China oil demand growth poised to slow to around 4% in H1 2024

China's oil demand growth is likely to ease in the first half of 2024 to around 4%, according to consultancies, with resurgent consumption from the aviation and petrochemical sectors offset by weaker diesel usage due to an ongoing property sector crunch, said Hydrocarbonprocessing.

Slowing demand growth for the world's biggest oil importer comes amid what remains an uncertain outlook for the Chinese economy and as travel patterns normalise following the post-COVID rebound earlier in the year.

The Organization of Petroleum Exporting Countries foresees Chinese demand averaging 16.41 million barrels per day (bpd) in the first half of 2024, up 3.2% on 2023 levels, while the International Energy Agency (IEA) forecasts demand averaging 17.1 million bpd for the full year, to show 3.9% growth.

Even though China's economy has made a faltering recovery this year, oil consumption was still on course to set record highs, having been subdued between 2020-2022 by strict COVID curbs. OPEC and the IEA expect China's oil demand to show growth in 2023 of 7.6% and 12.1%, respectively.

OPEC has dismissed fears of that demand growth for oil in China is fading, describing negative sentiment as "overblown" in a recent report. OPEC's forecasts show China accounting for 24.6% of global oil demand growth in the first half of 2024, according to Reuters calculations.

The OPEC+ group, which includes allies such as Russia, on Wednesday unexpectedly delayed an upcoming ministerial meeting expected to discuss output cuts as producers struggled to agree on production levels, sources said. Consultancies Wood Mackenzie, Rystad Energy and Energy Aspects respectively forecast China's first-half 2024 oil demand to grow by 3.7%, 4.0% and 4.4% versus the same period in 2023.

Their growth forecasts for the first six months range from about 578,000 bpd to 700,000 bpd to total between 16.2 million and 16.82 million bpd. China does not provide official data on oil consumption or inventory levels, and the private growth forecasts use different bases of comparison.

The forecasts put expected growth next year marginally below pre-pandemic rates, when China's oil demand grew at an average of 4.5% between 2016 and 2019, according to Reuters calculations using IEA data for full year growth.

We remind, the European Parliament voted on Wednesday in favour of a new law aimed at reducing packaging waste and boosting recycling across the EU. The legislation was overseen by Belgian MEP Frederique Ries (MR/Renew) and passed with 426 votes in favour, 125 against, and 74 abstentions.

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BASF is taking advantage of the currently low interest rate environment in China and has signed a CNY 40 billion (approximately €5 billion) syndicated bank term loan facility with a maturity of 15 years for its new Verbund site in Zhanjiang, said the company.

The new site is currently under construction in Guangdong province. The loan will be provided by major Chinese banks and offers flexible repayment options to optimize BASF’s cash utilization.

BASF is financing the new Verbund site with a combination of around 20 percent equity and 80 percent debt. “By signing this bank term loan facility, BASF is implementing its strategy to finance the Zhanjiang project with funds from China,” said Dr. Dirk Elvermann, Chief Financial Officer of BASF SE. The company’s financial strength and proven track record of strong sales and earnings growth in China enabled BASF to obtain highly attractive financing conditions for the loan.

“We are impressed by the great support for the project from the local banking market,” said Christian Jutzi, President Corporate Finance. “This underscores that our banking partners’ are confident that our new Verbund site will become a key platform for the long-term profitable and sustainable growth.”

We remind, BASF, a globally leading battery materials producer, and SK On, a globally leading electric vehicle battery cell manufacturer, have entered into an agreement to jointly evaluate collaboration opportunities in the global lithium-ion battery market focused on North America and Asia-Pacific. The collaboration brings together strong business and product development capabilities to develop industry-leading battery materials for lithium-ion batteries.

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German materials manufacturer Covestro has forged a global partnership with Chinese automotive trim company Xinquan Automotive at the China International Import Expo in Shanghai, said the company.

This alliance seeks to strengthen the China business and enhance international collaboration, supporting Xinquan’s expansion into North America, Europe, and ASEAN countries. The Chinese company is dedicated to innovation, aiming to establish itself as a global player in the automotive industry. Partnering with Covestro provides Xinquan access to Covestro’s wealth of expertise and extensive global network. This partnership is focused on pioneering technologies and sustainable solutions that align with the dynamic requirements of the global automotive market.

Covestro excels in offering a diverse array of solutions for the automotive industry. Polyurethane, invented by Otto Bayer at Covestro’s predecessor company Bayer, is the vital material for automotive interiors. Polyurethane-based automotive interior applications, such as instrument panels, door panels, and center armrests, offer a soft, tactile feel, enhancing the comfort of both drivers and passengers. Polyurethane materials are known for their lightweight properties, minimal odor, and low levels of volatile organic compounds. These attributes create a comfortable and environmentally compatible interior environment, answering key demands of the automotive industry.

We remind, Covestro is expanding its production capacities for thermoplastic polyurethane (TPU) Films in the Platilon® range, as well as the associated infrastructure and logistics. To this end, the company is investing a low double-digit million euro amount in its German center of excellence for the aforementioned films in Bomlitz, Lower Saxony.

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BASF has come a major step closer in building a proton exchange membrane electrolyze, said the company.

In cooperation with Siemens Energy, work on the water electrolysis at the Ludwigshafen site – the so-called Hy4Chem-EI project – is now entering the next phase of construction. Dr. Franziska Brantner, Parliamentary State Secretary at the Federal Ministry for Economic Affairs and Climate Action, presented the official notification of funding to Dr. Melanie Maas-Brunner, member of the Board of Executive Directors of BASF SE and Site Director Ludwigshafen, in the presence of Malu Dreyer, Minister-President of Rhineland-Palatinate.

With an output of 54 megawatts (MW) and a capacity of up to 8,000 metric tons of hydrogen per year, the PEM electrolyzer will be one of the largest of its kind in Germany once it is operational. Powered using electricity from renewable energy sources, the system will produce CO2-free hydrogen and thereby reduce greenhouse gas emissions at the site by up to 72,000 metric tons annually. BASF will primarily use this hydrogen as a raw material in the manufacture of products with a reduced carbon footprint. In addition, the company will supply hydrogen for mobility in the Rhine-Neckar Metropolitan Region to support the ramp-up of a hydrogen economy in the area.

BASF and Siemens Energy plan to begin operating the water electrolysis plant in 2025. In cooperation with the State of Rhineland-Palatinate, the German Federal Ministry for Economic Affairs and Climate Protection is contributing up to €124.3 million to the project – up to €37.3 million of which will be financed by the government of Rhineland-Palatinate.

BASF has set itself the target of achieving net zero CO2 emissions by 2050. The use of renewable energies, an increase in energy efficiency in production, and new technologies will support this objective. The Ludwigshafen site has a key role to play: Numerous technologies are being tested and developed at the company’s headquarters with the aim of replacing fossil fuels and using renewable electricity instead. In addition to water electrolysis, examples include the demonstration plant for electrically heated steam cracker furnaces and a methane pyrolysis test plant.

We remind, BASF, a globally leading battery materials producer, and SK On, a globally leading electric vehicle battery cell manufacturer, have entered into an agreement to jointly evaluate collaboration opportunities in the global lithium-ion battery market focused on North America and Asia-Pacific. The collaboration brings together strong business and product development capabilities to develop industry-leading battery materials for lithium-ion batteries.

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Covestro’s third quarter of 2023 was characterized by a persistently difficult market environment with continued low demand in all regions, said the company.

Covestro’s Group sales declined by 22.7 percent to EUR 3.6 billion (previous year: EUR 4.6 billion), mainly as a result of lower selling prices and a slight reduction in volumes sold. The Group’s EBITDA fell by 8.3 percent to EUR 277 million (previous year: EUR 302 million). In addition to exchange rate movements, this was attributable, inter alia, to a decrease in volumes sold due to lower demand. In contrast, higher margins had a beneficial effect on EBITDA, since the decline in the selling price level was more than offsetby lower raw material and energy prices compared to the extremely high raw material prices in the prior-year quarter. Lower selling and administrative expenses and a decrease in fixed cost of goods thanks to the Group’s strong focus on efficiency also had a positive effect. Net income in the third quarter was EUR –31 million (previous year: EUR 12 million), and the free operating cash flow (FOCF) rose to EUR 308 million (previous year: EUR 33 million).

“Again, there was no significant revival of the economic activity in the third quarter, with global demand remaining at a very weak level,” says Dr. Markus Steilemann, CEO of Covestro. “Covestro is thus all the more committed to creating the right framework: we are operating efficiently and with a high degree of cost consciousness. We are also investing in the global expansion of our capacities using innovative technologies. We are thus continuing to consistently orient ourselves towards the circular economy and are expanding the foundations for sustainable growth.”

We remind, Covestro is expanding its production capacities for thermoplastic polyurethane (TPU) Films in the Platilon® range, as well as the associated infrastructure and logistics. To this end, the company is investing a low double-digit million euro amount in its German center of excellence for the aforementioned films in Bomlitz, Lower Saxony.

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