China economic recovery to boost oil demand

Oil producers may have to reconsider their output policies following a demand recovery in China, the world's second-largest oil consumer, as per Hydrocarbonprocessing.

Demand in China, the world's largest crude importer and No. 2 buyer of liquefied natural gas, has become the biggest uncertain factor in global oil and gas markets in 2023 as investors bet on the speed of its recovery after Beijing lifted COVID restrictions in December.

"We expect about half of the growth in global oil demand this year will come from China," Birol told Reuters on the sidelines of the India Energy Week conference. He added that China's jet fuel demand is exploding, putting upward pressure on demand. "If demand goes up very strongly, if the Chinese economy rebounds, then there will be a need, in my view, for the OPEC+ countries to look at their (output) policies," Birol said.

Producer group OPEC+ angered the United States and other Western nations in October when it decided to cut output by 2 million barrels a day from November through 2023, instead of pumping more to cut fuel prices and help the global economy as the U.S. advised.

Birol said he hoped such a situation does not repeat, and that OPEC+ - which includes members of the Organization of the Petroleum Exporting Countries and allies such as Russia - will return to a constructive role in the market as demand improves. OPEC+ rolled over the group's current output policy at a meeting on Wednesday, leaving production cuts agreed last year in place.

Separately, Birol said price caps on Russian oil have achieved the objectives of both stabilizing oil markets and reducing Moscow's revenues from oil and gas exports. Russia's revenues likely fell by nearly 30% in January, or about USD8 billion, compared with a year before, he added. G7 nations, the European Commission and Australia this week approved a USD100 per barrel price cap on diesel and a USD45 per barrel cap on discounted products such as fuel oil starting from Feb. 5.

This followed a similar measure they implemented on Dec. 5 barring Western-supplied maritime insurance, finance and brokering for seaborne Russian crude unless it was sold below a USD60 price cap. Birol said fuel markets might face difficulties in the short term as global trade routes "reshuffle" to accommodate Europe drawing on more imports from China, India, the Middle East and the United States.

That could force other markets such as Latin America to scout for alternative imports, he said. Europe has decided to end refined fuel imports from Russia from Sunday.

We remind, Shenghong Refining and Chemical has started up its new vinyl acetate monomer (VAM) unit around the second half of January 2023. The VAM unit has a capacity of 300,000 tonnes/year. The start-up of Shenghong's new VAM unit has pushed China’s total VAM capacity up to 3.12m tonnes/year.

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Toray Advanced Materials Korea (TAK) has announced plans to increase its annual production capacity of polyphenylene sulfide (PPS) resin by 5,000 tons, said Kedglobal.

The expansion will take place at the Gunsan plant located in Saemangeum Industrial Complex and is set to be completed by 2024, bringing TAK's total annual capacity to 13,600 tons, the largest in South Korea. TAK will also raise its capacity for sodium sulfide, the main raw material for PPS resin, to 4,800 tons per year.

The Gunsan plant is unique in that it is the first to have a batch production system that allows for the production of PPS resin and compounds from raw materials. PPS is a super engineering plastic with high heat resistance, chemical resistance, and excellent mechanical strength, making it a popular choice for use in industrial parts such as electric vehicles, electronic devices, and housing facilities.

North Jeolla Province Governor Kim Kwan-young played a role in securing the expansion by asking Toray Industries President Akihiro Nikkaku for additional investment during his visit to Japan late last year.

Toray has expressed its intention to strengthen its relationship with the local community through this investment. "We will provide administrative support to ensure that the company's infrastructure growth can be completed in a timely manner," Governor Kim said.

We remind, Toray Industries, Inc., announced that it has developed a polyethylene terephthalate (PET) film that combines excellent applicability and adhesion for water-based and solvent-free coatings and can eliminate solvent-derived carbon-dioxide emissions. The company looks to produce the film at a domestic plant by end-March 2024 to help popularize eco-friendly film products for which decarbonization during manufacturing is desirable. These items include release, adhesive, printing, packaging, and automotive films.

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Mumbai-based Hindalco Industries Ltd. subsidiary Novelis Inc., an aluminum recycling and rolling company headquartered in Atlanta, has reported its financial results for the third quarter of its 2023 fiscal year, revealing some year-over-year losses, said Recyclingtoday.

Compared with the previous year, net income attributable to the company's common shareholder decreased 95 percent to USD12 million primarily because of factors driving lower adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) and unfavorable metal price lag from falling aluminum local market premiums, according to the company. Excluding special items in both years, third-quarter fiscal year 2023 net income from continuing operations decreased 60 percent relative to the prior year to USD96 million largely because of lower adjusted EBITDA.

"As expected, our results were pressured by continued unprecedented inflationary headwinds but were also further impacted by lower shipments resulting from significantly larger than anticipated customer inventory reduction actions in the beverage packaging market,” says Novelis President and CEO Steve Fisher. "We will continue to address these short-term challenges while remaining focused on building for our future in a prudent manner. Importantly, we believe the underlying demand fundamentals driven by increasing consumer preferences for lightweight, sustainable aluminum solutions in all our key end markets remains unchanged."

The company's net sales for the quarter decreased 3 percent to USD4.2 billion compared with USD4.3 billion in the prior-year period. Novelis attributes this to lower average aluminum prices and a 2 percent decrease in total flat-rolled product shipments to 908,000 tons. The lower prices were offset somewhat by increased product pricing and favorable product mix. Novelis reports shipping fewer beverage cans as customers reduced inventories and adjusted to more normalized levels of can demand postpandemic and softer demand for specialty products in this weaker macroeconomic environment. Conversely, easing supply chain constraints, including higher semiconductor availability, resulted in higher automotive shipments compared with the prior year.

Adjusted EBITDA decreased 33 percent to USD341 million for the quarter compared with $506 million in the prior-year period as a result of what Novelis says was "an extraordinary inflationary environment and higher energy costs" arising from geopolitical instability. Less favorable metal benefits from recycling, unfavorable foreign exchange and lower volume also negatively affected its third-quarter results. Providing some relief were higher product pricing, including some higher cost pass-through to customers, and favorable product mix, the company says.

Adjusted free cash flow from continuing operations was an outflow of $158 million for the first nine months of fiscal year 2023 compared with generation of USD217 million in the prior-year period. The company attributes the decrease largely to unfavorable metal price lag in the current year compared with a favorable lag in the prior year, lower adjusted EBITDA and higher capital expenditures. The company says it had a net leverage ratio of 2.6x at the end of the third quarter of fiscal year 2023 compared with 2.3x in the prior-year period. Novelis says it had a total liquidity position of USD2.1 billion as of Dec. 31, 2022.

In its earnings presentation slides, the company notes that its capital expenditure growth projects remain on track, including its USD2.5 billion greenfield rolling and recycling facility in Bay Minette, Alabama, and its USD365 million automotive recycling center in Guthrie, Kentucky.

We remind, Novelis Inc, a leading sustainable aluminium solutions provider and the world leader in aluminium rolling and recycling, broke ground and began construction on 7 Oct 2022 on its USD2.5 bn recycling and rolling plant in Bay Minette, AL, US. The highly advanced facility is expected to create up to 1000 new jobs and will have an initial 600,000 tonnes of finished aluminium goods capacity per year focused on the beverage container market, with flexibility for automotive production. It also adds a new recycling centre for beverage cans, increasing the company's recycling capacity by 15 bn/y cans when fully operational.

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Single-use plastic production rose globally by 6 MMtpy from 2019 to 2021 despite tougher worldwide regulations, with producers making little progress to tackle the problem and boost recycling, said Hydrocarbonprocessing.

Single-use plastics have emerged as one of the world's most pressing environmental threats, with vast amounts of waste buried in landfills or dumped untreated in rivers and oceans. The manufacturing process is also a major source of climate-warming greenhouse gas.

However, while growth has slowed recently, the production of single-use plastic from virgin fossil fuel sources is still nowhere near its peak, and the use of recycled feedstocks remains "at best a marginal activity", Australia's Minderoo Foundation said in its Plastic Waste Makers Index.

"Make no mistake, the plastic waste crisis is going to get significantly worse before we see an absolute year-on-year decline in virgin single-use plastic consumption," it said.

Exxon Mobil was at the top of the list of global petrochemical companies producing virgin polymers used in single-use plastics, followed by China's Sinopec.

Sinopec also leads the way when it comes to building new production facilities over the 2019-2027 period, the report said, with more than 5 MMt of annual capacity planned. Exxon Mobil was second with around 4 MMt.

Sinopec said in a statement that it was the first Chinese company to join the Alliance to End Plastic Waste, a global coalition of companies supporting sustainable plastic, and was also developing its own biodegradable plastic products.

China has driven rapid growth in global plastic demand over the past 15 years. Despite high-profile bans on some single-use products starting in 2019, it also accounted for half of the 15 MMt of new capacity that came online over 2019-2021.

China said last year in a "five-year plan" to tackle plastic production that it would make deep cuts in the production and usage of single-use plastics and ban some products entirely.

Chinese production growth is expected to slow, but the country still accounts for half of the top 20 companies planning to increase virgin polymer capacity up to 2027, Minderoo said.

Around 137 MMt of single-use plastics were produced from fossil fuels in 2021, and it is expected to rise by another 17 MMt by 2027, the researchers said.

We remind, Repsol has announced an investment of EUR26m to start a new production line (Reciclex range) for recycled plastics at its Puertollano Industrial Complex in Spain. Expected to start in Q4 2024, the new line will have the capacity to manufacture 25,000 tons of recycled plastic per year, which is almost double the current capacity of 16,000 tons.

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Trinseo, a specialty material solutions provider, and its affiliate companies in Europe announced a price increase for all polystyrene (PS), ABS and SAN grades, mostly based on raw material cost increases for styrene production, said the company.

Effective February 1, 2023, or as existing contract terms allow, the contract and spot prices for the products listed below will increase as follows:

STYRON™ and STYRON™ X-TECH general purpose polystyrene grades (GPPS) by +50 Euro per metric ton
STYRON™ and STYRON™ A-TECH, STYRON™ C-TECH and STYRON™ X- TECH high impact polystyrene grades (HIPS) by +50 Euro per metric ton
MAGNUM™ ABS resins by +40 Euro per metric ton
TYRIL™ SAN resins by +50 Euro per metric ton

We remind, Trinseo, a specialty materials solutions provider, is pleased to announce a distribution agreement with Omya, a leading global producer of industrial minerals and worldwide distributor of specialty chemicals. Under the terms of the agreement, Omya will provide high-quality ABS and PC/ABS resins to Trinseo automotive and mobility customers in North America starting February 1, 2023. The materials are offered under Trinseo’s well-known brands MAGNUM™ ABS Resins and PULSE™ PC/ABS Resins.

Trinseo, a specialty material solutions provider, partners with companies to bring ideas to life in an imaginative, smart, and sustainably ility-focused manner by combining its premier expertise, forward-looking innovations and best-in-class materials to unlock value for companies and consumers. From design to manufacturing, Trinseo taps into decades of experience in diverse material solutions to address customers’ unique challenges in a wide range of industries, including consumer goods, mobility, building and construction, and medical.
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