The Week in Chemistry: US PE, PP spot prices remain flat for fourth consecutive week; German chemical companies scale back production amid rising costs, Borealis to carry out global expansion plans despite rising energy costs, unstable demand

Sample article from our Chemicals Industry

LOS ANGELES , November 11, 2022 () –

 

US Resins

US spot resin markets remained well-supplied overall in the first week of November. However, fewer fresh railcar offers are meeting strong underlying demand, generating higher price expectations.

Producers reportedly plan to continue operating at reduced rates through the end of 2022, lending support to higher pricing.

Nevertheless, processors continue to face economic uncertainty, which could dampen demand and put a stop to pricing recovery.

Spot prices for prime PE resin held steady for the fourth week running. Meanwhile, off-grade material increased slightly.

Spot PP pricing followed a similar pattern, with prime resin holding flat for the third consecutive week while off-grade prices saw modest increases.

The primary source of this information is Plastics Today.

 

German Chemical Industry

Germany’s chemical sector has been scaling back production in the face of rising energy prices.

An announcement from BASF in October that the company would permanently reduce its European operations surprised political leaders, who are concerned for the impact the trend could have on the economy.

Chemical products account for 10% of the nation’s exports. However, more than 25% of chemical companies have now scaled back their production, according to a German Chamber of Industry and Commerce survey in November.

According to Wacker CEO Christian Hartel, the situation is only poised to worsen in the coming months.

Large chemical companies such as BASF and Wacker typically have long-term energy purchasing contracts that temporarily shield them from rising prices. However, contracts are gradually expiring, opening the door to soaring costs for many companies.

The German government’s €200B aid package would subsidize 70 percent of gas use for 25,000 industrial-level consumers.

BASF, however, has stated that it will not apply.

The primary source of this information is Euractiv.

 

Borealis and Global Chemicals Capacity

Borealis will continue with plans to grow its operations globally despite rising energy costs and economic concerns, the company’s CEO Thomas Gangl said in an interview with S&P Global.

The company plans to reach a global production capacity of 600,000 tonnes in 2025, compared to 100,000 tonnes in 2019. It plans to achieve this through acquisitions as well as organic growth.

Borealis does not plan to idle any production capacity in 2023, Gangl says, noting that the company makes products for segments that have relatively stable pricing and margins.

Energy prices will need to come down to relieve pressure on the chemical industry, Gangl notes.

In the meantime, Borealis began charging an additional €180 per tonne for European polyolefins in October to cope with rising energy costs.

The company also faces weakening demand in the near term in Europe and Asia. However, demand from Asia may pick up in a few more years on recovering market growth.

The primary source of this information is S&P Global Platts.

 

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Dan Rivard
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