson
Brazil-based Cosan said it and preparing to move really quick- has gone forward, city officials confirmed on 25 October. The
Shell are discussing the terms of ly to provide remedies likely to said. Beaumont City Council ap- force majeure was declared on 20
their ethanol joint venture, Rai- be required by regulators to ap- proved a Specific Use Permit October and covers butanol
zen. Those discussions are yet to prove the proposed $130bn merg- (SUP) on 26 October to allow for (NBA) and isobutanol (IBA) sup-
be concluded as of the date here- er, DuPont CEO Ed Breen said. the expansion of the plant, ply. I can confirm that BASF SE
pacity is 200,000 tonnes/year of asia SIAMS Q3 PROFIT GROWS AS year line resumed operations on
Group I base oils. CHEM EARNINGS SURGE 74% 24 October, while another 30,000
CNOOC OIL & GAS TO START Thailand-based Siam Cement tonne/year line and a bigger line
BONANZA CAN ONLY HOLD UP AROMATICS UNIT Groups (SCG) Q3 net profit in- with a 40,000 tonne/year capaci-
WITH EU-WIDE SOLUTIONS Chinas CNOOC Oil & Gas creased by 57% year on year to ty have yet to restart.
While Spanish chemicals are (Taizhou) Petrochemical is plan- Thai baht (Bt) 14.1bn ($404m),
going through a bonanza as the ning to start up an aromatics unit supported by strong performance HANWHA CHEM TO RESTART
countrys economy recovers from at Taizhou in Jiangsu province in in its core chemicals business. YEOSU PLANT IN OCT/NOV
the crisis started in 2008, EU-wide November, a company source Revenue fell by 5% year on year South Koreas Hanwha Chemical
solutions are needed to increase said on 26 October. Construction to Bt105bn, but earnings before is planning to restart two of its
competitiveness and secure a fu- of the unit has been completed, interest, tax, depreciation and three 50,000 tonne/year each
ture for the industry in the region, and output is expected in the sec- amortisation (EBITDA) rose by toluene di-isocyanate (TDI) lines
the president of Spains chemical ond half of November, the source 8% at Bt20.6bn. in Yeosu on 27 October, a com-
trade group FEIQUE, Anton Vale- said. However, the nameplate ca- pany source said. The compa-
ro, said. He added Spain needs to pacity of the new unit was not SHANDONG HAITIAN TO nys third 50,000 tonne/year TDI
update its infrastructure in order being disclosed. The company EXPAND SODA ASH CAPACITY will be restarted on 1 November,
to continue receiving investments has 1m tonnes/year of reforming Chinas Shandong Haitian Bio- the source said.
in manufacturing, and demanded and 400,000 tonnes/year of aro- Chemical plans to shut in early
measures from EU policymakers matics extraction capacities November its 1.2m tonne/year HANWHA CHEMICAL PLANS
to bring the cost of energy down in soda ash plant for capacity ex- TO RESTART EVA PLANTS
order to keep European chemicals SHELL SINGAPORE TO pansion works, a company offi- South Koreas Hanwha Chemical
competitive when compared to RESUME ETHYLENE SUPPLY cial said on 26 October. The plans to resume operations at its
their peers in the US or Asia. Shell is planning to resume domes- plant in Weifang, Shandong ethylene vinyl acetate (EVA)/low
tic ethylene supply in Singapore province, would be taken off density polyethylene (LDPE)
GERMANY BUSINESS by 30 October, market sources said line for a few days, to raise its plants at Ulsan on 5 November
CLIMATE IMPROVEs IN OCT on 25 October. The producer will soda ash capacity to 1.35m after the completion of mainte-
Germanys business climate contin- feed naphtha into its cracker at tonnes/year. nance works, a company official
ued to improve in October with Pulau Bukom in Singapore by 26 said. The EVA/LDPE plants
companies being more satisfied October, according to sources. It SHANDONG SHUNTIAN which have a combined annual
with their current business situa- will likely take one to two days RESTARTS UNIT production capacity of 120,000
tion and expressing greater opti- for Shell to produce on-spec eth- Chinas Shandong Shuntian has tonnes/year were taken off line
mism about the months ahead than ylene, sources said, adding that restarted one of the three mela- as scheduled on 24 October for
in September, the countrys Ifo eco- supply to domestic customers mine lines at its 100,000 tonne/ the overhaul.
nomic research group said on 25 could resume by 30 October, fac- year plant after a planned mainte-
October. Ifo said that its business toring in a few days for the sup- nance, a company source said on MIDDLE EAST/AFRICA
climate index for Europes largest plier to build up its inventory. 26 October. The 30,000 tonne/
economy rose from 109.5 points in SABIC/EXXONMOBIL JV
Design Pics Inc/REX/Shutterstock
The robust earnings growth in He expects Q4 sales to increase 1.7% to $3.79bn, aided by 2.0%
the coatings sector over the past by a low single digit percentage growth related to acquisitions.
several years is flattening out. year on year. PPGs industrial coatings seg-
Third-quarter results for the Shares of Sherwin-Williams ment performed well with a
major producers along with weak plunged $30.27, or 10.9%, to 6.1% sales gain while its perfor-
forward guidance shocked the in- $247.61 by the close of trading on mance coatings group lagged
vestment community, causing 25 October. Shares are down with sales down 0.8%.
share prices to tumble further 21% from their 52-week high of PPG earnings remain highly
Image Source/REX/Shutterstock
from their summer highs. $312.48, reached in July. levered to macroeconomic growth
The latest came from US-based It is worth noting that while as seen in the Q3 earnings warn-
Sherwin-Williams on 25 October, coming up short of expectations, ing due to F/X (foreign exchange)
where adjusted third-quarter the companys Q3 earnings actu- pressures and a slowdown in Eu-
earnings per share (EPS) of $4.23 ally grew, with adjusted EPS ris- rope where the company has its
came in shy of Wall Street con- ing 6.5% and adjusted net income highest margin leverage, said Coatings are running on empty
sensus estimates of $4.32. up 7.2% year on year to $401m. Susquehanna analyst Don Carson
Meanwhile, sales were up in a 24 October research note. PPG works off of easier comps ver-
Its clear that Q3 will 4.0% to $3.28bn. Q4 sales and European growth was weaker sus a weak 2016, takes cost-cutting
earnings are also expected to than expected in both architectur- actions and puts its cash hoard of
NOT be a standalone grow year on year just not as al coatings and PPGs industrial $2bn ($1bn on the books, and $1bn
disappointment as the much as analysts expected. segment where European auto on its way from glass divestments)
first quarter in 12 The pace of Sherwin-Williams OEM production for the quarter to work in the form of share buy-
earnings growth for all of 2016 is was flat, he added. And PPGs backs and bolt-on acquisitions.
failing to reach double expected to slow markedly from outlook for Q4 was disappointing,
digit EPS growth past years. From 2013-2014, EPS with chairman and CEO Michael THE 9TH INNING
frank mitsch gained 20.8%, followed by a McGarry expecting a continua- Laurence Alexander, analyst at Jef-
Analyst, Wells Fargo 27.1% jump from 2014-2015. tion of only modest improvements feries, is taking a cautious outlook
Based on management guidance, in global demand, leading to on PPG. While end-markets are
expected EPS in 2016 of $12.30 earnings growth comparable to or not falling off the table, the US is
The Paint Stores Group was (midpoint of its range of $12.25- slightly higher than Q3 results. in the 9th inning with architectur-
the strongest segment, posting a $12.35) shows 10.2% growth The company is reviewing various al demand growing 2%-4%. EMEA
6.7% gain in sales, while there from 2015. restructuring plans to reduce costs. (Europe, Middle East and Africa)
was weakness in the Consumer Shares of PPG at $91.22 at the growth has decelerated [0.2-0.4 per-
Group (-2.1%), Global Finishes WEAK CONDITIONS close of 25 October are down centage points], and weakness per-
Group (-1.1%) and Latin America The weakness from Sherwin-Wil- 22% from their 52-week high, sists in the emerging markets, he
Coatings Group (-0.4%). liams is not unique to the compa- reached in April. said in a 24 October note.
The real disappointment was ny but indicative of conditions Investor attention is on this The analyst cut his 2016 EPS es-
the forward guidance for Q4 EPS across the entire coatings sector. being a prolonged trend com- timate by $0.05, to $5.90, his 2017
of $1.45-$1.55, including around US-based PPG Industries pre- pared to a moderate hiccup. After forecast by $0.25, to $6.40 and his
$0.71 in costs related to the announced a Q3 earnings shortfall all, its clear that Q3 will NOT be 2018 number by $0.55, to $6.85 to
planned Valspar acquisition offset on 7 October its first such an- a standalone disappointment as shift to a flat outlook for PPGs
by about $0.03 in gains related to a nouncement since 2008. On 20 Oc- the first quarter in 12 failing to end-markets. Netherlands-based
decrease in its income tax provi- tober it reported adjusted Q3 EPS reach double digit EPS growth coatings giant AkzoNobel had
sion. Adding back the net impact of $1.56, showing modest growth Q4 is on track to continue this similarly uninspiring Q3 results,
of $0.68 takes us to a range of from $1.54 in the year-ago period. disappointing pattern, said with flat earnings and a modest
$2.13-$2.23 per share for Q4, fall- Without the benefit from share Wells Fargo analyst Frank Mitsch decline in sales. It characterised
ing well short of Wall Street esti- buybacks reflected in the EPS in a 21 October research note. the outlook as uncertain with
mates of $2.44. The company numbers, net income actually fell However, the analyst has a more challenging conditions in several
posted EPS of $2.12 in Q4 2015. 1.4% to $415m while sales rose positive view on 2017 prospects, as countries and segments.
Over the balance of the year,
the input cost tailwinds are likely coatings growth slows in q3 2016; mILLIONS, except for eps (earnings per share)
to turn to headwinds and the slow-
Company EPS % Change Net income % Change Sales % Change
er pace of sales growth is unlikely
to fully offset our investments in PPG Industries $1.56 1.3% $415 -1.4% 3,789 1.7%
new stores, territories and retail Sherwin-Williams $4.23 6.5% $401 7.2% 3,279 4.0%
programs already in place, said AkzoNobel 1.20 -3.2% 285 0.0% 3,600 -4.2%
Sherwin-Williams president and NOTE: all figures adjusted for charges; net income from continuing operations
Source: Companies, compiled by ICIS
CEO John Morikis in a statement.
C
a shift to producing better quality products in ap-
elaneses pending acquisition of the Ital- pearance, lighter weight and temperature resistance.
ian compounder SoFTer Group will fur- Everyone is constantly upgrading physical qualities,
ther increase the companys exposure in and there is much more attention to that kind of de-
engineered materials. tail, Rohr told ICIS.
The deal will not change Celaneses Growth for these products grows even as overall de-
place as one of the largest producers of mand weakens, as you cant make a me-too product and
acetyls in the world. be successful in a low-demand world, he added.
This will remain, and Celanese will continue making This is exemplified in the lower tiers of the automo-
acetate flake, acetate film and acetate tow under its Con- bile industry, where these companies have to compete
sumer Specialties unit as well as ethylene vinyl ace- with top-tiered producers on quality and appearance,
tate (EVA) under Industrial Specialties and acetic acid, Rohr said.
vinyl acetate monomer (VAM) and acetate esters under Automobiles are already an important end market for
Acetyl Intermediates. Celaneses resins. To increase its exposure to this mar-
But the contribution from the companys advanced ket, Celanese recently added a nylon platform to its
engineered materials has been growing. In Q3 2016, ad- portfolio of engineering plastics.
justed earnings before interest and tax (EBIT) from this The SoFTer acquisition will increase this exposure
segment rose 20% year on year to $127m. further. It will nearly double the number of Celaneses
product platforms for engineered materials, bringing it
There is a shift to producing from nine to 17.
Because SoFTer is based in Italy, its products were
better quality products already qualified for European vehicles.
in appearance, lighter weight The companys plants include one in Silao de la
Victoria, Guanajuato state in Mexico.
and temperature resistance This had has good access to Mexicos major manu-
mark rohr facturing hubs in Queretaro, Guanajuato and San Luis
CEO, Celanese Potosi. As of March 2016, the Silao plant had six lines,
and it can add three more.
In 2014, at its plant in Rio Grande do Sul state in Bra-
Celanese has been talking about expanding its en- zil, the company began making polypropylene (PP)
gineered-materials business for much of this year, compounds, polyamide (PA) compounds and polybu-
with an eye on the automotive sector. CEO Mark Rohr tylene terephthalate (PBT) compounds as well as engi-
explained why automobiles are an attractive end- neered thermoplastics. That same year, the company
market during an interview at the American Chemis- started making engineering plastics at its new plant in
Middle East/Asia
izham ahmad and matthew chong singapore
asia
judith wang singapore
asia
melanie wee singapore
Asia-Pacific spot prices of methyl of increasing spot enquiries from spread between MMA and down- cific in recent weeks, both planned
methacrylate (MMA) have extend- southeast Asian outlets. stream PMMA squeezing mar- and unplanned have cut into MMA
ed gains for two straight weeks on Firmer import buying appetite, gins for sellers of the latter product production, exacerbating the sup-
the back of tight supply fuelling with suppliers citing increased it was unclear whether MMA ply shortfall. The tight supply sce-
import demand, industry sources spot enquiries for emulsion resins prices have truly reached their nario spilled over to China, fuelling
said. On 14 October, spot prices of applications helped to boost mar- peak.Plant shutdowns in Asia-Pa- domestic MMA prices there.
MMA in 20-300 tonnes rose to an ket sentiment, coinciding with
average of $1,875/tonne CFR (cost cargo supply constraints faced by ASIA MMA
and freight) southeast Asia, up by several major regional producers. $/tonne, < 500mt, spot CFR SE Asia
$20/tonne from the preceding By and large, the current mar- 2,000
week. Current spot prices are at ket climate was characterised as
their highest since mid-May 2015, one skewed towards sellers,
1,800
according to ICIS data. leaving little room for negotia-
Workable levels on the buying tion on the buying side.
side were viewed by market sourc- Escalating MMA prices have, in 1,600
es at around $1,850/tonne CFR turn, compelled downstream poly-
southeast Asia. Selling indications methyl methacrylate (PMMA) 1,400
were placed at $1,900/tonne CFR makers to raise their asking levels
southeast Asia and above. even as overall demand was just
1,200
Negotiations were ongoing for moderate, according to regional Oct Oct
October, with some market players sources. While there was market 2015 2016
Europe
Katherine Sale dusseldorf
The European polymethyl meth- EUROPE PMMA strain on supply, with one Europe-
acrylate (PMMA) market has an MMA producer already imple-
reached a turning point with prices /tonne FD NWE menting sales control.
increasing on the back of tight up- 2.10 One factor that could impact
stream methyl methacrylate the situation is the fall polycar-
(MMA) supply, with this being a 2.05 bonate (PC) prices. Traditionally
key talking point for sources at the PC is priced above PMMA with
K Fair plastics trade show. 2.00
some buyers having the flexibili-
Q4 contract talks for PMMA ty of switching between the two.
were expected to end that week, Estimates of those who are
with prices settling between a 30- 1.95 able to do this vary between 10-
70/tonne increase on global tight- 20% of PMMA buyers.
ening of MMA supply, which 1.90 It is also not a quick process
Oct Oct
started initially in Asia in April. 2015 2016 with some saying it could take six
Solid demand combined with months to convert production to
planned and unplanned produc- the use of PC. Although it does
tion stoppages has had a contin- ised, with MMA prices so attrac- One European producer last not apply to the majority of the
ued squeeze on MMA supply. tive. European players have been week said it is struggling to obtain market, for some buyers in the
The pressure on supply was not expecting a fall in imports for enough MMA to meet its current roof lighting sector for example,
felt as quickly in the European months. This is not being reflected PMMA demand. Demand remains rising PMMA prices and a fall in
PMMA market. Prices started to in statistics, with the August Euro- solid, with continued growth being PC prices may result in some
increase for material heading to stat figures showing a year-on-year seen in key derivative sectors such players looking at their options.
the Middle East, but as of Q3, increase, sources have seen a drop as automotive. Linked with the With inventories low, demand
price increases were yet to materi- recently. One PMMA distributor, solid performance for PMMA, one robust and upstream supply short-
alise. The Q3 Europe PMMA con- which buys Asian product, said MMA producer said it had seen a ening weekly the majority of
tract rolled over, which marked a that with Asian prices above Euro- 3% increase in demand so far this PMMA sellers do not see this as a
shift in the market and previous pean it is currently not buying ma- year. Although demand may deflate serious threat at this time.
consecutive quarterly decreases. terial from its supplier. This has later because of the slowdown near European fourth-quarter con-
With prices firming rapidly in been the case upstream with Christmas, for October and Novem- tracts will settle this week, with
Asia, there was an expectation Asian MMA spot prices consider- ber it is expected to remain strong. supply expected to remain snug
that less MMA would be polymer- ably above European prices. This is likely to put continued for the rest of the year.
1,500
October pricing in the European that the polyols market in Eu-
polyols market were assessed at a rope is currently facing severe
rollover, sources confirmed. margin compression, as prices 1,450
Despite some upward pres- have not moved up with feed-
sure from raw material costs this stock propylene costs. 1,400
month, healthy availability One source said that propylene Nov Oct
2015 2016
meant that buyers were able to has moved up by 170/tonne
resist any upward pressure. since March 2016, while polyols
There were reports of some prices have struggled to match market due to various production ing output problems due to some
minor increases in the market, this. As a result, suppliers are like- outages. Covestro declared force feedstock sourcing issues this
with some players keen to keep ly to push for an increase on pric- majeure on TDI and intermediate month. Sources in the market also
pace with the higher propylene ing in November to restore mar- products earlier in October. said that Dow was currently un-
costs in October. However, the gins. The key factor behind the The company has a 300,000 dergoing a short three day shut-
majority of sources said that ample supply in Europe currently tonne/year TDI plant in Dorma- down at its polyols unit in
prices were steady overall this was the limited availability of tol- gen, Germany. There is another Terneuzen, the Netherlands for
month.Players have also said uene di-isocyanate (TDI) in the TDI producer also said to be fac- safety-related purposes.
Asia
Felita Widjaja Singapore
asia
yeow pei lin singapore
Northeast Asia ethylene import capacity. Chinese buyers see lim- vember-arrival cargoes. Regional (YNCC) is increasing ethylene ex-
prices are broadly stable, as the im- ited pricing risks for forward pur- supply is lifted by higher produc- ports in October and November
pact of rising regional supply is chases on expectations that region- tion rates after summer and as the on the back of turnarounds at its
counterbalanced by healthy de- al demand and supply will be cracker turnaround season in affiliates downstream plants.
mand from the key China market. balanced until the end of the year. northeast Asia draws to a close. Most of the supplies will be put
Spot requirements for Novem- They said prices are unlikely to Shipments from South Korea into the producers term export
ber-arrival cargoes to China have see significant fluctuations. and Taiwan in Q4 will be boosted contract with a regional trader.
been healthy and a similar picture Buyers have had no difficulty by reduced domestic consump- Taiwans supplies will likely
is emerging for December-delivery fulfilling requirements for No- tion. South Koreas Yeochun NCC go up in the second half of No-
shipments. Some Chinese end- vember and December, when
users intend to stockpile ahead of ASIA ETHYLENE downstream activity in Kaohsi-
the 2017 term import discussions $/tonne, spot CFR NE Asia ung slows down due to the clo-
and the Lunar New Year holiday. 1,300 sure of a major ethylene pipeline.
Buying activity is also driven CPC Corp is shutting its pipe-
by the strong performance of cer- 1,200 line from 25 or 26 November 2016
tain derivative sectors and a until 12 January 2017 to relocate
broadly stable ethylene price out- 1,100 the infrastructure to make way for
look for November and December, underground rail lines.
according to Chinese sources. 1,000 Downstream, the Asia polyvi-
nyl chloride (PVC) market is
TAIWAN TO STOCK UP 900 drawing support from higher
CPC Corp will shut its No 6 crack- post-monsoon Indian demand
800
er in Linyuan February-April 2017 Oct Oct and tight Chinese domestic sup-
for maintenance. The cracker has 2015 2016 ply on the back of environmental
720,000 tonnes/year of ethylene inspections in Shandong.
The 5 ICIS
$28 E*
th 5
Asian Oleochemicals
Conference
11 12 January 2017 // Kuala Lumpur, Malaysia
Register on or before Friday 4 November, 2016 and SAVE $285 o the standard registration fee.
Please quote promo code TZP73605 when registering to secure discount.
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price & market trends
europe
linda naylor london
Polyethylene (PE) and polypro- This is something that is not pletely in line with euro costs, Wilton, INEOS produces PP and
pylene (PP) buyers in the UK are likely to go away, however, said but that it was now hard to get linear low density PE (LLDPE) at
under strong pressure to pay some large packaging buyers. all the product it needed without Grangemouth, and LyondellBa-
more for their product as the You just have to pay the paying more. sell has a PP plant at Carrington.
pound sterling tanks against the price, said one. The UK price is If were prepared to pay more But the UK remains a net import-
euro, sources said. the euro price plus 20 [/tonne]. we will get the material we need, er of plastics goods.
There has been tension on a The UK imports a lot of its according to the buyer. Ian Wright, director general of
public scale in the UK as some packaging, including the contents Some traders were having diffi- the Food and Drink Federation,
brandowners have tried to recover of much of it, said the buyer, and culty getting increases in line with which speaks for manufacturers,
increased prices, said to be down this meant that costs were higher. the new currency rates, and they warned of the potential for more
to the weakness of the pound My costs will have gone up were doubly hit by the fact that similar disputes as Unilever/
which has left import prices high. by around 100 [tonne], said an- many buyers are now looking to Tesco as imported costs rise.
Recently there was public out- other large buyer, I cant take trigger end-year rebates by reach- On a more positive note, the
cry as Unilever sought to in- that hit. This is at a time when ing pre-agreed volumes with their weak pound has been a boon for
crease prices on some its goods European PE prices were largely regular European suppliers. exporters. Business is good,
to supermarket giant Tesco, and a rolling over in euro terms. The UK does have its own PE said another converter. There
private agreement led to a resolu- Yet another buyer said its and PP production. SABIC pro- are no imports and [our] ma-
tion of this issue. costs had not increased com- duces low density PE (LDPE) at chines dont stop running.
asia
paul lim singapore
October butac
price efforts Oct acrylates settle higher
Some sources said BASF has approximately 25% of total European butyl-A capacity
gain traction
The European October acrylate EUROPE ACRYLATES
US October butyl acetate (butac) esters contract price has settled at
free-market contract values con- increases of 20-25/tonne on aver- /tonne, contract FD NWE
2,000
tinued to gain strong traction on age depending on the ester, while 2-ethyl hexyl acrylate Ethyl acrylate
the push from September feed- there were also some rollovers Butyl acrylate Methyl acrylate
1,800
stock propylene, a buyer con- heard, mainly in distribution, due
firmed. Increases so far have been to subdued demand, sources said.
1,600
heard at 3 cents/lb ($66/tonne). Acrylate esters include methyl
Separate October initiatives of acrylate (methyl-A), ethyl acrylate 1,400
3-5 cent/lb surfaced from the (ethyl-A), butyl acrylate (butyl-A)
major domestic suppliers in mid- and 2-ethylhexyl acrylate (2- 1,200
September. The October initia- EHA). Players are in a wait-and-
tives were prompted mostly by see position on the impact the 1,000
Nov Oct
Septembers 6 cent/lb propylene fire at BASFs Ludwigshafen site 2015 2016
increase, but sellers also have could have. Some sources said
been intent on improving their BASF has approximately 25% of
profit margins, buyers said. total European butyl-A capacity some customers might like to se- the spot market, being quoted at
Price gains in September and and, therefore, the impact could cure volumes ahead of uncertain 950-1,050/tonne for methyl-A,
anticipated increases for October prove to be big. Customers that weeks. Normally at this time of 920-1,020/tonne for ethyl-A,
still lag propylene gains of 9.5 have BASF as their only acrylates the year, buyers would take a step 1,010-1,080/tonne for butyl-A
cents/lb during the same period. supplier are said to not be getting back. Although players could get and 1,150-1,225/tonne for
Demand was still described as any material at the moment. the material they need with no 2-EHA. October contract prices
steady, with no discernible sea- A distributor said its Asian major difficulty, the BASF inci- were assessed at 1,305-1,330/
sonal decline yet. suppliers have increased their dent might complicate things. tonne FD (free delivered) NWE
The fourth quarter of each cal- prices by $150/tonne. Another important point (northwest Europe) for methyl-A,
endar year is typically marked by Demand was considered rea- brought up by players is that Lud- 1,465-1,485/tonne FD NEW for
diminished demand and rising sonable, but rather weak in coat- wigshafen is a strategic hub to ethyl-A, 1,535-1,575/tonne FD
inventories as the weather cools ings. However, things could move product in and out of Eu- NWE for butyl-A and 1,640-
and major US holidays approach. change on BASF situation as rope. Prices were moving up in 1,665 FD NWE for 2-EHA.
A buyer said demand is flat year
on year, but has remained steady
since summer demand softened North america
after the spring paint and coat- david love houston
Cents/lb, contract DEL this month, but that spot feedstock previous day in response to news
78
60 styrene prices jumped higher late on a fire at Westlakes 259,000
the week ended 14 October. tonne/year Lake Charles styrene 76
58 EPS prices typically track ben- plant in Louisiana.
zene prices closely. October ben- It is yet unclear how long the 74
56
zene contracts settled at $2.31/ plant will be down. However,
72
54 gal, which was down by an aver- one source said that it did not ex- Oct Oct
2015 2016
age of 17 cents/gal from the previ- pect the plant to be down longer
52 ous month. Spot benzene prices than two weeks.
this month averaged $2.24/gal One producer said that, as ex- the producer said. One large
50
through 17 October. pected, October demand is defi- moulder described its demand
48 Nov Between June and September, nitely good. However, November this month as OK. It also expects
Sep
2015 2016 benzene contract prices in- demand will probably fall by November prices to be un-
creased by 48 cents/gal. around 20% due to seasonality, changed from October.
latin america
marianela toledo houston
ASIA
Helen Yan singapore
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directories
middle east/global
jonathan lopez london
Healthy global demand for poly- Abu Dhabis International Petrole- could help improve productivity at
ethylene (PE) and propylene (PP) um Investment Company (IPIC),
At Borouge, all the firm and therefore at its 50%-
is helping the UAEs Abu Dhabi with a 64% stake, and Austrian plants are operating owned Borouge, as any improve-
petrochemical complex of Bor- energy major OMV (36% stake). well, running at ment in efficiency is a bonus for
ouge to run at full capacity after Borouges 4.5m tonne/year pro- the companys partners, he said.
all plants within it have started duction capacity is divided into full capacity and
up, the CEO of joint-owner Aus- 2.3m tonnes/year of polyethylene feedstock is TURKEY IMPACT
trian chemical major Borealis (PE), 1.8 tonnes/year of polypro- Following the attempted coup
said on 20 October. pylene (PP) and 350,000 tonnes/
available detat on 15 July in Turkey, Gar-
Borealis CEO Mark Garrett said year of low density polyethylene Mark garrett rett said Borealis operations in
CEO, Borealis
that despite Chinas industrial (LDPE), supporting cross-linked the country continue to be run-
slowdown, demand for polymers polyethylene (XLPE). the performance tests and we have ning normally and said it would
to manufacture wires and cables proven the ability to run a 4.5m be wise for him not to com-
directed to the transportation feedstock ISSUES RESOLVED tonne/year facility like this, he ment on political developments.
and construction industries re- Following the disruption of feed- said. Although Garrett would not The coup was obviously a sur-
mains healthy in the country, a stock deliveries in February to go into detail on where Borouges prise to be honest. But as of now,
market Borealis is tapping into, he Borouge, causing one of the three output is being sold, the compa- Borealis country manager there
said in an interview with ICIS. 1.5m tonne/year steam crackers nys reach is intended to be global. tells me they are managing to do
Due to the start-up of several to be offline for the whole month, He would not comment on business without having noticed
plants at the beginning of this Garrett highlighted that the issues suggestions by sources in the too many changes, said Garrett.
year at the major petrochemical have been resolved. Middle East polymers market The political troubles have
complex of Borouge, which is co- At Borouge, all plants are oper- that Borouge was trying to com- maybe reduced demand a little bit
owned by Abu Dhabi National ating well, running at full capacity pete in east Africa with lower of- but we [Borealis and Borouge] still
Oil Company (ADNOC), full ca- and feedstock is available. The fers than its competitors. view Turkey as a place where we
pacity of 4.5m tonnes/year for system between ADNOC, Gasco He welcomed management want to do business it is a grow-
production of polymers will only and Borouge is now functioning changes at partner ADNOC, in- ing market and there will be grow-
be realised in 2017, said Garrett. and we seeing a good volume per- cluding new CEO Ahmed Al Jaber, ing demand for our products as
Borealis is privately owned by formance. All plants have passed pointing out that the reshuffle standards of living improve.
asia
paul lim singapore
eating into their market share. CFR CMP on 14 Oct. This is in line
End-users in the polyester in- with upward climbs in feedstocks 500
Oct Oct
dustries snapped up two ex-Chi- naphtha and paraxylene (PX). 2015 2016
na Main Port (ex-CMP) PTA car- PTA is a key feedstock in the
goes sold by major domestic production of polyester products
producer Yisheng Petrochemical. such as yarns, fibres and bottle pected to continue in the mid- more units to cease production in
The rapid sale on 17 October chips and constitutes close to term, until more plants shut down 2017. This is especially so for units
bucked the recent trend of thin 90% of feedstock costs. in the ongoing industry-wide con- with smaller economies of scale
trades, when end-users were hold- It is in turn produced from aro- solidation of production capacity. that are not integrated into the en-
ing out for better prices on unsta- matic PX. The attrition battle is ex- Already, the market is expecting tire polyester supply chain.
europe
heidi finch london
There are some early signs of an EUROPEAN MONTHLY ETHANOLAMINE CONTRACT PRICES BASFs Antwerp rather than its
increase in spot enquiries in the Ludwigshafen site. Another
European ethanolamines market /tonne, contract FD NWE buyer said it has ordered some tri-
1,400
and a firmer spot tendency amid ethanolamines 85% (TEA 85%)
DEA MEA DEA
reduced supply in the immediate spot at 1,070/tonne FD NWE
aftermath of the fire at BASFs 1,300 from another supplier in the mar-
Ludwigshafen, Germany site, ket, but had agreed the same price
sources said on 19 October. 1,200
compared to its last purchase.
A few suppliers said they have Some players said that it is still
seen some additional demand and too early to assess the extent of
enquiries for prompt delivery, be- 1,100 the impact on the ethanolamines
cause less material is available as a market following the Ludwig-
consequence of the accident. 1,000 shafen accident.
Sep Sep
One buyer acknowledged that 2015 2016 I think the full effects havent
its immediate contractual deliver- been felt yet, it is still early days,
ies from BASF have been affected. said one supplier.
It went on to say that there are ers, albeit at an additional cost of 1,130-1,140/tonne FD net for tri- One trader said it had not yet
some attempts to obtain deliver- 30-50/tonne. Few players were ethanolamines 99% (TEA 99%). seen any concrete additional de-
ies from BASFs other ethanola- prepared to comment on actual A few buyers, however, said mand but just price checking,
mine site in Antwerp, Belgium, spot price levels, although one they had not seen any adverse ef- adding that players were still in a
where possible, but there are also supplier said it is currently dis- fects on supply from BASF and/ wait-and-see mode.
some deliveries from BASF that cussing a plus 10/tonne for spot or they have not been subject to This is because a lot will de-
could not be supplied. BASF was in October. any firmer spot prices. pend on how long the production
not available to comment. It talked of prices around One customer said it is being units which are offline at Lud-
The same buyer said it has 1,100/tonne FD (free delivered) supplied as normal from BASF, wigshafen are likely to be down
managed to source some alterna- NWE (northwest Europe) net for adding it believes that its ethanol- for and how long the logistical ef-
tive volumes from other suppli- mono-ethanolamines (MEA) and amine volumes come from fects will last.
Asia
Jeslyn Lerh Singapore
600
The upside to Chinas spot import Renewed strength in the up-
acetone prices may be limited as stream propylene sector is likely 500
the restart of domestic plants re- to lend additional support. End
stores supply, market participants September/early October meant 400
said. Acetone prices have accu- the restart of some China-based
300
mulated gains of 25.6% since phenol/acetone plants from Oct Oct
early July to close at an average of scheduled maintenance. 2015 2016
europe
melissa hurley london
1 2 3 4 5
us to this this mean? impact global impact supply
point? markets? & demand
fundamentals?
www.icis.com/scenariostudy
enquire@icis.com
plants & projects
Notes: *Capacity: figures given in tonnes/year; tonnes/day are converted by multiplying by 330. (x) = expansion; T = total capacity including expansion.
Start-up: Dates given are for planned start-up. H1 = 1st half year; H2 = 2nd half year; Q1 = 1st quarter; Q2 = 2nd quarter; Q3 = 3rd quarter; Q4 = 4th quarter.
Status: S = study; P = planned; A = approval; E = engineering; U = under construction; C = completed; D = delayed; CAN = cancelled.
59.5%
derivative
polyethylene
FEEDSTOCK
Used in packaging, such as plastic
GLOBAL POLYETHYLENE
$/tonne, HDPE injection, spot
bags, films, containers and bottles.
Europe increasingly reliant on imports
Ethylene
1,700 as older, non-profitable plants close.
CFR SE Asia CFR China CFR India Key derivative is polyethylene, ac-
Europe buyers focus on security of
FOB NWE FOB US Gulf
stock following force majeures of 2015. counts for 59.5% of world demand.
1,500
Turkey market unclear due to political Low oil boosts European demand, and
and economic issues. Relies on imports. cracker margins remain high.
1,300 North America gained 10% PE capacity Europe cracker issues persist, but
in 2016 from roughly 20m tonnes. have been less of a problem in 2016.
1,100 Low oil may delay some 2017 startups. Supply tight in the Americas for much
US election will have direct impact on of 2016 because of turnarounds: at
Mexico as NAFTA agreement could end. least nine planned this year.
900
Sep Sep China and southeast Asia economy and US prices surged in Q3 because of low
2015 2016
currency curbed buying interest in 2016. inventories due to turnarounds and un-
polyethylene projects Asian market uncertain on new addition- planned outages.
al China domestic and global supply. Asia reliant on Middle East, Europe, US
Company, location CAPaCITY* start-up Relatively weak Asia demand thwarted imports amid slowdown in China crack-
OPaL, India 1,060 Q4 2016 efforts to reflect high feedstocks. er expansion and Japan cuts.
Shenhua Coal to Liquid and 280 Q4 2016 Price uncertainty in GCC region amid 2016-2017 supply growth driven by in-
Chemical, China tegrated coal-based projects in China plus
regional competition plus Iraq.
Zhong Tian He Chuang, China 670 Q4 2016 LatAm HDPE supply healthy after cracker projects in India and Mid-East.
NOVA, Canada 454 Q4 2016 startup of Braskem-Idesa Ethylene XXI. Strong PE capacity growth in US/Mid-
Sadara, Saudi Arabia 1,100 Q4 2016/ East may undermine naphtha-based
2017 complexes in Asia from late 2017/2018.
Jiangsu Sailboat 300 End 2016/
Petrochemical, China Q1 2017
Reliance, India
Dow Chemical, US
1,000 Q1 2017
750 2017
14.7%
derivative
Sasol, US 470 2017
Jiutai Energy Inner
Mongolia, China
250 2017 Ethylene Oxide
Uses include monoethylene glycol,
GLOBAL ETHYLENE OXIDE
ethoxylates, ethanolamines, personal
Ethylene
6.1%
derivative
GLOBAL ETHYLENE
Styrene
$/tonne, spot
1,400 Feedstock for polystyrene (PS) and ex-
CFR NE Asia FD NWE DEL US GLOBAL STYRENE
pandable polystyrene (EPS), styrene butadi-
1,200
ene rubber (SBR), acrylonitrile-butadiene- $/tonne, spot
1,000 styrene (ABS), styrene acrylonitrile (SAN) 1,300
FOB Rotterdam FOB US CFR China
and unsaturated polyester resins (UPR).
800 1,200
Restart of ELLBA at Moerdijk, the Nether-
600 lands, helped rebalance Europe: imports 1,100
down 55% in H1 2016.
400 Turkey and Norway key importers of EU 1,000
200
styrene. More exports to Asia on arbitrage. 900
Sep Sep US a net exporter of styrene to Asia and
2015 2016
Europe. South Korea is the second-largest 800
*
Capacity 000 tonnes/year
**
EO/EG
1,600
EO, contract FOB US EDC, spot FOB US Gulf Ethylene, spot DEL US
HDPE injection, spot FOB US Gulf Styrene, spot FOB US
1,400
$884
1,200
1,000
800
Ethylene peak in Sept
600
2016, rocketing from
400 lows of only $372
200
0
Sep Sep
2015 2016
$/tonne
1,500
EDC, spot CFR Asia NE Asia Ethylene, spot CFR NE Asia
HDPE injection, spot CFR SE Asia Styrene, spot CFR China
30%
1,200
900
Hike in Asia ethylene
prices from low of 600
$865/tonne to peak
of $1,215/tonne 300
0
Sep Sep
2015 2016
NOTE: ICIS does not publish an Asia EO price
$1,490
1,500
1,000
Peak price for Europe
HDPE before an uneven
500 decline to $1,280 in
September 2016
0
Sep Sep
2015 2016
200,000 94 60,000 94
150,000 88 45,000 88
100,000 82 30,000 82
50,000 76 15,000 76
0 70 0 70
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
SOURCE: ICIS supply & demand window, ICIS dashboard SOURCE: ICIS Supply & Demand window, ICIS Dashboard
31.3% 3.8%
Production rises steadily from 127.8m Operating rate peaks at 93% in 2020,
tonnes to reach 173.3m tonnes having risen steadily from 87% in 2017
Capacity utilisation peaks at 90% in 2015 Capacity rises from 41.1m tonnes in
Increase in capacity from before plateauing at 89% in 2020-2021 Average annual increase in 2011 to reach 54.9m tonnes in 2021
2011 to 2021 as US ethane global HDPE production
thanks mainly to US shale gas additions
additions come on stream from 2011 to 2021
GLOBAL STYRENE SUPPLY & DEMAND FORECAST GLOBAL ETHYLENE OXIDE SUPPLY & DEMAND FORECAST
40,000 94 40,000 94
30,000 88 30,000 88
20,000 82 20,000 82
10,000 76 10,000 76
0 70 0 70
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
SOURCE: ICIS supply & demand window, ICIS dashboard SOURCE: ICIS supply & demand window, ICIS dashboard
17.5% 79%
Operating rates hover around 88% from 37% hike in global capacity from 2011 to
2015-2017 before recovering to 91% in 2021 reach 36.9m tonnes/year in 2021
Production peaks at 34m tonnes/year in Production rises steadily from 22.8m
Boost to global styrene 2021 following a steady increase from a Low point in operating tonnes/year in 2011 to reach 30.8m
capacity during the period rates during 2017. tonnes/year in 2021
trough of 27.9m tonnes/year in 2014
2011 to 2021 Recovery to 83% by 2021
Mixed fortunes
for aromatics
ICIS gives its outlook ahead of the 15th World Aromatics & Derivatives Conference
in Vienna, Austria, which will examine key trends in this essential value chain
Rhian oconnor & Rob Peacock ICIS liance and OPaL in India and Hyundai in es spiked in the spring, caused by tightness in
T
South Korea from Q4 2016. The Reliance ca- the global markets earlier in the year. These
he global markets for aromatics have pacity is as a by-product from its new 2.25m pressures have now given way to increasing
seen mixed fortunes during 2016, tonne/year paraxylene unit, whereas OPaLs length in the global market.
with some markets faring better than capacity is linked to its new cracker. Hyun- A large portion of the speeches at the ICIS
others. Many markets continue to dai Chemicals new benzene capacity is part 15th World Aromatics & Derivatives confer-
contend with oversupply, with others man- of its integrated condensate splitter to mixed ence focus on the styrenics chain. After years
aging to see improved margins this year. xylenes production. of low growth and oversupply, things seem
These capacities should be joining the re- to be looking up for the chain. Aggressive
Benzene started Jurong Aromatics in the market by the consolidation and falling raw material costs
During 2016, benzene has seen length in the end of 2016. In 2017, alongside the captive have helped to boost profitability.
US and lack of liquidity in Europe, on top of capacities at Sadara and the delayed Petro Ra- But how long will this last? At the confer-
soft demand in Asia. The lack of liquidity in bigh units, there will be additional capacity in ence, Tim Stedman from Trinseo will ask if
Europe has been partly behind some of the China to meet growing derivative demand. the tipping point has now been reached.
spikes seen in prices this year, as market Certainly for styrene the return of Ellbas
players had to cover short positions quickly Benzene Derivatives Moerdijk unit in 2016 has improved Euro-
when little material was available. Thank- Demand for benzene is dependent on the for- pean supply.
fully, such occasions seem to have been rare, tunes of four main derivatives styrene, As the Singapore unit also ramps up and a
but have occurred just before contract settle- cumene, cyclohexane and nitrobenzene number of new styrene monomer plants
ments in Europe. which account for around 93% of global ben- come on stream in China, we forecast con-
The increase in global benzene supply an- zene consumption. Styrene production siderable length for 2017. Inevitably this will
ticipated for 2017 is not expected to really alone accounts for around 50% of global have some impact on pricing, and spreads
help this liquidity, even if the volumes of benzene demand. over benzene.
benzene coming into Europe increase. During 2016, styrene production levels Oil, naphtha and benzene pricing is forecast
Most material from any new source is ex- have been strong in Europe and the US, on the to be fairly constant over the next 12 months,
pected to be moved on a contractual basis. back of some demand recovery in these re- and this could provide an opportunity for sty-
Although this could theoretically free up gions and stronger demand in Asia. Addition- renics consumers to pressurise pricing.
some capacity in Europe, this may not actu- al Asian demand has come from prolonged In the next few years, ICIS expects capaci-
ally be the case. outages in the region. Price levels have also ty in Asia to continue to increase, with a
New benzene supply is expected from Re- supported production levels. In Europe, pric- forecast increase of over 2.5m tonnes/year by
the end of 2020. Again, the majority of this is
GLOBAL BENZENE CAPACITY (000 TONNES) expected in China, but new world-scale
plants are also expected in South Korea and
80,000 Southeast Asia.
Americas Europe & CIS Middle East & Africa Northeast Asia South & Southeast Asia This new capacity will be partly offset by
70,000
the expected closure of over 700,000 tonnes/
60,000 year in Japan during 2016-2018.
Demand is also looking a little shaky. Ap-
50,000
parent polystyrene (PS) demand in China is
40,000 down sharply, with some evidence of both
domestic production and imports declining.
30,000 Given the size of China, and the significance
20,000 of PS for the global styrene chain, this could
further lengthen the market.
10,000 Over the next few years, we will also see
0 an increase in capacity through the styrene
2016 2017 2018 2019 chain in the Middle East and Egypt.
SOURCE: ICIS Supply & Demand Database
In Egypt the reopening of E-styrenics
could be helped by the planned construction GLOBAL PARAXYLENE CAPACITY (000 TONNES)
of a styrene unit by Carbon Holdings, due to
be completed in 2020. 70,000
In Iran the focus is on expandable polysty- North America Europe & CIS Middle East & Africa Northeast Asia South & Southeast Asia
rene (EPS), with a number of new units com- 60,000
ing on over the next few years. In Saudi, a
50,000
new acrylonitrile butadiene styrene (ABS)
unit should start up at any time. These ex- 40,000
pansions could in turn put further pressure
on European and Asian supply. 30,000
Demand for cumene is essentially de-
pendent on the production of phenol and 20,000
A, have slowed down. Although there has SOURCE: ICIS Supply & Demand Database
Even if China avoids a real-estate led crisis, the country must move its economy from an investment to a consumption-led growth model
Multiple scenarios
for China growth
The real estate bubble and growing debt levels could derail the possibility of perpetual
growth. Chemical companies must consider different paths to stay viable in the country
john richardson perth Now, though, there are no guarantees that able to tackle its current problems. This means
J
China can firstly avoid a real estate-led finan- you need multiple scenarios for growth in any
ust a few years ago, it did not really mat- cial crisis. manufacturing or service sector, he added.
ter if you only had one scenario for Even if it does avoid such a crisis, it faces
growth in any chemicals or polymer the challenge of successfully moving its econ- Credit-Driven Consumption Leap
market in China. omy from an investment to a consumption- Lets think this through just for one product
If your growth forecasts for China were a led growth model. high-density polyethylene (HDPE). HDPEs
little optimistic over, say, a two-year period, I think Chinas old investment-led eco- wide range of end-use applications includes
this did not matter at all because over the nomic growth model is running out of the humble supermarket shopping bag
longer term, the economy was so robust that steam, and whether or not it can make the where the value addition is very low all the
you would quickly recover lost ground. transition to consumer-led growth is very way up to extremely high value plastic pipes
And quite often the reverse happened, with much in the balance, said a Hong Kong- that transport natural gas.
growth being better than you anticipated. As based investment banker. The ICIS Supply & Demand database
every mid-level petrochemicals company ex- If anyone tells you not to be worried that shows just how fantastically strong HDPE de-
ecutive knows, it is better to under-promise the only way is up I believe they are being in- mand growth has been in China, particularly
and over-deliver to your board of directors tellectually dishonest. The honest answer is that since 2008:
than the other way around. nobody knows whether or not China will be In 2008, consumption was around 5.5m
tonnes, but by the end of 2013 it had grown to still be big. In 2021, demand is expected to total The negative wealth effect would be signifi-
approximately 10m tonnes an increase of no 14.5m tonnes versus 12m tonnes in 2017. cant if property prices merely stopped rising
less than 81%. These forecasts for HDPE growth are only at todays heady pace.
This was almost double the 41% increase one scenario, and, as we said, one scenario no What could cause the new real estate bub-
during the five years from 2003 until 2008. longer works in todays China. So what might ble to pop? That quite scary number from the
What made 2008-2013 so incredibly good lead to demand growth being lower than we BIS. Few countries with this degree of lever-
for HDPE and for many other chemicals expect? age have in the past avoided a financial crisis.
and polymers was the big growth in credit Real estate is at heart of this risk as total home
during the 2009-2013 economic stimulus the ultimate property bubble loans are expected to be around 30% of GDP
programme. Research analyst Harry Dent quoted the fol- this year versus 20% in 2014.
In the case of HDPE, government spending lowing HSBC data in a 14 October article he Lets say, though, that China once again
on infrastructure resulted in strong growth in wrote for the investment website Seeking proves the sceptics wrong by avoiding a real
demand for natural gas pipes, with the boom Alpha: estate-led financial sector crisis. What are its
in the property sector benefiting consump- Chinas total value of residential housing is chances of creating a new, more sustainable
tion of kitchen containers and utensils made 3.27 times GDP, and is forecast to hit 3.72 growth model?
from HDPE. times by year-end.
China increased lending by no less than Japans great bubble peaked in 1990 at 3.7 Unlocking high rates of savings
$10tr in 2009 alone, when its nominal GDP times GDP. Shortly after, property prices fell While Chinas manufacturing sector is bur-
was only $5tr, with the lending binge continu- through the floor, losing 67%. dened by oversupply and high debt, the coun-
ing until the end of 2013. Hong Kongs 1997 bubble peak was at 3.04 trys personal savings levels are very high. De-
There was then a sharp dip in lending times. spite the boom in consumer spending over the
growth from early 2014 until the end of 2015, The US bubble peak in early 2006 was at last 20 years, there is still a propensity among
but credit growth picked up again in the first 1.75 times. many people to save rather than spend money.
half of this year. Hong Kongs current bubble has left the The key to success is persuading people to
Still, ICIS Analytics & Consulting expects value of residential housing at 5 times GDP. consume even more. The government can
HDPE demand will have risen by a compara- This is expected to rise to 5.5m times by the achieve this by improving healthcare and
tively modest 21% in the five years from 2013 end of this year. pensions provisions. Organisation for Eco-
and 2017 and again by 21% in the five years The fact that Chinese real estate is less nomic Cooperation and Development (OECD)
from 2017 until 2021. frothy than Hong Kongs is no source of com- data show the following:
fort, given that Chinas total debt is now at Chinas basic pension pays just 1% of aver-
Few countries with this 250% of GDP compared with 150% of GDP in age individual/province earnings for each
2008, according to the Bank for International year of coverage, subject to a minimum 15
degree of leverage have Settlements (BIS). years of contributions.
avoided a financial crisis. Real Other alarming data points include a 66% 30 years employment provides a pension of
estate is at heart of this risk increase in land values in Chinas top 100 just 30% of this average wage.
cities over the past 12 months, according to Some employees also pay 8% of their wages
Deutsche Bank. It adds that two-fifths of into a retirement fund and receive top-up an-
This would be the result of a slower, but property developers which have made win- nuities based on individual savings but this
more sustainable expansion in GDP as overin- ning bids for land over the last year will lose only covers 210m urban employees.
vestment in real estate and industrial capacity out, even if cost increases merely level out, Until or unless the government can close
is reduced. never mind decline. this gap, Chinese families will want to save
Volume-wise, however, the Chinese market Then there are the many thousands of Chi- rather than spend money in order to cover
is much bigger than it was back in 2003. This nese families who have used their collective their own retirement and healthcare costs.
means that even with a lower percentage savings to go long in real estate over the last One of the problems that Beijing faces is a
growth rate over the next few years, the rise in 12 months. One-fifth of buyers are estimated rapidly ageing population, thanks to its One
consumption in terms of extra tonnes would to be investors rather than owner occupiers. Child Policy.
Even though that policy has been aban-
CHINA HDPE CONSUMPTION doned, birth rates could take a generation to
improve by enough to reverse the decline in
000 tonnes
the size of the working population. Fewer
15,000 workers means lower tax revenue.
A solution is to transform the Chinese
12,000 economy by moving up the manufacturing
and services value chain. If China can, for ex-
9,000
ample, become a producer of internationally
recognised high-quality automobiles, then
this will boost tax revenues.
6,000
It would also help justify the higher
wages that have resulted from a shrinking
3,000 working population.
Can China square the circle? Come back in
0 10 years and we will give the answer. Thats
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
how long it will take before we know whether
SOURCE: ICIS Supply & Demand database
economic reforms have been successful.
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special report READER RESEARCH IN ASSOCIATION WITH
john baker london obsolete. Companies today, it notes, need a enable connected innovation that breaks
B
new model for todays nonstop customer. down internal silos to include more parts of
eset by accelerating commoditisation Business customers continuously evalu- the organisation in the innovation process.
of their products and with margins ate the products, services and brand promises Companies will need to do the same with
squeezed in todays low growth mar- that surround them, says Bjacek. external boundaries, adds Accenture, to cre-
kets, chemical producers are seeking In response, B2B businesses are adopting ate an innovation ecosystem - an extended
to drive more value and growth from their digital technologies to enable them to network that includes alliance partners, uni-
operations. And they are turning their focus offer the seamless, cross- versities, entrepreneurial companies, custom-
to an important part of the business equation channel interactions that ers and customers customers.
the customer, and how best to interact with business customers have Digital technology will play a key role by
them and meet their needs. come to expect as individ- enabling these connections and giving virtual
The buzzword is commercial excellence, ual consumers (although teams the collaboration tools needed to work
and the primary goal is to increase revenue and they are much more com- together seamlessly, says Bjacek. Instead of
margin by meeting customer needs efficiently plex in B2B). R&D being an isolated function, it will be the
and effectively. A broader aim is to improve centre of a web of flexible partnerships that
communication and connectivity, in order to There is tremendous lets companies draw on a range of knowledge
deliver innovative products and solutions. and resources to speed up innovation and
Its something the industry has been getting
potential to improve pivot quickly to exploit new opportunities.
to grips with for some time, but there is performance in the area of
tremendous potential to improve perfor- commercial excellence survey will take snapshot
mance in the area of commercial excellence, But how far has the chemical sector gone in
Paul Bjacek
notes Paul Bjacek, chemical industry research Lead, strategic research chemicals and natural its drive to add value through commercial ex-
lead at Accenture. resources, Accenture cellence? Are any companies near as good as
The growth of digital commerce makes it companies in the B2C world? This week ICIS
feasible not only to improve the customer and Accenture are launching an extensive in-
experience but also to collect and analyse a But more sophisticated and easier custom- dustry survey to gauge the maturity of the sec-
tremendous amount of data about the market er interactions through digitalisation are not tor in terms of its connections with customers
and buying patterns. the only factor in commercial excellence and ability to drive value, profits and growth,
This can, for instance, give great insight into companies are also looking to enhance their from them.
how pricing can be optimised so that value is innovation efforts through improved custom- Questions will include company priorities
not left on the table, as Julian Short, Accen- er understanding and partnerships along the in improving customer interactions, how con-
tures lead for commercial strategy, puts it. value chain, and are even beginning to look at nected they are, and how much they use digi-
ways of selling outcomes that the customer tal content and analytics to improve the cus-
advantages of closer intimacy will value more highly than products. tomer experience and the value they can
The business-to-consumer (B2C) market rec- Early examples of the latter approach, says derive from better performance.
ognised the benefits years ago and is reaping Bjacek, include large automotive paint shops, Also under scrutiny will be companies pri-
the rewards already, Short says. Now busi- where the paint management is the responsi- orities, their approach to innovation and the
ness-to-business (B2B) companies are begin- bility of the coatings supplier, under agreed move to selling outcomes rather than simply
ning to see the advantages of closer customer performance guarantees. Other potential products and solutions.
intimacy and improved sales and market ana- examples given by Bjacek include selling tyre Where does the industry stand on these points?
lytics capabilities. mileage instead of tyres or selling shelf-life Findings from the ICIS/Accenture survey will be
Accenture believes easy digital access to instead of packaging material. published in an issue of ICIS Chemical Business
information, products and channels has made In the innovation space, the digital econo- early next year. ICIS subscribers will receive an
the traditional buying path in which cus- my will enable much closer partnerships be- invitation to take part in the survey, but you can
tomers move from discovery through consid- tween the chemical producer, customers and access the online questionnaire using this link:
eration and evaluation to purchase all but academics. This open innovation model will bit.ly/2dLNPq9. We look forward to your input.
Living apart, T
Sietse Wiersma ECSPP
but together
together in respect to utilities, raw ma-
terials, by-products, auxiliary materials and
shared mandatory site services, such as safety
and firefighting. Clusters that succeed in find-
ing models to share costs and benefits are cost
efficient in the long run.
Key to cooperation is trust and transpar-
By intelligently sharing and pricing shared materials ency and a focus on the long-term advantag-
es. It is all about incremental cost versus
and utilities, chemical cluster occupants can ensure that integral cost.
the cluster they operate on grows and becomes more Looking at a typical cluster in more detail
reveals the underlying principles. In this arti-
competitive by attracting new investment cle I examine in particular spare capacities,
energy and fixed costs.
Spare capacities
Suppose a chemical company processes a raw
material into an intermediate and subsequently
into a product and has spare capacity of this in-
termediate. This spare capacity can be utilised
by selling the intermediate to one or more com-
petitors. If a competitor needs this intermedi-
ate, then an attractive profit can be enjoyed.
The shareholders in particular will like this
way of doing business. The price of the interme-
diate product should however not be too high.
Competitors in the market must be able to
supply at this price should your company
encounter a problem in the supply of the raw
material or the process equipment fails. In
the market you are not competing with the
product as a compound, but sometimes with
its purity or reliability of delivering the prod-
uct to customers.
The real profit, however, is in the efficiency
of the production process and in smart solu-
tions to lower the cost price. Debottlenecking
and process intensification are keywords.
Lets look at another situation in which the
same company also has by-products. The first
goal of course is to avoid by-products but if
they are unavoidable, then finding a second-
ary use is most advantageous.
Often if alternative uses cannot be found,
the additional costs for disposal of these by-
products can be crippling to a business.
However, they may have some use as fuel for
energy or may be useful as a raw material to
make a new product in a different or emerg-
ing market. This would create additional in-
come and potentially profit from a seemingly
useless by-product.
Now there are several options. This compa-
imageBROKER/REX/Shutterstock
Cultura/REX/Shutterstock
Now again the cluster grows with a new
company, but the odds that the new company
will survive are much better and could possi-
bly result in a sustainable new activity and a
healthy cluster. Based on the expression that Clusters that find ways to share costs and benefits will see sustainable growth
success breeds success it could be an exam-
ple for further growth. In this case the under- equipment, versus contracting the energy utilities need to be introduced from scratch, is
lying principle is to refrain from easy but un- from one or even more third parties. often prohibitively capital intensive.
certain money and to aim for a modest profit Now suppose the third party asks a price For start-up companies looking to locate
in the long run. at or just below the price the new company within a cluster, these infrastructure costs are
would have to pay if it would build its own usually much lower, but these site costs can
Energy energy plant. In this case the new company still be a high hurdle and thus hinder the
Let us look at energy costs. A new company is inclined to build itself to minimise risks of growth of the cluster site as a whole. In the
in a cluster can choose to build its own ener- supply. However, if the third party is offering beginning, a new company encounters a lot of
gy plant just to meet its own demands. In this the energy at an incremental level below, sometimes unexpected costs and the prof-
way it is not dependent on anybody else and then the new company will be tempted to its always lag behind the expectations, mak-
therefore minimises the risk of having to shut use that energy. ing life in the early years difficult.
down operations due to a failure in the energy What then is incremental? The energy sup- What can be done is to formulate a model
supply outside of their control. plying company will need to buy more feed- in which costs are more competitive for the
However, whoever the owner, equipment stock and will need more maintenance for early years, rising with the growth of the new
needs inspection, scheduled equipment being used more intensely. But at company. The reasoning behind this is rather
maintenance and repair in the same time if this company produces more simple: site costs such as security and emer-
the case of failure, so there energy without extensive capital investment, gency services usually remain constant re-
has to be some degree of re- its cost per unit will go down. This saving can gardless of the number of site tenants. A new
dundancy or sufficient back be shared amongst users, providing more cost company locating in the cluster will pay a
up to mitigate inter- efficient energy for both parties. The price of contribution to these costs.
ruptions in the energy will now be substantially beneath the Depending upon the contracts secured, these
energy supply. market price. In this case openness and trans- benefits will either be enjoyed by the existing
parency have been key factors to make it prof- companies, or inflate the profits of the site man-
The underlying principle is itable for all players involved. agement company.
The underlying principle in any case, is to
to refrain from easy but Fixed costs allow new companies to grow, mature and
uncertain money and to aim In chemical clusters, security and emergency survive in the market without being buried
for a modest profit in the response (firefighting) are mandatory and an alive under start-up costs.
integral part of the general site service, infra- Summarising, you could say that Living
long run structure and overhead provision. The costs apart together seems to be a matter of secur-
sietse wiersma for these are shared by all users on site. ing success in the long run by refraining from
President, ECSPP Thus the more companies on site, the short-term profits. Giving support to newcom-
lower the cost of those activities tend to be. It ers can ensure profitability in the long run.
is therefore in the interest of all the existing Sietse Wiersma is president of the European
But suppose a third party in the cluster companies to attract new companies to the Chemical Site Promotion Platform (ECSPP), which
has expertise in supplying energy or has an cluster to potentially lower their own costs. seeks to promote Europes chemical clusters as
overcapacity and is willing to sell that addi- Models for sharing costs are mostly based attractive locations for chemical investment. To
tional energy. on the number of operational personnel and/ contact him, email: sietse-wiersma@planet.nl
The new company now has to weigh up or the manufacturing footprint. Constructing For more information on ECSPP and chemical
the costs and risks of owning and operating on a greenfield site, where infrastructure and clustering, go to: chemicalparks.eu
80 HECTARES
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special report CHEMICAL SITES
Spains ChemMed
seeks investors
Spains economy and chemical sector are returning to growth after a prolonged
downturn. However, the recovery has not yet led to projects breaking ground in the
nations chemical clusters, which therefore need to become more attractive to investors
jonathan lopez London unemployment and bleak prospects. Together tract new and better investments, on the one
A
with labour reforms that have given businesses hand, and maintain the current chemical pro-
s Spain emerges from its long econom- more of a leading hand in work relations, duction on the other.
ic crisis, the chemical industry is social unease has grown. In evaluating the impact so far in 2016, both
enjoying a renaissance. Its main end In that complicated picture, however, Spanish have somehow failed. German chemical major
customers in automotive, packaging, chemical flagship sites are booming. Concentrat- Bayers materials division spin-off, Covestro,
the food industry and construction are typically ed in Tarragona in the northeast of the country felt it was time to close its toluene diisocyanate
the first to boom when a recovery looms. (the location of the ChemMed Cluster) and in (TDI) plant in Tarragona with 170,000 tonne/
However, Spains chemical production con- Cadiz and Huelva in the south near the Strait of year capacity citing market fundamentals.
tinues to be focused on commodity chemicals. Gibraltar, Spains commodity chemicals are However, in an unusual acceptance of busi-
Specialty chemicals, with the exception of the booming, as shown by October figures from the ness realpolitik, Covestro CEO Patrick Thomas
countrys pharmaceuticals, are still rare. Despite national chemical trade group FEIQUE. said to ICIS soon after the announcement that
efforts from authorities to attract new areas According to the trade group, the Spanish the closure would have been a huge issue had
of investment, no new projects have been chemical industry is on course to achieve annu- the spin-off not happened. Under Bayers
announced as of late. Facing higher costs than al growth in sales in 2016 of 2.3% to reach umbrella, the Spanish authorities would not
competitors overseas, European producers will 59.4bn, and of 2.5% in 2017, surpassing for the have welcomed the move, as they have the de-
need to produce higher-margin chemicals like first time the 60bn mark. However, the fall in ciding hand on Bayers drugs contracts with the
specialties in order to survive. energy prices, passed on to customers, brought Spanish national health service.
But Spains case is somehow different. Lack- less pricing power for chemical firms. Revenue Maintaining current chemical production is
ing its own currency when the housing bubble lags behind output growth, which is expected to vital for the social stability of Tarragona, too. A
burst in 2008, the country could not become rise by 3.3% in 2016 and 3.0% in 2017. town of 132,000 inhabitants, the regional capital
more competitive by devaluing the old peseta, ChemMed Cluster was not a new creation of a 400,000-strong metropolitan area, the chemi-
but by devaluing itself making its products and when it was announced to the world in 2015. cal park employs directly 10,000 people, with
its workers cheaper. The chemical park in Tarragona was estab- 36,000 further indirect jobs.
Although the countrys GDP is on course to lished decades ago; a quarter of all Spanish Attracting new investments is proving chal-
grow by 3% in 2016, the recovery is still heavi- plastics are produced there. However, by cre- lenging. Although ChemMed president Teresa
ly concentrated in metropolitan areas, while ating the ChemMed Cluster, the local, region- Pallares said in 2015 that one company was look-
some of the provinces continue to suffer high al and national authorities were hoping to at- ing to set up a plant to produce chemicals for the
focus on
ragona. That means we
need to have an energy
policy which puts us in a
competitive position com-
pared to other chemical
sites boosts
parks worldwide. The cost
of energy is a key
investment
competitive position
compared to other chemical
parks worldwide
anton Valero
President, FEIQUE
T
is worth its name, the same rules for all its mem- European Chemical Industry Council (Cefic).
bers should apply regarding unified energy costs otal investment in the chemicals sec- Were continuing to see investment going in
and other utilities or equal compensation for car- tor in Europe has continued virtually the direction of the US and Asia rather than
bon dioxide emissions under the EUs Europe- to stagnate while that in the US and Europe, Marco Mensink, Cefics director
an Trading System (ETS). China roars ahead. Over the 10 years general, told the organisations annual assembly
In a sector that already makes up 12% of to 2015, it has risen by a fifth to an annual in Florence, Italy, in October. We have an issue
Spanish industrial GDP, and is already 10% total of 21bn, or an average advance of just in Europe when it comes to having access to
above its pre-crisis levels, unlike many other 2% annually. Some analysts believe that competitive energy and raw materials.
peers within the manufacturing sectors ac- when essential expenditure like maintenance Yet investment trends in many European
cording to FEIQUE, the sustainable growth of is taken into account, this figure is equivalent chemical sites and clusters are contrasting
the chemical industry in the country is key to to only a negligible increase. sharply with the general picture of sluggish
achieve, as the EU has established, 20% of Meanwhile, from 2005-2015 chemicals capital expenditure in Europe as a whole. The
total GDP output coming from manufacturing investment trebled to 32bn annually in the desire among sites to have energy and feed-
by 2030. US, while it went up almost sevenfold to stock sources that are more sustainable in the
long term is boosting investment. Money is North Sea gas supplies for the companys Among a number of biorefinery projects at
not only being put into renewables and bi- large mixed-feed cracker at Wilton. SABIC European chemical sites is a planned 1bn
orefineries but also to improve the availabil- claims the project will make it the one of the facility to use wood to make biomass biodies-
ity of oil- and gas-derived feedstocks. Some most flexible feedstock crackers in Europe. el, biogasoline and bionaphtha by Kaidi of
sites have also been trying to integrate more Feedstock-driven investments in the UK China at Kemi in Lapland, northern Finland.
closely feedstocks with downstream chemi- and other European sites diverges from a gen- The project will replace an abandoned biore-
cals production. eral European trend for reductions in up- finery scheme at Kemi by the Finnish energy
In addition, sites are attracting investment stream chemicals investments, especially as a and fuels company Vapo Oy.
as a result of adopting supply chain strategies result of decreasing international competive- Local planners aim to fit the biorefinery into
by improving logistics, particularly in areas ness in petrochemicals. a local industrial cluster in the Kemi-Tornio
like rail and intermodal transportation. On some sites, margin improvements as a re- area of Lapland, where there are already pulp
One of the biggest feedstocks investments sult of low crude oil prices have and paper mills and metals producers.
has been in UK, in which there has been helped investment in the up-
pessimism about the outlook for investment grading of refinery opera- circular economy holds potential
in the countrys chemicals industry because tions, which has raised the Bio-refineries have become a key part of the
of the Brexit vote to leave the EU in a referen- efficiency of feedstock pro- strategies of sites aiming to exploit the trend
dum in June. duction. Another objective to establish localised circular economies,
has been to integrate feed- many of them bio-based.
shale imports secure production stock supplies more closely The circular economy offers a lot of poten-
INEOS, the Anglo-Swiss petrochemicals with downstream pro- tial for the chemical industry more jobs,
giant, is spending a total of around $2bn to duction. new markets, new secondary raw materials,
bring US low-cost shale ethane to its petro- Cefics Mensink told the associations general
chemicals complex at Grangemouth, Scot- The circular economy offers assembly. But Wiersma has suggested that the
land, as well as a smaller site at Rafnes, Nor- moves to bio-based production should be a
way. The project will turn Grangemouth,
a lot of potential for the gradual transition.
which has two crackers with a total ethylene chemical industry more Chemical sites and clusters are in a strong
capacity of 1m tonnes/year, into one of the jobs, new markets, new position to promote the circular economy
most competitive petrochemical sites in because of their ability to bring companies and
Europe only a few years after it was on the secondary raw materials businesses together to form value chains for the
brink of closure because of dwindling gas marco mensink recycling, reuse and remanufacture of products.
supplies in the North Sea. Director general, Cefic The bio and circular economy is a strategic
The site is undergoing a radical transfor- key development area for Kemi [for which] the
mation, with significant investment that will planned biorefinery showcases that the city is
herald a new era in petrochemical manufac- At the Leuna chemicals park in eastern an attractive location, says Tero Nissinen,
turing at Grangemouth, says John McNally, Germany, Total is enriching propylene from Kemis mayor. A similar view is taken at other
chief executive of INEOS Olefins & Polymers gasoline production at its refinery to feed into sites in Finland where wood-based biorefiner-
in the UK. It shows our ongoing commit- the manufacture of nylon and intermediates ies are being planned or constructed.
ment to creating a world-class manufacturing by DOMO Chemicals at the site. Rotterdam port is involved in a 14-strong
site at Grangemouth. This investment ensures our long-term consortium, which has just launched a
The first ethane shipment was docked at access to a strategic feedstock for our integrat- three-year demonstration project on the
Grangemouth in September, and now special- ed polyamide 6 production sequence, says conversion of various wood types like
ly built gas carriers are travelling across the Luc De Raedt, managing director of DOMO spruce, poplar and scrap wood into etha-
Atlantic from Marcus Hook in Philadelphia, Caproleuna. nol, butanol and other chemicals. The
Pennsylvania, which is linked by pipeline to scheme will also provide a number of blue-
the Marcellus shale gas field in the state. Bio-based investments prints for the construction and commercial
Part of the US ethane shipments will be Many sites are also focusing on increasing the operation of a biorefinery that can accom-
piped to a nearby gas cracker joint venture cost effectiveness and sustainability of their en- modate these processes.
between ExxonMobil and Shell at Mossmor- ergy supplies, with some switching to renewa- The port is hoping that the project will
ran under an agreement with INEOS signed bles as a source of both energy and feedstocks. result in one or more biorefineries based on
by the two companies last year. Its future has What stands out is the fact that a lot of the findings of the scheme. It is already the
also been threatened by declining natural gas new investments are based on new types of proposed location of a plant based on a tech-
supplies from the North Sea. (bio) feedstock, says Sietse Wiersma, presi- nology developed by Enerkem of Canada for
At Wilton in the Teesside cluster in north- dent of the European Chemical Site Promo- converting non-recyclable waste into metha-
east England, SABIC has been organising a tion Platform (ECSPP). That fact in itself is a nol and then substances such as acetic acid,
less ambitious scheme for shipping US ethane strange phenomenon. On the one hand there thickening agents and dimethyl ether.
to the site. The objective is also to replace is an urge to use less oil and gas for chemical Enerkem, which operates a facility using
products whilst there is still a low oil price, its technology in Edmonton, Canada, has an
What stands out is the fact resulting in the fact that bio-based chemical alliance with AkzoNobel to explore joint
products cannot compete with these oil development of waste-to-chemical facilities
that a lot of new investments derived products. in Europe.
are based on new types of At Teesside, work has started on the con- Antwerp port has decided to allocate an
(bio) feedstock struction of a 650m, 299MW Tees Renewa- adjacent former General Motors automotive
ble Energy Plant, with biomass for the facility manufacturing site for circular economy
sietse wiersma
President, ECSPP being shipped into the nearby Teesport. projects.
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Paraxylene
paul lim profile last published 25 July 2014
Uses by the the start of Q4. Major Asia PX produc- Asia PX capacity
Paraxylene (PX) is predominantly used to ers include SK Global Chemical, S-Oil, JX 000 TONNES/year
produce terephthalic acid. Other outlets in- Nippon Oil & Energy, ExxonMobil and Ide- Company LocationCapacity
clude dimethyl terephthalate (DMT), di-par- mitsu Kosan, who are part of the Asia Con- FCFC Mailiao, Taiwan 1,720
axylene, and herbicides. It is also used in sol- tract Price negotiating circle.
S-Oil Onsan, South Korea 1,700
vents. Both terephthalic acid and DMT are
Hanwha Total Daesan, South Korea 1,700
used to make polyethylene terephthalate Prices
(PET). DMT is also used to manufacture poly- Spot prices in Asia largely track upstream Ningbo Zhongjin Ningbo, China 1,600
butylene terephthalate (PBT) resin. crude oil and naphtha values. Sinopec Hainan Hainan, China 600
Around 97% of PX demand comes from The Asian PX spot market is also mainly a Fujia Dahua Dalian, China 1,400
the polyester chain via one of its intermedi- trading market, with sentiment often the key GS Caltex Yeosu, South Korea 1,350
ates, purified terephthalic acid (PTA) or DMT. driver to price movements. Aromatics Thailand Map Ta Phut, 1,310
Polyester fibres are the main consumer with Prices were commanding good margins (PTT) Thailand
the second largest use in PET resin, followed over feedstock prices in Q2 and Q3, as traders SK Global Incheon, South Korea 1,300
by automotive antifreeze. and producers priced in peak demand. A Chemical*
stoppage at a key east China plant by Ningbo HC Petrochemical Daesan, South Korea 1,180
Supply/demand Zhongjin also meant that a major end-user PetroChina Urumqi, China 1,055
In times of peak demand, especially during had to secure cargoes in the spot market.
Ulsan Aromatics Ulsan, South Korea 1,000
the spring and autumn season, PTA units End-users have consistently tried to settle
tend to run at full rates to feed strong demand more Asia contract prices this year to ensure CNOOC Huizhou, China 900
from polyester plants. However, once the lull more consistent costs, rather than depend Yangzi Nanjing, China 850
season for polyester starts, PTA plants will re- solely on spot prices. Petrochemical
duce run rates and conduct turnarounds, in Towards the end of Q3, supply lengthened Shanghai Shanghai, China 600
Petrochemical
turn reducing the demand for PX. considerably, with open-origin cargoes tar-
This year saw a slightly different scenario, geted to land in Asia from the US, Europe, SK Global Chemical Ulsan, South Korea 850
as polyester units continued to maintain Middle East and India. Singapores Jurong ExxonMobil/ Quanzhou, China 800
strong demand for PTA even through the start Aromatics, which had shut down at the end Sinopec/Saudi
Aramco (FREP)
of the lull season as they stocked up on feed- of 2014, also restarted its 800,000 tonne/year
stock before the stipulated shutdowns during PX unit and sent cargoes to southeast Asia Qingdao Lidong Qingdao, China 800
(GS Caltex)
the G20 meetings in China. and China.
The wide naphtha-PX margins, which The downstream PET market remains over- Lotte Chemical Ulsan, South Korea 775
peaked at $440-460/tonne in Q3, also encour- supplied and is about to enter the year-end NOTE: *Capacity listed is only for one line
aged PX producers to run at high rates for lull season in Asia as soft drink consumption
most of this year. Margins later dipped to the decreases with the onset of winter in north- based Virent, which is being acquired by US-
more conventional figures of $360-370/tonne east Asia. based refiner Tesoro.
SBR
Melissa Hurley profile last published 5 october 2013
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