Mexico’s Braskem Idesa prospects improve on terminal funding
but weak market to persist – Fitch

SAO PAULO (ICIS)–Mexico’s polyolefins producer
Braskem Idesa’s financial horizon improved
after securing financing to build its import
terminal although it will continue to be hit by
a weak market outlook, US credit rating agency
Fitch said on Friday.

Earlier in 2023, Fitch
had placed Braskem Idesa’s debt commitments
under a so-called rating watch negative (RWN),
arguing the unsettled financing for the
terminal and a poor outlook for polyethylene
(PE) could make the producer’s finances weaker.
The RWN has now been removed.

However, Braskem Idesa said in November it had
secured $408m in financing to finish the
construction of its import terminal, which is
key to the company because it will enable
it to
import 80,000 bbl/day of ethane, a PE
feedstock, and operate at 100% of its capacity
at its integrated polyethylene (PE) Ethylene
XXI complex in Coatzacoalcos, Mexico.

Fitch said that after the financing was sorted
out, the start-up date for the terminal could
be Q1 2025, earlier than the previously
expected Q3 2025.

Fitch’s credit rating on Braskem Idesa’s debt
commitments was kept at B+, however,
considering the polymers global market outlook.
A BB raging is still of ‘speculative’ grade,
also known as junk category. See Fitch’s
ratings scale here.

“The B+ rating reflects a weak outlook for PE
and a slower-than-expected market recovery
path. Over the past several months, PE demand
in North America has experienced a 10% decline,
while new supply has been ramping up globally,”
Fitch said.

The credit rating agency does not expect a
meaningful recovery in PE prices and producers’
spreads until 2025 at the earliest.

PE price, spreads forecasts

In $/tonne

2023

2024F

2025F

Price

1,018

1,057

1,258

Spreads

709

754

907

Ethane purchase costs

309

304

351

Source: Fitch

These spreads would be significantly than those
forecast by Fitch
earlier in 2023.

“Braskem Idesa is vulnerable to PE price
swings, spikes in raw material costs, as well
as dependence on a single product and single
site operations. The company is exposed to
operational risk from Pemex, which has an
agreement to supply a minimum volume of 30,000
bbl/day of ethane until the earlier of February
2025, or the start-up of the ethane import
terminal,” Fitch said.

“The recent expansion of the Fast Track
increased capacity to 35,000 bbl/day, or 53% of
capacity. The Fast Track expansion helps secure
ethane supply until the terminal is built.
Fitch assumes operating rates [for the
terminal] of 76% in 2023, 88% in 2024, and 87%
in 2025.”

According to figures by Fitch, Braskem Idesa’s
production stands at 1.05m tonnes/year of
mostly PE grades high density PE (HDPE) and low
density PE (LDPE).

21-Dec-2023

VIDEO: Europe R-PET flake, pellet sellers push for January
increases

LONDON (ICIS)–Senior editor for recycling Matt
Tudball discusses the latest developments in
the European recycled polyethylene
terephthalate (R-PET) market, including:

Colourless and mixed coloured flake sellers
offer higher prices for January
Further increases in bale prices in Italy
this month
Lots of uncertainty for Q1 and beyond

21-Dec-2023

GIF COMMENT: The European energy sector sees official
narratives challenged by hard facts in 2023 as energy costs
take centre stage

LONDON (ICIS)–Year 2023 was full of tensions
for the energy industry.

Europe’s efforts to secure supplies to replace
Russian gas unfolded against the backdrop of
heated debates about the future of fossil
fuels.

Energy costs continued to be a focal point for
both the gas industry and consumers alike, with
many voices in the social media and even
mainstream publications warning about looming
deindustrialisation in Europe.

The ICIS TTF front month has averaged
$13.1/MMBtu in 2023, down from $40.3/MMBtu in
2022, but still substantially higher than the
$7/MMBtu average from 2010 to 2020.

The year also highlighted the discrepancy
between Europe’s officially proclaimed goal of
decarbonisation and net zero as the only path
to it, and the reality of fossil fuels’ role in
keeping societies going.

“Twenty five years ago, the world’s share of
primary energy that came from fossil fuels was
about 80%. Today, the most recent data shows,
we are at about 80%. That is even thought the
pie has got a lot bigger, with a lot of clean
energy – particularly solar – making up the
growth, we are still at about 80% of the
world’s energy system consuming fossil fuels.
That is a hard truth,” the Economist’s
energy editor, Vijay Vaitheeswaran, said this
summer.

Vaitheeswaran pointed out the hypocrisy of
Europe’s strong anti-fossil fuel rhetoric on
the one hand and pricing poorer countries out
of access to LNG on the other.

“Europe sucked up half the world’s LNG last
year, raising prices, depriving countries like
Bangladesh and others of the potential to use
that natural gas and forcing them to go back to
coal,” he said.

With the lack of gas, coal remained king even
closer to home, in Germany, for example.

The future structure of European supplies also
reflected the ambiguity of its attitudes. While
the European Commission called for a phase out
of long-term supply contract after 2049, quite
a few of them were signed in the course of
2023.

Norway heralded the latest 10-year deal between
German government-owned SEFE and producer
Equinor on 19 December as a historic turning
point.

“What Europe has said is that they need gas in
the longer term and it has now been translated
from words into action,” Equinor’s CEO Anders
Opedal told Norwegian daily
Dagens Næringsliv on the day of the
signing.

The country’s Prime Minister Jonas Gahr Støre
said such an agreement could not have been
possible two years ago due to EU’s official
rejection of long-term contracts.

Long-term gas strategist and negotiator Morten
Frisch told ICIS that EU politicians have been
unofficially asking Norway to ramp up gas
production visiting the Troll field in the
presence of Opedal.

“Each time ministers from EU member countries
and EU commissioners visited Norway since 2021,
they have all asked the Norwegian prime
minister … for more Norwegian gas and for
longer,” Frisch said.

Frisch concluded that unofficially EU member
countries and the commission understand that
Europe will need more gas and well past 2030
but they are motivated by the desire to appease
the green lobby.

This year the official climate narrative
continued to be reinforced at conferences with
COP 28 announcing the ‘beginning of the end for
fossil fuels’. Practical actions, however,
painted a different picture.

English author William Ralph Inge once said
that whoever marries the spirit of this age
will find himself a widower in the next.

Year 2023 could be a precursor of changes to
come.

21-Dec-2023

Traders call for EU probe into German gas storage fee

LONDON (ICIS)–European gas traders have urged
the EU to investigate the compatibility of
Germany’s gas storage levy with EU regulations
and consider taking urgent steps to force its
removal.

The calls come as the charge
is expected to increase by 28% to €1.86/MWh
from 1 January 2024 and be extended by two
years to 2027.

There are fears it could incentivise other
countries to adopt similar taxes, effectively
contributing to the fragmentation of the EU gas
market.

Earlier this month, Italy’s energy regulator
ARERA
proposed introducing a €2.1908/MWh
neutrality charge on all border points to
recoup service costs incurred by the last
resort operators tasked last year with filling
storage sites amid reduced Russian piped gas
supply.

IMPACT ON CEE REGION

If the German tax, which also applies at
cross-border points is upheld and Italy
implements its own charge, central and eastern
European gas markets would be particularly
badly hit.

The countries would be blocked from accessing
sources of gas imported from western countries,
potentially forcing them to increase imports
from Russia via Ukraine or Turkey.

The impact of the German tax has already been
visible, as the Czech spot gas premium has
risen by 50% over the German THE equivalent
since the levy was adopted.

Earlier this year, government officials in
Austria, the Czech Republic, Hungary and Poland
sent a letter to the European Commission,
noting the tax would have a negative impact on
their countries’ ability to diversify sources
of supply.

The letter sent in May 2023 and seen by ICIS
said:

“As you are aware, the introduction of the
German gas storage neutrality charge already
made gas exports from Germany to Austria,
Poland, the Czech Republic and Hungary more
expensive. Increasing the charge would worsen
the situation for our countries even further:

• The German cross-border interconnection
points play a crucial role for the
diversification of gas supplies for many Member
States in the region. LNG from north-western
Europe and Norwegian pipeline gas is
transported via Germany. The charge and any
increase in costs negatively affect our efforts
to diversify our gas supply.

• Very crucial transmission capacity bookings
from Germany for the next gas year would be
more expensive”

The European Commission replied to the letter
in July 2023 to confirm it carried out a legal
assessment of the case but traders are now
pushing for a more concrete answer and a
resolution to the situation.

“Austria will be particularly badly hit if
Italy also introduces the tax. If it happens
every other regional market may consider doing
the same,” a gas trader active in the CEE
region said.

GAS STORAGE ACT TO PERSIST

The German gas storage levy was introduced last
year to compensate for the elevated costs
incurred by the hub operator THE for securing
gas stocks.

The tax was initially set at €0.59/MWh but has
since then increased and extended to
cross-border and end-user exit points since
January 2023.

Responding to questions from ICIS, the THE hub
operator confirmed the Federal Ministry for
Economic Affairs and Climate Action was in
favour of extending the gas storage act by
another two years to 31 March 2027. The fee
would aim to recoup €7.138bn over the remaining
period.

The European Commission had not replied to
requests for comment at the time of
publication.

21-Dec-2023

UPDATE: Qatar LNG continues to Europe as others avoid Red Sea

LONDON (ICIS)–Elevated risks of crossing the Red Sea have
not dissuaded Qatari LNG tankers from the waters that connect
the Middle East and Europe.

Celsius-owned vessels and US, Japanese and bp-chartered
vessels have avoided the Red Sea area since the London
market’s Joint War Committee expanded its Listed Area around
the Red Sea by three degrees north “to factor in the missile
range from Yemen,” Head of Marine and Aviation at Lloyd’s
Market Association Neil Roberts told ICIS on 18 December.

Some vessels have redirected voyages around the Cape of Good
Hope, ICIS data shows.

Others may also have remained in Asia or are crossing the
Pacific from there as a result, added a shipbroker.

But Qatar-origin vessels are traditionally a majority of Suez
traffic into Europe.

Their ongoing voyages, plus weak European gas demand meant
that the ICIS TTF month-ahead’s rise to €35.35/MWh
($11.34/MMBtu) on 18 December soon gave way to a three-month
low on Tuesday.

“The Qatari cargoes are the most important for the European
gas market. If they had to go around Cape of Good Hope it
would take much longer, but so far they are not changing
course,” according to ICIS LNG analyst Alex Froley.

INSURANCE AND SHIPPING

Shippers also have new requirements.

“Underwriters will … 1703187265 be requiring voyage
notifications,” said Roberts.

bp told ICIS on Monday that it had stopped all Red Sea
shipments, adding: “we will keep this precautionary pause
under ongoing review.”

Norway’s Equinor also said its vessels would avoid the area,
affecting its LPG and oil carriers.

The extra costs of avoiding the Red Sea to deliver gas from
the Middle East to Europe is not something most traders want
to commit to, given the additional costs, several traders
said.

Companies including Shell and Gunvor have not responded to
requests to clarify their positions on the matter.

REROUTED VESSELS

Some US LNG vessels heading east were signalling for Suez,
but are instead heading south around Africa.

Examples of vessels taking similar routes between the US and
Asia include the Korean company SK E&S-chartered Prism
Courage and the KOGAS-chartered Hyundai Peacepia, the
bp-subchartered 160,000cbm Kool Ice and EDP-chartered Cool
Discoverer, along with Trafigura and Kansai
Electric-chartered vessels.

“For US LNG cargoes going east to Asia, there isn’t such a
big difference between going via the Mediterranean and Suez
and going south around Africa, it only adds a day or two to
go south, so it’s not a big impact,” said Froley

Four Celsius-owned vessels approaching the Suez area were
also rerouted, with the shipowner declining to comment.

Shipowners are also responsible for notifying insurers that
vessels are crossing the Red Sea.

RED SEA CROSSINGS

Multiple Qatari-chartered and Chinese-company chartered
vessels continue to cross into the Red Sea.

Recent entries also include TotalEnergies and Shell-chartered
vessels, possibly hours before the Listed Area was expanded,
making it unclear if they will send further vessels for now.

WARNINGS GOING FORWARD

Qatari vessels aside, it remains unclear whether the threat
to LNG and other vessels could grow, forcing more companies
to take alternative routes or shift destinations for some
cargoes to optimise where possible.

If the European gas market tightens later this winter, any
interruptions could have a deeper impact.

“During the Somali emergency, re-routing was considered but
was offset by the use of armed guards,” said Roberts.

“In the present case, armed guards cannot effectively defend
against aerial threats like helicopters, drones and missiles,
so for the sake of the vessel and crew, several major lines
are rerouting.”

21-Dec-2023

INSIGHT: Red Sea attacks threaten to take shipping back to
18th century

HOUSTON (ICIS)–Shipping companies, already
facing constraints through the drought-stricken
Panama Canal, are starting to avoid the Suez
Canal because of attacks on vessels.

Chemical companies shipping material are now
facing the prospects of operating in conditions
resembling the 18th century, when neither of
the world’s principal canals existed and ships
had to cross the capes at the tips of South
America and Africa.

ICIS has heard from a couple of chemical
tanker brokers that many shipowners have
started to avoid the Suez Canal and are going
around the Cape of Good Hope at the southern
tip of Africa
Shipments of crude, liquefied natural gas
(LNG) and liquefied petroleum gas (LPG) have
also been affected by the attacks
The Panama Canal Authority already has
reduced transit capacity, and it will continue
to do so through the first months of 2024. If
waits become too long at the canal, ships may
take the longer route around Cape Horn

ATTACKS DISRUPT TRAFFIC AT SUEZ
CANALMany
shipping companies are suspending travel
through the Suez Canal and going around the
Cape of Good Hope following attacks by Yemen’s
Houthi militants on commercial vessels in the
Red Sea.

Sources told ICIS that the longer route around
Africa could add 10-14 days to sailing times.
More time at sea will reduce shipping capacity,
which would increase costs.

To secure the Red Sea, the US Department of
Defense
announced a 10-nation coalition to address
security.

However, it is unclear if the coalition will be
enough to discourage attacks from the Houthi.

FIRMS REROUTE LNG SHIPMENTS, EUROPE
PRICES SPIKESeveral shipping
companies, including some operating LNG
carriers, have temporarily halted shipments
through the Red Sea, according to Ed Cox, ICIS
gas analyst.

At least five LNG vessels appeared to have
turned away from the Red Sea, according to ICIS
LNG Edge.

The ICIS TTF front month spiked twice on Monday
before the January ’24 contract closed 7%
higher from Friday. The price has has
fallen since.

For the US, most LNG cargoes were going to
Europe, so they do not have to pass through the
major canals. The minority of shipments that go
to Asia are traveling through the Cape of Good
Hope.

SHIPPING ALREADY DISRUPTED BY PANAMA
DROUGHTThe disruptions at the
Suez Canal are compounding those at the Panama
Canal.

A drought has restricted the amount of water
that the canal can use to operate its locks. As
a result, the Panama Canal Authority has
reduced transit capacity throughout the second
half of the year, and it will continue to do so
into 2024.

The following table shows
the schedule of restrictions.

Date

Vessels/day

30-Jul

32

3-6 Nov

25

7-30 Nov

24

1-31 Dec

22

1-31 Jan

20

1-Feb

18

Source: Panama Canal Authority

US FACES NGL GLUT IF CANAL CONSTRAINTS
PERSISTAlready, the restrictions
at the Panama Canal have caused some shippers
to reroute exports of LPG through the Suez
Canal to reach markets in Asia, said Barin
Wise, vice president of feedstocks and fuels
for Chemical Data (CDI). The attacks in the Red
Sea have made that route increasingly
dangerous.

Should the Red Sea and Bab-el-Mandeb strait
become unnavigable for an extended period
months and wait times at the Panama Canal
continue to climb, LPG exporters face the
prospect of going around the tip of Africa.

That longer route would increase the time those
vessels spend at sea, and that would
effectively reduce shipping capacity for LPG.
The same would hold true for US exports of
ethane, about half of which go to China, Wise
said.

Ideally, shippers would have spare LPG vessels
to make up for the extra time spent on the
water. However, Wise questions whether the
market has enough vessels to offset the longer
routes.

Shipping costs will likely increase as a result
of logistical constraints.

If the Suez canal restrictions persist, then it
would become more difficult for the US to
export NGLs. The country could face a glut, and
that would bring down ethane and propane
prices.

Ultimately, Wise expects the US LPG exports
will shift from Asia to Europe. Middle Eastern
exports will shift from Europe to Asia. It is
unclear if that would balance out the market.

Ethane shipments to Asia would become more of a
challenge due to the lack of spare very large
ethane carriers (VLECs).

US ETHYLENE EXPORTSThe
US also exports quite a bit of ethylene to
Asia, said Kim Haberkost, director of olefins
for Chemical Data (CDI).

She has started to hear about shipment delays
caused by the restrictions in the Panama Canal.
These delays have not had a major effect on US
markets.

So far, there has been no talk about the Suez
Canal disrupting US shipments. However, that
could change if the lines at the Panama Canal
get longer, which would further delay ethylene
shipments, Haberkost said.

POLYETHYLENE EXPORTERS RELY ON RAIL TO
AVOID CANALUS polyethylene (PE)
producers can avoid any canal delays by
shipping their material by rail to ports on the
West Coast.

The US has an excess of PE capacity, and it
needs to export about 45% of its output if they
want to maintain plant utilization rates at
90%.

Insight by Al Greenwood

Additional reporting by Marta Fern

Thumbnail shows a ship. Image by
Shutterstock.

21-Dec-2023

Shutdowns at Texas-Mexico rail crossings rattle chems

HOUSTON (ICIS)–Some players in the chemical
industry are worried about the disruptions of
shipments caused by the closures at two
railroad crossings between Texas and Mexico.

The railroad company Union Pacific (UP) said
that US Customs and Border Protection had
closed the El Paso and Eagle Pass border
crossings on Monday because of the migrant
crisis.

Each day the border crossings are closed, UP
has to embargo customers’ goods on more than 60
trains, or nearly 4,500 rail cars. An
equivalent of goods is being held in Mexico,
the company said.

The crossings represent 45% of cross-border
shipments on UP, the railroad company said. It
estimates that the economic impact of the
border closure is more than $200m/day.

UP said its other gateways cannot handle the
extra traffic caused by the shutdowns.

The
railroad company BNSF said it is not
accepting any new shipments as a result of the
closures. Trains already en route will be
staged until the gateways reopen and it is safe
to resume cross-border operations.

A source in Mexico said the outlook is very
complicated on the logistics front with little
information about what is happening. It is too
early to tell if the closing will affect the
market in Mexico.

In the US, a distributor of polypropylene (PP)
expressed concerns about the effects of the
closings.

A toluene buyer was watching the market.

In 2022, Mexico was the largest export market
for the US for plastics and organic chemicals
traded in kilograms; organic chemicals traded
in liters; and inorganic chemicals traded in
metric tonnes, according to the US
International Trade Commission (ITC).

During that same year, Mexico was the largest
export market for the US for polyethylene (PE),
according to the ITC.

Thumbnail shows a railroad. Image by
Shutterstock.

20-Dec-2023

EU Innovation Fund update – December 2023

LONDON (ICIS)–A total of 37 programmes from 14
different countries that have demonstrated
innovative low-carbon technologies are in line
to receive €3.45bn of funding from the EU’s
Innovation Fund, it was announced 15 December.

The 37 projects have signed grant agreements
with the European Climate, Infrastructure and
Environment Agency (CINEA), the implementation
body of the Innovation Fund, following a third
call for large-scale projects.

The EU said that in addition to the 37 projects
that have signed agreements in mid-December,
two more are still in the process of undergoing
grant application preparations.

20-Dec-2023

Germany first to take advantage of European Hydrogen Bank’s
financing scheme

LONDON (ICIS)–Germany will become the first
member state to participate in the EU’s
voluntary auctions-as-a-service scheme under
the European Hydrogen Bank (EHB).

Germany will make a total of €350m available
from its national budget, which will be
combined with the €800m of funding for the
first
EHB auction which opened in late November.

A second EHB auction
was announced on 20 November which will take
place in the spring of 2024, which will boost
total financing from the European Commission to
€3bn.

The auctions-as-a-service scheme enables member
states to contribute their own financial
resources for awarding support to projects
located within their territory, meaning that
the €350m from Germany will only be available
to projects in that country.

Project developers must express their interest
in using the auctions-as-a-service mechanism in
their bid.

The Commission invited other member states to
follow Germany in taking up the scheme.

20-Dec-2023

MOVES: Markus Kamieth to succeed Martin Brudermuller as BASF
executive board chairman

LONDON (ICIS)–The BASF Supervisory Board
decided on Wednesday that Markus Kamieth will
succeed Martin Brudermuller as chairman of the
executive board of directors of BASF in 2024.

Kamieth, who has worked in Germany, the US and
Asia for the company will succeed Brudermuller
following the BASF Annual General Meeting on 25
April 2024. He had been on the board based in
Ludwigshafen from 2017 and, from 2020, located
in Hong Kong, overseeing the greater China and
south and east Asia areas and mega projects in
Asia.

Kamieth had been widely tipped for the
position.

Also on Wednesday Chief Technology Officer and
head of research Melanie Maas-Brunner indicated
that she would not renew her contract with the
company beyond 31 January 2024. She will be
succeeded by Stephan Kothrade.

Brudermuller has been chairman of the executive
board at BASF since 2018.

Thumbnail image shows flags flying at BASF
headquarters, Ludwigshafen, Germany (picture
credit: RONALD
WITTEK/EPA-EFE/Shutterstock)

20-Dec-2023