Inflation and Uncertainty in European Plastics Industry

The fallout from Russia's war with Ukraine is having a lasting impact on almost every market, including plastics in Europe, with inflation, low demand, and uncertainty, said Chemanager.

To gauge this uncertainty, PIE conducted its 10th Market Survey with almost 200 participants from across the European plastics industry.

While Europe's energy crisis is easing, inflation and general uncertainty continue to shake the European plastics industry, according to the latest Plastics Information Europe (PIE) survey. Nearly half of respondents said their company's performance in the first half of 2023 was worse than in the second half of 2022, with only 28.7% seeing some improvement. This follows a trend from last year, when almost half of respondents reported worsening performance in H2 2022, with only 26.7% reporting an improvement.

Companies based in France, Spain, Portugal, the UK and Ireland did not report a downturn in business, while most companies in Benelux, Italy and Central and Eastern Europe said business had weakened, suggesting regional irregularities. Plastics recyclers have been particularly hard hit by falling prices for virgin plastics, with 70% reporting less business in H1 2023 compared to H2 2022, and none seeing an improvement.

While H1 2023 fell short of expectations, the industry remains cautiously optimistic, with over 29% of respondents expecting an upward trend in H2 2023 and the majority not expecting a decline. European sales forecasts are cautious, with Spain, Portugal, and the Benelux showing strong optimism, while plastics recyclers and resin producers lack positive forecasts.

In the face of economic pressures, some 31% of companies surveyed reduced budgets, while only 19.7% increased spending compared to the previous year. Investment varied by region, with Southern Europe showing higher activity and the Benelux/Nordic regions showing lower investment. Plastics recyclers were the most eager to invest, while those involved in the trade and distribution of plastics products were more cautious.

We remind, ALPLA and PTT Global Chemical (GC) introduces Thailand's first food-grade rPET to the market, which is already being used for Thailand's first 100% rPET bottles.

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Oil prices hit new peaks on Wednesday with global benchmark Brent crude hitting its highest since January after a steep drawdown in U.S. fuel stockpiles helped offset some concerns of weaker demand from China, said Reuters.

Brent was up USD1.00, or 1.2%, at USD87.17 a barrel by 11:06 a.m. ET (1506 GMT), having earlier touched $87.65, its highest Jan. 27. West Texas Intermediate crude (WTI) gained USD1.13, or 1.4%, to USD84.03. The U.S. benchmark touched $84.65, its highest level since November 2022.

U.S. gasoline stocks fell by 2.7 million barrels last week, while distillate inventories, which include diesel and heating oil, dropped by 1.7 million barrels, government data showed, compared with analysts' expectations in a Reuters poll for both to hold mostly steady.

"We're seeing gasoline demand surge. It's raising concerns about the tightness of inventories for gasoline, which are still below average," said Phil Flynn, an analyst at Price Futures Group.

Markets largely shrugged off a higher-than-expected 5.85 million-barrel build in U.S. crude stocks after a record drawdown the week before.

The U.S. fuel stock drawdown helped offset some demand concerns after Chinese data on Tuesday showed crude oil imports in July fell 18.8% from the previous month to their lowest daily rate since January.

Supporting prices, however, were top exporter Saudi Arabia's plans to extended its voluntary production cut of 1 million barrels per day for another month to include September. Russia also said it would cut oil exports by 300,000 bpd in September.

We remind, China's state-controlled Shaanxi Yanchang Petroleum Group is expected to double its purchases of Russian ESPO blend this year to about one million metric tons, according to two sources familiar with the plant's operations. The company is due to start up a 50,000 barrels per day crude processing unit at its refinery in landlocked Shaanxi province in the north later this month, after retooling work that allows the plant to process more crude.

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MRC) -- U.S. oil refiner Phillips 66 and grain trader Archer-Daniels-Midland are discussing a biofuels joint venture with an aim toward producing lower-carbon jet fuel, three people familiar with the matter said, said Hydrocarbonprocessing.

The oil and corn-based ethanol industries, which were at odds for years over blending mandates, have increasingly become allies amid a series of partnerships aimed at securing crop feedstocks to produce lower-carbon biofuels without costly refinery upgrades.

The two companies are discussing putting ADM's dry corn mill operations into a venture that would convert grain-based alcohol to jet fuel, the people said.

ADM, an ethanol pioneer and for years the top U.S. producer, has sought to downscale its role in the business in recent years. It put the dry corn mills up for sale in 2016 and, after failing to find a buyer, spun off the assets into a wholly-owned subsidiary called Vantage Corn Processors.

ADM sold its Peoria, Illinois, dry mill in 2021. Its two remaining dry mills in Columbus, Nebraska, and Cedar Rapids, Iowa, are among the country's largest, with a combined capacity to produce 613 million gallons of ethanol a year, according to Renewable Fuels Association data.

Meanwhile, Houston-based Phillips next year plans to start making renewable fuels at a Rodeo, California refinery converted from crude oil to processing fats, used cooking oils and soybean oils into 50,000 barrels per day of renewable diesel, gasoline and jet fuel.

Several U.S. states, led by California, have set up low-carbon fuel markets that reward fuel producers for developing motor fuels that emit less carbon. They can earn credits for producing fuels with lower carbon intensity compared with refining crude oil.

Phillips declined to make an executive available for comment and both ADM and Phillips 66 declined to comment. Potential value of the deal could not be immediately learned.

We remind, Phillips 66 plans to run its refineries in the mid-90% range of their combined crude oil throughput capacity of 1.9 million barrels per day (bpd) in the third quarter of 2023, Chief Financial Officer Kevin Mitchell said. The company's refineries ran at an average of 93% of combined capacity in the second quarter of the year, the company said on Wednesday in a statement released ahead of a conference call with investor analysts.

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Covestro has started production in its new plant for polyurethane elastomers systems at its integrated site in Shanghai, China, said the company.

Groundbreaking for it had been announced in summer 2022. The investment is in the double-digit million Euro range. It is part of a series of investments in the Elastomers raw materials business the company undertook in the past few years worldwide, e.g. in its sites in Thailand and Spain. The new plant in Shanghai shall help meet ever rising demand for the material in the Asia-Pacific region, for example in renewable energy applications such as offshore cable protection and silicon wafer cutting rollers of photovoltaic panels, among others.

“We provide materials that help to facilitate a more climate-neutral and circular world. The products to be manufactured at our new plant in Shanghai are an excellent illustration of this, as they will assist our customers in meeting the increasing demand for renewable energy solutions,” says Sucheta Govil, Chief Commercial Officer at Covestro. “In doing so, we are supporting the growth of an industry that is vital for preserving our climate. Furthermore, we are promoting sustainability in various industries by supplying materials containing renewable attributes.”

The polyurethane elastomers systems produced in the site can be used for a variety of end products. For offshore windpower, the protection of subsea cables is a core application area. The material is also used in the manufacturing process of photovoltaic panels or in screening medias in the mining industry. In all of the above, it is designed for purpose in close collaboration with customers to withstand even the harshest of conditions thanks to its excellent wear, tear and abrasion resistance.

We remind, Covestro has commenced a new manufacturing line for thermoplastic polyurethanes (TPUs) that will be utilized for paint protection films (PPFs). The line is installed at the firm's current Taiwanese facility in Changhua. Products manufactured here will be available in the global market. The world's PPF market is expected to rise steadily until 2030, with Asia-Pacific representing the biggest share of the overall market.

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India’s fuel consumption slipped to a 10-month low in July, government data showed, as monsoon rains restricted mobility in the world's third-biggest oil importer and consumer, said Hydrocarbonprocessing.

Total consumption in July, a proxy for oil demand, totaled 18.09 million tons, down 6.6% from June. However, it was up 2% compared with the same period a year earlier.

Sales of diesel, mainly used by trucks and commercially run passenger vehicles dipped about 13% month-on-month to 6.89 million tons in July.

"With consumption patterns already slowing down due to the monsoon, weak July figures for diesel demand were aggravated by the floods in Northern Indian states over the first-half of last month," said Viktor Katona, lead crude analyst at Kpler.

Fuel demand in India typically falls during the four-month monsoon season beginning in June as parts of the country are affected by heavy floods.

"Restricted mobility and an overall slowdown in construction activity have been the key factors behind bitumen demand falling to the lowest reading this year. We believe India's diesel demand will remain subdued in August, only to rebound in September-October," Katona said.

Sales of gasoline in July were 5.3% lower than the previous month at 2.99 million tons. Sales of bitumen, used for making roads, dropped 30% from June, while fuel oil use rose 9.6% in July. Cooking gas, or liquefied petroleum gas (LPG), sales increased about 7% to 2.39 million tons and naphtha sales rose 9.3% to 1.07 million tons, the data showed.

We remind, PT Pertamina plans to begin producing bioethanol from sugarcane and cassava this year and has also begun production of green hydrogen using geothermal energy.

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