Icis Chemicals Outlook 2017 Europe

Europe Chemicals Outlook 2017
EUROPE
CHEMICALS
OUTLOOK
2 17
Key markets covered:
Acids Intermediates Solvents

Aromatics Olefins Surfacants
Base Oils Oleochemicals Upstream Feedstocks
Fibre Chains Plastics/Polymers And so much more...
QUICK NAVIGATION
AROMATICS PLASTICS/POLYMERS SURFACTANTS AND
BENZENE, TOLUENE AND XYLENE AFRICA POLYMERS OLEOCHEMICALS
CHLORVINYLS FATTY ACIDS/ALCOHOLS
POLYETHYLENE (PE)
BASE OILS POLYPROPYLENE (PP)
BASE OILS POLYSTYRENE (PS) AND EXPANDABLE UPSTREAM FEEDSTOCK
POLSTYRENE (EPS) BIOFUELS
POLYETHYLENE TEREPHTHALATE (PET) CRUDE
INTERMEDIATES POLYMETHYL METHACRYLATE NAPHTHA
ACETIC/VAM (PMMA)
ACRYLATE ESTERS/ACRYLIC ACID R-PET
BUTANEDIOL (BDO) ACRYLONITRILE-BUTADIENE- OTHER
CYCLOHEXANE (CX) STYRENE (ABS)/STYRENE- 2016 HIGHLIGHTS
ETHANOLAMINES ACRYLONITRILE (SAN) AUTOMOTIVE OUTLOOK
MALEIC ANHYDRIDE (MA)/ PHTHALIC TURKEY PE CAUSTIC SODA
ANHYDRIDE (PA) TURKEY PP CENTRAL AND EASTERN EUROPE
METHYL METHACRYLATE (MMA) OUTLOOK
MONOPROPYLENE GLYCOL (MPG)/ CHEMICAL M&A
PROPYLENE OXIDE (PO) POLYESTER FIBRECHAIN CHEMICALS OUTLOOK
PHENOL/ACETONE CAPROLACTAM COMPANY PERFORMANCE
PLASTICIZERS/OXO-ALCOHOLS EPOXY/ECH
FERTILIZERS
PU CHAIN MELAMINE
OLEFINS MDI/TDI MTBE/ETBE
BUTADIENE (BD) RUSSIA OUTLOOK
ETHYLENE/ PROPYLENE SHIPPING
SOLVENTS TIO2
ETHYL ACETATE (ETAC)/BUTYL
ACETATE (BUTAC)
IPA ICIS PRODUCTS AND SERVICES
MEK PRICE FORECAST REPORTS
MIBK NEWS
DASHBOARD
PRICE REPORTS
SUPPLY AND DEMAND DATABASE
You can rely on ICIS for all your market intelligence needs
PRICING INFORMATION SUPPLY AND DEMAND DATA
ICIS is the benchmark for independent and reliable price assessments for key Asian Receive an end-to-end perspective across the global petrochemical supply
countries such as India, Northeast and southeast Asia for over 180 commodities. chain, enabling you to grasp the local or regional scenario in a global context.
Our reports also provide price histories and expert commentary to help you Data includes import and export volumes, consumption, plant capacities,
understand the key price drivers and market conditions and settle your contract production and product trade flows from 1978 up to 2030.
prices confidently with access to time-sensitive offers, bids and price movements
Request your free sample report Enquire about our supply and demand data
NEWS INFORMATION FORECAST REPORTS DIGITAL CHEMICAL BUSINESS MAGAZINE
Be the first to find out about breaking news and ICIS publishes monthly forecast reports for ICIS Chemical Business (ICB) e-magazine is the
analysis across the global petrochemical markets. selected commodities showing a 12-month rolling No.1 source of market intelligence and analysis
Our market-moving news articles cover production price forecast as well as details of supply and of the global chemical markets. It is the essential
updates, plant capacities, output and shutdowns, demand, trade balances, capacity and margins. It is reading for global chemical industry players,
plus so much more. a valuable tool to identify commercial opportunities providing decision support for executives making
in the short to mid-term. current transactions, as well as short term and long
term planning.
Request a free trial of ICIS news Enquire about the price forecast reports Download a free sample now
AROMATICS
BENZENE, TOLUENE AND XYLENE
EUROPE AROMATICS FACE GAME- the impact of the spike in oil prices by late The spectre of crude oil volatility as well
CHANGING 2017 November pushing the market higher. as the wider political uncertainties are still
By Truong Mellor hanging over the petrochemical industry,
This has opened up the arbitrage window but European players believe that the
The aromatics market in Europe is into Asia from both Europe and the US as shape of the benzene market in 2017 will
facing some potential game-changing 2016 draws to a close. With spot numbers very much depend on how any import
developments in 2017, combined with wider in Europe chasing the higher Chinese volumes will be absorbed.
political and economic uncertainties on the market, domestic prices hit a yearly high in
global stage. early December. Some aromatics players expect to see a lot
of import material being fixed directly with
European benzene prices were volatile over Looking ahead to 2017, players anticipate benzene consumers in Europe, thus limiting
the course of 2016, with the region proving that the European benzene market will see activity in the spot market as needs are met
to be the highest-priced market for much considerable impact from new production with contractual volumes.
of the first six months of the year. Limited capacities in both India and the Middle East.
demand and a build-up in supply saw the However, a regional dependence on
US market struggle with low pricing. This will help rebalance the European imports will always led to a degree of
benzene market, which has struggled with uncertainty in the market due to delayed
As a result, Europe saw a sharp increase availability in recent years due to the gradual vessels and production outages. One trader
in benzene imports arriving during the first move towards lighter cracker feedstocks earlier this year said that while it expects
half of 2016. Eurostat data showed Indian and the impact this has on regional to see benzene importers target European
benzene imports up from the same period feedstock pyrolysis gasoline (pygas) supply. consumers, this may not necessarily lead to
in 2015, while Saudi import volumes of a complete slowdown in spot trading.
benzene had doubled over the same period. With more of Europes benzene supply
coming from abroad, it remains unclear We could see waves of spot trading next
Spot prices in Europe subsequently eased what impact this will have on liquidity and year, the trader said. Indian vessels could
by May 2016, but have since seen spurts of pricing in the region. get delayed or re-routed to the Middle East,
bullishness due to availability constraints. then consumers will step into the market
The exit of key aromatics traders such as to cover themselves. Once those vessels
In a reversal of the usual global dynamic, Vitol and Trammo from the stage in 2016 has arrive, there could then be a surplus of
benzene prices have been taking cues from already curtailed the liquidity of the European material, so those same spot volumes end
Asia towards the end of the year, with some market, which has shrunk in recent times up back in the market.
regional tightness in China combined with due to production rationalisation.
Meanwhile, toluene and mixed xylenes
(MX) activity in 2017 is likely to remain
linked with the fortunes of the gasoline
market, with the gasoline blending sector
still the driving force in terms of European
pricing and consumption.
Sources have spoken of a potential sea-

change in the global gasoline blending
market next year with the change in gasoline
specifications towards a lower sulphur content
in China and the US by January 2017.
The reduction of sulphur content in the

refining process will limit the availability
of octane blending components, which
could see firmer prices as a result. Toluene
can always be substituted in the gasoline
blending pool, but if reformate and TX
streams are commanding higher numbers,
this should also support toluene.
Copyright 2017 Reed Business Information Ltd. ICIS is a member of RBI and is part of RELX Group plc. ICIS accepts no liability Back to Quick Navigation | 03
for commercial decisions based on the content of this report. Content published between December 2016 and January 2017.
BASE OILS
BASE OILS
EUROPE BASE OILS MARKET TO unclear whether this will be the case during You can rely on ICIS
BE DRIVEN BY SUPPLY, CRUDE OIL 2017 as a lot hinges on whether markets
such as Nigeria, become viable for exports
for all your market
By Sarah Trinder
again. intelligence needs
Solvent neutrals availability and crude oil
prices look likely to be the main drivers in Solvent neutral supply in the Baltic and PRICING INFORMATION
the European base oils market during 2017. Black Sea were also tight towards the end
ICIS is the benchmark for independent and
of 2016 but there were signs of availability reliable price assessments for key Asian
A number of Group I capacity closures potentially improving. The winter holiday countries such as India, Northeast and southeast
Asia for over 180 commodities. Our reports also
in 2015 left some players expecting period and first half of January tend to be
provide price histories and expert commentary
brightstock supply to tighten during 2016, fairly quiet for these markets and it remains to help you understand the key price drivers and
but this was not the case. to be seen whether this will bring any market conditions and settle your contract prices
confidently with access to time-sensitive offers,
balance to market conditions. bids and price movements
The scenario expected for 2016 had
been that Group I capacity closures in Fundamentals aside, crude oil values and
Request your free sample report
2015 - amounting to around 1.5m tonnes, their impact on downstream vacuum gasoil
according to some sources - would leave (VGO) prices could also influence the base
availability of brightstock in Europe tight, oils market in Europe during 2017. NEWS INFORMATION
with it ultimately becoming a niche product. Be the first to find out about breaking news
There is usually a time lag of between and analysis across the global petrochemical
markets. Our market-moving news articles cover
However, this has not been the case a month to three months before such
production updates, plant capacities, output and
during 2016, with producers focusing on upstream costs filter into base oils prices, shutdowns, plus so much more.
production of heavier grades in Europe and depending on whether fundamentals
supply of SN150 and SN500 tightening. outweigh this influence, so rises in VGO Request a free trial of ICIS news
prices seen during Q4 2016 are yet to be
Limited supply of SN150 and SN500 has seen in base oils values.
SUPPLY AND DEMAND DATA
been exacerbated by unconfirmed outages
at plants within Europe. However, sources expect firmer VGO Receive an end-to-end perspective across the
global petrochemical supply chain, enabling
values to underpin base oil prices at current you to grasp the local or regional scenario in
The tight conditions on the solvent levels at least, if not support firmer values a global context. Data includes import and
further down the line. export volumes, consumption, plant capacities,
neutral grades, combined with firmer
production and product trade flows from 1978
upstream costs and weaker euro versus up to 2030.
US dollar exchange rates, has resulted in Crude oil supply is expected to balance out,
expectations that domestic Group I prices if not tighten, during 2017 amid an OPEC Enquire about our supply and demand data
will increase around the beginning of 2017, deal to curb production. Should crude oil
at least in the case of SN150 and SN500. prices increase on the back of this, VGO
FORECAST REPORTS
prices could also increase and this could
The outlook for brightstock is cloudier, with eventually feed into downstream base oil ICIS publishes monthly forecast reports for
selected commodities showing a 12-month rolling
recent lengthier supply conditions having prices. price forecast as well as details of supply and
translated into lower prices. However, demand, trade balances, capacity and margins.
Although there are potentially some bullish It is a valuable tool to identify commercial
one source suggested that availability of
opportunities in the short to mid-term.
brightstock is already balancing out amid signs on the cards for 2017, the outlook
signs of healthier demand and that length for base oils in Europe remains uncertain Enquire about the price forecast reports
could be absorbed during 2017. and entirely dependent on how the supply/
demand balance plays out in 2017, and
A lack of arbitrage opportunities has meant whether these fundamentals outweigh the DIGITAL CHEMICAL BUSINESS MAGAZINE
the European export market has been influence of upstream costs. ICIS Chemical Business (ICB) e-magazine is the
illiquid throughout the year. Again, it is No.1 source of market intelligence and analysis
of the global chemical markets. It is the essential
reading for global chemical industry players,
providing decision support for executives making
current transactions, as well as short term and
long term planning.
Download a free sample now
INTERMEDIATES
ACETIC ACID/VAM
EUROPEAN ACETIC ACID MARKET This is where change is now in the offing, Without looking further ahead, producers
TO LIVEN UP AFTER PERIOD OF with methanol tracking upward in the short. state that they are confronted with an
STABILITY It had been expected that contract prices immediate need to implement this increase
By Peter Gerrard in the first quarter would reflect higher or there will be no commercial sense in
numbers already seen in the spot market. In continuing to make the material and ship it
Last years Outlook for the European acetic the event, the announcement of a triple digit across the Atlantic to Europe.
acid market was headlined No big game hike on 15 December meant an effective
changes on the horizon for acetic acid. increase of 60/tonne in the cost of acetic of There is some scepticism from other
Until 15 December this year, much the acetic acid from raw materials alone. players that a major rise will be necessary
same could probably have been said because, they say, acetic acid producers
for 2017. Caution should be used in any prediction have benefited from relative movements
about what the evolution of methanol in methanol and acetic acid values.
The market, as broadly predicted for 2016, numbers will be over the year. But, given Nevertheless, the near term prospect is a
has proved to be reasonably stable and the balance of the acetic market, any rise likely significant upward price push.
balanced for most of the year, following in the feedstock cost now, or later on, will
some early softness, mainly arising from the probably be limited to no more than its This probable price increase in the opening
upstream methanol market. impact on acetic acid producer costs and weeks and months of 2017 will also be
therefore have negligible impact on the fuelled by rise in the value of the dollar
The European market is fundamentally spread between the two. against sterling and the euro, another cost
well supplied. This does not appear likely factor, which sellers will be looking to factor
to change during the course of the coming In the short-term, producers are adamant into their prices. As with the methanol price,
year, which removes the main driver for that the hefty upturn in their production costs it is not necessarily prudent to build forecast
meaningful price increase over the period must be met by a sharp rise in the acetic models on the basis of unpredictable
as a whole. The chief determinant of any acid price, with steep increments already developments on the foreign exchange
price movement therefore seems to be in announced in the US being matched by markets.
raw material cost, deriving from methanol corresponding increases in Europe. Several
values mainly in Europe and North America. suppliers are active in both regions.
term planning.
INTERMEDIATES
ACRYLATE ESTERS/ACRYLIC ACID
EUROPE AA, ACRYLATES WAIT will return in a more progressive manner, a The market might start okay but by mid Jan
ANXIOUSLY FOR BASF RETURN, supplier said. things will be very short; if someone does
GAZPROMS PLANT not have contractual business, then there
By Vasiliki Parapouli For me it will be interesting to see if BASF will be problems, the buyer added.
will take a more relaxed stance, at least for
The European acrylic acid (AA) and the first months of the year, another source In terms of raw material prices, sources said
acrylate esters markets have entered said. that propylene is very likely to move up in
2017 amid lingering supply uncertainty the first and second quarter of the year and
caused by the explosion and consequent For others, what happened at Ludwigshafen this will probably be reflected into AA and
fire at BASFs Ludwigshafen site in is a lesson that has to be learned from the acrylate esters prices.
mid-October. market in order to move forward in 2017.
After climbing on very high levels, some
The incident has been monopolising the I hope that after that, all the suppliers, we sources expect spot prices to remain flat
markets attention for the past couple of will come to our senses and start supplying from December into January:
months as supply has turned significantly product at realistic market prices; prices are
tight, especially when it comes to butyl- not sustainable and we have to come back However, come mid-January they will
acrylate (butyl-A), 2-ethylhexyl acrylate to realistic margins, a supplier said. probably spike again. Generally speaking, a
(2-EHA) and AA. lot will depend on naphtha and propylene,
According to this source, demand will be a a buyer said.
A few days after the incident, German bit higher than normal at the beginning of
chemical major BASF declared force the year: Customers are looking for reliable It remains to be seen if producers will be
majeure on deliveries of acrylic monomers partners; they appreciate when they see successful to keep the momentum they had
which is still is in place, while it is unclear flexibility and reliability from the suppliers in October and November into next year
when the company will be able to lift it and side, it said. in terms of pricing, according to another
fully come back to normal production. source.
There has definitely been a shift in the
The big question, at least for the beginning thinking of the market. Other players were wondering when
of 2017, will be when and how is BASF Gazprom Neftekhim Salavat will bring back
going to return into the market, according Most players agree that the market will online its AA plant in Russia, although this
to a source. remain tight, at least for the beginning of the probably will not happen until March or
year, with a buyer stating that January will April.
For some players, it will be interesting to still be tight but adding things would start
see the approach that BASF will take once relaxing from the end of January onwards. Originally, the plant was expected to begin
it will be ready to come back. production in October 2016, but due to
Another buyer said that there was not sufficient winter conditions, this has been postponed
I am wondering if they are going to be amount of product in the last quarter of 2016 to for some point during the first quarter of
more aggressive; but I suspect that they allow people to have full inventories. 2017, according to market estimates.
PRICING INFORMATION DIGITAL CHEMICAL BUSINESS MAGAZINE
ICIS is the benchmark for independent and reliable price assessments for ICIS Chemical Business (ICB) e-magazine is the No.1 source of market
key Asian countries such as India, Northeast and southeast Asia for over 180 intelligence and analysis of the global chemical markets. It is the essential
commodities. Our reports also provide price histories and expert commentary reading for global chemical industry players, providing decision support for
to help you understand the key price drivers and market conditions and settle executives making current transactions, as well as short term and long
your contract prices confidently with access to time-sensitive offers, bids and term planning.
price movements
Request your free sample report Download a free sample now
INTERMEDIATES
BUTANEDIOL (BDO)
EUROPE BDO PRICES HIT BOTTOM

IN 2016 WITH UPWARD PRESSURE
INTO 2017
By Katherine Sale
After two years of prices free falling in the

European butanediol (BDO) market, prices
have finally hit the bottom, with upward
pressure dominating first-quarter contract
talks for 2017.
Prices have dropped 27% from April

2014 to April 2016, using the ICIS mid-
point, which has compressed margins for
European producers.
One producer said its biggest concern for

2017 is industry profitability after years of
falling prices.
There is a consensus in the market that

the bottom has been reached, and this
was reflected in the rollover of third-quarter
prices, and fourth-quarter prices edging
higher in 2016. Although the demand increase from the Chinese prices recently. This has been a
automotive sector is expected to continue at key talking point, with sentiment that global
First-quarter contract talks are in the early a positive level, many feel it may not be to prices are firming.
stages, with players on both sides of the the extent seen last year.
market expecting increases. The exchange rate has also had an impact,
Growth across the EMEA region is with some importers seeing a substantial
BASF has announced it will be targeting expected, with opportunities from the squeeze on margins because of the
a 50/tonne increase for the quarter, polyester and polyurethane chains. weakened euro against the dollar.
and Ashland has announced it will
seek a 75/tonne increase, where Supply expectations are mixed, with sellers This is even more painful in a market that
contracts allow. currently seeing the market on the snugger has had actual price decreases for such a
side, whereas buyers see the overall supply long period.
At this stage, expectations from buyers are level as healthy.
limited, although one said the maximum it The exchange rate could draw material away
would accept for the quarter is a 20/tonne There is less length in the market compared from Europe, with exports to dollar-based
increase. to the start of 2016, with inventories at a regions more attractive because of this.
lower level for some sellers after a period of
The outlook for demand is positive with good demand. With more balanced fundamentals and growth
players expecting stable-to-firm demand expected for demand, the Europe BDO
and continued growth from the Supply has tightened in the US and market may have reached a turning point with
automotive sector. Asia, which resulted in a two-year-high in upward pressure for the start of 2017.
INTERMEDIATES
CYCLOHEXANE (CX)
EUROPE CX MARKET TO BECOME At the start of 2016 CEPSA announced it You can rely on ICIS
MORE RELIANT ON IMPORTS would be reducing operating rates, reducing
output by 50,000 tonnes as its Huelva,
for all your market
AFTER SABIC PLANT CLOSURE intelligence needs
By Katherine Sale Spain facility.
The European cyclohexane (CX) market Although there has been no confirmation PRICING INFORMATION
will become more reliant on imports in from the producer, once SABIC exits the
2017, with the chemicals major SABIC European market there is expectation for reliable price assessments for key Asian
closing its Wilton, UK, facility any day now, production to be ramped back up. countries such as India, Northeast and southeast
leaving supply balance as the key talking provide price histories and expert commentary
point for 2017. We expect that operating rates at existing to help you understand the key price drivers and
suppliers will increase, given there is scope market conditions and settle your contract prices
SABIC is expected to close its 330,000 to increase utilisation rates in Europe. bids and price movements
tonne/year CX plant at the end of 2016, with However, additional incremental supply
material being taken from stock until they would have to be imported, ICIS consultant
are empty for the first part of 2017. Rob Peacock said on the topic.
The company has the largest nameplate The closure of Invistas adipic acid plant NEWS INFORMATION
capacity of any producer in Europe, but in Orange, Texas this year has also made Be the first to find out about breaking news
actual operating rates are expected to be substantial amount of CX available. and analysis across the global petrochemical
much lower than full capacity. production updates, plant capacities, output and
At full capacity the facility produced 200,000 shutdowns, plus so much more.
There is no confirmation from the producer tonnes/year of adipic acid, which required
on this, or on the exact date that production 140,000 tonnes of CX. Request a free trial of ICIS news
with cease.
However, plants closing in Europe is not a
Once production comes to an end at Wilton, new occurrence in a market that has seen
Receive an end-to-end perspective across the
Europe will be left more reliant on imports to rationalisation over the years because of global petrochemical supply chain, enabling
keep supply balanced in Europe. poor profitability. you to grasp the local or regional scenario in
a global context. Data includes import and
Despite this, demand outlooks from buyers export volumes, consumption, plant capacities,
The looming closure has resulted in a large production and product trade flows from 1978
amount of trading activity in 2016. Imports for 2017 are positive, with some seeing up to 2030.
increased, and there was talk of spot being possible growth between 2-4%.
offered with a very high discount level in the Enquire about our supply and demand data
summer. With the region becoming more dependent

on imports, some buyers are concerned
FORECAST REPORTS
2016 was expected to be the point of that shipping or weather issues could cause
a short-term imbalance in the market. ICIS publishes monthly forecast reports for
reckoning for the CX market, with a difficult selected commodities showing a 12-month rolling
trading year for sellers as players worked price forecast as well as details of supply and
hard to cement relationships in readiness There are also some concerns that with one demand, trade balances, capacity and margins.
less player in the market any production It is a valuable tool to identify commercial
for the shift in 2017. opportunities in the short to mid-term.
problems in Europe would hit the supply
The question on everyones lips was where level quicker than before. Enquire about the price forecast reports
material is likely to come from to meet the
demand in Europe. With product available in the US and Asia,
the majority of buyers are expecting the DIGITAL CHEMICAL BUSINESS MAGAZINE
There is potential for operating rates to be overall supply level to be balanced. ICIS Chemical Business (ICB) e-magazine is the
No.1 source of market intelligence and analysis
ramped up in Europe, with the excess capacity of the global chemical markets. It is the essential
expected to be utilised after the shutdown. With shifting tides in the European CX reading for global chemical industry players,
market it may be an uncertain start to the providing decision support for executives making
year, until an equilibrium is reached and the current transactions, as well as short term and
However, a large chunk of the deficit is long term planning.
expected to come from overseas, especially market adjusts to having one less player in
from the US, making Europe more reliant their midst. Download a free sample now
on imports.
INTERMEDIATES
ETHANOLAMINES
EUROPE ETHANOLAMINE trial production in Asia and Brazil, based There are also other measures which could
SOURCES UNFAZED BY on increasing demand in Asia and South help to counter any possible adverse effects
GLYPHOSATE UNCERTAINTY, America. on DEA demand into glyphosate, were it not
to be re-approved in Europe, post ECHA
MIDEAST OPS
One ethanolamines manufacturer said it assessment. This includes options such as
By Heidi Finch
does not expect a fundamental change converting DEA into TEA, where flexibility
European ethanolamine demand is unlikely in ethanolamine demand in Europe next allows.
to be adversely affected by the uncertainty year, although it does anticipate a possible
about the future of downstream glyphosate increase in demand for MEA for a certain One supplier talked of good demand for
usage in the EU, which is an outlet for di- fungicide application in Brazil, following its DEA into the downstream adhesives and
ethanolamines (DEA), according to market approval there. coatings sector, which it suggested could
players. help to lessen the impact to some extent of
MEA demand into derivative triazine is any possible loss in demand for European
Neither do they believe that demand will be typically strongly linked to upstream crude DEA into the glyphosate sector, post the
negatively affected by the expected start-up oil and shale gas developments and the ECHA assessment.
of new Sadara ethanolamine capacity in the volatility in upstream markets. There is
Middle East in 1H 2017, taking into account some talk that if crude oil prices were to Some selling sources are also as equally
structural trade flows and growth potential move up over a sustained period, this is unfazed by the new joint venture Dow/Saudi
outside the region. likely to support a pick-up in MEA demand Aramco Sadara ethanolamines facility in the
and prices, although this remains to be Middle East and any possible effect on the
Some players expect that demand for seen. European ethanolamines market next year.
ethanolamines is likely to be comparable
to 2016, with some talk that it could move The future of DEA demand into glyphosate One supplier suggested that any effect from
closely in line with GDP, or even slightly in the EU also remains uncertain. This is the new Sadara capacity is likely to only
above, depending on the homologue. because the European Chemical Agency be felt in 2018 rather than 2017. This is
(ECHA) has yet to issue an opinion on taking into the account the expectation that
One supplier suggested that mono- glyphosate usage amid concerns over the remaining derivative production at the
ethanolamines (MEA) demand is likely to possible health related risks and whether it Sadara complex is likely to come onstream
grow in line with GDP but tri-ethanolamines should or should not be approved in the EU in mid-2017.
99% (TEA 99%) is likely to rise slightly more beyond 2017.
than GDP this year if demand continues There is some feeling among players that
to hold up well into the main downstream Despite this, ethanolamine players the new Sadara volumes in the Middle
construction and esterquat sectors and if remain unfazed by this uncertainty, as East are unlikely to have any real effect
material was not to be readily available. they maintain that the DEA market into on physical availability in the European
glyphosate in Europe is a small market ethanolamines market next year, as the
There was also some talk that not only TEA, relative to the other regions and because main Sadara volumes are expected to
but also DEA may move slightly above GDP DEA is structurally a net export product supply the Asian and Middle East markets
in 2017 in Europe, provided that the GDP in Europe. rather than the European market anyway.
growth is quite modest.
Therefore, players are only concerned This is taking into account larger growth
This is because ethanolamine run rates are if the ECHAs assessment were to ban potential in the emerging markets compared
normally determined by MEA demand and glyphosate usage in Europe and if this were to the mature European market. However,
therefore if DEA and TEA demand were to to lead to other regions to re-consider their this has not been officially confirmed.
fare better than MEA, this could mean less options regarding glyphosate usage and
availability for DEA and TEA. However, the turn against it. There is some talk that the new Sadara
latter remains to be seen. facility is more likely to help to increase
However, players said that it still remains supply flexibility for Dow in Europe, as it
One buyer expects ethanolamine demand unclear what the outcome of the ECHA allows Dow to supply ethanolamines to
in Europe to grow modestly because it is assessment will be and when it will actually Europe either from the US or Middle East.
a mature market. However, it said that it be known. One ethanolamine supplier
expects the real growth potential to come said it did not anticipate any effect on DEA Exchange rate factors are also likely to
from emerging markets outside of Europe. demand into glyphosate in 2017, possibly have a bearing on the flow of imports into
only in 2018, if at all, as the ECHA is not Europe from US dollar regions in 2017,
It referred to some new downstream expected to make an assessment until the where flexibility allows.
esterquat operations which have started end of 2017 at the latest.
A few suppliers from outside Europe, have The European ethanolamines market is this will depend on how demand pans out in
already reduced their exports to Europe expected to be balanced to well-supplied Europe and how the Sadara volumes, once
during the fourth quarter of 2016, due during 2017 provided that there are no available, are allocated among the regions.
to lacking profitability from a price and unexpected plant reliability issues, although
exchange rate perspective and it remains to
be seen if this continues.
term planning.
INTERMEDIATES
MALEIC ANHYDRIDE (MA)/PHTHALIC ANHYDRIDE (PA)
EUROPE MA MARGINS AT CRUNCH at year-end and reduce the amount offered While BASF may be experiencing longer
POINT AND PA STILL RESTRICTED to the spot market. term implications, other producers are in the
INTO 2017 process of building stock.
By Jane Massingham There are some customers that talk of
healthy growth into 2017 and 2018, but it is These issues led to a rather tight market
Maleic anhydride (MA) margins in Europe thought the European capacity should be and higher spot prices in Q4 and some
have reached the crunch point, able to cover the increased volumes. say this will continue at least in the early
producers say. part of Q1. However, PA contracts are
Imports are expected to remain at a low integrally tied into the orthoxylene (OX)
Looking into 2017, manufacturers state level in the first half of the year given that price movement and here there have been
that plants cannot continue to operate with other regions are more attractive. smaller movements.
the current margins and stress it is just not
feasible. Another aspect that could change the The outlook for PA in Europe 2017 will as
product flow in 2017 is the anticipated usual largely depend on availability of both
2016 has ended with firm spot prices for Polynt and Reichhold merger that is PA and OX past Q1 and the price of OX.
both flake and liquid and some say that this expected to be finalised in Q1. This is
is an attempt by customers to build stocks pending approval from the European There are a couple of scheduled outages
ahead of the hefty price increases proposed Commission. planned for OX in Q1, so this could help to
for Q1. support the PA market.
The phthalic anhydride (PA) market is also
Producers are struggling to absorb the expected to remain firm in the first part of There is some geographical growth for PA
higher feedstock prices of butane and, 2017, though this is driven more by supply in Europe, namely for polyester products
given that contract prices largely rolled over issues through Q4 2016. as the resins and plasticizers are now more
for Q3 and Q4 in 2016, margins have been mature markets.
eroded. There was a force majeure in place in
November from LANXESS 115,000- There are some estimations of growth for
As a result, producers are seeking 120,000 tonne/year plant following poylester polyols markets of between 15-
increases of between 50-100/tonne, problems starting up after its scheduled 20% in 2017.
depending on the source, region and outage in October.
starting point. While a significant proportion of the
Deza also had extremely low output through market is liquid, there are cost implications
Some customers have agreed an increase November after planned maintenance to transport material due to the high
of some magnitude could be possible, but at its 35,000 tonne/year site and normal temperatures that it needs to be stored at.
feel a 30-50/tonne move is more realistic rates were not expected until the end of
given the balance in the market. December/early January. As a result, some see increasing interest
for flake spot business. Liquid has typically
Availability can cover all contractual BASF too, although mainly for captive use, been dictating a premium price to flake, but
commitments. However, some speculated was running at very low rates following the flake prices are now in line with liquid and
there were production issues at two sites, fire at its Ludwigshafen site in October. some expect these could continue to move
but it would appear these suppliers have Proviron also underwent routine maintenance further, especially if there is no short-term
taken a strategic move to control volumes in the second half of November. improvement to the supply balance.
INTERMEDIATES
METHYL METHACRYLATE (MMA)
FATE OF EUROPE MMA SUPPLY peaking in November when some buyers Production is expected to reach normal
UNCLEAR WITH NEW MIDEAST were concerned they would have to stop levels for Dow in the first quarter, with some
CAPACITY ON HORIZON production due to a lack of material. buyers seeing this has the key factor that is
By Katherine Sale tightening global MMA supply.
Europe is a net importer of MMA, but with
The European methyl methacrylate (MMA) supply problems in other regions, firming The supply shortness came to a head in
market is questioning what will the fate prices and a weakened euro against the the fourth-quarter of the year, with Lucite
of European supply be in 2017 with new dollar exchange rate the imports dried up. International implementing sales control on
Middle Eastern capacity on the horizon, in a European contracts on 18 October.
market that has been plagued by tightness Although some material continued to flow
for much of 2016. from Brazil, overall imports were down and The sales control was in place until the
spot prices rose. start of December, with a number of buyers
In mid-2016 everyone thought it was turning to the spot market during this period
going to be a bloodbath for producers next Dow Chemical has an ongoing issue at its for the additional volumes required.
year, but now it seems the sentiment has 360,000 tonne/year Deer Park facility, which
changed. said one buyer. started in the middle of 2016 after force Quarterly and monthly contract prices have
majeure was declared by its acrylonitrile increased since April this year, with the
Even up to last years European (ACN) supplier. upward pressure continuing into the new
Petrochemical Association annual meeting year amid solid demand and tight supply.
in Budapest in October, buyers were INEOS declared force majeure at its Green
confident that the only consequence of the Lake, Texas, facility on 15 July after it was At this stage, new Middle Eastern supply is
new supply coming onstream in the Middle discovered that the main feedstock propylene very much welcomed by buyers to loosen
East was a long European supply balance pipeline had been compromised by flooding. the tightness in Europe, but the question is
next year. when will it come?
With Dow Chemical running at a reduced
However, especially in the second half rate for the second half of the year and also Mitsubishi Rayon Co, parent company
of 2016 supply month-by-month has buying material to meet its own demand, of MMA major Lucite International, is
become tighter and tighter, with constraints this added a further strain on global supply. scheduled to come on stream in a joint
venture with SABIC with a 250,000 tonne/
year MMA facility in the middle of 2017.
MMA regional operating capacity (tonnes/year)
Petro Rabigh, a joint venture between
Japans Sumitomo Chemical and state-
owned energy firm Saudi Aramco, is also
scheduled to have a new 90,000 tonne/year
MMA plant next year.
Petro Rabigh had said it was delaying

the completion of its Phase II expansion
project, which includes the MMA production,
to 2Q 2017, citing construction market
challenges, the Saudi Arabia-based
producer said on 30 September.
However, recently there has been talk

that the project has been delayed again,
possibly to the start of 2018. There is no
confirmation from either producer on this at
the time of writing.
With 340,000 tonnes/year scheduled to

come on stream in 2017 this will result in
Saudi Arabia jumping to seventh largest
producer in the world.
At this stage players think exports from the
Middle East to Europe are unlikely before
the last quarter of 2017.
Some think Middle Eastern material will not

hit Europe until 2018 and so the previous
influx that was set to lengthen the European
market seems unlikely.
As SABIC will be a new producer in the MMA

market, it will first have to go through the
Registration, Evaluation, Authorisation and
Restriction of Chemicals (REACH) regulation
process before selling product to Europe.
The demand outlook is positive with

continued growth, with some sectors
outperforming GDP expectations.
Continued growth is expected from the

automotive sector, a key use of downstream
polymethyl methacrylate (PMMA). It has
been a particularly strong year for the
sector, and although growth for 2017 may
not hit the heights of 2016, an increase is
still expected.
At present some producers are seeing an

unprecedented level of demand for the
season and this strong level is expected to
continue in 2017.
One seller said it sees underlying demand

growth at around 1.5% for 2017, however
with imports expected to be down for the
first half of the year that could almost
double.
For some the first quarter is the strongest

of the year, with customers throughout the
supply chain replenishing stocks.
Europe is the lowest priced region globally

and combined with a weakened euro
against the dollar, Europe is currently not an
attractive export destination.
MMA future planned operating capacity (tonnes/year)
With demand for 2017 set to start strong
and little respite at the end of the year
for producers to build up inventory, the
tightness that has dominated discussions
in Europe will continue for at least the first
quarter.
With a major maintenance turnaround

scheduled in October at Lucite
Internationals Cassel facility, buyers are
hopeful that the supply situation will have
eased by that stage.
The supply worries of 2016 will continue

into 2017 with buyers eagerly awaiting the
new Middle Eastern supply and the easing
of constraints globally.
INTERMEDIATES
PROPYLENE OXIDE (PO)/MONOPROPYLENE GLYCOL (MPG)
EUROPE PO/MPG DEMAND LIKELY to growing demand into the flavours and There is also some talk that the new PO
TO BE CLOSELY TIED TO GDP fragrances sector and reformulation for and MPG Sadara capacities are unlikely
By Heidi Finch detergents in certain cases. to affect the European market, because
the Sadara PO and MPG volumes are
European propylene oxide (PO) and mono One MPG supplier said that players expected to be used in the emerging
propylene glycol (MPG) demand is likely to who buy both MPGI and DPG are more markets such as Asia, the Middle East and
move closely around GDP in 2017 and no concerned to secure their volumes for DPG Africa rather than the mature European PO
significant change in availability is expected in rather than MPGI in 2017. and MPG markets. However, the latter was
2017 despite the start-up of the new Sadara not officially confirmed.
capacity in the Middle East. This is based on expectation that the
tightness in DPG supply in Europe during It also understood that PO in Sadara will be
European PO consumption is estimated to 2016 could continue into 2017, because mainly used captively anyway and therefore
move slightly above GDP, driven by polyols, while DPG is co-produced with MPGI, the that any effect is likely to be felt on PO
according to some PO suppliers. yield of DPG is structurally limited relative to derivative exports from Europe, such as for
MPGI and the growth potential for 2017 is polyols and possibly for mono propylene
However, the latter will also depend on how greater for DPG than for MPGI. glycol rather than for PO directly. However,
polyols demand pans out and on availability this was not officially confirmed.
for toluene di-isocyanate (TDI), which has In addition, MPG rates are typically driven
been very tight over recent months. TDI is by demand for MPGI and not DPG and However, there is some expectation that
used in combination with polyols to make there is no real flexibility to adjust ratios, exports of MPG from Europe may be less
polyurethanes. according to recent producer feedback. affected by the new Sadara capacity when
compared to polyols exports.
Overall demand for MPG in Europe is There is some talk, however, that a
estimated to be flat or move in line with few players can feed MPG back into This is because the Sadara capacity is
GDP in 2017, according to several buying the process in order to generate some relatively small in size for MPG when
and selling sources, amid mature market additional DPG, but this is unlikely to make compared to polyols and structurally more
conditions. any significant difference as these recycled volumes are exported from the EU outside
volumes are believed to be very small the region for polyols rather than MPG,
However, some manufacturers maintain anyway. according to recent Eurostat data.
that mono propylene glycol industrial
grade (MPGI) demand could be boosted One PO/MPG supplier remains optimistic Overall, PO and MPGI players do not
seasonally, if there is a harsh winter in about export opportunities for PO and expect to see any significant changes in
2016/2017 and there is a strong demand derivatives, if the US dollar were to remain supply and demand in Europe in 2017,
for MPGI into the main downstream de-icer strong against the euro, but this will also despite the new Sadara capacity, because
sector over this period. depend on price developments globally. of greater growth potential outside Europe.
There is some talk that any growth potential European PO and MPG players do not DPG availability in Europe is still likely to
for MPG in Europe is likely to be driven by expect to see any real effect of the new PO be challenging in 2017, despite the new
MPG US pharmaceutical (MPG USP) USP and MPG joint venture Dow/Saudi Aramco Sadara MPG capacity, as structurally limited
and di-propylene glycol (DPG) rather than Sadara capacity in the wider global market DPG yields relative to MPGI are likely to
for MPGI. until 2018, because the remaining Sadara be further compounded by DPG growth
derivative operations are not expected to expectations in excess of GDP. However,
DPG is estimated to grow in excess of GDP start-up until the 1H of 2017, albeit in a the latter will also depend on how MPG run
next year, which believed to be mainly due staggered way. rates pan out too.
INTERMEDIATES
PHENOL/ACETONE
PETRO RABIGH A QUESTION MARK Before 2016, the last time acetone spot and acetone capacity online in mid-
FOR PHENOL AND ACETONE IN 2017 prices were above propylene contract price 2017. However, some European market
By Luke Milner levels was February 2013, according to participants remain sceptical and expect
ICIS data. further delays, which could mean no impact
The question of when Petro Rabighs phenol on the European market until 2018.
and acetone production capacities will come December 2016 saw what for some was a
on line is perhaps the greatest unknown for surprise upturn in acetone spot prices as It remains to been seen just when the
the European phenol and acetone sector demand remained strong, when compared new capacity in the Middle East will be
in 2017. to supply and export opportunities remained operational and just how the European
in place. Demand for phenol was also market will react. The difficulties of shipping
Nevertheless, as market participants considered relatively strong for December phenol and questions over storage
contemplate the opening months of 2017 many during the last month of 2016, placing capacities for additional phenol in Europe
expect little change when compared to 2016. producers and sellers in a good position have been raised by market participants as
moving into the new year. possible barriers to increased imports, and
One producer said: [Im] not expecting any while acetone is easier to transport, Petro
change in early 2017. Meanwhile early 2017 adder agreements Rabigh is also expected to begin production
have seen mixed results, with limited of MMA at the site.
Meanwhile another producer said of 2017: increases and decreases as well as
To be honest, at least in the first three rollovers, with geographical location, adder Back in Europe, the phenol market is
quarters I dont see the market different to level starting points and different company expected to continue to be predominantly
this year. strategies all contributing to the differing contract based in 2017, with prices moving
picture emerging across the market. in relation to the benzene contract price
In 2016 the European phenol markets with an adder on top, while movements in
supply and demand dynamics remained In 2016 structural overcapacity did not result propylene will continue to play a key role
relatively well balanced throughout the year, in actual oversupply in the European phenol in acetone contract price negotiations.
while a rapid rise in acetone spot prices and acetone markets, however, in 2017 Movements in upstream prices will help to
in the second quarter of 2016 followed by supply and demand dynamics could be determine both whether European material
a long period of limited softening that saw impacted by new capacity in Saudi Arabia. is competitive when compared to prices in
spot prices remaining above acetone methyl export markets and whether the European
methacrylate (MMA) contract price levels Petro Rabigh, a joint venture between market becomes attractive to sellers from
until the end of the year and above propylene Saudi Aramco and Japans Sumitomo outside of Europe, all of which remains to
contract levels from May until September. Chemical, is expected to bring new phenol be seen as the year unfolds.
term planning.
INTERMEDIATES
PLASTICIZERS/OXO-ALCOHOLS
OXO-ALCOHOLS AND latter part of 2016, as it was not impacted water levels on the River Rhine.
PLASTICIZERS MARKET SET as much by the production problems.
TO HOLD FIRM ON SUPPLY Upstream, orthoxylene (OX) pricing is
However, it is still considered a balanced expected to remain tight for the short term,
LIMITATIONS
to firm market, with targets in place for Q1 with jumps expected for January prices of
By Jane Massingham
and an expected healthy level of demand between 40-70/tonne.
The outlook for the oxo-alcohols and moving into its traditionally strong period of
plasticizer markets remains firm into 2017 consumption in Q2. Additional upward pressure is likely to come
on the back of supply restrictions, buyers from propylene in the first half of 2017 as
and sellers concur. Downstream acrylate esters are expected the market remains snug in Europe on the
to remain firm and tight into 2017. Glycol back of planned turnarounds.
For oxo-alcohols, a force majeure ethers were also said to be starting the year
declaration remains in place at BASFs on a strong note, with higher targets posted Turkey launched an anti-dumping duty
nbutanol (NBA) and isobutanol (IBA) site in and possible export opportunities in place. (ADD) investigation against South Korean
Ludwigshafen, Germany. DOTP. The intention to investigate Korean
On plasticizers, given that DOP is such DOTP imports was published on 23
The unit has a nameplate capacity of a small percentage of the European November.
450,000 tonnes/year of NBA and 50,000 plasticizer market and used mainly in niche
tonnes/year of IBA and, given reports that areas in medical sector, there appears Exports from Korea to Turkey have risen
the propylene pipeline will not be fully to be greater stability moving forward, a lot, said a producer in the region, so we
functional until mid-2017, supply constraints and customers have not been faced with are going to the government for protection.
for NBA and to a lesser extent IBA are the same surging prices felt for other
expected to remain. plasticizers in Q4. The announcement of the investigation
could lead to less Korean material being
Perstorp will no longer produce NBA from Due to legislative issues, many have moved imported to Turkey, as importers could face
its Stenungsund, Sweden, site in 2017 as away from traditional phthalate plasticizer DOP. higher duties.
it no longer produces the plasticizer dioctyl
phthalate (DOP). Dioctyl terephthalate (DOTP), diisononyl Although there is no formal timeframe
phthalate (DINP) and di-propyl heptyl for this, news is expected around March/
Along with the supply issues, there are phthalate (DPHP) have all seen significant April 2017. This latest investigation into
also upstream constraints expected from increases in Q4 on the back of the plasticizer imports follows one already
propylene in Europe due to a number of supply issues arising from a combination started in June, on Korean imports of
planned turnarounds and higher prices of unexpected production issues for phthalate DOP. An outcome to this has not
are expected for contracts on propylene. both plasticizers and upstream phthalic yet been reached.
However, US and Asia availability is said anhydride (PA) in Europe.
to have better supplies and there was talk There were also reports that US producer,
therefore that globally propylene should be Into 2017, DINP, DPHP and DOTP are all Eastman, has filed an extra petition in the
balanced. expected to remain tight for at least the US with the aim of imposing duties on
first quarter. While BASF remains on force DOTP imports, a distributor said.
Indeed, the January settlement for majeure there are small volumes of DINP
propylene in Europe at plus 45/tonne being produced and delivered to customers. In addition, potential news on environmental
resulted in NBA and IBA price increase issues with regards to the usage of
targets of between 30-40/tonne, However, there are other producers phthalate plasticizers in certain applications
depending on the player. still building stocks following unplanned could see further switches in the future.
production issues, which were a result of However, most sources feel the changes
2-ethyl hexanol (2EH) has not seen the unexpected issues at upstream phthalic that need to occur in the short-term have
same amount of upward pressure in the anhydride (PA) plants. Added to this are already done so within Europe, with further
logistical issues with deliveries due to low shifts unlikely in 2017.
OLEFINS
BUTADIENE (BD)
REVERSAL OF FORTUNE FOR

EUROPEAN BD PRODUCERS
By Nel Weddle
2017 looks set to be a positive year for

European butadiene (BD) producers, who
can be forgiven for feeling that the tide has
turned after a couple of slow and sluggish
global demand years and that finally
the benefits of the 2014-2015 capacity
investments will be fully realised.
2016 saw the start of the upturn. At first

largely supply-driven, price increases in
Asia led to a pick up in demand for export.
Competition among players keen to

exploit the arbitrage was fierce but spot
availabilities were limited as producers
had opted to restrict their spot exposure in
2016 because of ongoing uncertainties over
derivative demand performance, particularly
that of synthetic rubber. None of them,
and particularly those with added capacity
The crunch period will be mid-February to May We expect a strong Q1-Q2, a producer
to deal with, wanted to be left looking for
some European producers have already said, adding that it was unlikely to have spot
outlets.
outlined that spot availabilility will be extremely sales in January and February as it would
limited during this period as they fulfill their own be preparing for its own turnaround.
Additionally, output was reduced
contractual obligations and support other co-
because of constraints on crude C4
producers through maintenance downtimes. I have the impression that buyers are pretty
(CC4) BD feedstock production through
nervous, said a second producer, exports
light feedslates and planned, as well as
The table below shows 2017 planned will be heavily reduced in the first half.
unplanned issues at crackers.
turnarounds known so far. None are
confirmed, given that most companies have Reinforcing this view is talk that certain
As 2016 wore on, there was little respite
a policy of not commenting on production. domestic European consumers have taken
from the firming market conditions. It was
telling that the price roller coaster of the
previous years the big highs followed by
equally big lows which the market had come Company Location Timing
to expect was now not so evident. Higher
prices were being sustained which was Dow (one line) Terneuzen, NL End Feb-end April
a key signal that derivative markets were
improving, supported by improvements in SABIC Beek, NL March-April
the natural rubber market as well.
INEOS Dormagen, Germany March-April
Moving into the fourth quarter, ongoing
strong demand from Asia, good demand MOL Tiszaujvaros, Hungary June
from our own European domestic
consumers who had also felt the
Borealis Porvoo, Finland Aug-Oct
benefit from soaring Asian prices on their
derivative markets all the while mindful of
SABIC Wilton, UK Sep-Oct
a turnaround season on crackers and BD
units which gets underway mid-Q1 both
here in Europe and in Asia, have seen spot Total Gonfreville, France Sep-Oct
prices soar.
steps to counter expected supply shorts so producers can concentrate on export this year and its impact on naphtha, still
through securing mini supply contracts. opportunities. Europes primary feedstock.
Asian buyers reactivity is unpredictable, but Producers were open-armed at the start of Our biggest fear is that ethylene wont be
we prefer to be safe than at risk potentially, the year, now its please take a ticket and as good as it has been so ethane crackers
a consumer said. wait in line, everyone is now more focused will continue to run flat out [being a low
on Asian business, a source said. cost producer and their ethane is fixed take
While producers limited spot exposure in or pay] - and the naphtha crackers will be
2016 through flexible and competitive terms Despite the strong competition for volumes, forced to reduce, a third source said.
and conditions for contractual consumers increasing freight rates and other shipping
for 2016 contracts, the reverse appears to challenges, traders see good opportunities So far the 2017 focus is on supply and
be true for 2017. during the first half of the year, providing producers are hoping to reap the benefits
they can find the necessary volumes. from the spot market of course this could
It was a buyers market last year, now come back to bite should bullish demand
its the turn of the sellers, a second Afterwards its a big question, a second expectations for 2017 not follow through.
consumer said. source said, much of course still is
depending on ethylene and propylene Maintenance turnarounds in the first half
There is talk that contract rebates have market developments. would insure against that, but come the
shrunk, that there have been offers at second half of the year things could still
contract price flat even, but perhaps this is There are some bullish expectations be very different.
more to do with helping buyers turn away regarding crude oil price development
term planning.
OLEFINS
ETHYLENE/ PROPYLENE
EUROPE OLEFINS SUPPLY Average yearly margins 2000-2016

CRUNCH EXPECTED IN H1,
CHALLENGES TO COME IN H2
By Nel Weddle
2017 has got off to a firm but relaxed start

for European ethylene and propylene
players, who so far appear confident that
all the necessary preparations to cover the
spring cracker turnaround season have
been met.
Preparation is key, a consumer said.

Weve taken advantage of low spot prices
during the fourth quarter of 2016 to help
with turnaround preparations.
2016 ended on a better-than-expected

note from a demand point of view spot
volumes were attractively-priced and an EU ethylene exports
increase in the January contract price
was widely anticipated and, with the
turnaround season due to start at the end of
the first quarter at the back of their minds,
consumers were of the opinion that lower
prices were unlikely.
Cracker margins have remained healthy

and although 2016 naphtha-based contract
margins fell 2%, year on year, they are 17%
higher than in 2014.
Such cracker margins continued to

incentivize high cracker operating rates
through 2016, which, alongside unplanned
derivative issues, led to lengthy supply
during the fourth quarter.
Some producers managed to mitigate

this through exports despite largely
unfavourable prices recent data from
Eurostat showed that just over 100,000
tonnes of ethylene were exported from the
EU to the rest of the world in November an impact, particularly since derivative production, there are technical limitations,
alone. maintenance is often planned to take a producer said.
place alongside, but memories of previous
Other producers, unable to access export two-years asset unreliability remain at the Another indication of consumers
markets, were forced to trim rates. forefront and consumers, and producers preparedness in case of supply issues has
alike will have taken great care to make been the suggestion that buyers have opted
Most sources anticipate a generally tight sure that every eventuality is taken into for higher volumes under contract in 2017
first half of the year, but supply could be consideration. than seen in the previous couple of years.
especially so in the March-April period.
[We are] expecting full speed ahead on There has been more interest to contract
Sources naturally point out that planned crackers 100% but unreliability is a out, and with increased flexibility on
turnarounds should not have so much of clear challenge. We are at the ceiling of volumes, the producer said.
Increased flexibility on contract volumes and demand balances are expected to be You can rely on ICIS
reflects the uncertainties on the second half- lengthier because of new capacity start ups
year outlook for both ethylene and propylene. which could in theory help to correct any
for all your market
Europe imbalances. intelligence needs
Ethylene, because of the raft of new
crackers due to start up in the US In Europe itself, the return to service of the PRICING INFORMATION
throughout 2017, and particularly in the Karlsruhe-Ludwigshafen propylene pipeline
second half of the year. destroyed in the fatal explosion at BASFs reliable price assessments for key Asian
Ludwigshafen, Germany, site in October countries such as India, Northeast and southeast
New derivative output notably is expected around mid-year, which could
polyethylene (PE) is also due; with this take some of the pressure off sellers in the to help you understand the key price drivers and
in mind, European PE players are only inland market. market conditions and settle your contract prices
confident of conditions during the first half. bids and price movements
Some are not so convinced that the impact [There is] no reason to believe that
will be seen in 2017. the first six months of 2017 will be any
different to the first six months of 2016
While on paper there is new capacity, it supply tightened and spot prices rose to
could be a re-run of several years ago, a premiums, a second producer said. NEWS INFORMATION
second producer said. Be the first to find out about breaking news
The producer conceded however that and analysis across the global petrochemical
Much was made of the tsunami of ethylene propylene had the added impact of the
and polymers coming from the Mideast strikes at several French refinery and shutdowns, plus so much more.
[Middle East] but we saw delays and the petrochemical sites in the May-June period.
impact was much more moderate than Request a free trial of ICIS news
expected, the producer added. [The markets will be on the] tighter side for
the first half largely down to the turnarounds,
In Asia, ethylene producers are bullish but focusing further forward, it is much more
despite a lighter turnaround season uncertain, the first producer said. Receive an end-to-end perspective across the
and some capacity growth on the back you to grasp the local or regional scenario in
of increased demand due to some 2017 will be a good year but there are a global context. Data includes import and
downstream expansion plans. challenges to come. In 2018, there could be export volumes, consumption, plant capacities,
a wall of ethylene, it added. up to 2030.
However, prospects again grow dimmer
as year-end 2017 approaches, because of The table below shows 2017 planned Enquire about our supply and demand data
fears over the new US capacities. cracker maintenances heard so far. None
Propylene is even more unclear. While have been confirmed by the companies in
FORECAST REPORTS
Europe should at best be balanced, if not question, as most have a non-disclosure
tight at times, both the Asian and US supply policy regarding the status of their assets. ICIS publishes monthly forecast reports for
price forecast as well as details of supply and
demand, trade balances, capacity and margins.
It is a valuable tool to identify commercial
Company Location Timing
Enquire about the price forecast reports
Total NC3, Antwerp, Belgium March-May
Dow Terneuzen 2, NL 1 March-15 April DIGITAL CHEMICAL BUSINESS MAGAZINE
ICIS Chemical Business (ICB) e-magazine is the

SABIC Beek 3, NL March-May
ExxonMobil Gravenchon, France March-April providing decision support for executives making
long term planning.
OMV Schwechat, Austria March-May
INEOS Cologne 5, Germany Sep-Oct
Borealis Porvoo, Finland Aug-Oct
Total Gonfreville, France Sep-Oct
Versalis Porto Maghera, Italy Q3
PLASTICS/POLYMERS
AFRICAN POLYMERS
AFRICAN POLYMERS GATHER Egypt, North Africa LDPE CFR prices vs China CFR LDPE prices
INTEREST BUT STILL HAVE A LONG
WAY TO GO
By Matt Tudball
The African polyethylene (PE) and

polypropylene (PP) markets in various
regions across the continent are gaining
increasing interest from major global
players, and are being touted by some as
the next major export destination after Asia.
But they still face major financial, political
and logistical challenges which need to
be overcome before the African polymers
industry can grow.
Polymer producers are looking to Africa as

one of the next major export destinations as
China becomes increasingly self-sufficient.
Bob Patel, CEO of LyondellBasell told

delegates at the 50th annual European
Petrochemicals Association (EPCA) meeting
in Budapest, Hungary, in October, that the
future growth of petrochemicals will come from Egypt, East Africa raffia CFR prices vs China flat yarn (raffia) CFR prices
Africa and Asia including India and China.
Both continents have a huge potential to

grow even though plastics consumption in
the developed countries is far higher, Patel
said, adding that if plastics consumption
was to rise by just one kilogram per capita
in this region, seven to eight new world-
scale PE plants will be needed.
Africa is a frontier market, but will be an

interesting place to do business in the
future, Patel told a news conference after
the inaugural session of the meeting.
However, the political and security situation

in Africa is keeping it from attaining its full
business potential.
That market has tremendous potential in

the next 20 years, Patel said.
In terms of prices, each region has its own

political and/or economic issues that will away from several markets such as Turkey and if these prices are maintained after
impact on demand during 2017, and price and Africa, with producers taking advantage the Lunar New Year holiday, beginning on
movements in China will also play a part in of better netback opportunities. 28 January, some African cargoes will be
price direction during the coming year. diverted away from the continent.
Low density polyethylene (LDPE), in
Higher price levels in the Chinese and particular, was drawn to China because of Prices in Africa, however, have started to
Asia-Pacific markets have attracted material higher prices compared to other markets, rise and some grades were in line with
Chinese levels by mid-January. However, Nigeria is also facing the issue of currency to the region have already proved to be
significantly cheaper freight rates from the shortage, which impacted the market aggressive with prices, undercutting Middle
Middle East to China will keep the arbitrage throughout 2016, and is showing no real Eastern prices by up to $40-50/tonne.
window open unless producers are able to sign of improvement. The lack of hard
push African prices higher in the coming currency has led to increasingly long delays East Africa, and more specifically Kenya
months. in payments and a growing reluctance from and Ethiopia, is likely to be on many
traders and distributors to do business with producers radars in 2017 due to strong
Several key markets in Africa Nigeria, buyers who do not have international bank demand and the growth potential in both
Egypt, South Africa and Kenya are accounts. markets. Kenya leads the region in terms
currently experiencing varying degrees of of market size, but Ethiopia is quickly
financial and economic problems, which Nigeria is not looking good at all, an attracting supplier attention with several
have affected demand in one way or international distributor said. existing and up-and-coming industries such
another. as caps and closures and cement.
Right now there isnt too much demand,
For both Egypt and Nigeria, a lack of and even if there is, I dont know how to The opening of the Chinese-built Addis
foreign exchange was a major hindrance sell to that market. You cant keep doing AbabaDjibouti Railway, which was
to trade in 2016, and there are few signs of [business] on open credit, as even the inaugurated on 10 January 2017, will
improvement. In November, the Egyptian customers now dont want to do it as greatly improve the ease of getting imports
government floated the pound, which the rate of forex from banks is too high into land-locked Ethiopia, although poor
caused a massive drop in the currency compared to letters of credit, the distributor logistics and transportation links in the
against the US dollar, and increased said. region, such as from the Kenyan port
running costs for converters as well as of Mombasa to Nairobi, need to see
raising import prices into the country. With close to 170 million inhabitants, a significant improvement to ease the
Nigeria is still a key market for polymers, movement of goods.
Currency is still a problem. After the with the majority of demand coming from
devaluation, the dollar became very high, the detergent and liquid packaging sectors. Upcoming elections in Kenya in the middle
so costs have become very high, and this is In addition, local manufacturing industries, of the year may cause some disruption
a problem for the buyers, an Egyptian PP such as cement, will help polymer demand around summer, although some sources
producer said in January. for storage and transportation, although the say this will be minimal as they believe
Dangote refinery and petrochemical project the result is a foregone conclusion, and
However, there is still demand in the in Lekki, Nigeria, is due to come online the market will soon return to business as
Egyptian market, a PE producer in the sometime in the next year or two, and may usual.
country said, even though imports have cover a large part of that demand.
decreased. Politics and finance will also have a large
With domestic production still limited, the part to play in the outlook for South Africa
The Egyptian market will be focusing country relies heavily on imports, and its in 2017. While the rand has strengthened
on exports of both polymers from local geographic location makes it open to an against the dollar over the last 12 months, it
producers EPPC (Egyptian Propylene increasing volume of US material as well as remains extremely volatile and at the mercy
& Polypropylene Company), Oriental cargoes from the Middle East and India. of political events in the country.
Petrochemicals and newcomer Ethydco, all
of which will be exporting material to help US cargoes could factor significantly A South Africa-based polymer producer
facilitate the inflow of much needed foreign in 2017 due to an increase in US PE said the actions of President Zuma and
exchange into the Egyptian economy. capacity, and traders shipping US material the ruling African National Congress (ANC)
in the run-up to elections at the end of the last of his troubles there is speculation driven by events in other regions the
the year will have a major impact on the in South Africa that he could still be increasing self-sufficiency of China and
countrys financial situation. removed. growing production capacity in the US are
just two examples.
The rand fluctuated during 2016 alongside Should this happen, I have no doubt
political turmoil, which saw Finance Minister that we will see the rand fall sharply with Whether it is growth and investment
Pravin Gordhan under threat of arrest immediate effect and will precipitate huge opportunities in the African markets that
from his political opponents. There is also uncertainty within the economic and attracts producers (despite the considerable
the possibility of a credit downgrade by investment space. A ratings downgrade challenges that come with them), or
the international credit ratings agencies. is quite clearly confirmed then in this changes in other markets that diverts focus
However, compared to other currencies, it scenario, the producer said. onto the region, the continent is certain to
has fared reasonably well. be of increasing interest to global suppliers
2017 will be an interesting time for the throughout the rest of the year.
However, Mr Gordhan may not have seen African polymers market, with change
term planning.
PLASTICS/POLYMERS
CHLOROVINYLS
UNCERTAINTY AND OPTIMISM UK PVC-ethylene spread 2013-2016

AHEAD FOR EUROPEAN PVC
By Chris Barker
The overall outlook for European polyvinyl

chloride (PVC) in 2017 is for stable to
slightly increasing demand and stable
supply conditions.
However, significant uncertainty surrounds

these predictions due to risks to political
and economic stability in Europe combined
with the unclear outlook for feedstocks.
With regards to demand, there are many risk

factors for economic and political stability
in 2017 including rising political populism in
the EU and US, which could also threaten
the structure of the EU and the integrity of
the euro; and a troubled environment in the
Middle East, which affects Turkey, Europes
largest export market.
being a structural importer of PVC. Sterling economy such as agriculture could have a
Despite the uncertain scenario for next is expected to remain weak in 2017, and serious impact on demand; however, funds
year, PVC market expectations were economic and currency uncertainty is likely are expected to remain in place until 2020.
mildly positive for demand and business to continue into at least the next year, with
conditions in 2017, with the market businesses also reducing long-term orders The outlook for the Turkish market is mixed,
consensus cautiously optimistic. and office construction due to uncertainty. This with political instability rising following a coup
will also lead to spillover effects in the rest of attempt in mid-2016 and structural issues such
This is partially due to the end of several the EU. as poor demand in export markets, slowing
trends which have been causing problems economic growth and low credit availability.
in Europe. Demand in eastern and central Real estate research firm Savills has
Europe has been weaker than in 2015 due predicted flat house prices in the UK for However, the market now presents
to delayed infrastructure investment from the 2017 and a fall in commercial development good export opportunities for European
EU, which has significantly reduced overall activity of 30-40% over the next five years, producers due to US material being
PVC demand in Europe, particular for pipe- due mostly to knock-on effects from the squeezed out of the market by new tariffs
grade end users. New infrastructure projects Brexit vote. In the longer term, the lack of introduced in 2015. As a result, US exports
have been rescheduled for early 2017. subsidies from the EU for sectors of the UK to Turkey have fallen by more than 40% in
2016 compared to 2015.
The economic outlook for most of northwest US PVC imports in Turkey (Jan-October)
Europe is also quite positive - albeit with
caveats - with the construction industry
reviving somewhat towards the end of
Source: Turkstat (2016 figures subject to revision)
this year, particularly in Germany. One

exception is the UK, where domestic buyers
saw a significant drop in domestic demand
for profiles in 2016 and expect the same
situation going forward, due in part to
stalling house prices following the UKs vote
to exit the EU earlier this year.
The fluctuating British pound, which dropped

against the euro in response to the vote
and then rose following the US election
result, has also created challenges for
European producers in 2016 due to the UK
European PVC export prices 2016 with plants at Martorell, Spolana and
Ercros Spanish sites expected to close
due to the phasing out of mercury
chlorine cells in Europe from December
2017 onwards.
Analysis by ICIS consulting suggests

that the feedstock market will become
tighter from 2018 onwards, but this will
not be a factor for most of 2017, with only
the Spolana plant in the Czech Republic
scheduled to close in the first half of the
year.
In order to maintain the required level of

EDC/VCM production to continue PVC
production at the same rate, European
producers may increase chloralkali run
rates to pre-2008 levels of 83-85%,
although this will lead to problems related to
excess chlorine production within the overall
European system, particularly at specific
locations.
Export spot prices also rebounded in the PVC feedstocks ethylene dichloride (EDC) In addition, European EDC capacity is quite
second half of the year, although this was and vinyl chloride monomer (VCM) are well utilized compared to chloralkali, which
partially as a result of limited availability likely to become a significant bottleneck could lead to a bottleneck in production and
from European producers due to feedstock for the market from late 2017 onwards, an increase in imports from, for example,
issues. the US or the Middle East to fill the gap.
Dollar vs Euro 2016
In the long term, the recent victories by
government forces in Iraq and Syria may
lead to a more stable situation in Turkeys
bordering export markets. Market players
expect any return to stability in the market
to take between 18 months to three years,
and the overall outcome of both civil wars is
still in doubt, so this is unlikely to have any
immediate impact in 2017.
There are no production capacity changes

scheduled in Europe for 2017. However,
the European market will continue to be
Source: Xe.com
affected by structural changes in the global
supply and demand situation.
In a global perspective, India remains a

strong and rising market despite suffering
some short-term demand difficulties due European EDC supply and demand
to demonetisation, whilst Chinese prices
are expected to be stable-to-firm due
to increased regulations on the carbide
production process introduced in the
second half of 2016, and the Chinese
administrations intention to prioritise
environmental clean-up in the coming
years.
The US dollar gained strongly against

the euro in 2016 following the election of
Republican presidential candidate Donald
Trump, which saw a fall in PVC imports into
Europe. One of the scenarios over the next
year involves a stronger US dollar, which is
likely to have a similar impact in 2017.
MARGINS
PVC prices in 2015 increased strongly PVC-ethylene spread 2013-2016

relative to ethylene due to the very tight
market as a result of production issues in
crackers and PVC plants across Europe.
European producers have mostly succeeded

in maintaining their margins in 2016, despite
the lack of major production issues to
drive down availability in the market. While
the PVC-ethylene spread has decreased
slightly towards the end of last year it is still
considerably wider than in 2013-2014, a low
point for the European market as a whole.
This was attributed partly to greater

consolidation in the market, with the new
company INOVYN formed in the second
half of 2015 from INEOS and Solvay, with
some assets also divested into the smaller
company VYNOVA.
In addition, the weaker Turkish market in

2016 and H2 2015 has also encouraged
European producers to focus more on their
domestic markets.
term planning.
PLASTICS/POLYMERS
POLYETHYLENE (PE)
EUROPE PE SELLERS CONFIDENT

FOR FIRST HALF OF THE YEAR
By Linda Naylor
European polyethylene (PE) sellers are

confident for the first half of 2017 but the
situation is not so clear for the second part
of the year.
A series of cracker turnarounds in the first

half - albeit planned - is expected to keep
the market from any hint of oversupply.
European PE prices are low in global terms

and this is expected to have an effect on
the volume of material coming into Europe,
particularly in the first half. Delays to US start-ups do however It is here that buyers and sellers
seem highly likelyHistory suggests that fundamentally disagree about the market for
The second half of the year is not so clear, commissioning capacity on this scale always January.
however. takes longer than expected, said ICIS
consultant and blogger John Richardson. The spread between ethylene and PE has
Sentiment is changing, said a large buyer. been falling steadily since June - when it
Im noticing lots of producers wanting to If these plants are delayed, 2017 could be saw its strongest spread in 2016. Buyers
lock in contract volumes for 2017. a simple rerun of 2016, as many sources have bought some stock as it became clear
expect, but 2018 will be another matter. that the market had bottomed out.
In the associated polypropylene (PP) market
the opposite was the case, as propylene As for the shorter-term outlook, already some The chart below shows the current
tightness was expected to support PP PE sellers are approaching their buyers with delta between ICIS low-end low density
sellers next year, and PP sellers were a three-digit increase for January. A rise is polyethylene (LDPE) FD (free delivered)
generally more confident than buyers. widely expected for the January ethylene EU gross prices compared to the prevailing
contract, and sellers are aiming to put some ethylene price.
The fly in the ointment for PE sellers is the margin on top of the monomer.
swathe of ethane and PE supply due on
stream in the US during the second half of
the year.
Not only was there supply coming up in

North America, but also in China. It was the
North American capacities that would exert
most pressure on markets, however.
One theory is that these capacities are

being delayed, and Europe will not see
an increase in imports from there in 2017.
Imports from North America have been a
feature of 2016, with low prices at the end of
the year leading to offers that were too high
to work, or material moving towards regions
with better netbacks.
Its [American product] been there on and

off in 2016, said the buyer. I cant see
much changing in the first six months [of
2017].
Imports were no longer possible as stronger compared to European spot price minus With imports limited and planned shutdowns
netbacks elsewhere led to trades moving to 50/tonne for costs and 6.5% import duty. maintaining a balance, sources said the
regions with better netbacks than Europe, main disturbance would come from imports
where prices are low in global terms. While January buyers expect to be paying from North America, while all the while
an increase - it will be hard to avoid if the admitting that these are likely to be delayed.
The above chart shows ICIS mid-point January ethylene contract goes up - they
Asian high density polyethylene (HDPE) generally did not expect to be paying any
blowmoulding CFR (cost & freight) price more than the monomer.
term planning.
PLASTICS/POLYMERS
POLYPROPYLENE (PP)
EUROPE PP BUYERS FIGHTING

BACK AGAINST HARSHER
PAYMENT TERMS
By Linda Naylor
Polypropylene (PP) prices have moved

within a relatively narrow price band
throughout 2016, and have been little-
affected by imports. Buyers were forced
to accept harsher payment terms for new
2016 linked contracts - particularly those
with a link to monthly propylene contracts -
following shortages in 2015 that left them in
a vulnerable position.
As 2016 progressed, supply shortages such

as the ones seen in 2015 failed to emerge,
and the spread between propylene and PP
at freely negotiated accounts has narrowed,
narrowing producer margins.
Memory of 2015 supply shortages are Some buyers are already buying spot
The above chart shows ICIS low-end FD still raw, and buyers admitted they would supply to protect against potential
(free delivered) EU gross homopolymer be taking a risk by not having contracts in shortages, but the weakness of the euro
injection prices compared with the place. against the dollar also put this supply
prevailing propylene monomer contract potentially at risk, said producers.
price. There is nothing to support higher prices,
said the buyer. Many sources expected a rerun of 2016
As 2017 begins, buyers are again in 2017, so did not expect to be under
experiencing difficulties as producers push Anything more than a 20/tonne increase pressure from supply shortages.
to secure even bigger deltas between in 2017 and I wouldnt link [my contracts],
propylene and PP prices for propylene- said another. Propylene has the potential to be tight in
linked deals. Europe next year, said an observer, but
We have not been able to come to an propylene globally should be long.
Even at the end of December, buyer and agreement with one of our suppliers and
sellers are still discussing pricing for 2017 have switched to monthly negotiations, Some imports that had been expected
in many cases, and in some are agreeing said a third large buyer. to affect the European PP market had
to disagree and abandoning linked deals not appeared in 2016, such as the new
altogether. New 2017 contracts were said by buyers to Borouge 3 plant in Abu Dhabi, with the
be closer to propylene contract plus 250- capacity to produce 1 million tonnes of PP
Others are still talking, but finding 300/tonne, and it was on this base that capacity annually.
agreements very difficult to reach with some buyers said they were being asked to add
suppliers. another increase. European prices remain low in global terms,
however, and exporters are finding better
Do they want me to commit suicide in One producer was said to be asking margins in other regions.
December or bit by bit next year? said one propylene contract plus 400/tonne for
large buyer. some grades. The following graph shows South East
Asian homopolymer injection CFR (cost
Conflict has arisen particularly when it There were accusations of blackmail from & freight) prices in USD compared with
comes to propylene-linked deals for this some buyers, and some were now ready to European ICIS FD NWE (northwest
year. New contracts, giving producers a take the risk and move to freely negotiated Europe) spot prices, minus 50/tonne costs
better deal than in 2015, were instated in monthly pricing, which could mean sharp and a duty of 6.5%.
2016, and now sellers are looking for more hikes if product becomes tight.
in 2017.
New PP capacity in China this year and
next, is expected to be absorbed by local
consumption, said sources, but it would
also mean fewer imports, from Europe and
elsewhere.
Many sources canvassed expected 2017

to be a rerun of 2016, so buyers were not
overly concerned with supply issues. They
saw no reason to accept harsher payment
terms, and would risk not being able to get
product if unforeseen circumstances arose,
they said.
On the whole, however, sellers are more

relaxed than buyers for 2017, whether right
and wrong.
term planning.
PLASTICS/POLYMERS
POLYSTYRENE (PS) AND EXPANDABLE POLYSTYRENE (EPS)
EUROPE PS, EPS PLAYERS FOCUS Another talking point of the EPS market in 2017 is happening in politics and economy, a PS
ON MARKET FUNDAMENTALS will be the new capacities that are expected in buyer said.
By Vasiliki Parapouli the Middle East and especially in Iran.
However, he added, most of the main
The European polystyrene (PS) and EPS capacity there has been increased by styrene actors react in a very emotional
expandable polystyrene (EPS) markets 250,000 tonnes/year in 2016, with a further and irrational way. As a consequence, the
have kicked off the new year focused 120,000 tonnes/year expected in the next styrene price - as well as other aromatics -
again on styrene, having gone through couple of years, according to ICIS Analytics. is very volatile and it is nearly impossible to
very difficult discussions for the December be able to predict it, he added.
contract prices following the significant Meanwhile, PS players said that
unexpected price hike for the feedstock. consumption will probably remain flat The significant increase in the December
throughout next year, except months like styrene barge contract brought up again the
An EPS producer said that everything from August or the holiday season, while demand lingering discussion about the substitution
January onwards will still be related to in Europe is not expected to change much. of PS to other polymers:
styrene and the weather conditions:
PS demand is very price sensitive because If styrene continues to be that volatile, then
An increase in January styrene will slow of competition with other polymers such as this might speed up substitution decisions
down EPS business; also bad weather, polypropylene for high impact polystyrene in the packaging business from PS to other
especially in eastern Europe, will impact or polyethylene terephthalate for general alternatives, like PP or PET that are stable
demand as well, he said. purpose polystyrene, a source said. and less costly products, a buyer said.
Other EPS sources expect growth to be Styrenics players said that the European There might be still some volume that
around 2% in the next five years, mainly in styrene market should become more flexible could shift from PS to PP; but thats going
the CEE building and construction sectors, in order to deal with growing political and to take investment and a real belief in the
while the market will face strong competition economic uncertainty, as well as other factors fundamentals of PP, another source said.
versus mineral wool. that could possibly impact its fundamentals.
However, other players said that a lot of
Other EPS sources said that they expect The election of Donald Trump as US transition to other products that could have
higher pricing in 2017 than the previous year. President and the recent Brexit vote make happened, has happened.
flexibility key for styrenes outlook.
For southern Europe weather will not be a PP is going to see some ups and downs
problem; but for countries like Italy, it is the Flexibility could be key to understand but there is no return to the early days of
political and economic uncertainty that are and also shape the market, to react in a this decade, one of them said.
not helping the market, a buyer said. positive and suitable way to everything that
term planning.
PLASTICS/POLYMERS
POLYETHYLENE TEREPHTHALATE (PET)
EUROPE PET STILL IN THE DARK My feeling is that prices are for sure Yet the same statistics show that even though
WITH UNCLEAR FUTURE not going to go down for December and the markets capacity utilisation rate rose by
By Pavle Popovic January. Maybe at least for the first quarter, 3% from 2015 to 2016, it is well below 2011
one buyer said. levels which were more than 80%.
One year on and the polyethylene
terephthalate (PET) market is still A producer said: I think certainly there will To add to this, elections in 2017 for France
reflecting on the same factors that shook be a surge again in January on the back of and Germany threaten any price calculations.
it throughout 2015 - geopolitical increased raw materials. We expect to see
turbulence, volatile crude oil values and prices up to 950/tonne in January. If populist parties succeed in both votes,
erratic economic conditions. the macro-economic instability that followed
Imports, which have failed to influence Brexit could be replicated.
At the time of last years Outlook, however, the market towards the end of 2016,
the world was yet to face Brexit and the are, according to sources, set to remain Nobody can say what can happen next
fall of the British pound. It had not uncompetitive. week. Somebody else might exit the
experienced Donald Trumps electoral European Union, one buyer said.
victory and the rise of the US dollar, nor Purchases of PET from outside of the EU
was it influenced by OPECs production have been impeded by the stronger US If the EU does stay intact, market participants
cut and oils price rally. dollar and players see no end to this in the believe there is a potential anti-dumping duty
near future. (ADD) against PET imports from South Korea.
What did these events mean for PET in
2016? Firstly, 2015s domestic spot price This does, however, depend on a consistent With upstream purified terephthalic acids
highs of 1,110-1,150/tonne FD (free foreign exchange, which was generally not (PTAs) anti-dumping investigation due to be
delivered) in May were unobtainable for the case in 2016. settled by 3 May 2017, some are expecting
market participants in 2016. April 2016 hit the process to spread to PET.
an annual peak of 920-980/tonne. Look at the currency, I am having to
gamble on the currency. That will determine A South Korean ADD investigation for PET
Secondly, PET rates have been whether I lose or gain on my PET deal, is nevertheless unconfirmed officially and,
unpredictable. By the end of November said one trader. as with anything in the market, players are
2016, domestic spot PET values over 900/ waiting to see what happens.
tonne were described by one source as a Regarding longer term developments,
psychological barrier. That barrier was then players have different views. This is, after all, what they have come to
broken the following week. expect from European PET - a product that
One market participant noted that growing did its best in 2016 to leave many feeling
So expectations for the product in 2017 are PET consumption globally should swing helpless to global trends.
at least mixed if not unsure. prices back up.
2017 promises to be no different.
In the short term, several players say that Indeed, the ICIS Supply and Demand
prices will not go down. Margins have been database shows that European You are 10% of the consumption, one
low for producers and the settlement of consumption increased by 4.4% between trader told its customers. You follow the
feedstock paraxylenes (PXs) December 2014 and 2015. While preliminary data for ways, nothing much or less.
contract at a 20/tonne increase will only 2016 also shows a rise of about 4% in the
intensify upward pressure on PET. year since 2015. Additional reporting by Caroline Murray
price movements
PLASTICS/POLYMERS
POLYMETHYL METHACRYLATE (PMMA)
EUROPE PMMA LIGHTING Although PMMAs strengths are clear, so Estimates of those who are able to do this
APPLICATIONS TO SHINE IN 2017 are its weaknesses namely it is more vary between 10-20% of PMMA buyers.
By Katherine Sale fragile than the unbreakable PC alternative
. It is not a quick process with some saying
The outlook for 2017 in the European Producers are looking into developing it can take up to six months to convert
polymethyl methacrylate (PMMA) market PMMA with a higher breaking point to production.
is looking bright, with players expecting increase its use in cars. This would
the lighting applications sector to shine represent a breakthrough for PMMA, which Although it does not apply to the majority
next year. will not only have the possibility of replacing in the market, for some buyers in the roof
glass but also other plastics, for example lighting sector, for example, a rise in PMMA
Expectations at this stage are for continued in dashboards, while also retaining its prices coupled with a fall in PC prices, could
growth in the European market, at levels aesthetic qualities. result in some players assessing their options.
above GDP for some applications.
A solid performance from the construction Overall, with inventories low, demand robust
Lighting applications are used in the derivative sector is also expected, in particular in and upstream supply shortening weekly, the
automotive and construction sectors, with the replacement lighting sector. A number majority of PMMA sellers do not currently
growth expected for both in 2017. of buildings are updating their lighting see this as a serious threat.
requirements to use LED bulbs, and this is
Although growth expectations for the expected to result in an increase in demand The European styrene acrylonitrile (SAN)
automotive sector are cooling, a year-on- for PMMA, which is used to cover lights. market has, at times, also faced strong
year increase is still expected. competition from PMMA. Most of the time,
There has also been an increase in PMMA this has resulted in weak SAN demand and
The amount of PMMA used in vehicle use in facade applications, with continued a rather dull market situation.
production is increasing because of new growth in this sector seen in recent years.
uses and the pursuit of lighter materials to The fact that SAN is a very niche business
replace glass and metals. Another benefit of PMMA is its ability to has also made the situation more difficult.
disperse light, which ensures uniformity However, during the past few months, the
PMMA can be used for frontal lighting in without hot spots, and means that the increase in PMMA prices due to the global
cars which use LED lights, because LED LED bulb is not visible. This is particularly tightening of methyl methacrylate (MMA)
lights operate at a lower temperature than important for signs in commercial use, and PMMA supply, has resulted in some
traditional lighting making PMMA more and combined with its weather-resistant room for improvement for SAN volumes.
suitable. properties, PMMA is ideal. Again, this is Producers admit that they had to make an
seen as an area of strength for 2017. additional effort to get some positive results.
Unlike conventional front-lighting, larger
more complex lights are used in SUV Some players estimate that the construction The tight upstream MMA supply situation
vehicles, with one supplier saying that this sector accounts for 30% of European is expected to continue until the end of the
means a double-layer of PMMA is used in PMMA demand the highest percentage of first quarter of 2017.
some cars. demand in the region.
Whether this supply level will be mirrored
The hot topic in the automotive sector is Growth in both the construction and downstream for PMMA is in part dependant
the continuing pursuit of light-weighting automotive sectors are largely driven on the supply balance in Asia. Material
vehicles, and here there are some bright by microeconomics, but the increase in coming into Europe from Asia traditionally
possibilities for PMMA. applications is also exciting some PMMA increases after the Lunar New Year period,
participants. which falls on 28 January 2017.
Manufacturers continue to replace glass
and metals in cars with lighter plastics. PMMA does compete with other plastics in Due to the tightness in global MMA supply,
Comparing the weight of traditional glass some applications. The increase in PMMA less MMA has been polymerised, and at
with a highly-transparent PMMA alternative, prices in Q4 2016 combined with the fall this stage, it is unclear if the traditional
manufacturers will be able to reduce the in PC prices this year, could cause some pattern will occur.
weight by half. competition in 2017.
90,000 tonnes of new PMMA capacity is
Unlike other plastics, for example Traditionally, PC is priced above PMMA, due to come on stream in the Middle East
polycarbonate (PC), PMMA does not and some buyers have the flexibility to in the second half of 2017, with the potential
yellow over time from exposure to ultra- switch between the two. to impact on global trade flows.
violet (UV) rays.
Some market participants say Asian some players believe the new supply may advances in lighting applications the future
material could be displaced in places such be needed to meet continued growth in the is looking bright.
as Europe and Turkey, with this new wave market.
of Middle Eastern material. Additional reporting by Vasiliki Parapouli
Although the future of the global supply
Given the current snugness in supply and balance is not clear, demand for PMMA
the demand growth estimated for this year, in 2017 is expected to be strong, and with
term planning.
PLASTICS/POLYMERS
RECYCLED POLYETHYLENE TEREPHTHALATE (R-PET)
VIRGIN PET OFFERS HOPE TO post-consumer PET bottle prices would help You can rely on ICIS
RECYCLERS AS THE R-PET to reduce pressure on recyclers margins.
for all your market
MARKET LOOKS TO 2017 intelligence needs
By Luke Milner R-PET flake prices were broadly stable
in the latter part of 2016 and the closing
The European recycled polyethylene stages of the year saw less price pressure PRICING INFORMATION
terephthalate (R-PET) market is looking on R-PET flakes as virgin PET prices rose
to 2017 with both hope and trepidation and availability, particularly for colourless reliable price assessments for key Asian
after a difficult 2016 that saw both R-PET R-PET flakes, became increasingly countries such as India, Northeast and southeast
prices and recyclers margins under balanced.
pressure. to help you understand the key price drivers and
While increasing virgin PET prices in late market conditions and settle your contract prices
Looking to 2017, the latter stages of 2016 2016 helped to increase the gap between bids and price movements
have given recyclers some hope that the virgin PET and R-PET to what market
pressure placed on prices by low virgin participants consider to be healthier levels,
polyethylene terephthalate (PET) through there was little support for higher R-PET
much of 2016 will subside. flake prices in the closing stages of 2016.
NEWS INFORMATION
Virgin PET competes directly with R-PET in However, several R-PET sellers considered Be the first to find out about breaking news
certain applications. rising virgin PET prices in late 2016 as a and analysis across the global petrochemical
positive sign for 2017; if this trend continues
Signs of rising virgin PET prices in late 2017 into 2017 it may provide room for recyclers shutdowns, plus so much more.
and stronger crude oil prices have given to increase their prices.
recyclers some optimism that pressure from Request a free trial of ICIS news
low virgin PET prices will alleviate and could Market participants are also relatively
even give recyclers room to increase their positive regarding demand for 2017,
own prices. especially in the R-PET food grade pellet
sector, which has suffered from some Receive an end-to-end perspective across the
However, recyclers remain cautious when buyers switching from R-PET and back to you to grasp the local or regional scenario in
it comes to their own margins, as one virgin PET for financial reasons. a global context. Data includes import and
export volumes, consumption, plant capacities,
recycler pointed out that rising virgin PET production and product trade flows from 1978
prices could lead to post-consumer PET In some cases, R-PET food grade pellet up to 2030.
bottle sellers looking to increase the prices prices have decoupled from virgin PET
of post-consumer PET bottles sold to price movements, where buyers have Enquire about our supply and demand data
recyclers. political and environmental commitments to

purchasing R-PET.
FORECAST REPORTS
It remains to be seen whether this will be
However, rising virgin PET prices have ICIS publishes monthly forecast reports for
the case, as 2016 has seen good post- selected commodities showing a 12-month rolling
consumer PET bottle availability throughout already helped to reduce the premium paid price forecast as well as details of supply and
the year and some in the market also by some for R-PET food grade pellets. demand, trade balances, capacity and margins.
expect this to be the case in 2017. opportunities in the short to mid-term.
Those that have been true to R-PET
Market participants have mixed remain so, said one seller of R-PET food Enquire about the price forecast reports
expectations for 2017 post-consumer PET grade pellets. It added that some buyers
bottle tenders, with some expecting lower committed to R-PET had already lined up
new projects for 2017. DIGITAL CHEMICAL BUSINESS MAGAZINE
prices but others expecting increases.
These expectations are partly based on ICIS Chemical Business (ICB) e-magazine is the
Such new projects will help to support No.1 source of market intelligence and analysis
market participants locations, as national of the global chemical markets. It is the essential
trends, rather than a pan-European demand in the R-PET market, although it reading for global chemical industry players,
approach, remain in play across the market. remains to be seen just how demand will providing decision support for executives making
develop in 2017 and if, should increases in current transactions, as well as short term and
long term planning.
Higher post-consumer PET bottle prices virgin PET continue, buyers will look more
would place greater pressure on recyclers favourably on R-PET in the new year, after Download a free sample now
margins and provide further support for difficult years in 2015 and 2016, many
higher R-PET pricing, while a reduction in recyclers remain cautious.
PLASTICS/POLYMERS
ACRYLONITRILE-BUTADIENE-STYRENE (ABS) AND
STYRENE-ACRYLONITRILE (SAN)
STYRENE PRICES TO REMAIN The election of Donald Trump as US President fourth quarter of each year, which is usually
DEFINING FACTOR FOR EUROPE and the recent Brexit vote make flexibility key slower in activity, he said.
ABS, SAN MARKETS for styrenes outlook, they said.
By Vasiliki Parapouli According to this source, customers will
However, flexibility seems not to have the restock in January; for February, some
European acrylonitrile-butadiene-styrene same importance in a market like SAN. years it has been a very strong month,
(ABS) and styrene-acrylonitrile (SAN) market other years not so much.
players forecast that feedstock styrene prices Flexibility is not key for SAN as the product
will again monopolise the attention of both is mainly sold by price; if you hit the right In terms of prices, this producer expects
markets in 2017. price you get the deal. No matter if you are ABS to continue to move up, at least for the
flexible or not, a producer said. first few months of the year.
We expect styrene monomer prices to
keep increasing, at least for the first quarter Europe ABS players expect no big changes Looking at previous years, we expect a pretty
of 2017, and SAN prices will follow the for 2017, while the average growth rate similar pricing pattern for Q1, he added.
same direction, a SAN producer said. for the EMEA region during the year is
expected to be around by 3- 4%. A source on the buy side said that its demand
Another SAN producer said that the general is looking already strong for Q1 2017:
price pressure increased during 2016, For the first half of 2016, the growth rate
coming from both other European suppliers of the EMEA countries has been at 9%, We are already getting big inquiries from
but also from Asian players. according to a supplier, who added that the Russia, Poland and Czech Republic, we see
biggest competitor for European ABS has a very busy first quarter coming, he said.
Players forecast that SAN compounding always been imports.
demand will increase, as it is linked to ABS, With regards to the gap between Asian and
while household demand could remain Chinese plants are participating more in European prices, a producer said that it
stable or decrease slightly. the export business towards Europe and reduced quite a bit in 2016:
that raises concerns for European players,
Styrene industry players at the ICIS he added. We will be in a better position against the
aromatics conference in Vienna, Austria, in Asian competition in 2017; of course, the
November, claimed that the market should Another producer said that next year will be best scenario for the end of 2016 would
become more flexible in order to deal with quite similar to 2016: have been for raw materials to increase
growing political and economic uncertainty, both in Europe and in Asia; but that did not
as well as other factors that could possibly We expect the first quarter of the year to be happen and we were forced to increase our
impact its fundamentals. the strongest; it is the exact opposite to the prices. Still, the difference is not that big.
term planning.
PLASTICS/POLYMERS
TURKEY PE
SUPPLY COULD BE MAJOR Turkish LDPE, HDPE film CFR prices vs Chinese LDPE, HDPE film CFR prices
INFLUENCING FACTOR FOR
TURKISH PE
By Matt Tudball
The Turkish polyethylene (PE) outlook for

2017 could be driven largely by supply, both
under- and oversupply depending on grade,
as well as upstream costs and domestic
political and economic issues.
In terms of availability, the market has

entered 2017 with a shortage of low density
polyethylene (LDPE), balanced linear low
density polyethylene (LLDPE) supply, and
heading towards oversupply of some high
density polyethylene (HDPE) grades.
As well as supply issues, upstream costs

will also be factored into the price direction
in Turkey, especially when the current
domestic economic situation is weakening
demand in the country.
The decision to cut oil production by both

OPEC and non-OPEC oil-producing Turkish levels of $1,215/tonne CFR Turkey Turkey Turkish prices have a long way
countries has led to higher crude prices, for the same week, its clear to see why to go to catch up with China. However,
and higher January offers from suppliers to producers favour China over Turkey. Chinese levels are thought to be over-
the Turkish market. The curb in production inflated and many players in the market are
began at the beginning of 2017, creating a Despite a softening in Chinese levels and questioning how long they can be sustained.
bullish sentiment across many markets, and firmer Turkish prices in early January, prices With the start of the Lunar New Year holiday
this is likely to last well into the first quarter. in the Chinese market are still well over on 28 January, Chinese levels could drop,
$100/tonne higher than in Turkey. although Turkish LDPE prices will face
Firming Chinese PE prices at the end of last upward pressure for some time to come.
year have also affected the Turkish market, Given the cheap freight cost from the
with producers, particularly from Iran, Middle East to China at approximately In contrast, HDPE film and blow moulding
side-stepping Turkey and sending cargoes $10/tonne compared to $40-50/tonne to in Turkey is now considered to be
to China because of the better netbacks.
However, Chinese prices have started to
slow or even fall as the Lunar New Year
approaches, although any drop in PE prices
in the Asia is likely to be minimised by firm
ethylene levels in the region.
In Turkey, as well as the impact of firmer

crude oil and Chinese prices, participants
will be paying close attention to supply
levels as the market for some grades could
be about to change.
The market has already seen a shortening

in LDPE supply because of a surge in
Chinese CFR (cost & freight) prices. With
Chinese levels as high as $1,360/tonne
CFR on average in November, compared to
oversupplied, and HDPE film prices have problems in Turkey mean demand levels the weak currency as an excuse to defer
been much slower to move compared with remain lower compared to Europe. payments. This has a knock-on effect up
prices for LDPE. the polymer chain, and many sources in
Some Egyptian HDPE material has been Turkey now say payment collection is one
Unlike Chinese LDPE, the average price seen in Turkey, and some sources in the of the major problems facing the market.
of HDPE film CFR China is just over $10/ Turkish market expect imports from Egypt to
tonne higher than in Turkey, meaning increase going forward, adding extra length Potential political change could also have
Turkish prices face less upward pressure to the market. But as Iranian suppliers focus an impact on the market later in the year
from Asia. And with a potential new supply on better Asian netbacks for the time being, as buyers and sellers wait to see what
of HDPE expected from Egypt in 2017, that any new HDPE imports could be used to fill will happen if a proposed referendum on
pressure will diminish further. up any gap left by the lack of Iranian imports. constitutional change gets the go-ahead in
the first half of the year. The referendum will
HDPE supply increased in 2016, with ETHYDCO has been exporting LLDPE to decide whether current president Recep
regular monthly volumes of up to 10,000 Turkey, along with Qatar and Saudi, but in Tayyip Erdogan will be granted executive
tonnes per month entering Turkey from small volumes. These exports to Turkey are powers to rule Turkey as president.
Uzbekistan. In July, Egypts ETHYDCO also expected to increase into the year, but Regardless of the outcome, the referendum
started production of HDPE, although it has currently LLDPE is the most balanced of all itself may lead to subdued trading activity
yet to start exporting significant volumes the markets. in the country as was seen around the
to Turkey. Currently, due to Egypts lack elections in June 2015.
of foreign currency, it is likely that exports Domestically, Turkey will continue to face
will be directed to Europe in preference economic problems as the dollar continues With several aspects at play, all of which
to Turkey because of better European to strengthen against the lira and other could all have an influencing factor on the
demand and to facilitate the flow of US emerging markets. The lira dropped to a Turkish market, it is understandable that
dollars into the Egyptian market. While both new record low of 3.72 against the dollar on participants are finding it hard to predict
the EU and Turkey benefit from 0% import Monday 9 January, and buyers in Turkey what lies in store for the market, and the
duty for Egyptian material, the economic have found that their customers are using country as a whole, in 2017.
term planning.
PLASTICS/POLYMERS
TURKEY PP
TURKEY PP MARKET FACES Turkish CFR raffia prices vs China CFR flat yarn (raffia) prices
UNCERTAIN START TO THE YEAR
By Matt Tudball
Turkish polypropylene (PP) market

participants face an uncertain start to
2017 because of on-going economic
issues caused by geopolitical unrest in the
region and a weakening currency, leading
to cautious buying activity and potential
shortage of supply.
2016 finished with the Turkish lira dropping

to record lows against the US dollar almost
every week, which continued into the new
year. The lira reached a new low of 3.62/$1
on 5 January, falling to yet a new record
low of 3.72 on 9 January 2017, making it
the poorest-performing emerging market
currency in the world, according to local
news sources.
However, while the deadly terrorist attack in

Istanbul on 31 December went some way
to causing the drop in the currency, that
has been exacerbated by a stronger dollar. on average from Saudi Arabia to Turkey Main Port on Friday 6 January, as Turkish
Consumers further down the PP chain - Turkish prices will need to rise at least homopolymer raffia prices rose to $1,020-
are using the poor economic situation to $40-50/tonne higher than those in China in 1,040/tonne CFR Turkey on Thursday 5th
delay payment or cancel orders, which is order to make suppliers consider Turkey as January, marking the first time Chinese
shortening liquidity further up the line. an attractive alternative. raffia prices have been lower than Turkish
levels since early December.
As a result, raw material consumers and The good news for Turkey is that Chinese
converters are managing stocks carefully PP prices have started to soften on Despite the drop in Chinese levels, higher
and buying less, creating less demand for declining PP futures ahead of the Lunar upstream costs and limited supply may
producers in the Middle East and Iran in New Year, which begins on 28 January. limit further reductions, and those same
particular, with Iranian producers reducing Chinese CFR flat yarn (raffia) prices factors could cause Turkish prices to
exports to Turkey towards the end of dropped to $1,000-1,040/tonne CFR China continue to rise.
last year.
2011-2015 full-year homopolymer imports & 2016 Jan-Nov imports. Source: Turkstat
The Turkish polymer market is also, to
some extent, at the mercy of the Chinese
market. Higher CFR (cost & freight) prices
in China compared to the Turkish market
means suppliers can get better netbacks
in China than in Turkey. Iranian producers
in particular have been taking advantage
of this, as well as some Middle Eastern
suppliers, and the result is less supply to
Turkey.
Due to cheaper freight rates from the

Middle East to China compared to Turkey
- approximately $10/tonne from Saudi
Arabia to China compared to $50/tonne
Producers have almost all increased their if they have kept their stocks limited in as was seen around the elections in June
January offer prices to Turkey because of recent months because of the uncertain 2015.
the rising crude prices following the cutback market outlook.
in oil production by both OPEC and non- However, despite the on-going economic
OPEC oil-producing countries. Players from all sides of the market will also problems and political uncertainty faced in
be watching to see what happens should Turkey, it is still one of the largest importers
This, together with limited supply to a proposed referendum on constitutional of PP in the world, with annual import rates
Turkey because of better arbitrage change get the go-ahead in the first half of continuing to grow, with 2016 volumes
opportunities in China and some planned the year. The referendum will be to decide looking on track to match those of 2015.
maintenance outages in Egypt and India whether current president Recep Tayyip Due to the large volume of imports entering
at the end of last year, will allow producers Erdogan will be granted executive power to the country, producers cannot afford to
to take a more bullish stance with Turkish rule Turkey as President. Regardless of the ignore the market even with the currently
buyers. These buyers may also find outcome, the referendum itself may lead weak demand levels.
themselves in a tough negotiating position to subdued trading activity in the country
term planning.
POLYESTER FIBRE CHAIN
CAPROLACTAM
EUROPEAN CAPRO MARKET According to this source, Asian demand Another important point is the new nylon 6
FOCUS TURNS TO BENZENE, looks to be strong and even higher in terms capacity that is expected to come online in
CRUDE OIL of raw material prices. 2017:
By Vasiliki Parapouli
Although this will be a temporary situation, The general tendency, especially for
The European caprolactam (capro) it will surely have an effect in all western integrated players, is to push prices up in
market witnessed a different ending in markets, at least for at the beginning of 2017.advance, while waiting for nylon 6 to flood
2016 to previous years, as a jump in the market due the new capacity, which will
feedstock benzene prices in a seasonally A capro producer said that the stronger dollar appear later in 2017, the buyer said.
quiet month like December made the will give some room for improvement with
contract price negotiations quite a regards to Europes market competitiveness. Players from both sides of the market
challenging task. have pointed out several times that the
We expect the dollar to get stronger versus European capro needs a new approach
However, the strong upward trend of benzene the euro due to the political and economic defined by stability, rationalisation and
spot prices and the improvement of crude oil uncertainty in in Italy and Greece; therefore, more discipline.
prices led to some players restocking rather the general export position of the European
than destocking, keeping December demand market, not only of capro, will be much For suppliers, this new approach is needed
unusually strong, in an attempt to avoid better, he added. in order for margins to be recovered and
paying higher prices in January. the market situation to become sustainable
This source said that the market again.
The market has moved into 2017 with all experienced a similar trend at the end of
eyes turned to raw material prices and 2014, when the dollar was again stronger The whole year has so far been
crude oil movements. and the impact to the overall European disappointing for profits and although
industry was very positive, generating growth looks solid, it was expected to have
What we are forecasting for the first half strong demand from the export business. a faster pace, a buyer said.
of next year is a higher crude oil price
with respect to the average level of the Demand in engineering plastics was 3-5% The opportunistic behaviour of some market
second half 2016. Consequently, there higher in 2016 and this trend seems to be participants has to give its place to a certain
will be support for a price increase in all holding up in Europe; the carpet industry is level of stability where capro can become
downstream petrochemicals, including not doing as well as we would like but it will balanced again and every business in the
capro and nylon 6, a buyer said. come around, the producer said. value chain can survive, sources said.
term planning.
PU CHAIN
MDI AND TDI
EUROPE MDI AND TDI PLAYERS levels over the past few years. It expected September 2016. Over this period BASF
HOPE FOR STABILITY IN 2017 prices to remain at these elevated level as a continued to run its 80,000 tonne/year
By Ben Lake result, if supply stability continues. Schwarzheide facility. This has not been
able to fill the supply/demand gap and
After a largely smooth year, the The changing climate could begin to TDI remained structurally short throughout
European crude methyl di-p-phenylene influence spread of demand across the 2016.
isocyanate (MDI) market has ended year. A source highlighted the mild winters
2016 tumultuously, with pricing shooting of the past two years. This allowed the After finally beginning to produce volumes,
up following numerous plant outages. construction industry to work continuously the Ludwigshafen plant was then idled due
Production problems are not expected to throughout the year. In comparison, the to a technical defect. With no indication
last, however, and players anticipate a sudden drop in temperatures over the of a return date, players face continued
return to normality next year. past few weeks has stopped construction shortages in the market.
outside. Cold weather across Europe could
Current production issues at sites run by dent sales in the colder months. If BASF reaches full production capacity
Covestro and Huntsman are not expected in 2017, this will leave the market
to persist. While shortness may last into There remains an oversupply of pure MDI oversupplied, according to sources. While
January, there is little anticipation of issues in Europe. This small market is unlikely to the expectation would be that prices would
over the next year. Few gaps in supply see any major change in demand. It could, fall, after so many hikes, this may not be the
were seen in 2016, and the belief is that this therefore be expected for this market to case, as prices in Europe are still the lowest
trend should continue. remain flat in 2017. globally. Multiple production issues have
also hit other plants around the world and
A source said that there might be a small Toluene di-isocyanate (TDI) players have seen prices climb even higher than Europe.
bump in demand next year but nothing endured months of turmoil in 2016 with the
major, with stability predicted overall. Another view on 2017 conditions remaining uncertain. With the arbitrage window open, the excess
source saw a healthy increase in demand as product may end up exported out of Europe
customers had invested in new lines. Supply issues in 2016 stem from the and price levels could sustain or take longer
delayed start of BASFs new 300,000 tonne/ to decay than expected. This is contingent
While prices have risen to around the year Ludwigshafen plant in Germany. on global TDI prices remaining high and
2,000/tonne level, one producer said that Originally due to come online in late 2015, this again is tied into European production
this is more representative of historical price the plant did not begin production until levels.
term planning.
SOLVENTS
ETHYL ACETATE (ETAC)/BUTYL ACETATE (BUTAC)
EUROPE ETAC LOOKS TO Next year could be similar to this autumn, importers away from the European market.
IMPROVED SUPPLY, BUTAC once demand has picked up said a At current prices, imports are making their
EXPECTED TO STABILISE producer. way to Europe but it remains to be seen if
By Ben Lake volumes are enough to fill any capacity gap
There will be more material available in not filled by INEOS.
The profitability of the European ethyl Europe, with INEOS set to complete a
acetate (ETAC) markets future is dependent 100,000 tonnes/ year expansion to its Hull, Butyl acetate (butac) prices are expected to
on an evolving supply situation in 2017. UK plant at some point in 2017. INEOS has return to levels seen before BASF entered
already said that it has intentions to move force majeure following an explosion in
The import market saw significant some of this material abroad turning Europe October.
restrictions over large parts of 2016. This into an export region in the process.
has especially been true of Indian exporters. The lack of this major producer is fuelling
Numerous issues, such as increased Without imports, the market was short in current price hikes but once it returns
shipping and feedstock costs, have 2016, meaning there will be demand to be to market, sources are expecting a
rendered the European market unprofitable. filled in Europe. It is unclear if the expansion reestablishment of the status quo. Butac is
Some of these will drag into 2017. will meet the entirety of demand in Europe. normally structurally oversupplied in Europe
and this keeps prices supressed.
The Indian governments demonetisation We provide, say, 10% of European
policy, which has rendered large swathes of requirement. Might drop to 6-8%. There With no set return date and market talk
physical currency in the country worthless, will be an impact, a player in the Indian suggesting anywhere between weeks and
is due to finish at the end of December market said at the time of the INEOS months for a return to production there is no
but the effects could drag into 2017. While announcement. guarantee of a quick resolution.
players feel its influence easing, the policy
is still having an effect. A trader said it did not believe that 2017 would Once production levels return, a source
be as volatile as 2016, with prices not returning sees no reason that prices would move
If Europe remains unpalatable for imports, to the lows seen for large parts of 2016. again for the rest of the year.
buyers could find themselves running short
of material when demand picks up, as it We see a level maintaining above 900/ Same flat level as for most of 2016. Dont
is expected to do from February onwards. tonne for most of the year, said the source. think there will be any new demand, said
Without the material coming from abroad, the source.
sources expect prices to maintain the higher Prices were driven down as suppliers
levels seen in recent months. competed for market share, this pushed
term planning.
SOLVENTS
IPA
EUROPEAN IPA PRICES IPA-propylene cost spread 2013-2016

MAY REVERT TO AVERAGE,
UNCERTAINTY LIES AHEAD
By Chris Barker
After a year of strong margins for producers

and high spot prices, European isopropanol
(IPA) is likely to revert to its historic average
in 2017.
Most of the issues which caused a tight

market in 2016, and therefore contributed
to high prices, are unlikely to be relevant in
2017.
At present, price trends are already moving

towards a narrower spread with feedstock
propylene.
However, there are a number of factors

which are likely to contribute to uncertainty
this year, including volatile feedstocks, which
fundamentally depend on crude oil, and an
unclear economic and political outlook for
Europe. The initial divergence from previous trends In addition, this trend was exacerbated by
was the result of a short market in Europe the stronger dollar against the euro in the
The price spread between IPA and feedstock due to a force majeure at Shells facilities in second half of the year, which made US
propylene has been wide in historical terms Singapore, according to market sources. imports by Exxon increasingly unaffordable
for 2016, with this trend beginning towards for European buyers.
the middle of 2016 and reaching near-record Shell does not comment on its
levels around July. production status. The dollar has continued to rise following the
election of Republican presidential candidate
Europe vs US export price 2013-2016 Donald Trump in the US and the promise
of increased government spending and
infrastructure investment, suggesting that
lower cost competitiveness of US material
could still be a factor in 2017.
US imports supply approximately 15% of the

total IPA demand in Europe.
There are also unknown factors surrounding

the stability of the EU and the euro following
the rise of populism across the US and
Europe and the UKs vote to leave the EU
(Brexit) in mid-2016.
This raises questions regarding the level

of the euro a crash in value could also
contribute to lower imports from the US.
Dollar/euro exchange rate, 2016 following closures over the last ten years.
This leaves the market relatively vulnerable

to supply shocks and price spikes, since
issues with just one plant can impact a
significant percentage of European capacity.
However, despite Shells issues in 2016

having a major impact, overall market views
still suggest a mostly flat pricing level for
2017, but this may be accompanied by a
reduction in producers margins as propylene
and IPA prices become closer together.
The feedstock outlook for 2017 is stable-to-

firm due to the recent OPEC and non-OPEC
agreements to cut crude oil production.
Source: Xe.com This has already boosted WTI crude oil

prices by approximately 15% since late
However, with Shells Dutch cracker issues enlarge its IPA capacity in 2017, which will November, with market players expecting
and IPA problems having being resolved late add to the potential availability in the market. strong increases for feedstock propylene in
in Q3 2016, and no immediate reason to January.
believe that any further problems will occur, This is the only known capacity change
low availability from domestic producers is intended for Europe over the next 12 months. The increases in feedstock are expected to
unlikely to be a dominating issue in 2017. trickle down to European IPA prices, albeit
One ongoing issue for the European market with the current high spread between IPA and
European producer Novapex will also is the small number of domestic producers feedstocks serving as a mitigating factor.
European producers- capacity

IPA spot price 2013-2016
percentage 2016
price movements
SOLVENTS
MEK
MEK MARKET COULD BE ROCKED MEK spot price 2013-2016

BY VOLATILE FEEDSTOCK PRICES
By Chris Barker
The European methyl ethyl ketone (MEK)

market is poised to be rocked by feedstock
price trends in 2017 due to the volatile
crude oil market.
Supply and demand are expected to

be stable compared to 2016, with the
structurally balanced-to-long market a
concern for producers and the relative
vulnerability of MEK to supply shocks an
issue for buyers.
SUMMARY
The supply and demand outlook for MEK
in 2016 is stable, with no capacity changes
scheduled over the next 12 months.
Supply and demand have shifted significantly

in 2016, with the market moving from being
structurally balanced to structurally long due
to increased exports from Sasols plant in
In addition, the market has become OPEC agreements to cut oil production, but
Secunda, South Africa to Europe.
less dependent on spot business due to with significant uncertainties depending on
the ongoing shift towards a more direct the strategies of major oil producers.
The Secunda plant has a total nameplate
producer-buyer relationship, meaning a
capacity of 65,000 tonnes/year, according
greater emphasis on contract prices. This This has already boosted WTI crude oil
to ICIS plants and projects data, equivalent
has led to an overall downward trend in prices by approximately 15% since late
to over 22% of total MEK capacity in
prices. November. This has also begun to trickle
European countries.
down to MEK prices, which saw their first
The small supply base for MEK is an major increase of 2016 towards the end of
European producers- capacity ongoing concern for buyers in Europe, December, despite relatively low demand
percentage 2016 due to the vulnerability of the market to and business activity combined with
shutdowns or production issues at a small destocking taking place during this period.
number of producers, although this was not
so much of an issue in 2016 as in 2015 with Crude oil markets are expected to be
no major supply disruptions and a steady rebalanced only by the second half of 2017
decrease in pricing. after being oversupplied for most of 2015-
2016, and in the short term the supply and
The low price level combined with stable- demand outlook will depend a great deal on
to-firm feedstocks in 2016 have severely whether non-OPEC countries like Nigeria
squeezed margins for European producers. and Libya go through with production
Price increase attempts above the cost reductions as planned.
pass through from naphtha are very likely
in Q1 2017 in order to recover margins lost In the long term, with shale oil companies
in 2016. in the US becoming swing producers,
rising prices could push up supply and lead
The feedstock outlook for 2017 is stable-to- to prices slumping again or stabilising at
firm due to the recent OPEC and non- similar levels to 2016.
term planning.
SOLVENTS
MIBK
EUROPE MIBK TO REMAIN is expected to return to structurally You can rely on ICIS
STRUCTURALLY LONG, ROCKED BY balanced-to-long once the production
issue is resolved.
for all your market
FEEDSTOCKS intelligence needs
By Chris Barker
However, traders have noted that export
European methyl isobutyl ketone (MIBK) demand has been strong in 2016 and this PRICING INFORMATION
prices are expected to be strongly affected trend is expected to continue into 2017,
by feedstock price trends and the typical although this may be negatively affected by reliable price assessments for key Asian
structural factors impacting the product rising spot prices in Q4. countries such as India, Northeast and southeast
in 2017. provide price histories and expert commentary
The market remains vulnerable to a similar to help you understand the key price drivers and
The limited production base remains a supply shock as in 2014-2015, with only market conditions and settle your contract prices
concern in Europe and leaves the product two major producers - Arkema and Shell bids and price movements
relatively vulnerable to supply shocks and - remaining in operation, and with Shells
price spikes. plant at Pernis in the Netherlands making
up 3/4 of remaining capacity.
SUMMARY
European MIBK spot prices have risen The feedstock outlook for 2017 is stable-to- NEWS INFORMATION
strongly in Q4 of 2016 after being stable-to- firm due to the recent OPEC and non- Be the first to find out about breaking news
soft for most of the year. This was a result OPEC agreements to cut oil production, but and analysis across the global petrochemical
of tightness from one of the major European with significant uncertainties depending on
producers, according to market players, the strategies of major oil producers. This shutdowns, plus so much more.
although this could not be confirmed at the has already boosted WTI crude oil prices by
source. approximately 15% since late November. Request a free trial of ICIS news
Spot demand is expected to remain weak in For the moment, little impact has been seen
2017 due to structural factors, with on MIBK pricing but significant pass through
is expected to upstream propylene in 2017, Receive an end-to-end perspective across the
MIBK spot only making up approximately global petrochemical supply chain, enabling
10% of demand in the market. As a result, with market players expecting a double-digit you to grasp the local or regional scenario in
the spot supply and demand situation price rise for January. a global context. Data includes import and
export volumes, consumption, plant capacities,
MIBK spot price 1-year chart up to 2030.
Enquire about our supply and demand data
FORECAST REPORTS
ICIS publishes monthly forecast reports for

price forecast as well as details of supply and
demand, trade balances, capacity and margins.
Enquire about the price forecast reports
DIGITAL CHEMICAL BUSINESS MAGAZINE
ICIS Chemical Business (ICB) e-magazine is the

providing decision support for executives making
long term planning.
SURFACTANTS AND
OLEOCHEMICALS
FATTY ACIDS AND ALCOHOLS
EUROPE FATTY ACIDS/ALCOHOLS Feedstock tallow prices have been on There is some market consensus that PKO
ON AN UPWARD PRICING the rise because of competitive demand supply could ease towards the end of the
TRAJECTORY from the energy sector, supply issues from first quarter as crop yields in Indonesia and
By Cuckoo James inefficient production and on the back of a Malaysia are expected to improve after last
spike in alternative feedstock, vegetable years El Nino adversely affected farming.
European palm-based fatty acids and alcohols oils. The tallow market is balanced to tight.
prices were on an upward trajectory last year, However, others disagree as PKO prices
and the outlook for pricing in Q1 remains Feedstock palm kernel oil (PKO) prices have shown no signs of dropping.
bullish due to a rise in feedstock prices. have also been on an upward trajectory,
driven by market shortage. Hotter weather There are other factors that are expected
Palm-based fatty acid and alcohol prices from El Nino this year has adversely to exert upward pressure on fatty acids and
in the first quarter of 2017 are expected to affected PKO production and yields in alcohols, including the euro to US dollar
increase due to a feedstock supply shortage Indonesia and Malaysia. exchange rate.
in Europe, albeit amid minimal purchases
as buyers wait for softer prices. There is stiff competition between tallow The euro weakened versus the dollar in
and palm fatty acids, with some customers 2016, from $1.08 in January 2016, down to
Many Q1 fatty acids and alcohols contracts choosing to buy the cheaper tallow-based $1.03 at the time of writing.
are currently being finalised. Upstream products. This has, in some instances,
prices have been increasing from the offset some of the upward pressure on The rise of the US dollar has typically
beginning of the fourth quarter, primarily on palm-based product, especially on palm pushed up prices for European fatty acids
insufficient production. oleic acid. and alcohols.
term planning.
UPSTREAM FEEDSTOCKS
BIOFUELS
BLAND BIODIESEL AND TWO be that sellers will be able to offer greater on 11 May, closing its huge 380,000 tonne/
BRIGHT SPOTS FOR BIOETHANOL GHG savings next year as a result of more year Rotterdam ethanol plant.
IN 2017 efficient processes.
By Vicky Ellis & Sarah Trinder Swooping in to buy the asset, which has
This could counteract the expectation of a pivotal role in Europes market thanks to
As seen in previous years, legislation increased consumption as a result of a its size and location near the Rotterdam
remains at the heart of the biofuels story for higher GHG emissions saving target to pricing hub, came Belgian ethanol producer
2017. Biodiesel is facing uncertainty amid some extent. Alcogroup (in partnership with Vanden
the potential annulment of anti-dumping Avenne Commodities and Vandema).
duties for material from Argentina and An imminent legislative issue on the horizon
Indonesia. for European biodiesel is whether WTO and This is also a source of uncertainty for early
EU court rulings that anti-dumping duties 2017: how quickly and to what level will
For the bioethanol market, booming supply (ADDs) on Argentinean and Indonesian Alcogroup ramp up Rotterdam production?
and shifts in the EUs sugar regime are the biodiesel will result in biodiesel from these
big factors to watch out for in 2017. This countries re-entering the European market While buyers will have been enjoying
follows a rocky 2016 when plants changed in 2017. some periods of softer prices in 2016, a
hands or restarted, while the political pessimistic mood dominated at a November
football of biofuels has continued to receive The ADDs were brought about by the conference of ethanol players, driven by
a kicking. allegation that differential export taxes from expectation of ample supply impacting
the countries were distorting prices but the prices.
BIODIESEL 2017 MORE OF WTO and EU court rulings have said that
THE SAME? this has been difficult to substantiate Two potential bright spots shine for
European sellers.
The European biodiesel market has had In September 2016, the European Biodiesel
yet another sluggish year in terms of Board said it would demonstrate that There is the end of the EUs sugar market
spot activity and the expectations from differential export taxes did distort biodiesel regime on 30 Sept 2017. Received wisdom
sources is that this is largely unlikely prices in the context of an appeal. goes, that beet ethanol producers will pick
to change. sugar over ethanol much higher sugar
EU SUGAR CHANGE MAY BE A prices are attractive.
Discretionary blending outside of mandates SWEETENER FOR BIOETHANOL
in Europe has decreased amid lower crude There is a counter-argument if the overall
oil values and although prices have firmed A key question for the European bioethanol sugar output of such producers increases,
significantly there are no signs yet that they market in 2017 is how it will cope with more ethanol be made as a co-product;
will increase to levels which would prompt overflowing capacity. meanwhile, sugar is not the largest
higher discretionary blending of biodiesel feedstock for European ethanol.
outside of mandates. The year of 2016 was fairly turbulent for
prices: freefall in first quarter, climbing in the Maize was king of the crops in 2014,
German biofuels legislation functions second and a fall in the third. The relative making 42% of all feedstock used by
differently to other EU member states and stability dominating in the fourth quarter was ePURE trade group members. Wheat made
instead of implementing a biofuels blending fairly unexpected. up a third, followed by sugar beet at nearly
mandate, prescribes a greenhouse gas a fifth of feedstock (18%).
(GHG) savings target. Late spring, early summer 2016
developments are set to have long-lasting Beet production is in two main consuming
Through blending biofuels, the GHG ramifications on the market well into 2017 markets, France and Germany, as a trader
content of fossil fuels had to be decreased and beyond. pointed out in December. I would say from
by 3.5% in 2016 and sources said that one day to another, if they all decide to
this resulted in lower levels of biodiesel In July 2016, Germanys agricultural group produce sugar, then we have a problem.
consumption. CropEnergies restarted its mothballed Can they really stop producing, I dont think
400,000 cubic meter (cbm) per year ethanol so.
In 2017 this GHG emissions saving target plant, Ensus, at Wilton in the northeast of
will increase to 4%, which could prompt England. A second bright spot is biofuels mandates
higher consumption of biodiesel. being boosted in countries like Belgium
CropEnergies was striking at a weak (doubling to 8.5% biofuel in transport)
However, one biodiesel market source moment for its rival, Abengoa, whose and Norway (upping its quota, though the
believes that one of the trends next year will Netherlands business filed for bankruptcy increase is for advanced biofuels).
One bogeyman that may prove to be less Europe, (up to 1.2bn litres duty free, claims Canadian infrastructure is not easily geared
frightening this year is the Canada-EU trade ePURE) and fulfil domestic needs with for such an export flow, according to
agreement, CETA. cheap US product. another trader, while long-term deals may
be needed for Canadian players to make
Signed on 30 October, removing trade For now, the view is that CETA will not the effort. And another block seems to be
barriers on ethanol, CETA could risk have a short term impact. CETA relies on weak Europe pricing.
ethanol coming into Europe from Canada, a the European parliament approving the deal
European producer said in November. The (it could come into force provisionally in
theory is that Canada could send ethanol to Spring 2017).
term planning.
UPSTREAM FEEDSTOCKS
CRUDE
OIL PRICE STICKINESS MAY LAST The combined effects of negative interest UPSTREAM INVESTMENT STAYS WEAK
ON STRONG LIQUIDITY AND WEAK rates and lasting quantitative easing have
FUNDAMENTALS resulted in a liquidity glut, with a lot of sub- At the microeconomic level, the head of the
By Julien Mathonniere optimal investments earning poor returns. EIA, Adam Sieminsky, said that the lack of
While this may be good news for emerging upstream investment over the past couple
Subdued global oil production may keep energy markets offering higher yields, it of years or so might be a problem five years
the oil price above $50/bbl, although also upholds a volatility trap, subjugating from now. This confirms and amplifies the
probably below the $55 mark. The investors decisions to the markets short- findings of a Deloitte study earlier this
final OPEC production-curbing deal, if term movements. year where the accounting powerhouse
implemented and properly verified, will help estimated that the global upstream industry
rebalance the market. However, it may This liquidity has so far defied all the US would need to invest at least $3,000bn
not significantly affect supply and demand Federal Reserves attempts to restore in 201620 to ensure crude oil long-
fundamentals. credit bullishness. Currently, the short-term term sustainability. With an average 6%
interest is the only rate over which the Fed replacement rate and no Ghawar giant oil
Both Saudi Arabia and Russia have kept has kept a modicum of control, and it is field in sight, oil supply might feel the years
producing at record-high levels, and the US negative. As economist Lena Komileva of underinvestment as early as 2025.
will not participate in any collective supply from G+ Economics recently put it, the
agreement. Meanwhile, higher-breakeven risk-free rate has become the rate-free risk: The silver lining is that capital expenditures
shale producers prepare to return to the investors must pay to park government from several exploration and production
market. bonds. companies (E&Ps) increased during
Q2 2016, essentially on higher crude oil
After an inflexion in Q1 2017, world liquids Quantitative easing is generally intended prices and hence, larger cash flows. This
production will resume growth from Q2 as a short-term solution because perfusing suggests that prices now hovering above
2017 on a shallow-rising trend, according to the economy for too long puts downward the $50 mark may help maintain capex
the Energy Information Agency (EIA). pressure on the domestic currency and feeds commitments and mitigate production
inflation. Should the Fed decide to cut it off declines, especially after the big, general
Sustained demand from Brazil, Russia, abruptly, this may cause a taper tantrum, balance sheet clean-up of the beginning
India, and China (the BRIC countries), that is, a mass panic of investors drawing of the year and OPECs return to market
notably on increased power generation and their money rapidly out of a bond market that management.
the mobility revolution in India and China, is already suffering from low yields.
will keep in line with this increased supply. Some oil will also be displaced by the rise
A tightening of US credit seems unlikely of electric vehicles which, according to
World demand for refined products, in 2017, essentially because of the Feds some predictions, may cost the same price
however, may not pick up until the global overall dovish stance and reflationary bias. as their internal combustion counterpart in
economy improves. China, which remains The US federal fund rate is projected to end 2022 . This may entail the displacement of
central to it, currently exhibits a smoothly at 1.1% at end-2017. In a speech at the 2bn bbl/day of oil, which would be enough
decelerating GDP (est. 6.57% in 2017), a Economic Club of New York, the Feds vice- to create another, long-lasting supply glut.
massive debt overhang, and a fading effect chairman Stanley Fischer recognised the
from the past years investment stimulus. possibility that low long-term interest rates However, it is unclear how this may
can be a signal that the economys long-run play with the extra power demand, as
Persistently low interest rates have flooded the growth prospects are dim. the substitution effect from producing
fixed-interest markets with too much liquidity,
resulting in turn in a volatility trap, that is,
a situation where short-term movements on
the markets rule over investors decisions Figure 1 Distribution of participants projections for the change in real GDP in 2017
and jeopardise steady, long-term upstream
investments in hydrocarbons.
EXCESS LIQUIDITY PERSISTS
At the macroeconomic level, energy has

been lagging the other commodity markets
because increased volatility has put
downward pressure on investors returns. Source: US Federal Reserve, Minutes of the Federal Open Market Committee 2021September 2016
Figure 2 Cash flow and capital expenditures for select US oil producers SOME SOFT SPOTS IN FUNDAMENTALS
China also crystallises a few concerns

for oil markets. The country is currently
registering a smoothly decelerating GDP
(est. 6.57% in 2017), combined with a
massive debt overhang, and a fading effect
from the past years investment stimulus.
After Beijing granted independent Chinese

refiners their first import licences in the
summer of 2015, the so-called teapots
have become one of the most sought-after
oil market, mopping up part of the global
excess supply.
At current prices, China whose high-cost

Source: Evaluate Energy
production fell to a trough of 3.89m bbl/day
in September will keep importing lower-
more electricity will merely displace date, including 24 M&As larger than $50bn cost oil from Africa and the Middle East to
oil consumption from one sector to in size. Last October, SM Energy closed gradually replace coal (of which it is the
another. Regardless, every technological the acquisition of nearly 25,000 net acres worlds first producer and consumer).
breakthrough by Silicon Valley blue-chip contiguous to the properties it already
companies like Tesla is diverting funds owned in the area for $1.6bn, and the debt- Lastly, Venezuelas PDVSA has run into
away from upstream investment, not to ridden Occidental Petroleum paid $2bn deep financial troubles, which put a bit
mention the downward pressure on refined cash for 35,000 acres. of bullish pressure onto the markets
products markets gasoline in the first by constantly threatening to wean US
place. Nearly all wells currently in operation in refineries off one of their main sources of
the US are now horizontal, suggesting that supply.
LARGE PRODUCERS TIGHTEN COSTS drilling economics there have spectacularly
improved on longer laterals, and generally Venezuela produces a type of heavy sour
On the geopolitical side, the picture may in well-known areas where costs of crude that fits well into the distillation curves
look slightly more blurred and complex. production are under tight control. of the US Gulf Coast refiners. According
Three years into its all-market stance, Saudi to the EIA, about 30% of its crude imports
Arabia has tentatively reverted to supply Russia is pumping oil at post-Soviet record come from that country in order to satisfy
management to lift prices, while producing rates, recently claiming that it may keep refinery requirements for its subsidiary
at full throttle to retain market share. ramping up production, although this might CITGO and other term arrangements.
be from high-cost hence uneconomic
The Kingdom is now feeling the full effects areas such as the Arctic. Ironically, PDVSA, the national oil company
of its earlier laissez-faire policy in terms of has been importing lighter material from the
fiscal deficit and slower GDP growth, not Although the country has now pledged to US to be used as diluent with Venezuelas
to mention its melting foreign exchange commit to production caps, its output has heavier production at its refinery in
reserves. Besides, Saudi Aramco may have increased by an approximate 150,000 Curacao.
found good reasons to try to fetch a higher 200,000 bbl/day since the beginning of last
oil price for its upcoming IPO. year. Beyond the possible disruption to the US
downstream sector, any default would
While the traditional role of Riyadh as a Russian hydrocarbon production has also knock off a few bond holders. Hence,
discipliner still worked to some degree benefited from a weak rouble that reduced their recent reluctance to exchange more
flooding the market with cheap oil to force drilling costs and taxes. The country also than $5.3bn of PDVSAs outstanding notes
out the competition, some producers have introduced its own Urals futures at the maturing in 2017 for longer-term securities.
radically improved their drilling economics Saint-Petersburg Mercantile Exchange
to move down the production cost curve (SPIMEX) on 29 November, following The country has again miraculously passed
and come back to the market at much lower a decade-long attempt to price its own the peak of alert, but its future will influence
benchmark prices. Russian crude domestically. global oil production and supply from
Latin America in particular. The resulting
The US is one of them. US shale E&Ps will This might be a first step towards the short-term bullishness may, in the longer
likely fight for market share if prices stay at de-dollarisation of Russian commodities. term, boost US domestic production and
or above $50/bbl, in particular from prolific However, given the countrys huge budget in turn, put downward pressure on prices,
basins like the Permian, which not only deficit, the Kremlin may have to convince especially if the recently elected US
remains profitable, but seems to drive an investors that its intent goes beyond president Donald Trump decides to verge
increase in merger and acquisition (M&A) achieving higher prices, and the political on the protectionist side.
activity. environment will be the biggest hurdle to
overcome.
According to IHS Markit, spending in the
Permian might be close to $20bn year-to-
UPSTREAM FEEDSTOCKS
NAPHTHA
EUROPE NAPHTHA, GASOLINE OIL SUPPLY AND DEMAND producing countries that do not participate
FATE HINGES ON TUMULTUOUS in the OPEC-led supply reductions, the
OIL OUTLOOK Crude oil markets are now expected to EIA said.
By Cuckoo James re-balance only in the second half of 2017 if
the futures price curve is to be believed. OIL PRICES
The outlook for European gasoline and
naphtha markets continues to be heavily Brent futures time spreads are atypically Oil prices could easily take any direction in
dependent on oil price forecasts, because wide for the first half of next year, but the new year, and along with fundamentals,
of the price elasticity of gasoline in the tightens for months further out in the curve. traders would be keeping a close eye on
key US export market and the potential A wide spread in a contango market is code the US dollar as it is an influential factor.
impact of sharp shifts in crude oil prices on word for persistent oversupply.
European refiners. A rise in the US dollar typically exerts
OPEC and Russia are pumping oil at record downward pressure on oil prices. The
Prices for both gasoline and naphtha high levels prior to their promised output pricing trajectory of the US dollar in turn is
closely track that of upstream ICE Brent cut, according to surveys. highly dependent on US monetary policy.
crude oil futures.
Experts agree any action to cut supply from In January, oil and US dollar would be
Lower oil prices will help keep the record 1 January as promised at the OPEC summit heavily influenced by the US Federal
high consumption of gasoline in the US in November - if it happens at all - might not Open Market Committee meeting on 13-14
going, while higher oil prices can soon put a be enough in view of this imbalance. December, and traders will be watching out
damper on consumption. for the possibility of accelerated interest rate
Countries represented in the second OPEC hikes in the near future which could push
European refiners are structurally at higher and non-OPEC pact in mid-December the dollar higher.
risk than their US counterparts of suffering account for 60% of the worlds oil output,
a loss when oil prices rise sharply, as they and could be impactful if the terms are If the US economy stays strong through
have done in December 2016. complied with. the next month or two, its also likely that the
chance of another rate hike comes sooner
Refiners will profit from higher prices in the A big risk persists with Nigeria and Libya. than later. Again, stronger USD playing
beginning in case they have bought crude Having been affected by conflicts and against the oil rise, Larry said.
at lower prices but their margins will dip supply outages, these are two countries
once high crude prices start trickling into with significant potential to increase GASOLINE, NAPHTHA SUPPLY AND
their system, said Ehsan Ul-Haq, senior oil production, Natixis Economic Research DEMAND
consultant at KBC. analyst Abhishek Deshpande said in a note.
Depending on the direction oil fundamentals
EU refineries are under pressure as is and Another potentially bearish factor is Irans and prices take, US gasoline demand
they will have even more issues trying to production reference level. This is the level growth in 2017 will either slow or rise above
stay active while prices go against them. from which it will decrease its output. Unlike current estimates, up from a record high
We still havent seen export demand nor for most others, it is not set at October 2016 reached in 2016.
regional demand prop up enough to keep but at 2005, a gloriously productive time in
EU refineries running behind the margins, Irans oil history. The EIA estimates lower oil prices in 2015-
Carl Larry, principal oil and gas consultant 2016 ensured an increase of over 2% or
at Frost and Sullivan said. There are other dangers too. The prominent 400,000 bbl/d in gasoline consumption in
one being a potential increase in US tight oil the US.
However, experts also believe Europe production if prices start edging up.
could exploit potential weaknesses in Latin EIA also estimates US gasoline
American refineries, at least for a while. Some US production companies had consumption will reach a record high of
already increased investment, especially in 9.31m bbl/d in 2016.
Demand for crude from European the Permian Basin, when crude oil prices
refineries should remain elevated into neared $50/bbl, the US Energy Information The organisation is currently forecasting
year-end and early 2017, as weakness in Administration (EIA) said. gasoline consumption growth will slow to
Latin American refining continues to reduce just 60,000 bbl/d in 2017.
the availability of US product for European A price recovery above $50/b could
markets, Olivia Schorah from Energy contribute to supply growth in other U.S. The US is a key export destination for
Aspects said. tight oil regions and in other non-OPEC European gasoline and blendstock naphtha
- much of the prospects for the two markets make the largest contributions to global oil West African demand in 2016 received
depend on the direction oil prices and US demand growth. a boost after Nigeria resumed the oil-for-
gasoline demand takes in the new year. products swaps programme, and this could
Asian demand for European naphtha is continue into next year despite the countrys
Europe is structurally long on both gasoline here to stay, although arbitrage economics struggle for foreign reserves.
and naphtha, and has to export product to play a huge role in spot deals.
the US, West Africa and Asia to balance its European petrochemical demand could be
stocks. The International Energy Agency estimates the stable factor next year in supporting
naphtha, LPG and ethane use as naphtha demand, as it has done all through
Both products are well placed to exploit petrochemical feedstocks in non-OECD this year.
global growth in the transport and countries will rise by around 6m bbl/d
petrochemical sectors, which continue to between 2015 and 2040.
term planning.
OTHER
2016 HIGHLIGHTS
EUROPE HIGHLIGHTS 2016: THE JANUARY banks quantitative easing (QE) programme
YEAR NO-ONE PREDICTED Crude oil markets started 2016 the same was launched in 2015 started to cause
By Johnathan Lopez way they finished it oversupplied. rising prices, with the latest figures showing
Moreover, following the agreement between inflation at 0.6%.
Europe was shaken in 2016 by social and Iran and world powers to curb its military
political earthquakes for which we will only nuclear ambitions, sanctions on the country FEBRUARY
realise the full effects in years, perhaps started to be lifted allowing it to pump from Annual results for European chemicals
decades, as the European chemical its wells enormous amounts of crude, companies released in February and
industry braced for a different world enlarging the global oversupply. thereafter showed an improvement in 2015,
following Donald Trumps victory in the US compared to 2014, but petrochemicals
presidential election. European stock markets reeled from the continued posting contracting output
crude oil market crisis and jitters from volumes.
2016 started with economic predictions China, where even stock trading was
stating the UK vote on EU membership suspended at some point due to heavy Following the diesel scandal involving
planned for June was a geopolitical risk losses, a key market which had been so far Germanys major producer Volkswagen
but neither the countrys government or its resilient in supporting European chemicals in 2015, which uncovered software
corporates had made contingency plans in companies prospects. manipulation in order to pass laboratory
the event of UK citizens voting to leave the tests on CO2 emissions, the European
28-country bloc. The EUs chemical trade group Cefics chemical-intensive automobile industry said
director general, however, said at the time it welcomed new real-conditions tests.
Equally, the idea of Donald Trump that China would continue providing them
becoming President of the US was a distant with growth, although his words were In eastern Europe, fertilizers and chemical
reality for which the countrys media and among his last as the groups president company Grupa Azoty got embroiled in
opinion pollsters were caught off-balance. had already told ICIS it badly needed a a management crisis after the new far-
stronger voice to lobby for its interests in right government in the country dismissed
But December closed with the UK Brussels, the EU capital. That chosen voice without notice the CEO and appointed a
government scrambling around to find a was Marco Mensink, former director general party faithful in the post.
negotiation strategy on how to leave the of the Confederation of European Pulp and
EU as it plans its departure for 2019 and Paper Industries (CEPI). The dismissed CEO had entered just a
Donald Trump planning his arrival to the few months earlier, for the first time, the
White House on 20 January, promising that By mid-January, the woes from China had ICIS Top 40 Power Players 2015 list for the
all Americans will enjoy the effects of a new greatly affected German chemical major way he had placed Azoty at the vanguard
industrial renaissance based on patents BASFs share price as the company had of chemicals in eastern Europe and had
and products. made that market a key battleground for its embarked in an international expansion.
expansion projects. With production plants
This unforgettable year also saw more than ramping up while demand slowed, analysts However, like the best soap operas,
200 countries agree on bringing targets worried the company may not go into a not even before 2016 had ended the
to reduce their CO2 emissions as global supply/demand balance until 2020. government which controls 33% of the
warming continues to threaten agriculture company through the Polish Treasury felt
and lifestyles across the planet. Another sign showing the Chinese El yet a new CEO was needed and, without
Dorado was not proving as buoyant as much fuss, again appointed a new head for
In a year in which post-truth politics also expected came from French chemical major the company.
become a recurrent term, the new US Arkema, announcing it would not exercise
president has publicly questioned the reality an option to increase its stake at the Although operational performance has been
of climate change and has promised to Chinese acrylic acid and butyl acrylate joint holding during 2016, Azotys share price
eliminate all barriers to responsible energy venture Taixing Sunke Chemicals. has not, as investors dont normally like
production to tap into the countrys fossil political interference.
fuels reserves. Inflation in the 19-country eurozone started
the year at 0.3%, far from the European February also unveiled the $43bn offer from
2016 had started, however, with market jitters Central Banks (ECB) target of close to, but ChemChina to acquire the Switzerland-
in China as it seemed at the time the countrys below, 2%. headquartered agrochemicals major
debt was unrepayable. Chinas economic Syngenta, in a move which could facilitate
woes, however, were quickly put aside as its However, the enormous amounts of money food supply to the non-arable China for
central bank continued printing money. pumped into the euro system since the decades to come and left western analysts
amused at how state-printed money can do At his first public event since being The EU said later in August that it would
so much. appointed director general, Cefics Mensink review the DowDuPont deal very closely,
said he was actually feeling how EU citing concerns about the agrochemicals
MARCH lawmakers were coming to understand division.
As the effects of the ECBs QE struggled to better the needs of the chemical industry,
filter to the real economy, the bank presided adding the current Commission was Although a smaller deal, Germanys
over by Mario Draghi unleashed in March listening more carefully to its demands. Evonik also went US-bound in May when
an extension of the programme, as well as it announced the $3.8bn acquisition of Air
a move in interest rates to encourage banks However, the relationship between EU Products specialty & coatings additives
to lend to households and businesses. bureaucrats and the chemical industry business, a move viewed as expensive by
has always been complicated. In October, analysts.
However, the real problem of growth in the the executive director at the European
eurozone is unlikely to be fixed by printing Chemical Agency (ECHA) told industry While in May most of the European chemical
money the eurozone needs capital delegates to stop complaining and get industry supported a free trade deal between
investment to spur growth and project it on with the job of registering its chemical the US and the EU, the Transatlantic Trade
into the future, said analysts at the time, products within the Reach regulatory and Investment Partnership (TTIP), a
but also a bunch of German industrialists framework. crack started to appear as social pressure
who think the state needs to spend more mounted the new generation of free trade
on infrastructure and education to keep As a premonitory sign of the mess the deals as defined by the EU Commission
Germany at the forefront of the world country would be left in after the EU was not popular among large swathes of
economy. referendum, the global head of chemicals public opinion.
at auditor KPMG told ICIS in April that UK
March was also the month when companies should be making contingency Within chemicals, Austrias major Borealis
petrochemical major INEOS received at plans in case voters chose to leave the EU. CEO broke the ice saying the Commission
its Norwegian complex of Rafnes the first If only they had listened. was working against the will of the people
US ethane shipment, which the company while Spanish energy major CEPSA said
hopes will keep it competitive as the shale In April we also heard that the UKs TTIP would be a challenge for Spanish and
gas revolution on the other side of the pond chemical industry was overwhelmingly in European chemicals as their competitive
continues pumping inexpensive natural gas. favour of staying within the EU. They were disadvantages would only increase in a free
only two months away from finding out the trade area with US peers.
On the morning of 22 March, a terrorist country they operate in was not of the same
attack struck Brussels airport, in the first of opinion. The European chemical trade group Cefic
a series which would shake Europe in 2016, was always a strong supporter of TTIP,
killed 32 and left hundreds injured. Polands government continued publishing although the complexity of representing
sudden dismissals April also saw the CEO more than 30 countries and hundreds
The attack caused a reduction in air travel at refiner Lotos made redundant, without of companies will always cause dissent
which was reflected in Aprils imports of jet much explanation. Cefic was accused by players in the
kerosene into the EU. industry in May of representing mostly the
MAY interests of large global chemical players
APRIL German chemical major Bayer in May European and from overseas which would
By April, the manufacturing sectors in the unveiled a $62bn offer to acquire US naturally favour a free trade deal like TTIP.
eurozone started seeing a revival in activity agrochemicals major Monsanto. Farmers
which would only grow as the year went around the globe were therefore wondering By July, TTIP was already considered dead
by on the back of recoveries in periphery if their prospects to have some kind of by the German chemical trade group VCI
countries like Spain or Italy. Although the leverage with their suppliers would be and Cefics director general confirmed in
recoveries are nowhere near to providing valid any longer if Bayer was to succeed, September optimism would not be the
enough jobs for the youth and the long-term three large companies would practically right word to use when talking about its
unemployed, the chemical industry has control the market - ChemChina/Syngenta, survival prospects.
benefited from the bonanza as it is in the DowDuPont and its resulting agrochems
front line of the upturn. business and now Bayer/Monsanto. JUNE
On 23 June the stock and currency
The EU came up with yet another plan to Bayer, weary that its shareholders markets, the UK political establishment
stir the green sector within the 28-country had bought stock thinking more about and the countrys pollsters were all betting
bloc with a package about the circular a pharmaceutical company than an voters would follow the expected path of
economy although some chemical trade agrochemicals major, tried to convince them events and vote, albeit tightly, to stay in
groups showed fears that the measures with the narrative that due to the simple the EU. Bourses were up and the pound
would only overregulate. human need of eating, agrochems will sterling was trading at a healthy 1:$1.47.
always be a profitable business to be in and
However, by the end of the month, the would offset risks at pharma. By 09:00 GMT on Friday 24 June, markets
European Commission the EUs executive were in free fall and the UK Prime Minister
body was promising the industry at an Investors are not buying the story, at least David Cameron had addressed the nation
event in Brussels Better Regulation by yet. From more than 110/share in May, to announce his resignation the mess
scrapping duplications and rationalising the Bayers stock traded in December he had helped to create would be left to a
laws which rule the bloc. around 98. successor.
For the first time in decades, the UK was quickly. On 14 July, Frances National Day, northern hemisphere boosts that products
not following the free market-focused, a terrorist driving a lorry ploughed into prospects.
liberal economics it helped establish in the crowds watching a fireworks display in Nice
80s. From immigration to big corporates by the Mediterranean sea. By December, prices had indeed recovered,
dominating the world, the referendum but probably not by as much as producers
campaign gave wings to those who did He left 86 people dead and 434 injured. would have liked.
not approve of developments in the last 30 France, in the midst of a social, political
years but had never been asked about and economic crisis, extended the state SEPTEMBER
them. of emergency declared in November 2015 Bayers initial $62bn offer to acquire Monsanto
after another terror attack in Paris which left ended up being $66bn by September, when
The country woke up suddenly to a 130 dead and 368 injured. the US firms shareholders agreed to the deal.
reality it had dismissed, or at least failed
to recognise: the north of England, the The Nice attack soon took a back seat in This was also the month when crude
birthplace of the industrial revolution but the media however when the day after, oil producers around the world started
now a post-industrial region where jobs are on 15 July, key EU ally Turkey suffered a recognising that as long as the oversupply
scarce and in many cases too badly paid, coup dtat. In events still unfolding as the stayed put, selling prices would remain low,
had voted overwhelmingly to leave the Turkish president continues a crackdown biting their national budgets in many cases and
EU, as recognised by UKs chemical trade against those he considers responsible, putting pressure on future projects expansions.
group CIA at the time. more than 100,000 civil servants, army
members and intellectuals have been Initial thoughts to start fixing the problem
A committed supporter of free markets and arrested or fired from their posts. of low prices crystallised in November and
globalisation, the UK and the US later in December, when OPEC members agreed
November were, 30 years after Ronald The failed coup attempt shook up the to cut oil output, a deal extended later
Reagan and Margaret Thatcher started their countrys petrochemicals industry. Many on to other 11 non-OPEC countries. The
economic revolution, suffering a backlash companies have struggled to recover from International Energy Agency (IEA) would
against the system which was meant to the events, with both demand and prices pour cold water on this in November.
create wealth at the top that would later on remaining low, and exports to Turkey
trickle down to the rest of society. seeking out better netbacks in Asia and September also saw German chemical firm
other regions. LANXESS placing a $2.5bn offer to acquire
It did not trickle down as expected and US-based Chemtura, a producer of high-
talk of those left behind by globalisation The tumultuous year was completed by quality flame retardants and lubricant additives.
became commonplace after Brexit. a slide in the lira to a record low against
the US dollar, with no immediate signs of That move, among others, gained LANXESS
Although overshadowed by Brexit, there recovery, and the national statistical agency CEO, Matthias Zachert, the top spot in the
was other news in June, such as BASF saying Turkey had entered negative growth ICIS Top 40 Power Players, a list of the most
announcing its intention to acquire specialty territory in the quarter July-September. influential chemical CEOs around the world,
chemicals and surface treatment producer which was published in November.
Chemetall, part of US Albemarle, for Meanwhile in Syria, Russias military helped
$3.2bn, which was ultimately completed in the countrys president regain formerly OCTOBER
December. lost areas, with Aleppo finally falling into BASFs Ludwigshafen plant in Germany
government hands by December. suffered the most serious accident in
Italys energy major Eni said it would decades on 17 October, which left three
keep under its umbrella the petrochemical AUGUST dead and several injured. As the accident
arm Versalis, after talks for a potential The UKs Bank of England (BoE) unleashed caused by an explosion only affected the
divestment with investment fund SK Capital on 4 August a 170bn stimulus package sites port overlooking the River Rhine,
collapsed in June. to try to fend off the expected downturn logistical operations were affected at first
after Brexit, although those supporting but the company managed to keep the
JULY departure from the EU continued to accuse disruption to a minimum.
Another eventful month, which started the bank of scaremongering and of creating
however with stock markets in Europe a negative vicious cycle which feeds The most serious accident in the chemical
recovering part of the losses posted after pessimism in the economy. industry in years, the incident left questions
the Brexit vote, emboldening those in the still unanswered about how it could have
UK who had supported the departure. In August we also heard German industrial happened, considering the supposedly tight
gases major Linde was in talks with US health and safety tests the site has to pass
However, voices across Europe started peer Praxair over a potential merger. every year.
unveiling the conditions required for the UK Although it took a few months and a CEO,
to continue having access to the European Linde finally said in December it had agreed
At the time, chemical analysts were divided
single market, where most of its exports are terms for a merger with the US firm.
about the potential implication of the
directed. The French chemical trade group, accident on the companys financials, with
for instance, told ICIS the UK should apply During the month, observers of some suggesting it could bite as much as
Reach if it wanted to trade chemicals with polyethylene terephthalate (PET) said the between 1% and 3% from BASF fourth-
the EU. low prices the product had had to endure quarter earnings before interest, taxes,
during the course of the year might have depreciation and amortisation (EBITDA),
But July will not be remembered by the bottomed out, after June saw low prices although others were more circumspect,
aftermath of Brexit as the news cycle shifted when traditionally the summer season in the arguing production would not be affected.
How the accident affected fourth-quarter November was also the month when more You can rely on ICIS
financial will be unveiled on 24 February 2017, than 200 countries agreed on terms to
when the company presents its annual results. implement the Paris Accord from 2015 to
for all your market
curb CO2 emissions to stop the planets intelligence needs
NOVEMBER temperature rising.
The month European chemicals said PRICING INFORMATION
they were bracing for a different world While delegates gathered in Marrakech
after outsider Donald Trump won the US to finalise details, however, there were reliable price assessments for key Asian
presidential elections. widespread fears the new president in countries such as India, Northeast and southeast
the US would overturn the accords as
Following the same pattern as Brexit, large he intends to exploit fossil fuels to make to help you understand the key price drivers and
swathes of voters in industrial regions possible his promised industrial revolution. market conditions and settle your contract prices
decided to abandon their traditional house bids and price movements
the Democratic Party and opted for a Perhaps a sign of how climate change
billionaire who was promising to overhaul is already with us is the River Rhine in
laws and ways of approaching business Germany, a key petrochemical transport
culture in order to Make America great route in Europe. Although normally at low
again by producing and hiring American water levels in the autumn, by 21 December NEWS INFORMATION
products and workers as a maximum the federal and local river authorities told Be the first to find out about breaking news
economic policy. ICIS that water levels were unusually low and analysis across the global petrochemical
for the time of the year.
While the line won approval from a lot of shutdowns, plus so much more.
working class voters, the appointments Trump DECEMBER
has made to his administration have revealed Just one day after a German economic Request a free trial of ICIS news
the greatest number of billionaires and research institute explained how the
bankers a US government has ever seen. economy had ended the year in a festive
mood, another lorry was used in a terror
Trump is not yet at the White House and the attack on a Berlin Christmas market, killing Receive an end-to-end perspective across the
way his presidency develops in 2017 will be 12 and leaving dozens injured. you to grasp the local or regional scenario in
one of the most fascinating aspects of the a global context. Data includes import and
new year. Terrorism has become a recurrent theme export volumes, consumption, plant capacities,
in Europe, and although most citizens up to 2030.
Chemical companies, the paradigm of an understand the threat is difficult to fend off, it
export-intensive sector, are concerned seems many feel the proposals from far- Enquire about our supply and demand data
the protectionist rhetoric heard during the right groups increasingly anti-Muslim and
campaign will translate into reality. nationalist are the way forward. How Europe
FORECAST REPORTS
deals with this will be a main feature of 2017.
Analysts in Europe have started pointing ICIS publishes monthly forecast reports for
at the growing wealth gap between those Elsewhere in Italy, a weak prime minister price forecast as well as details of supply and
at the top and those at the bottom as the who had proposed constitutional reforms demand, trade balances, capacity and margins.
fundamental reason for the Brexit and Trump and linked his victory in a nation-wide It is a valuable tool to identify commercial
votes, a problem the western establishments referendum to his post, was forced to quit
will need to start looking at if they intend to after losing. Enquire about the price forecast reports
solve the real problems of their time.
Markets, however, were unfazed by his
Back at home, European manufacturing resignation, although talk about the troubled DIGITAL CHEMICAL BUSINESS MAGAZINE
was in November at its highest point Italian banking system persisted and by ICIS Chemical Business (ICB) e-magazine is the
since January 2014, fuelling demand for the end of the year the oldest bank in the No.1 source of market intelligence and analysis
chemicals, although Cefic painted later in world and the one with the largest amount reading for global chemical industry players,
December a sombre picture about stagnant of bad loans, Monte dei Paschi di Siena, providing decision support for executives making
volumes during the course of 2016. was on the brink of a bailout from the Italian current transactions, as well as short term and
long term planning.
Treasury.
In Spain, without a government after two Download a free sample now
inconclusive elections in December 2015 and December also left the EU deciding how its
June 2016, a minority cabinet led by Mariano Emissions Trading System (ETS) will look
Rajoy was finally formed in November, which like from 2020 onwards, with the unusual
pleased the Spanish chemical trade group. feature of the German chemical trade
group VCI and the EU wider group Cefic
However, Spaniards away from the disagreeing on the fundamentals.
booming metropolitan areas as the
country recovers from its worst crisis since The IEA also said in December if crude oil
the 1940s following the Civil War continue producing countries keep their promises for
to see unemployment at record highs and output cuts, the markets might move into
stagnant or decreasing salaries. Social deficit by June 2017.
discontent continues to be on the rise.
OTHER
AUTOMOTIVE OUTLOOK
AUTOMOTIVE INDUSTRY FACES Coupled with this, China continues to have Typical year-end destocking has not been
SERIES OF CHALLENGES IN 2017 rising debt estimated at around 250% as heavy in several individual petrochemical
By Mark Victory of GDP. As senior ICIS consultant John sectors in 2016.
Richardson argues and elaborates on in
The global automotive market looks to 2017 the December issue of the ICIS Global In Asia, this is because of the approach of
with a greater series of potential challenges Automotive Report, current liquidity may the Lunar New Year in late January, while
than in recent memory. be enough to keep the China bubble going in Europe expectations of rising feedstock
through 2017, but at some point an end will costs in the new year are trumping working
Will the recent rally in crude prices have to come. capital arguments in several downstream
continue? Will the spread of populist markets.
politics continue to cause shock geopolitical This will have major consequences for the
results? Will Chinas GDP growth continue, global automotive industry because China is Typically, players destock towards the new
or will its increasing debt levels start to the worlds largest market for automobiles, year to reduce working capital on year-end
weigh on demand? Will a Donald Trump and imports heavily from other regions. balance sheets.
presidency be good or bad for the global
economy? Will protectionism increase? In the past few years, sales growth in China Although US vehicle sales rose in
has been supporting the auto industry November 2016 year-on-year which
All of these issues have the potential elsewhere meaning that this is perhaps was attributed to Black Friday deals
to reshape the sector even without the most serious risk for auto manufacturers passenger car sales continue to fall as the
factoring in the shift to electric vehicles and heading into 2017. market increasingly shifts to larger vehicle
lightweight materials, and the longer-term classes.
sea-change in demographics. Coupled with this, if the crude rally extends,
the industry could be faced with the This leaves the US auto fleet unbalanced,
As always, it will ultimately be undesired twin spectre of rising costs and and could be a problem for the industry
macroeconomic conditions that dictate the falling sales. if a macroeconomic downturn emerges,
strength of 2017 auto demand, which are because, typically, larger vehicle classes
deeply mixed and confused across the While the industry is moving evermore are more heavily affected by declining
globe following a series of shock events in towards globalisation, local issues are economic conditions than smaller classes.
2016. It is remarkable, given the underlying pushing individual regions in opposing
volatility of conditions, that auto sales in directions. Nevertheless, early forecasts for 2017 US
2016 have been so strong. GDP are positive, and petrochemicals markets
This is most clearly shown in the Global are expected to grow, according to ACC
One of the key drivers of this has been ICIS Basket of Automotive Petrochemicals predictions. With senior petrochemical figures
vehicle sales in China, which have been (IBAP), which was broadly stable (albeit at being nominated for key positions in Donald
stimulated throughout the year by vehicle a slight drop compared with the previous Trumps government, the industry could find
tax subsidies and are due to rise from 5% to month) in November as rises in China were itself with powerful government advocates as
7.5% at the start of 2017. outweighed by dollar-term falls in Europe the new president begins his term.
and the US.
One need only look at the pre-tax cut China In Latin America, uncertainty over Trumps
auto sales figures to gauge the impact. This is mirrored in the global market price policies and exchange rates is fuelling
China sales are, therefore, likely to decline. direction expectations from chemical chain volatility, as is continued economic and
players, where views are sharply mixed political instability, particularly in Brazil.
Stripping out China, global auto sales depending on individual market conditions. Nevertheless, Brazils GDP is expected to
in 2016 to November across key auto fall less in 2017 than in 2016.
producing regions would have fallen.
OTHER
CAUSTIC SODA
THE CALM BEFORE THE STORM Caustic soda FOB spot price 2016
FOR EUROPEAN CAUSTIC SODA
By Chris Barker
The caustic soda market will enter a calm-

before-the-storm scenario in 2017, with a
mostly stable situation expected but market
players needing to adjust to significant
changes coming from 2018 onwards.
Significant capacity changes are expected

at the end of the year, with several large
chloralkali plants due to be closed as a
result of the phasing out of mercury cell
technology in December 2017.
Most possible scenarios suggest a tighter

European market from late 2017 onwards,
which could potentially be rebalanced by
higher plant run rates or increased imports
from overseas.
The situation in the European market has

clarified considerably in the second half of
2016 following a long period of uncertainty
regarding the future of supply in Europe.
Remaining mercury chloralkali capacity 2016
Net caustic soda capacity closures totalling
between 863,000 tonnes/year and 1.1m
tonnes/year are expected in Europe before
the beginning of 2017 due to mercury cell
caustic soda/chlorine production being
declared outside Best Available Techniques
(BAT) in 2013, with closures mandated by
December 2017.
KEM ONEs plant at Lavera, France has

also been closed due to conversion work at
the end of 2016 but is scheduled to restart
in January 2017.
However, combined with other plants with

lower production the short term impact has
been to greatly exacerbate the tightness
in the European Mediterranean import
markets in the second half of 2016, with
prices spiking from September onwards.
Company Plant Location Capacity (KT) Status
INOVYN Tavaux France 396 DMT FM declared on 5 December due to technical problems
KEM ONE Lavera France 341 DMT Offline for mercury conversion until January 2017
TCI Sanmar Port Said Egypt 200 DMT Restarted following shutdown in November-December
Among the major plants scheduled to close and December. This is a possible source Chloralkali run rates are expected to jump
in 2017 is the Spolana, Czech Republic of material to fill any gaps in availability in the first two months of 2017 as capacity
site owned by Unipetrol, which will switch which has been long speculated about by utilisation goes back to normal following
to imported feedstocks to produce polyvinyl market players. lower run rates in the winter season.
chloride (PVC) in June, with Ercros also
closing capacity at two sites in Spain Turkey is a major European import market However, the market is expected to remain
towards the end of the year. This is likely and has suffered from political instability tight in the first quarter of 2017 due to
to lead to local tightness in the central throughout 2016, with an attempted coup in the aforementioned production issues
European and Spanish markets during the the middle of the year exacerbating already and tightness in the Mediterranean, with
time period of the closures. existing economic problems and increasing producers initially separately targeting
uncertainty. However, sources say that the double-digit increases, although some
The market consensus is that demand market has continued to grow at 1-2% prices have yet to be announced and
is likely to be at a similar level to 2016, per year. negotiations have not begun in most cases.
when it was regarded as strong compared
to seasonal trends in the none-Alumina
sectors. Thus, early expectations are for
firm pricing and erratic tightness in the
European market in 2017.
However, the tightness in European

markets this year was exacerbated by
reduced availability from the US, and with
utilisation rates in that country rising and
expected to recover in the early part of the
year this is unlikely to be a limiting factor for
the remainder of 2017.
The US dollar gained strongly against

the euro in 2016 following the election of
Republican presidential candidate Donald
Trump, which played a part in reducing
caustic soda imports into Europe. One of
the likely scenarios over the following year
involves a stronger US dollar, which is likely
to have a similar impact in 2017.
Average utilisation rates also rose slightly

from 2014-2016, due in part to some
capacity being phased out in 2014-2015,
meaning that the remaining capacity has
needed to run at higher rates in order to
ensure continuity of supply.
Shipping data also shows increased interest

in southern European and Turkish markets
from the Middle East, with shipments
recorded from Qatar and Iran in November
OTHER
CENTRAL AND EASTERN EUROPE OUTLOOK
PETCHEMS FEATURE HEAVILY MOL also hopes that by the end of the this from Austrias OMV. Asked about its plans in
AS BIG CENTRAL AND EASTERN year it will be set to further capitalise on the sphere for 2017, it said it was planning
EUROPEAN GROUPS PURSUE the late 2015 launch of its 130,000 tonne/ no major petrochemical investments or
year butadiene (BD) plant by commencing facilities for the 12 months.
STRATEGIC CHANGE
production at a 60,000 tonne/year synthetic
By Will Conroy
rubber plant, built in Tiszaujvaros in Back in Poland, the largest Polish chemical
Strategic shifts are under way at three partnership with Japans JSR Corporation producer and second largest European
major central and eastern European (CEE) at a cost of forint (Ft) 70bn. fertilizer producer Grupa Azoty has
petrochemical producers as they prepare to announced that it is entering the new year
enter the new year. Analysts have generally praised MOLs following another management reshuffle.
strategic switch as well thought out. The
Polands PKN Orlen and Hungarys MOL idea of polyols looks interesting and MOL New CEO Wojciech Wardacki, who
are busy getting in line with newly released would actually like to develop it alone, which according to a treasury ministry source
several-year strategic plans, while the week is also an interesting development overall, has been appointed to better align the
before Christmas the largest Polish chemical said Tamas Pletser, an analyst at Vienna- companys strategy with the populist
maker Grupa Azoty was coming under the based Erste Investment. right governments policies, arrived at
purview of its third CEO in less than a year. Azoty talking about a revolution, stating:
MOLs big regional rival PKN Orlen has Management [at Grupa Azoty] is not
The new government-blessed company put out a 2017-2021 strategic plan familiar with the concept of revolution. My
chief, sources said, has been tasked with which, while allocating initial capital mission is to complete the integration of the
aligning the firm more closely with state expenditure (capex) of zloty (Zl) 800m for group, comprising of four companies, while
planning. petrochemicals during the first two years, ensuring that they remain independent, and
reveals little in terms of petrochemical to enhance the groups market position.
Of the three companies, it is MOL that has investments that might be ahead.
announced the most radical development An immediate task for Wardacki will be to
plan by far. Its new strategic gearing The company cited the great uncertainty ensure that more delays do not afflict the
towards petrochemicals and chemicals will concerning the paths the oil price and plan to build a world-scale 400,000 tonne/
see the group invest around $1.5bn every economic development would take in the year propane dehydrogenation (PDH) plant
five years until 2030 with the aim of turning near future, saying it had deliberately kept for the production of propylene, valued
the company into a leading European the plan non-committal investment wise so at $700m, at Azoty subsidiary Zaklady
enterprise in these two segments. that it could flexibly adopt capex decisions Chemiczne Police (ZChP). A tender to
as things became clearer. find a turnkey general contractor has been
We are considering a strategic investment announced.
in propylene production and propylene Orlens CFO Slawomir Jedrzejczyk did,
oxide-based polyols, with a final investment however, emphasise that petrochemicals Azoty, which is expected to release a
decision expected in the first half of next is absolutely one of the objectives for our strategy update during the first half of 2017,
year. Furthermore, we will raise our development. is having to fend off scepticism about its
petrochemical feedstock intake to three prospects from analysts who are wary of
million tonnes per year and introduce We will work on new products and on how government interference in its affairs
new product lines, said Miika Eerola, expanding the chain, he added. could throw it off course commercially.
MOL Groups senior vice president for
downstream production. In terms of investments already Nevertheless, Raiffeisen Centrobank
commenced, Orlen underlined that it was analyst Dominik Niszcz said the expected
The company anticipated that in polyols fully committed to the planned $360m scrapping of Polands treasury ministry in
there would continue to be growing demand Polyethylene 3 (PE3) project at Czech favour of a development ministry, which
in parallel with a lack of regional production Republic subsidiary Unipetrol, one of the would take over the states holdings in
capacity. biggest investments in the history of the companies such as Azoty and Orlen from
Czech petrochemical industry. Speculation the treasury, could be good news.
The company aim, according to Eerola, is that Orlen was minded to sell Unipetrol was
to deepen MOLs downstream integration well wide of the mark, it added. The development ministry as a supervising
along the value chain whilst also moving entity may better coordinate the expansion
towards semi-commodity and specialty Perhaps the least action in the field of plans and proposals of the companies
products in the packaging, health and petrochemicals in CEE can be expected that would fit into Polands economic
automotive industries.
policy. I assume that any large projects to minority shareholders who have turned And second largest European soda ash
be undertaken by the companies will be to the courts in an attempt at getting an producer, Poland-based Ciech, may by the
thoroughly analysed, so that they match the opportunity to explore a move in which theyend of 2017 be preoccupied in assessing
big picture, he said. say they cannot see any business sense. incursions into Europe made by cheap
competition from new trona-based natural
Elsewhere across CEE, observers will Another Czech company, synthetic resins soda ash plants in Turkey. It recently
take stock of Unipetrols attempts to revive maker Spolchemie, will, meanwhile, be announced it was switching to four-year
Czech polyvinyl chloride (PVC) subsidiary hoping for a trouble-free first-year debut fixed-price contracts partly to combat the
Spolana. Burdened by old technology, the from its long-awaited membrane-technology, looming threat.
company was reacquired after a decade by mercury-free chlorine plant, finally
Unipetrol from Orlen unit Anwil, angering constructed after several years of delays.
term planning.
OTHER
CHEMICAL MERGERS AND ACQUISITIONS
EUROPE CHEMICALS M&A AGRO increasing and consumers will continue

Among others, BASF itself closed in
GOES GLOBAL demanding more natural products. December the acquisition of US surface
By Jonathan Lopez treatments producer Chemetall, part of
Bayers shareholders spent 2016 wondering Albemarle, while Dutch major AkzoNobel
Agrochemicals will continue to be the highlight if the pharmaceutical company they had finalised the acquisition of BASFs industrial
in the European chemical mergers and invested in was no longer such an entity as coatings division for 475m.
acquisitions (M&A) space in 2017 as two the transaction would potentially move the
regional players go global Swiss Syngenta focus from high-earning drugs to currently Transactions to be finalised in 2017 include
being acquired by ChemChina and Germanys struggling agrochemicals. Germany Evoniks $3.8bn acquisition of the
Bayer acquiring US major Monsanto. specialty and coatings division from US Air
Bayer will potentially move further away from Products, a move analysts saw as strategic
To concern of farmers around the world, the its third business, petrochemicals, after the but expensive.
agrochemicals industry will be practically initial public offering (IPO) of approximately
controlled by the two new entities and a 36% of the companys stock in 2015. German peer LANXESS, which had already
third one resulting from the merger of Dow embarked in 2015 in a joint venture with
Chemical and DuPont, announced at the In October the company said it had already Saudi Aramco for its synthetic rubber
end of 2015. secured $59.6bn in bank financing for business, announced last year its intention to
Monsantos acquisition, but that still leaves acquire US producer of flame retardants and
Agrochemicals have had a hard time it short of $6.4bn. A total divestment of lubricant additives Chemtura for $2.5bn.
during 2016, as prices hit rock bottom Covestro, after the shares rocketed in their
in subsectors like fertilizers while the first year trading on the stock, would give The companys CEO, Matthias Zachert,
persistent need for capital expenditure Bayer the spare change it needs. was awarded last year the top spot in the
(capex) in research and development ICIS global list of Top 40 Power Players in
(R&D) pushed the industry into a further European chemical analysts remain the chemical industry for the way he has
wave of consolidation. certain it will occur sooner rather than later, turned around LANXESS over the past
although the company persistently denied it years.
Along the way, Germanys chemical major in 2016.
BASF was left behind and never undertook There has been quite a lot of activity in
the transformational deal needed for the ChemChina entered the European the M&A space in 2016, and we expect
company to remain a global and key player agrochemicals sector in January when it that trend to continue into 2017 given the
within agrochemicals, according to analysts announced its intention to acquire Swiss challenge European chemicals have to
in March. agrochemicals major Syngenta for $43bn, generate organic growth, said Francois
the largest transaction of a Chinese Lauras, vice president and senior credit
Two possible moves [Syngenta, Monsanto company abroad to date. officer for European chemicals at US credit
acquisitions] have been made and those rating agency Moodys.
deals, at least on paper, could have made It was not only an acquisition intended to
sense for BASF and, assuming they get boost the state-owned Chinese chemical In the current uncertain environment, large
through, BASF will be standing on the majors earnings. Chinas harsh soil arability companies are willing to pursue acquisitions
sidelines in the agrochemicals sector, said is limited, and the countrys Communist Party in order to boost their revenue and organic
Peter Hall, from chemicals M&A specialist cadres were looking at the transaction to growth.
investment bank The Valence Group. facilitate food security in coming decades by
acquiring the necessary technologies. Lauras concluded by saying the former
They might pick up some business if El Dorado of emerging markets may be
[antitrust] remedies are required, but logically The move also left western analysts receiving less focus as growth has slowed
anybody in that sector has to be revaluating amused at how capitalism can take a down China or in fact disappeared in
their strategy given the massive structural different face when state money plays by 2016, with recessions registered in Brazil
shift happened in a short period of time. private economy rules. and Russia.
While genetically modified organisms In the wider chemical industry, cheap financing Having said that, they are still growing at
(GMOs) used in agriculture have been an on the back of record-low interest rates in a faster pace than developed economies,
important source of revenue for Monsanto, the eurozone continued to allow companies so they will remain attractive in chemicals
Hall does not think the technology will to achieve the external growth they cannot companies long-term perspectives, given
take hold in Europe once the company is achieve organically in their home markets will that many of them in the west continue to
acquired by German chemical major Bayer continue to be subdued in 2017, according to have a large exposure to the more mature
as the eating healthy trends are only figures from the EUs trade group Cefic. markets of Europe for historical reasons.
OTHER
CHEMICALS OUTLOOK
CHEMS STRUGGLE WITH WEAK EU same time, year on year comparisons with a consumer chemicals and personal care
ECONOMIES, COSTS AND SLOWER stronger part of 2015 were more apparent. products sales volumes. Indeed weaker
EXPORT MARKET GROWTH export markets have hit the performance of
By Nigel Davis The trade federation Cefic reported in EU companies large and small.
December that its economists expect a
Third quarter results season highlighted the small uptick in EU chemicals production of Fertilizer production in Europe was down
nervousness in the European chemical sector about 0.5% in 2017. Growth last year was sharply in 2016 as North African producers
running through the latter part of the year. The completely flat. in particular lifted output. A bright spot
outlook has worsened since with geopolitics was polymers where growth was driven
adding the most significant layer of uncertainty That overarching figure conceals very by automotive demand and demand in
and a period of will he wont he speculation different trends within the sector, however. packaging and electronics.
following the election in November of Donald
Trump to the US presidency. Petrochemicals production was up in Polymers demand in automotive is
2016 after several years of sharp declines. expected to moderate in 2017 but growth
The new presidents first 100 days will set Producers have benefited from the low oil price could be buoyed further by the other major
the tone for the year at least and is likely to and lower operating costs even though their end-use sectors.
encourage and concern business in equal competitive disadvantage remains. Naphtha
measure. costs in 2016 were down about 17% year For 2017, Cefic expects overall moderate
on year on an average oil price of $44/bbl, growth in a volatile and challenging
Chemical producers have a lot to lose if the Germanys chemicals trade group said earlier. environment, the trade group said of the
tide turns still further against global trade. overall chemicals outlook.
Tariff barriers would hit players in this sector Cefic notes that ethylene cash costs in the
hard. The UKs Brexit debate has highlighted EU are about double those in the US. That Growth for the sector in 2016 was not as
particularly the connectedness of chemical differential has reduced markedly since the high as expected a year ago. Industrial
markets and chemical companies. oil price fell sharply but remains significant. production has slowed in major global
Producing petrochemicals in the EU is markets and, with it, demand for chemicals.
No matter whether a producer is big expensive although relatively sophisticated
or small, barriers to trade or to the free end-use markets ensure a degree of Uncertainty and economic risks have
movement of people are bound to be underlying demand. intensified over the past few months VCI
a cause for concern. A return to more president and BASF CEO said earlier this
restrictive operating and marketing The EU chemical industry continues to month.
conditions would not be welcomed. weather the impact of globalisation as well
as competitiveness challenges associated This applies particularly to the EU, our
On European minds are the EU policies that with the cost of doing business in the EU, home market, he added.
will impact business in 2017, primarily the Cefic said.
ongoing energy debate. The Reach burden For example, the result of the Brexit
increasingly bears down on producers of all While demand for chemicals globally is referendum has adversely affected the
sizes. increasing year on year, the EU chemical investment and consumption climate in
industrys share of that continues to decline Great Britain, he said. Moreover, the
Attention is very much drawn to the next and it now stands third behind Asia and the EU is burdened with a long list of further
registration deadline in 2018 but Reach US in terms of worldwide sales. Despite problems: the refugee crisis, the unstable
evaluation costs and authorisation issues investment leakage, the industry is holding banking sector, the difficult government
are important across the sector with some its own to keep manufacturing in Europe, formation in Spain, the latent inability to pay
important chemical intermediates such as the trade group added. of Greece, the constitutional referendum
bisphenol A being added to the Candidate and the government crisis in Italy.
List of products that are likely to have to be Chemicals demand has been constrained
authorised in use. in the weak EU environment while Chinas The VCIs president also spoke about
slower growth and the lacklustre economic the controversial debate about trade
Petrochemical producers enjoyed performance in the US pressured export and investment agreements like the EU-
another good year in 2016 with margins volumes. Returns from exports have been Canadas CETA or the EU-US TTIP.
underpinned by still low oil-based costs and higher, however, as the euro has lost value
still high product prices. against the US dollar. At the moment, hardly anything speaks for
the economy picking up in Europe, he added.
Margins were squeezed towards the end Cefic noted that stronger competition and
of the year as the crude price rose. At the weak global growth had taken its toll on
OTHER
COMPANY PERFORMANCE
UNCERTAINTY PREVAILS IN THE petrochemicals, saw its net profit fall by interest and tax of $78m, over double the
EUROPEAN PETCHEMS INDUSTRY 27% year on year in the third quarter of $37m posted the previous year, while Shells
By Niall Swan 2016 with sales also down by 20%. chemical operations posted a 2% year-on-
year increase in Q3 earnings to $542m.
It is beyond a doubt that 2016 will go In its Q3 statement, the German company
down as one of the most turbulent but also said that it expects full-year sales to decline [It is] hard to be very optimistic about
most important years in modern times, due to the divestment of its gas trading the outlook. The first half of the year
not only in broad global terms but in the business, with operating profit before disappointed, said Paul Hodges, chairman
petrochemicals business too. special items seen slightly lower compared of consultants International eChem, in a
with 2015. recent blog post.
On 23 June, the UK voted in favour of
leaving the EU, a decision which, despite Covestro - which will shortly publish its first Then Q3 saw major volatility as the hedge
repeated warnings, was one that very few full-year results as an independent entity funds and high frequency traders played
believed would transpire. - saw a surge in third-quarter net profit, up their games in the oil market - prices
61.9% year on year to 259m, analysts weakened as demand slowed, but then
Fast-forward to 8 November, and the US questioned the resilience of the company in the story about another effort at an OPEC-
presidential election managed to trump tougher conditions. Russia quota deal pushed oil prices back
the UK in terms of unexpected votes as up again.
real-estate developer and reality television After Covestro experienced strong
star Donald Trump was elected ahead of tailwinds in 2016 [brought about] by lower This led to companies doing some out-
Senator Hilllary Clinton. raw material costs and the delayed start- of-the-ordinary stock-building during the
ups of competitor capacities, raw material summer months, said Hodges, but a lack
The impact of these two seismic events on costs are rising significantly since mid-2016 of demand from the downstream end of the
the chemicals industry has yet to be felt and the delayed capacity additions are value chain took its toll.
with Trump awaiting his inauguration on 20 finally coming. Consequently, we expect
January, while Article 50, which allows the that Covestro might see pricing power Of course, some companies still did
UK to leave the EU, will be triggered by the headwinds in 2017, said Baaders chemical relatively well - either because of luck, in
end of March, with two years of negotiations analyst Markus Mayer. being at the right place at the right time, or
expected. because they have a very robust strategy,
Specialty chemicals producer AkzoNobel he added.
MERGERS & ACQUISITIONS was another company whose Q3 results,
Elsewhere, there are major changes despite being moderately positive, failed to CAPACITY UTILISATION
afoot in the chemicals industry, with three inspire. Net profit was unchanged year on Less-than-impressive financial results were
major mergers or acquisitions - worth an year at 285m despite a 4% drop in sales. coupled with faltering capacity utilisation,
estimated $200bn cumulatively - in the which dropped to the lowest level for the
process of being completed. The Dutch companys results were roughly sector globally since the height of the
in line with consensus according to recession in early 2009, according to the
German agrochemicals major Bayers analysts at Sanford Bernstein. Baader Bank American Chemistry Council (ACC).
acquisition of US company Monsanto, was less kind, saying: Our conclusion
Swiss-based Syngentas sale to Chinese [is that a] 2% price decline in Q3 2016 Global capacity utilisation in October of last
state-owned chems company ChemChina, underpins our fear that Akzo has not the year fell to 78.4%, which is just above the
and the long-awaited merger of Dow and pricing power to surpass rising raw material lowest reading ever seen of 77%, according
DuPont are all expected to be completed in costs. to the ACC. Whats possibly more worrying,
2017, leaving an entirely different industry however, is that it says capacity utilisation
landscape. In a year that saw weak oil prices on the has been in constant decline since the end
back of over-production, a problem which of 2015, when it stood at 80.7%.
FINANCIAL PERFORMANCES 2016 OPEC is hoping to counteract with a
Looking back at Q3 results across the production cut, major oil companies such as However, according to the latest European
industry does little to reassure that things Shell and BP relied on their petrochemical Chemical Industry Council (Cefic) Chemical
will improve in the coming year. segments to produce strong results. Trends Report, capacity utilisation in the EU
reached 81.9% in Q3 2016, which is a slight
BASF, the worlds biggest chemical BPs petrochemicals business posted a Q3 quarter-on-quarter increase suggesting that
company and one of the largest in underlying replacement cost profit before there is some light at the end of the tunnel.
FALLING CHEMICAL PRICES When taking all of the above into There was enough to be positive about in
Cefic also recorded that petrochemical consideration, its likely that the most the second half of 2016 to suggest that the
prices in the EU were 8.5% lower in Q3 prevalent word analysts will be using for industry is heading in the right direction, but
2016 than in the same period of 2015, while the European chemicals industry for the rising costs coupled with the disconcerting
in the wider EU chemical sector, prices foreseeable future is uncertainty. potential effects of both Brexit in the UK and
were down 4.6% year on year in the first Donald Trumps policies leaves a sour taste
nine months of 2016. as we enter into the new year.
term planning.
OTHER
EPOXY/EPICHLOROHYDRIN (ECH)
EUROPE EPOXY RESINS Speaking in December, one distributor said: The development of epoxy resins demand
MARKET LOOKS TO At the moment there is material coming will also be key to the development of
DEVELOPMENTS IN ASIA from Asia but I dont know what the situation demand in the European epichlorohydrin
By Luke Milner will be like in January or February. (ECH) market, as epoxy resins are the
largest downstream application of ECH.
The rising price of feedstock bisphenol A reduction in imports would help to
A (BPA) in Asia in December and the rebalance the European market at a time The ECH market, just like the epoxy resins
subsequent pressure placed on Asian epoxy when market participants are closely market, is watching developments in Asia
resins prices, as well as the strength of the watching developments in upstream pricing. as in 2016 some in the market saw ECH
US dollar against the euro, have become key imports affecting the supply and demand
talking points in the European epoxy resins However, it remains to be seen whether balance in Europe.
market as 2017 gets underway. this will lead to a change in direction in the
European epoxy resins market and price Although the ECH market in Europe was
The market has been particularly increases. Some in the market continue to generally considered balanced throughout
competitive in 2016 as sellers looked to doubt whether price increases would be early 2016, by the end of the year opinion
secure market share and imports helped to possible in early 2017. was divided, with two producers separately
keep the supply and demand balance tipped mentioning tighter supplies but other market
in the favour of buyers throughout the year. In mid-December, another distributor said: participants seeing a balanced-to-long
The epoxy market is a summer market. market.
Competition among sellers and market
length combined to maintain pressure on With the civil engineering and construction Mixed market views also led to mixed
epoxy resins prices throughout 2016 but sectors influencing demand in the epoxy contract price results in late 2016 and this
with signs of rising prices in Asia and some resins market winter is traditionally a quieter lack of concord provides the starting point
European market participants already time for epoxy resins, particularly when for 2017.
receiving offers from Asian suppliers at the weather is coldest or if the winter is
raised prices in December, several European prolonged. Propylene contract prices will continue to
players expect a reduction in Asian imports influence ECH contract price movements in
during the early months of 2017. The development of the markets supply 2017. However, with demand levels closely
and demand balance in early 2017 will in connected to developments in the epoxy
One European producer, speaking about part also be dependent on how quickly resins market both markets are likely to be
developments in the Asian market, said: demand from these sectors, amongst influenced by any fluctuation in import levels
Competitors from Asia Pacific will see others, picks up. and pricing.
additional costs and start increasing prices.
term planning.
OTHER
FERTILIZERS
FERTILIZER FIRMS FACE tender held in mid-November following At present, Turkish companies are
POLITICAL, ECONOMIC slow domestic sales, high stocks and the exporting CAN but are not allowed to sell it
UNCERTAINTY demonetisation of the currency. domestically. The ban on AN is expected to
By Richard Ewing stay permanently in Turkey.
At the same time, China is not exporting at
Like other commodities, fertilizers face present due to better domestic prices on For the phosphates market in 2017, India
an uncertain 2017 due to political and limited availability, higher feedstock coal demand for diammonium phosphate (DAP)
economic uncertainty on both sides of the prices and transportation issues. Operating remains lacklustre and buyers are expected
Atlantic, with consolidation expected by rates are now heard down to around 50% to return to the market in Q2. Business
players looking to follow in the footsteps of of capacity and there is talk they could is very thin in India due to high stocks
Canadian giants PotashCorp and Agrium drop further given stringent environmental and requirements covered by previous
who should receive regulatory approval for checks on coal-based producers. purchases under MOUs.
their mega-merger in the summer.
The Chinese export tax policy for 2017 In April-December 4.59m tonnes of DAP
The global urea market is firm as the year has now been announced and the tax arrived at Indian ports and there are
draws to a close and looks set to remain on urea has been cancelled in line with expectations that around 5m tonnes will be
firm through January amid expectations expectations. Given that exports are limited imported in 2017.
that demand in Europe, the US and Latin by the reduced operating rates and the
America will pick up again in the new year domestic market giving a better net back Phosphoric acid negotiations for Q1
as well as India returning to the market. to producers, it appears the government is contract deliveries to India are underway,
no longer concerned about exports being with expectations heard of a $20-30/tonne
Prices have moved up in latest business, preferred over supplying the domestic reduction from the current Q4 price of $580/
with Egyptian tonnes trading at $255-261/ market. tonne CFR (cost and freight) with 30 days
tonne FOB (free on board) and Arabian credit.
Gulf urea at $250-255/tonne FOB. Egyptian There is even talk of the potential need for
numbers are in line with this time last year, imports during Q1 2017 to satisfy domestic The reduction or rollover is expected to be
while Arabian Gulf prices are $15/tonne demand given that the domestic market is in line with global DAP prices which have
higher. looking short for the spring season. been under pressure. It remains to be seen
whether the new price for Q1 will make it
The US market is looking short moving into The ammonium nitrate (AN) market is cheaper to import DAP or produce it locally
Q1 2017 and ahead of the spring season, ending the year on a firm footing, with in India.
with some estimations that the market supply limited as producers in Russia focus
is short by 400,000-600,000 tonnes at on the domestic market. The new price is expected in the coming
present. Imports are expected to be needed weeks and it will most likely determine the
even if awaited new domestic capacity While supply remains limited, demand is amount of DAP demand for Q1 and will give
starts up early in the new year. also restricted mainly within Russia. There some price direction to the market.
are some enquiries from Brazil but these
However, the US is undervalued compared are yet to translate into deals. The Chinese market will be the focus
to the international market and will have of Q1 for the phosphates industry. The
to increase price levels to attract import Compared to last year, AN prices in the government scrapped the export tax for
tonnes. Black Sea and Baltic are around 12% lower, DAP and monoammonium (MAP) and
at $185-190/tonne FOB versus $210-215/ reduced the tax for nitrogen, phosphate,
European demand is also expected to tonne FOB in end-December 2015. potash (NPK) from 30% to 20% for 2017
pick up in January/February for the spring effective from 1 January.
application season, with talk that 400,000 The major news moving into the New Year
tonnes are still needed. Meanwhile, there is expected to be the removal on the ban of Moreover, the government has been
are estimates that Brazil still needs to calcium ammonium nitrate (CAN) sales and cracking down on pollution from plants and
purchase 300,000-350,000 tonnes before distribution into Turkey. producers are heard to be cutting down
the end of January and will likely to have to production by 20-30% early next year.
pay higher to secure tonnes. The ban is expected to be lifted by February
2017. With the Turkish market being short This will have an effect on DAP prices
There are also expectations that major of CAN, the lifting of the ban could lead to which have been rising lately on increased
buyer India will return to the market in significant imports. domestic prices despite a lack of
January/February after scrapping its last international demand
Ammonia producers are in a more upbeat North America benchmark prices have Potash prices found some stability in
mood heading into 2017 after a recent gained ground from multi-year lows earlier the second half of 2016 with numerous
rebound in prices west of Suez, although in 2016. Since August, prices in Canada cutbacks in output from all producers
new capacity planned for 2017 will create have risen from an average of $70.5/ combining with an uptick in demand
challenges for suppliers and traders, while tonne FOB Vancouver to $86.5/tonne FOB following the settlement of Chinese and
buyers in most regions will be spoilt for Vancouver. Indian contracts mid-year.
choice.
Some of this is connected with stronger The 2016 year finished on a firmer note,
The outlook for Q1 remains relatively prices in China starting in October, which with increases in demand in China as well
bullish, with no word from Russian came as somewhat of a surprise to the as spot demand noted in India and Taiwan.
manufacturing giant Togliatti on greater global market. Middle East sulphur prices The purchase tender season in southeast
export availability for January and February moved up during the fourth quarter lending Asia during the third-quarter put pressure
loading, and the future of Ukrainian further support to benchmark sulphur on producers, but few sales dipped below
producer Odessa Port Plant (OPZ) unclear prices. the levels established in Chinese contracts.
after failed privatisation attempts.
However, not all of the gains in Vancouver Negotiations for Chinese and Indian
The outlook for Q1 in Asia Pacific looks were led by the international market. contracts are expected to get underway in
better for buyers than east of Suez with spot a timelier fashion in 2017, with the 2016
offers already heard for February, albeit at Vancouver and the US West Coast have agreements marred by long delays owing to
undisclosed prices. spent the much of 2016 extremely tight falling prices and high stocks in China and
in supply, first from the Fort MacMurray India.
Demand for material in India is expected to wildfires in April, then from flooding and a
remain strong and until the phosphates slow ramp-up from both to solid production. However, global prices will be tested when
units of the $8bn Waad al Shamal project This supported higher prices toward the end capacity from the K+S Legacy mine in
start to consume feedstock Saudi of the year. Canada and EuroChems Russian mines
Arabian Mining Company (Maaden) should start producing in the second-half of 2017.
continue to offer spot tonnes on a regular Potash producers will be looking to make
basis. hay while the sun shines with the current Additional contributions from Rebecca
Sulphur prices in North America moving stability in prices not expected to last Clarke, Julia Meehan, Sylvia Traganida,
into the New Year are somewhat uncertain, through 2017 owing to new capacity coming Deepika Thapliyal, Mark Milam, Annalise
as weak phosphates markets and a recent on-stream in the latter half. Little and Kate Wilcock.
spike in sulphur prices battle against
one another.
term planning.
OTHER
MELAMINE
EUROPE MELAMINE MARKET

SOLID BUT EXTERNAL FACTORS
COULD BRING UNCERTAINTY
By Katherine Sale
Demand in the European melamine market

is expected to remain solid in 2017, but with
imports expected to be lower for the first half
of the year and an anti-dumping decision
against China approaching, external factors
are the areas of uncertainty for the year.
Demand was robust throughout 2016, with

players across the market expecting levels
to remain stable in 2017, with capacity
utilisation at facilities already high.
Both buyers and sellers said that without

any further investment in production it would
not be possible to increase levels in Europe.
It is the strong demand levels that led

melamine major Borealis to sign a
memorandum of understanding to look into
opportunities for melamine production in greater investment in furniture and kitchens. the sole melamine producer in the region
Algeria, with Asmidal. with a capacity of 75,000 tonnes/year at its
The US is also an area of interest. After a Waggaman plant.
The feasibility study for the project is period of stagnation, demand has started to
currently underway, with a decision on the increase from the region. Exports from Europe fell throughout 2016,
project expected this year. with European producers focusing on
Product from other areas is required to domestic demand.
Demand looks set to remain strong this meet US demand, with Cornerstone being
year, with the chemicals-intensive eurozone
construction sector posting an increase in
activity of 0.8% in October month on month,
according to Eurostat.
Melamine demand from Spain was

particularly strong in 2016, with continued
strength expected in 2017.
Despite a slow start to last year, demand

in Russia picked up strongly in the second
half 2016, resulting in Russian melamine
producer Eurochem largely focusing on
its domestic market, with more volumes
staying in the country.
Demand outside of Europe has increased,

with some European producers seeing 10%
growth from India, South Korea, Malaysia
and Indonesia.
The increase in demand is largely linked to the

emerging middle class in some regions, and
The trend for imports was not as clear with
imports rising for the first four months of
2016, however imports fell year on year for
the data available from August onwards.
The shift in material away from Europe

came following the tightening of supply in
China in the latter half of the year, which left
buyers outside of Europe short of material.
With Chinese producers exporting between

20,000 25,000 tonnes of melamine each
month, according to some players, this
severely tightened supply in certain regions.
This was particularly noticeable in both

Turkey and India, with prices in India almost
doubling in November, before easing in the
last month of the year.
However, requests from both countries

remain high, with product for some
producers outside of the regions being
directed there.
Given the current demand level and rising

prices in areas outside of Europe, combined
with the weakened euro against the dollar
exchange rate, imports in Europe are
expected to be at a lower level for the first
half of 2017.
Although negative for buyers in this regard,

producers of end goods are currently
benefiting from a more attractive export
market, with opportunities here expected to
continue.
There are no major maintenance

turnarounds planned in Europe for the first
half of the year. Despite this, producers see
supply on the tighter side for the first six
months of the year, linked to lower imports
and low inventories after a period of good
demand.
One producer said with urea prices

remaining at a lower level, profitability
for sellers is high at present, especially
considering the global level of demand.
Other possible factors that may impact the

European melamine market include the
upcoming decision on extending the anti-
dumping tariff against Chinese product and
general economic uncertainty.
The review by the European Commission

was announced in May 2016 and is
expected to take 12-15 months to complete.
If the tariff is lifted this would have an impact

on global trade flows and is seen as the
pivotal decision for the market next year.
Players are also concerned about the Prices were stable in 2016, but with 2017 starts with some upward pricing
impact of the UK leaving the EU and the demand for European product high at the pressure, good demand, European
election of Donald Trump as US President. end of the year this spurred European production running well, and players looking
producers to separately target price outside of the region for any factor that
However, at the start of the year strength increases between 50-100/tonne. could tip the current market balance.
and stability are the main messages for
demand, with supply and factors outside At this stage the market is divided, with (*Chart based on December Eurostat data
of the region being the main area of buyers seeing little justification for a high as of 16 December, Eurostat import/export
discussion for the ongoing first-quarter increase, with targets on the buying side data is subject to revision as more detailed
contract negotiations. between a rollover to a small double-digit information becomes available. EU figures
increase. comprise the aggregate of member states
data published by Eurostat.)
term planning.
OTHER
MTBE/EBTE
GASOLINE, CRUDE PRICE WAITING slightly increase following a 50% capacity Scandinavian growth may also be on the
GAME TO LEAD MTBE, ETBE expansion at the Ravenna MTBE/ETBE cards, suggested one market source, which
By Vicky Ellis plant at the end of 2016. The Italy-headed may be linked to greater focus on biofuels
energy firm Eni is understood to have in the region.
The industry is in wait and see mode, one begun this work in August.
MTBE and ETBE maker said at the end of However a recent change in focus of the EU
2016, thanks to the turbulent year for the The Ravenna site on the Adriatic coast, under its recent proposals for an updated
energy complex, with gasoline led around between Venice and San Marino, can Renewable Energy Directive (RED) have
by crude oil. produce either MTBE or ETBE and was caused some concern in the first generation
geared to make the former earlier in the biofuels market, for a change in emphasis
Fundamentally, changes in the oil market year. towards second generation biofuels.
will of course influence the absolute price of
the ethers, MTBE and ETBE. Ravenna has a capacity of 140,000 tonnes, In terms of external ETBE supply factors,
according to the ICIS Plants and Projects imports have been weak in 2016. Lower
To give the chemicals their full names, database, and so a 50% increase would lift Brazilian supply of ETBE to Europe is a
methyl tertiary butyl ether and ethyl tertiary this to around 210,000 tonnes. likely to be the key reason for this.
butyl ether, they are closely linked in price
and fortune to Eurobob gasoline, which ETBE Partly, South American governments
rises and falls based on supply/demand For the outlook of the market for ETBE, have been motivating consumers to take
dynamics and the price of oil. which is partly derived from ethanol, ethanol, according to industry feedback,
European biofuels legislation will be of which means more ethanol could stay in
Both are blended into gasoline to make the interest. the region, reducing exports to places like
products which end up at the petrol pump, Europe.
so gasoline consumption is key. Europes Increased biofuel needs in some countries
gasoline use has broadly flattened in the such as Belgium are anticipated, which will As things stand, this could imply that the
past couple of years in Europes major double its ethanol consumption thanks to a producer Braskem, which has three ether
consuming nations (see charts) and this higher biofuels mandate. The country has plants in Brazil, is unlikely to return its
trend looks set to continue based on what mandated E10, meaning ethanol in petrol exports to Europe to levels seen before
2016 data there is. should effectively double to 8.5%. 2016.
MTBE
At the end of 2016, European demand for
MTBE looked to be healthy in the first half
of 2017, according to another producer,
though it was too early to tell how this
demand would be the second half of the
year.
Globally, a change in Chinas gasoline

specifications starting from 2017, in order
to reduce sulphur content, has been seen
as a potential demand driver for cleaner
burning ethers. However one analyst has
downplayed the likely impact on Europe. It
remains to be seen whether Chinas own
production will cater to this.
On the supply side, no dramatic changes

are expected. Domestic supply may
OTHER
RUSSIA OUTLOOK
RUSSIA PETCHEM SECTOR RELIES The government pledged to grant direct The plants PET capacity is expected to
ON STATE SUPPORT, MOVES financial support to infrastructure projects reach 500,000 tonnes/year in 2018, 1m
TOWARDS CONSOLIDATION needed to build the major plant of the tonnes/year in 2019, and 1.5m tonnes/year
By Sergei Blagov Eastern Petrochemical Company in in 2020.
Nakhodka port on Russias Pacific coast.
Russian petrochemical producers kept The funding is expected to be disbursed In recent years, Russias new petchem
pursuing major projects this year despite from 2018 on. The Eastern Petrochemical projects were implemented with the officially
the countrys continued economic Company is controlled by Russias oil giant stated goal of import substitution.
uncertainty, with many relying on direct Rosneft.
government support. Meanwhile, the In 2013, Russias petrochemical holding
sector continued moving towards further Plans to build the major petrochemical SIBUR started operation of its new 500,000
consolidation around the nexus of state-run plant in Nakhodka were first floated back tonne/year PP facility in Tobolsk, while
energy giants. in 1974. Rosneft started considering this Russias Titan group also started operation
project in 2007 and formed the Eastern of a new 180,000 tonnes/year PP plant in
In June, the Russian authorities moved Petrochemical Company in 2011. By late Omsk, western Siberia.
to revise the rules of the government loan 2016, Rosneft was understood to continue
interest rate subsidies to be offered to new project development of the Nakhodka plant. In 2014, Russia started operation of
chemical projects in coming years. RusVinyl, a new 330,000 tonnes/year PVC
The plant, to be based in Nakhodka, production facility at Kstovo. The launch
The move was aimed to encourage Primorie region in the Far East, is expected of Tobolsk-Polymer turned Russia from a
development of new projects and limit onstream in 2020-2021. It will have the net importer into a net exporter of basic PP
the countrys dependence on imports of capacity to produce 2m tonnes/year or grades.
chemical and petrochemical products. urea, 1.1m tonnes/year of ammonia and 1m
tonnes/year of methanol. The new plant is Last year, one more major production
According to the governments decree, expected to cost more than $5bn to be built. facility was launched in Russia. In February
investment projects to build new production 2016, the ammonia and fertilizer plant in
facilities to produce cords and yarns; Russias leading petrochemical producer Mendeleyevsk started operation at full rates.
speciality chemicals; oxides, peroxides Nizhnekamskneftekhim (NKNKh) also aims
and hydrooxides used as pigments and to build new major polymer facilities with The new production units have the capacity
isocyanates become eligible to receive the governments support. NKNKh plans to to produce more than 700,000 tonnes/year
government subsidies. finish construction of its new units to produce of urea, 480,000 tonnes/year of ammonia
600,000 tonnes/year of ethylene (C2) in and 230,000 tonnes/year of methanol.
Russias authorities have approved 2019, and a second-stage C2 unit, also
government funding amounting to $1.75bn 600,000 tonnes/year, by 2025 at an estimated The plant cost $1.5bn to build and was
to support a project of Russias leading cost of $7.8bn, according to the company. subject to delays. The regional government
petrochemical holding SIBUR to build the Nizhnekamskneftekhim has disclosed plans had earlier pledged to finish construction of
West Siberian petrochemical plant, also to cut dividend payments in 2017 to increase the project in the town of Mendeleyevsk in
known as ZapSibNefthekhim. investment in its C2 projects. the Russian internal republic of Tatarstan in
2012, and then in 2014.
By late 2016, the ZapSibNefthekhim The Russian authorities are backing a new
construction site employed nearly 13,000 project to produce bottle-grade polyethylene In the meantime, the Russian petrochemical
workers. terephthalate (PET) though this lagged sector continued moving towards further
behind the original schedule. consolidation around the nexus of state-run
The West Siberian petrochemical plant energy giants.
located in Tyumen region, western Siberia, The plants PET capacity was previously
is due onstream in 2020. expected to reach 486,000 tonnes/year In March 2016, the Russian oil company
in 2017. However, this project remained Bashneft finalised a deal to take over the
The projects total cost is expected to reach slow to be implemented, apparently due to countrys major petrochemical producer
$9.5bn, while the plants total capacity is funding problems. Ufaorgsintez.
due to reach 1.5m tonnes/year of ethylene,
500,000 tonnes/year of propylene, 1.5m In November 2016, the authorities of Bashnefts interest in Ufaorgsintez was
tonnes/year of polyethylene (PE) and Kabardino-Balkariya region signed an increased up to 100%. Ufaorgsintez, the
500,000 tonnes/year of polypropylene (PP). agreement with subsidiaries of China countrys leading producer of polymers,
This project is supported by the government National Petroleum Corporation (CNPC) to acetone and phenol, is based in Russias
despite signs of domestic PP overproduction. build the new PET plant. internal republic of Bashkortostan.
In mid-October, Rosneft moved to take These transactions were seen as a move Therefore, the countrys petrochemical
over Bashneft and the transaction valued towards further consolidation of the Russian production facilities are becoming
at $5.2bn was approved by the Russian petrochemical sector, because Rosneft increasingly dominated by a small number
Federal Antimonopoly Service in late already controls a number of petchem of state-run energy companies.
November. assets, including Angarsk Petrochemical
Company and SANORS.
term planning.
OTHER
SHIPPING
EUROPE SHIPPING MARKET shipowners, and some sources suggest that There were hints of consolidation in
FACING UNCERTAINTY IN 2017 rates could increase as a consequence. the market last year, with Stolt-Nielsen
By Melissa Bartlett and Sarah Trinder There are some saying that higher rates acquiring Jo Tankers in November.
could prove difficult to achieve though.
At the beginning of 2016 there was hope The positives to this deal were that this
in the European shipping market that lower If there are many ships around, rates will meant Stolt-Nielsen acquired new vessels
bunker fuel costs would translate into a go down, even if bunker fuel prices are without ordering more into the market.
positive year for ship owners. high, one ship operator said. However, a spokesperson at the company
said at the time that this would in no way
However, despite comparatively lower and The contracts for 2017 that were prompt Stolt-Nielsen to start recycling
less volatile crude oil price movements renegotiated at the end of this year are vessels.
versus recent years, shipping movement already fixed with bunker escalation
has slowed noticeably, with routes inside clauses in most of them. Owners will try Sources expect the trend for consolidation
and outside of Europe proving sluggish and to get higher rates but it will be difficult, a to continue in the coming years, with
rates on the decline for a large part of the shipbroker added. players thought to be racking up losses
year. behind closed doors.
A bunker escalation clause is a device
For the most part chemical tanker shipping in contracts which allows companies to There are a lot of deals being done
has been considered one of the more cover their costs should bunker fuel costs people are selling vessels. Theyre losing
stable markets across the industry in 2016. increase at any point. assets and making cash for short-term
Results in the 8th Maritime Employee expenses. Eventually they will struggle
Survey, conducted by maritime jobs Not only are shipowners covering financially. You hear rumours about that
specialist Halcyon Recruitment and online themselves against the prospect of rising big owners are talking consolidation, one
training provider Coracle, suggest that fuel costs, they are also said to be locking source said.
working conditions were best for tanker themselves into contracts for longer in an
sector employees. attempt to keep vessels employed. Meanwhile players in the market expect
demand for vessel space to be largely
Those in the tanker segments fared best Owners are locking in contracts for longer stable going into 2017.
with 56% receiving a bonus and 42% a pay periods, one broker said, adding that one
increase, the survey said. player in particular was offering low rates Volumes [shipped] next year will be a
and long contract terms in order to lock in rollover or slight increase. Some new trade
However, this is not to say that the market volumes. routes are going to appear. Trade routes
has survived a long summer of discontent which were coming into the market this year
unscathed. With rates and vessel employment having like methanol flows from the US Gulf to
faced a tough year, it is not really surprising Asia. That should increase further, but I still
As Basil Karatzas, founder and CEO of to see players being forced to be more think overall volumes will be more or less
Karatzas Marine Advisors & Co, highlighted competitive. the same, within a half percent up or down,
recently: The four major market segments one source said.
(dry bulk, tankers, containerships and Throughout 2016 European ship-owners
offshore) have not been moving in unison, have been faced with deciding whether to Were not going to see a big increase in
but, for the most part, all four have been accept continuing erosion of rates to keep volumes on the short as political change
bleeding cash for the best part of the last vessels on the move or to keep vessels puts uncertainty into the market, it added.
five years. When the whole industry is in port to wait for better offers, incurring
losing money (and not just a few ship significant costs which may not be possible The whole industry has faced a summer of
owners or market segments), concerns to recover considering the weak market uncertainty, and it is yet unclear whether a
naturally arise about structural problems conditions. One source suggested that it recovery is imminent.
within the whole shipping market. costs about $8,000 a day to have a ship
waiting in port in Europe. As Karatzas pointed out: It is possible
There are no significant signs on the that the current pessimism is not fully
horizon that the current situation will change Although newbuilding activity decreased justified. After all, the maritime industry has
in 2017. in the first eight months of 2016, there are unconsciously become an integral part of
still new vessels due to enter the market in our daily lives, with more and more people
A recent upswing in crude oil prices amid the coming months, and with no significant worldwide used to a middle-class lifestyle
an OPEC deal to cut production in 2017 increase in enquiries on the horizon, the and accustomed to products (including
could result in firmer bunker fuel costs for pressure is building on some players. food) from a global distribution list.
Although there are no clear drivers for there is no evidence to suggest any notable that still nothing is certain.
an imminent market recovery, one can change on the horizon in the next 12
discern trends that will shape the shipping months. Many industry experts expect it to We are cautiously optimistic for year
industry in the next decade. Larger and be several years before any sustainable end and [the first quarter of 2017], said a
better capitalised ship owners with cost improvements materialise, noted the source.
efficient operations and a dependence on Halcyon Recruitment and Coracle survey.
technology seem to have a comparative [It is] still hard to say if its sustainable, [the
advantage, he added. Among a market that has underperformed market has been] very volatile, it added.
almost every expectation last year it seems
Save for some short term improvements, the only thing players are confident of is, is
term planning.
OTHER
TITATNIUM DIOXIDE (TIO2)
EUROPE TIO2 DEMAND TO HOLD the end of 2016, beyond low seasonality, In the paper laminate sector, there is talk
STABLE, OTHER CONSIDERATIONS which it attributed to economic and of similar healthy demand for 2017 to that
REMAIN political uncertainty in Europe. It therefore seen in 2016, if not higher, depending on its
By Heidi Finch considered there to be no justification for downstream portfolio.
any upward price movement in Q1 2017,
Underlying titanium dioxide (TiO2) demand in despite the proposed three-digit price hikes. In terms of TiO2 supply in Europe,
mainland Europe is likely to remain relatively producers have cut back capacity globally
steady in 2017, taking into account market Separately, some producers have and they been stricter on inventory levels
maturity, but this will also depend on how the announced their intention to raise prices by during 2015/2016, which has helped to
economy and prices pan out in view of further 150/tonne or 200/tonne from 1 January remove the excess in the market and
proposed price rises. 2017. This was believed to be due to rising support an upward price movement during
upstream costs and the need to improve the second half of 2016.
However, the TiO2 producer landscape is profitability in the industry, combined with
likely to look slightly different in 2017, in view low inventory levels. There is some expectation that European
of Huntsmans proposed tax free spin-off TiO2 producers will continue to keep their
of its TiO2 Pigment, Additives and Textile Some buyers conceded that an upward production closely aligned to demand in
Effects businesses in the first half of the year. price movement may be likely in Q1 2017 2017 for the same reasons.
for feedstock, profitability and supply related On top of this, Huntsmans TiO2 facility
European TiO2 consumption into the main reasons, but some suggest that any price in South Africa will be closed by 2017 for
paints and coatings sectors is expected to rises will be moderated by low seasonality restructuring and cost cutting reasons.
be fairly steady, albeit with the possibility of and the sizeable price rises implemented
some slight movement in either direction, over the past few quarters. Despite this, European buyers and resellers
depending on economic conditions and part remain unfazed by Huntsmans closure
of Europe. There is also some talk that if sizeable price of its TiO2 plant in South Africa during
rises are likely to continue during 2017, the fourth quarter of 2016, even though
One TiO2 buyer from the paints and there is a possible risk that downstream volumes from Europe are expected to fill the
coatings sector said its target is to demand could be jeopardised, particularly gap, post South African plant closure. This
grow above the market in 2017, but it into the downstream decorative paints is because the South African TiO2 plant is
acknowledges that this is likely to be sector, which is typically price sensitive. relatively small in size anyway.
challenging, taking into account fragile
economic conditions over recent months. However, one downstream plastics player Players are eagerly awaiting Huntsmans
said its demand has not been adversely spin-off of its TiO2 Pigments, Additives
However, it remains hopeful that some pick- affected by recent price rises, although it and Textile businesses and how this will
up in activity will be possible, stating that suggests that if this were to continue over shape up. It remains to be seen if this will
it does not expect the downstream paints a sustained period during 2017, then it said only mean the formation of a new business
demand in 2017 to be worse than 2016, some demand destruction could occur. under a new company name or if this could
which it said has been a bad year. also lead to TiO2 capacity changes as well,
Nevertheless, the TiO2 demand outlook for according to market players.
Another player suggests that the demand 2017 from the downstream plastics and paper
outlook for paints and coatings demand in laminate sectors remains rather promising. A Huntsman company spokesperson,
Europe in 2017 is likely to vary, depending however, recently said Nothing has been
on the part of Europe. There was talk of stable to slightly rising published with regards to any business
demand from the downstream plastics changes other than the separation out of
It went on to say there is some additional sector in northwest Europe, in particular in Huntsman.
paints and coatings demand in the UK from Germany in 2017. This is based on what
mainland Europe, because of currency some consider to be favourable employment Overall, players do not expect to see any
related cost benefits, which it suggests conditions, which is likely to help support significant change in TiO2 supply and
could continue, if exchange rate factors investment in construction activity. demand in Europe. However, sources are
were to support this. keen to see how Huntsmans expected
One TiO2 buyer in the downstream plastics spin-off will play out and how demand will
It added that paints and coatings demand in sector is hopeful that some uncertainty fare, as political and economic uncertainty
mainland Europe is likely to be stable, if not regarding the effect of Brexit on plastics in parts Europe and the possibility of further
slightly lower in 2017 for economic reasons. demand is the UK is likely to be offset TiO2 price rises over a sustained period
One TiO2 buyer in the Mediterranean talked by expected healthy plastics demand in remain considerations.
of a weak paints and coatings demand at Germany in 2017.
term planning.
You may also be interested in:
Download the Asia and Americas Chemicals Outlook magazine at

www.icis.com/press-releases/global-chemicals-outlook-2017-series
ICIS price forecast reports
Supply, demand and price trends at a glance
ICIS price forecast reports provide a clear view of prices and supply and demand trends for the next 12 months.
Packed with vital information, the report includes everything you need to assess where the market is heading
and the impact or opportunity that presents for your business.
How price forecast reports can help you

n Understand the market
Use ICIS price forecast reports to understand where the market is
heading and identify the risks and the opportunities for your business.
What are the major demand developments for your product?
n Safeguard commercial decisions

Use market information to make better-informed business decisions
relating to supply and demand. Learn about changes in market Price Forecast Window
capacities. What factors will affect supply for you?
ICIS price forecasts are now
n Budgeting and planning available on the Dashboard
Whether you are planning how much you will be spending in the short-to channel using the Price Forecast
medium, or even long term, use the price forecast reports to help assess Window which will enable users to:
future prices for your product. What will the price of your product be in six
months time? n Chart the price forecast against
the last (rolling) twelve months of
Asia Europe USA Global related price history.
Price forecast Polypropylene 3 3 3 n Plot the last 12 months to view
reports currently forecast progression and ICIS
Polyethylene 3 3 3
available forecast accuracy
Benzene 3
Styrene/Polystyrene 3 n Convert data into different
currencies and units and download
Available as Ethylene 3 3 3 this data into excel in order
price forecast Propylene 3 3 3 to easily enter into your own
windows only calculations
Styrene 3 3
To talk to someone about price forecast reports call the numbers below, or email us at sales.uk@icis.com
Asia-Pacific, Middle East Europe, Africa The Americas
Tel: +65 6789 8828 Tel: +44 20 8652 3335 Tel: +1 713 525 2600 or Toll free: +1 888 525 3255 (US and Canada only)
To find out more or take a trial visit: www.icis.com/priceforecast

Print copy.pdf 1 10/22/15 6:28 PM
ICIS News
ICIS News
The leading news service for real-time
ground breaking news and analysis
The leading news service for real-time
on the global petrochemicals markets
ground breaking news and analysis
on the global petrochemicals markets
The ICIS News services give you unrivalled access to the most in-depth stories impacting the petrochemicals markets,
influencing commodity prices and affecting your daily business decisions.
The ICIS News services give you unrivalled access to the most in-depth stories impacting the petrochemicals markets,
influencing
Our team ofcommodity prices
global editors areand affecting
reporting your the
around daily business
clock decisions.
to bring you the latest news and analysis so that you get the
full picture of market and pricing developments first, providing you with invaluable foresight to take advantage of every
Our team ofand
opportunity global editors
to stay are of
ahead reporting around the clock to bring you the latest news and analysis so that you get the
your competitors.
full picture of market and pricing developments first, providing you with invaluable foresight to take advantage of every
With ICIS News,
opportunity and toyou
staywill be the
ahead firstcompetitors.
of your to read:
With ICIS News,

Breaking you
news on thewill be themarkets
chemical first tothat
read:
will
impact your business
Breaking news on the chemical markets that will
News
impacton market
your moves, deals and announcements
business
that will affect your organisation
News on market moves, deals and announcements
Force majeures,
that will closures
affect your and developments that
organisation
influence your commodity prices
Force majeures, closures and developments that
Expert analysis
influence on industryprices
your commodity trends and hot topics
know whats happening and why
Expert analysis on industry trends and hot topics
Plantswhats
know and Projects news
happening - the
and whylatest on capacities,
outputs and shutdowns
Plants and Projects news - the latest on capacities,
Searchable
outputs and archive with over 1.4 million
shutdowns
articles from the past 10 years
Searchable archive with over 1.4 million
articles from the past 10 years
ICIS News offers access to additional sources

including the ICIS Plants and Projects
ICIS News offers access to additional sources
database and Chemical Business
including the ICIS Plants and Projects
News Base (CBNB)
database and Chemical Business
News Base (CBNB)
Chemical Business News Base (CBNB) is a premium resource available on ICIS News. It provides you with an
extensive external source of upstream and downstream petrochemical news in summarised snapshots, so you can
Chemical Business
quickly and News
easily get Base (CBNB)
the latest updates isona whats
premium resource
important to available
you. on ICIS News. It provides you with an
extensive external source of upstream and downstream petrochemical news in summarised snapshots, so you can
CBNB offers
quickly readers:
and easily get the latest updates on whats important to you.
Fast and consistent coverage on news, facts, figures User-friendly search functionality to find
CBNB
fromoffers readers:
the upstream and downstream petrochemicals articles most relevant to you from around the
industry
Fast and consistent coverage on news, facts, figures globe
User-friendly search functionality to find
from the upstream and downstream petrochemicals articles most relevant to you from around the
Access
industryto over 700 news sources, including technical Quick
globe and easy-to-read summarised
and trade journals, company literature, market snapshots of articles with option to access full
researchtoreports,
Access stockbroker
over 700 reports,
news sources, books,technical
including and articlesand
Quick from the originalsummarised
easy-to-read source
directories
and trade journals, company literature, market snapshots of articles with option to access full
research reports, stockbroker reports, books, and articles from the original source
directories
Find out more: www.icis.com/news
Find out more: www.icis.com/news
Your view on the chemicals markets
In todays fast moving world, you need quick and easy access to the information you rely on. The ICIS
Dashboard gives you access to benchmark pricing data, news and analysis in one place.
This dynamic online platform is configurable and displays information updates according to your preferences. It
enables you to build your own view of the market intelligence important to you.
Reports channel Fully customisable view
Access all ICIS reports that you View the market data thats
subscribe to, within the same important to you. Choose your
platform quotations preferences and
customise workspaces
Price history analysis
Integrated view
Plot price history data
based on your preferred One-stop view of pricing,
currency and units to help market data, analysis
you understand where prices and news
might be heading.
New secondary Y axis
Download data Price forecasts
Export data and charts to Chart the price forecast

integrate into your own against related price history
analysis- multiple formats to understand where the
available market is heading
Supply and Demand window
Access charts and graphs showing

changes in supply and demand,
production, capacity and trade flows
Market updates
Get alerts and breaking news stories

related to your market, to keep you up to
Compare price assessments side-by-side speed with events affecting prices
You can add up to 11 windows per workspace
Find out more: icis.com/about/dashboard

Request a free trial: icis.com/trydashboard
Asia-Pacific, Middle East Europe, Africa The Americas
Tel: +65 6789 8828 Tel: +44 20 8652 3335 Tel: +1 713 525 2600 or Toll free: +1 888 525 3255 (US and Canada only)
Pricing intelligence to propel
your business forward
You can make confident commercial decisions using pricing data from ICIS. Our highly
respected pricing service covers all the major chemicals, energy and fertilizer markets, with a
methodology that is trusted by buyers, sellers and analysts alike.
Powerful data in your hands - Look back and think ahead -

ICIS gives you access to all of the following: Access historical, current and forecast
pricing data, so you can:
Spot and contract prices for over 180
commodities Understand price drivers and fluctuations
Market commentary on trends and Adapt to emerging market volatility
business developments Mitigate risk using our objective analysis
Reported and confirmed transactions Conduct evidence-based negotiations
Plant and production news shutdowns, with suppliers
maintenance and turnarounds Settle contracts based on benchmark
prices
Request a free sample report Request a free

www.icis.com/trial enquiry@icis.com
Supply and Demand
Database
Single searchable source of historical data on
global petrochemical and energy markets
Historical and forecast data (1978-2030) Upcoming plants, including speculative

Over 100 petrochemical products and announced projects
Over 12,000 renery units Data breakdown by country, region,
product or product family
Over 18,500 petrochemical plants
GDP, population, and consumer price
Import, export and consumption volumes
index by country
Plant capacity, production and operating
status
More than just data, the ICIS Supply and Demand Database is a powerful analytics tool which
gives end-to-end perspectives across the global petrochemical supply chain, including reneries.
Data is derived by ICISs team of Consultants using a bottom-up approach reconciling
demand with supply, production, local capacity and net trade. Forecasts are validated against
economic indicators such as GDP and per capita consumption.
Request a one-to-one demo now. www.icis.com/supplydemanddata enquiry@icis.com

Icis Chemicals Outlook 2017 Europe

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Icis Chemicals Outlook 2017 Europe

Uploaded by

Copyright:

Available Formats

Europe Chemicals Outlook 2017

Acids Intermediates Solvents

PRICING INFORMATION SUPPLY AND DEMAND DATA

NEWS INFORMATION FORECAST REPORTS DIGITAL CHEMICAL BUSINESS MAGAZINE

Sources have spoken of a potential sea-

The reduction of sulphur content in the

Download a free sample now

PRICING INFORMATION SUPPLY AND DEMAND DATA

NEWS INFORMATION FORECAST REPORTS DIGITAL CHEMICAL BUSINESS MAGAZINE

PRICING INFORMATION DIGITAL CHEMICAL BUSINESS MAGAZINE

Request your free sample report Download a free sample now

EUROPE BDO PRICES HIT BOTTOM

After two years of prices free falling in the

Prices have dropped 27% from April

One producer said its biggest concern for

There is a consensus in the market that

summer. With the region becoming more dependent

PRICING INFORMATION SUPPLY AND DEMAND DATA

NEWS INFORMATION FORECAST REPORTS DIGITAL CHEMICAL BUSINESS MAGAZINE

Petro Rabigh had said it was delaying

However, recently there has been talk

With 340,000 tonnes/year scheduled to

Some think Middle Eastern material will not

As SABIC will be a new producer in the MMA

The demand outlook is positive with

Continued growth is expected from the

At present some producers are seeing an

One seller said it sees underlying demand

For some the first quarter is the strongest

Europe is the lowest priced region globally

With a major maintenance turnaround

The supply worries of 2016 will continue

PRICING INFORMATION SUPPLY AND DEMAND DATA

NEWS INFORMATION FORECAST REPORTS DIGITAL CHEMICAL BUSINESS MAGAZINE

REVERSAL OF FORTUNE FOR

2017 looks set to be a positive year for

2016 saw the start of the upturn. At first

Competition among players keen to

PRICING INFORMATION SUPPLY AND DEMAND DATA

NEWS INFORMATION FORECAST REPORTS DIGITAL CHEMICAL BUSINESS MAGAZINE

EUROPE OLEFINS SUPPLY Average yearly margins 2000-2016

2017 has got off to a firm but relaxed start

Preparation is key, a consumer said.

2016 ended on a better-than-expected

Cracker margins have remained healthy

Such cracker margins continued to

Some producers managed to mitigate

Dow Terneuzen 2, NL 1 March-15 April DIGITAL CHEMICAL BUSINESS MAGAZINE

ICIS Chemical Business (ICB) e-magazine is the

Borealis Porvoo, Finland Aug-Oct

Total Gonfreville, France Sep-Oct

Versalis Porto Maghera, Italy Q3

The African polyethylene (PE) and

Polymer producers are looking to Africa as

Bob Patel, CEO of LyondellBasell told

Both continents have a huge potential to

Africa is a frontier market, but will be an

However, the political and security situation

That market has tremendous potential in

In terms of prices, each region has its own

PRICING INFORMATION SUPPLY AND DEMAND DATA

NEWS INFORMATION FORECAST REPORTS DIGITAL CHEMICAL BUSINESS MAGAZINE

UNCERTAINTY AND OPTIMISM UK PVC-ethylene spread 2013-2016

The overall outlook for European polyvinyl