Current Affairs
December 1, 2024
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November 26, 2024
Housing Update
Macro update
Housing activity in 2024 reflects a continued US housing shortage, as demand far exceeds available supply. There has been a mix of trends across existing home sales, new home sales and multi-family. The combination of elevated mortgage rates, rising home values, and limited inventory has constrained existing home sales activity to levels 25% below the 2017-2019 average pace.
In contrast, new home sales have experienced stronger demand, modestly above pre-pandemic levels. Multi-family construction activity has been steadily declining since mid-2023 but remains elevated in a long-term context.
For existing home sales, a key to unlocking more activity would be lower mortgage rates. We normally expect that a 100bp reduction in primary mortgage rates could translate to a 10% rise in existing home sales over the following six months. Given our outlook for modestly lower interest rates in 2025, we expect housing sales could rise in the low single digit range. Our outlook for housing starts is stable with the 2024 average of 1.35 million.
The preliminary PMI surveys for November indicate a continuation of recent trends across the major sectors of the economy. Services activity remains resilient, with readings in the high 50s. Manufacturing has been more subdued with a reading below 50 for the past five months.
High mortgage rates continue to weigh on existing home sales
High mortgage rates continue to weigh on existing home sales
November 26, 2024
Summary of a Busy Year in Global Polyurethanes
Global Transformation in the Polyurethane Industry in 2024
PUdaily | Updated: November 26, 2024
The global polyurethane industry is undergoing a seismic shift in 2024. Facing challenges ranging from macroeconomic fluctuations, soaring energy costs and increasing environmental pressures to restructuring market landscape, major players are adopting various strategies to tackle challenges and seek long-term development. This article will provide an in depth analysis on this industry transformation from three aspects: plant closures, M&As and capacity expansions.
1. Force Majeure Events & Plant Closures: Signals of Self-Adjustment
Dow Closes Two Plants
- Closure of the U.S. PO Plant: Dow has announced its plan to close its PO plant located in Freeport, Texas, by the end of 2025, aiming to optimize cost structures and ensure long-term value creation. This decision epitomizes the self-adjustment of the global chemical industry under multiple pressures such as economic slowdown, rising energy prices, stricter environmental regulations, and intensified competition in Asian markets.
- Closure of the Argentina Polyols Plant: Similarly, Dow has made the decision to terminate the production of 50 ktpa of polyether polyols at its plant in San Lorenzo, Santa Fe Province, Argentina. The plant had long been facing the issue of low operating rates due to an oversupply of polyols in the global market, coupled with Argentina’s deteriorating economy, high inflation, and sluggish domestic demand. These factors made it challenging to maintain smooth operation. This move reflects Dow’s reevaluation of its global asset portfolios and strategic adjustments to improve asset efficiency and focus on businesses with greater growth potential.
Argentina’s Rio Tercero Shut down TDI Plant
Argentina’s Petroquimica Rio Tercero shut down its 28 ktpa TDI plant on October 14, 2024, due to global oversupply and its inadequate competitive edge.
Dow Underwent MDI Force Majeure In North America
Between May and September 2024, Dow’s North American MDI plant underwent force majeure due to hurricanes and supply disruptions from upstream raw material supplier Olin. The 340 ktpa plant kept a low operating rate even after resuming production, further highlighting the impact of natural disasters on the stability of chemical supply chain.
2. M&As: Restructuring and Strategic Transformation
LANXESS Sold Urethane Systems Business
On October 3, 2024, German specialty chemicals giant LANXESS sold its Urethane Systems business to Japanese UBE Corporation for nearly EUR 460 million, signaling the company’s exit from the last remaining polymer business to undergo a transformation towards a pure-play specialty chemicals company. The aim of this sale is to strengthen its overall competitiveness through portfolio transformation.
Covestro to be Acquired by UAE’s Oil Giant ADNOC
In the same month, Abu Dhabi National Oil Company (ADNOC) agreed to buy Covestro, providing financial support to avoid the risks of layoffs and strategic contraction due to deteriorating market conditions. ADNOC’s involvement not only supports Covestro’s “Sustainable Future” strategy but also helps achieve its growth targets. This acquisition will provide ADNOC with access to a leading global platform for MDI, TDI, polyols production and chemical materials development, extending its strategic positioning from upstream to downstream applications.
3. Capacity Expansions: Strong Momentum of Chinese Enterprises
Amidst a general contraction in the global polyurethane industry, Chinese enterprises are demonstrating robust growth momentum.
Wanhua Chemical’s Expansion Plans: Wanhua Chemical has increased its MDI capacity to 800 ktpa and TDI capacity to 250 ktpa in Fujian; besides, its Yantai site will see an additional 850 ktpa of polyols capacity, showcasing its ambitions in the global polyurethane market.
Capacity Expansions at Longhua New Material, ZPC and Shenghong Petrochemical: Longhua New Material’s expansion project will bring its polyols capacity to 930 ktpa, while ZPC, Shenghong Petrochemical and others are also adding new polyols capacities, further solidifying China’s position in the global polyurethane industry chain.
Summary: Strategic Differentiation amidst Industry Transformation
In 2024, the polyurethane industry is undergoing a profound transformation. Many multinationals are facing challenges and adopting strategies such as closures and strategic contractions to optimize assets and unlock profit potential. In contrast, Chinese enterprises are accelerating their pace of capacity expansion under the dual drivers of policy support and market demand. They are continuously strengthening their core competencies by enhancing supply chain stability and increasing R&D investments. In the future, Chinese polyurethane enterprises will play a more important role in the global market to promote the industry development. This transformation is not only a test of the strategic wisdom in enterprises but also a guide to the future for the industry.
November 25, 2024
Government Regulation Impacting the RV Industry
RV industry continues fight against multi-state motorhome ‘ban’
By Larry Adams
November 22, 2024 | 12:51 pm CST
Six states are on a collision course to limit the sale of new gas- and diesel-powered RVs.
The states — California, Washington, New York, Oregon, Massachusetts, and New Jersey — are poised to effectively eliminate the sale of new gas- and diesel-powered RVs starting January 1, 2025.
RV Industry Association Government Affairs staff, along with several of our motorhome manufacturer members, met on Tuesday. Nov. 19, with the California Air Resources Board (CARB) staff overseeing the Advanced Clean Trucks (ACT) regulation.
According to the RVIA’s most recent newsletter, the meeting was requested by CARB to discuss in more detail the RV industry comments submitted as part of the ACT amendments proceeding in October.
“They also wanted to hear more directly from our members about what they are being told by the chassis manufacturers about why they are unable to deliver products,” according to the newsletter.
RVIA representatives repeated its belief that an “exemption or a delay in implementation from the ACT would be of greatest benefit to allow the industry to continue to provide motorhomes to dealers and customers in the state.”
CARB said it does have the authority to create exemptions to the regulation. This is different than what CARB has said on other regulations when they stated that allowable exemption are set by the law which created the rule, not by CARB.
“While no final resolution was attained, all sides agreed to continue talking and another meeting is being arranged in early December. The RV Industry Association will continue to explore all its options to find an equitable solution.”
In 2025, California’s Advanced Clean Trucks (ACT) regulation, aimed at promoting zero-emission vehicles (ZEVs), will create a near-total “ban” on motorhome sales in the state, as well as in additional states that follow the California Air Resource Board (CARB) regulations. While the regulation does not specifically ban motorhome sales, the ACT regulation mandates manufacturers of medium and heavy-duty vehicles to sell an increasing percentage of ZEVs each year. This has led chassis manufacturers to halt sales of traditional internal combustion engine chassis for motorhomes in California, stemming from the lack of ZEV chassis suitable for motorhomes.
Since 2020, the RV Industry Association has been working with CARB on the ACT regulations through conversations directly with CARB staff as well as written and oral testimony at multiple public hearings. When CARB filed its proposed amendments earlier this year, the RV industry met with CARB staff to discuss the impact on the industry. The Association also submitted comments laying out the negative impact of the regulation on the motorhome industry.
Unfortunately, CARB did not make any further amendment that would alleviate the problem of motorhome manufacturers being told by chassis manufacturers that they would not be able to supply ICE (internal combustion engine) chassis for sale into California since they could not offset their ZEV deficits by sales of a ZEV motorhome chassis.
Making the matter more complicated, it is not just the ACT that is causing the issue right now; it is the trio of regulations passed in the last 2-3 years: the ACT, along with the Omnibus Low NOx rule and the Advanced Clean Fleets rule. These three rules work together to gradually transition medium- and heavy-duty vehicles to zero-emission vehicles (ZEVs) by 2036. We have commented to CARB on each of them, and also on the Small Off-Road Engine regulation which threatens spark-ignition engines on generators.
November 19, 2024
Homebuilder Confidence
Builder confidence increases for third month as election uncertainty lifts
By Larry Adams
November 18, 2024 | 1:38 pm CST
WASHINGTON — Builder sentiment improved for the third straight month and builders expect market conditions will continue to improve with Republicans winning control of the White House and Congress.
Builder confidence in the market for newly built single-family homes was 46 in November, up three points from October, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today.
“With the elections now in the rearview mirror, builders are expressing increasing confidence that Republicans gaining all the levers of power in Washington will result in significant regulatory relief for the industry that will lead to the construction of more homes and apartments,” said NAHB Chairman Carl Harris, a custom home builder from Wichita, Kan. “This is reflected in a huge jump in builder sales expectations over the next six months.”
“While builder confidence is improving, the industry still faces many headwinds such as an ongoing shortage of labor and buildable lots along with elevated building material prices,” said NAHB Chief Economist Robert Dietz. “Moreover, while the stock market cheered the election result, the bond market has concerns, as indicated by a rise for long-term interest rates. There is also policy uncertainty in front of the business sector and housing market as the executive branch changes hands.”
The latest HMI survey also revealed that 31% of builders cut home prices in November. This share has remained essentially unchanged since July, hovering between 31% and 33%. Meanwhile, the average price reduction was 5%, slightly below the 6% rate posted in October. The use of sales incentives was 60% in November, slightly down from 62% in October.
Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
All three HMI sub-indices were up in November. The index charting current sales conditions rose two points to 49, the component measuring sales expectations in the next six months increased seven points to 64 and the gauge charting traffic of prospective buyers posted a three-point gain to 32.
Looking at the three-month moving averages for regional HMI scores, the Northeast increased four points to 55, the Midwest moved three points higher to 44, the South edged up one point to 42 and the West held steady at 41.
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