Current Affairs
July 9, 2024
German Chemical Industry Update
German chemicals association: Industry past its rock bottom, but export-driven model might be over
By Jonathan Packroff | Euractiv
Est. 3min
0:30 (updated: 7:10)
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Building of industry leader BASF in Ludwigshafen, Germany. [Firn/shutterstock]
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Germany’s chemical industry has overcome its low point, but the previous model of exporting basic chemicals has ended, the sector’s umbrella association VCI said on Monday (8 July).
The group, representing industrial giants such as BASF, Bayer and Fresenius, expects chemical and pharma industry production to climb 3,5% this year and sales to gain 1.5%.
This comes after two years of faltering production – with an aggregate 15% slide between 2021 and 2023.
However, production was still 11% below the “pre-crisis level”, said VCI president Markus Steilemann while presenting the sector’s half-year results in Berlin on Monday, referring to the energy crisis that was triggered by the full-scale invasion of Russia in Ukraine in February 2022.
The recovery was particularly strong in the production of inorganic basic chemicals – such as hydrogen, chlorine and sulphuric acid, which saw a year-on-year increase of 12% in the first six months of 2024.
Similarly, the production of petrochemicals – i.e. chemicals based on oil and gas – saw an increase of 8.5%.
“Energy prices are back at a more tolerable level,” said Steilemann, “and at the same time it has to be said that we still do not have competitive industrial prices for the basic chemicals industry in Germany due to the overall international energy price situation,” he added.
The combination of relatively high electricity prices and high prices for oil and gas derivates, needed as feedstock for some products, “continues to put products manufactured in Germany at a competitive disadvantage,” he said.
In terms of exports, therefore, many basic chemicals produced in Germany are “no longer competitive,” he said.
Hundreds of closures
Steilemann said he believed that “what Germany actually did very successfully in the chemicals sector for many decades up to 2016/2017 – the basic chemicals export model – has come to the end of its life for Germany”.
In 2023, Germany’s biggest chemical company, BASF, made headlines by closing one of its ammonia production sites in Ludwigshafen. The site, which is currently for sale, is only one of numerous examples.
“To our knowledge, around 300 companies in the chemical industry actually ceased operations last year,” Steilemann said, noting,g however, that this would also include small firms such as laboratories.
Nevertheless, he said, “Those who recklessly assumed that production would return 1:1 after the energy crisis were wrong.”
“Unfortunately, for many companies, what’s gone is gone.”
Shift away from prescriptive regulation?
From the next European Commission, Steilemann joined the ranks of many stakeholders calling for the Green Deal to be complemented by an Industrial Deal.
“We need to put a business plan behind this transformation because, so far, it has led to more rules, more regulation – very fine-grained regulation,” he said.
He said the chemical industry alone was affected by 43 laws adopted over the last legislative term. He said this would lead to up to 600 additional regulations, such as implementing acts or national implementation, parts of which are still outstanding.
“In this respect, no matter what approach the new Commission takes, we will initially see a knock-on effect from the legislation of the last Commission,” he said.
German chemicals association: Industry past its rock bottom, but export-driven model might be over
July 8, 2024
Hurricane Beryl Update
Hurricane Beryl shutters Texas coastal shipping lanes
Ports in Houston, Corpus Christi, Galveston, Freeport and Texas City halt operations
· Monday, July 08, 2024
Texas ports along the Gulf Coast closed operations and vessel traffic before Hurricane Beryl made landfall in southeast Texas at 4:30 a.m. Monday CDT as a Category 1 storm packing 94 mph winds, heavy rainfall and the potential for life-threatening storm surges.
Ports in Houston, Corpus Christi, Galveston, Freeport and Texas City were shuttered Sunday morning after the Coast Guard declared condition “Zulu,” according to Reuters.
Under port condition Zulu, all vessel movement and cargo operations are restricted.
“Due to the expected weather, all Port Houston facilities will be closed,” port officials said on X.
They said they would provide an update by noon Monday about Tuesday operations.
Texas ports are major shipping hubs for crude oil, gasoline, liquefied natural gas, steel, automotive goods and chemicals, as well as a variety of consumer commodities.
Rainfall totals in the Houston metro area over the past 24 hours range from 5 to 8 inches. Storm surges of 3 to 7 feet have been reported in parts of the middle and upper Texas coasts.
It’s unclear when the Coast Guard will lift condition Zulu and allow the ports to resume regular operations.
The storm has already caused power outages to more than 1 million homes and businesses in the Houston area, according to The Associated Press. Houston and other parts of southeast Texas have flood warnings in effect until Monday night.
Hurricane Beryl’s track shifted eastward over the past 48 hours, with the storm making landfall in the coastal town of Matagorda, about 95 miles south of Houston. The storm had been predicted to make landfall near or south of Corpus Christi and travel north through Laredo, San Antonio and Austin.
The storm’s path was expected to track through east Texas on Monday and then up toward Shreveport, Louisiana, and Arkansas into Tuesday.
July 3, 2024
The End of The Dream
BASF Pulls Plug on Potential Chile Investments Amid Lithium Rout
Wilfried Eckl-Dorna and James Attwood, Bloomberg News
(Bloomberg) — German chemicals giant BASF SE has abandoned plans to invest in lithium mining assets in Chile as a slowdown in electric-vehicle adoption worldwide drags down battery metal prices.
BASF withdrew from initial talks with Wealth Minerals Ltd., the Vancouver-based firm that has exploration projects in Chile, the German company said in an email to Bloomberg Tuesday.
A potential arrangement had included possible funding and offtake if Wealth obtained production contracts in Chile. BASF also was exploring the possibility of building a plant in Chile to turn lithium into the cathode that goes into electric-vehicle batteries.
“No collaboration between BASF and Wealth Materials materialized in the end,” BASF wrote. The company didn’t give a reason for ending the talks or mention the proposed cathode plant.
The withdrawal follows BASF’s announcement last week that it scrapped plans for a $2.6 billion nickel-cobalt refinery in Indonesia. Slowing EV sales growth has pushed down prices of key inputs, with lithium at three-year lows after surging to a record in late 2022. BASF now plans to bolster raw-materials supply for European operations via a new battery recycling plant in Germany, due to start operations later this year.
While the German company’s involvement in Chile was at a very early stage, it’s withdrawal is a blow to European authorities’ push for companies to secure deals with key battery metals suppliers.
It’s also a setback for Wealth as it grapples with a strategy being implemented in Chile to open new areas to lithium extraction. One of the company’s projects is in an area deemed of strategic importance, meaning it would have to take on a state-owned company as a majority partner.
Wealth Chief Executive Officer Henk van Alphen declined to comment on BASF’s exit. He said implementation of the government’s lithium strategy has been slow though progress is being made. Authorities next week are scheduled to announce details of firms interested in new contracts in nonstrategic salt flats.
July 3, 2024
Shipping Costs Are Rising
Ocean Shipping Prices Are Pushing Toward Pandemic-Era Highs as Congestion Swells
Date: Monday, June 24, 2024
Source: The Wall Street Journal
Ship backups that plagued seaports during the Covid pandemic are making a comeback, as vessel diversions because of attacks in the Red Sea trigger gridlock and soaring costs at the start of the peak shipping season.
Flotillas of containerships and bulk carriers are growing off the coasts of Singapore, Malaysia, South Korea and China while ports in Spain and other parts of Europe look to dig out from container piles.
Houthi rebel attacks on commercial shipping in the Red Sea, which have effectively closed the Suez Canal since the end of last year, are being felt at faraway ports as the disruptions extend voyage times, throw ships off schedule and strand sea containers.
The snags are complicating logistics for retail and manufactured goods, but importers and exporters say they are most concerned that the backups could expand as demand picks up in the coming months heading into the busy peak shipping season. That could drive already-resurgent freight rates close to levels seen during the pandemic, when companies vied for scarce space on ships and spot-market prices for shipping a 40-foot container surged past $20,000.
The average worldwide cost of shipping a 40-foot container hit $4,119 the week ending June 14, according to Freightos, more than triple the cost in June last year and the highest rate since September 2022.
“We have not seen those $20,000 rates for a container as it was in the pandemic, but we are looking at $7,000 per box from Asia to the U.S. East Coast rates versus the normal rate of about $3,500,” said Michael Murray, who runs DeSales Trading, a threads and yarns wholesaler in Burlington, N.C.
“As an importer there is nothing worse than getting stuck with inventory having inflated freight costs like what happened in 2022,” he said
The disruptions come as a range of other events are adding to supply-chain challenges.
Some U.S. importers are pulling orders forward ahead of new tariffs on Chinese goods. The Panama Canal has been limiting ship movements because of a drought that only recently showed signs of abating. In the U.S., retailers and manufacturers are worried about recent dockworker warnings that they might strike at U.S. East Coast and Gulf Coast ports in October.
Freight specialists say the congestion could get worse if more importers bring in goods early to avoid higher costs and further delays later in the year.
“What we are seeing is a surge in cargo, as shippers book earlier and perhaps more containers than normal,” said Jonathan Roach, a container shipping analyst at London-based Braemer. “This is an attempt to front-load inventory and mitigate longer transit times and potential delays.”
“If the congestion worsens, we may see even more front-loaded cargo bookings, which could make the situation even worse,” he said.
The impact already shows signs of reaching the earnings of importing companies.
Mark Webb, chief financial officer of Quincy, Mass.-based J. Jill, said on a recent earnings call that the apparel retailer used “very costly” airfreight to rush in items ahead of Mother’s Day in May.
British retailer DFS Furniture this month slashed its profit outlook by half, largely because “Red Sea routing issues have persisted, resulting in delays to customer deliveries and higher freight costs.” The company said nearly $18 million of its goods were delayed because of the Red Sea-related disruptions.
Houthi rebels effectively closed the canal to most commercial shipping last fall when they started hijacking and attacking vessels in support of Palestinians in Gaza. They have captured, damaged and sunk vessels, killing several sailors.
Ocean carriers were initially able to cope with the re-routings around the Cape of Good Hope in southern Africa, which added 10 days or more to sailings. But global shipping networks started to buckle in May as retailers and manufacturers ramped up orders in an apparently early start to the peak shipping season.
The diversions around Africa knocked ships off schedule, causing ocean carriers to cancel some sailings and to divert vessels from other parts of the world to fill gaps in service. The disruptions also stranded containers in ports around the world and led to a shortage in export hubs like China.
The Port of Singapore, a global hub for container lines, has been swamped, leading to long wait times for a berth and increased shipping costs.
Average time in port at Singapore increased 15% between mid-April and mid-June to almost 40 days, according to S&P Global Market Intelligence’s Port Performance data.
Meanwhile, brokers, port operators and ship owners said ports like Barcelona in Spain and Antwerp in Belgium have been heavily congested in recent weeks as ships skip Mediterranean distribution hubs like Piraeus in Greece and Marseille in France and sail across Europe’s Atlantic coastline.
The cost of leasing sea containers has also skyrocketed at some gateways because so many boxes are tied up on the longer voyages around Africa’s Cape of Good Hope and stuck in the cargo snarls in Asia and Europe.
Container xChange, an online marketplace for sea containers, says the average price for a shipping container in Singapore in May was up 26% from October, before the Houthi attacks on commercial vessels began. Leasing prices for boxes from Shanghai to Los Angeles and Long Beach in May were about double the rate of last November.
The fast-rising shipping prices have been a boon to container lines. Danish shipping major A.P. Moller-Maersk this month raised its full-year guidance for the second time in roughly a month, projecting a $3 billion improvement in free cash flow for the year over its previous forecast.
“Trade flows will eventually return to normal when the Gaza conflict is resolved and ships return to the Red Sea,” said Nils Haupt, the chief spokesman for German boxship operator Hapag-Lloyd. “Freight rates will fall, because there is no escaping that there is a lot of extra capacity at sea.”
July 3, 2024
Furniture Market Update
Furniture up in June as overall economy struggles
By Larry Adams
July 2, 2024 | 1:03 pm CDT
Economic activity in the manufacturing sector contracted in June for the third consecutive month and the 19th time in the last 20 months, say the nation’s supply executives in the latest Manufacturing ISM Report On Business.
Furniture & Related Products was one of eight industry categories that reported growth in June, coming in as the fourth highest growth industry behind printing, petroleum, and primary metals.
The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee:
“The Manufacturing PMI registered 48.5 percent in June, down 0.2 percentage point from the 48.7 percent recorded in May. The overall economy continued in expansion for the 50th month after one month of contraction in April 2020. (A Manufacturing PMI above 42.5 percent, over a period of time, generally indicates an expansion of the overall economy.) The New Orders Index remained in contraction territory, registering 49.3 percent, 3.9 percentage points higher than the 45.4 percent recorded in May. The June reading of the Production Index (48.5 percent) is 1.7 percentage points lower than May’s figure of 50.2 percent. The Prices Index registered 52.1 percent, down 4.9 percentage points compared to the reading of 57 percent in May. The Backlog of Orders Index registered 41.7 percent, down 0.7 percentage point compared to the 42.4 percent recorded in May. The Employment Index registered 49.3 percent, down 1.8 percentage points from May’s figure of 51.1 percent.
“The Supplier Deliveries Index remained in ‘faster’ territory, registering 49.8 percent, 0.9 percentage point higher than the 48.9 percent recorded in May. (Supplier Deliveries is the only ISM Report On Business index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.) The Inventories Index registered 45.4 percent, down 2.5 percentage points compared to May’s reading of 47.9 percent.
“The New Export Orders Index reading of 48.8 percent is 1.8 percentage points lower than the 50.6 percent registered in May. The Imports Index dropped into contraction territory, registering 48.5 percent, 2.6 percentage point lower than the 51.1 percent reported in May.”
Fiore continues, “U.S. manufacturing activity continued in contraction at the close of the second quarter. Demand was weak again, output declined, and inputs stayed accommodative. Demand slowing was reflected by the (1) New Orders Index improving to marginal contraction, (2) New Export Orders Index returning to contraction, (3) Backlog of Orders Index dropping into stronger contraction territory, and (4) Customers’ Inventories Index moving into the low side of the ‘just right’ range, neutral for future production. Output (measured by the Production and Employment indexes) declined compared to May, with a combined 3.5-percentage point downward impact on the Manufacturing PMI calculation. Panelists’ companies reduced production levels month over month as head count reductions continued in June. Inputs — defined as supplier deliveries, inventories, prices and imports — continued to accommodate future demand growth. The Prices Index eased but remained in expansion (or ‘increasing’) territory; the index registered its second month of cooling increases.
“Demand remains subdued, as companies demonstrate an unwillingness to invest in capital and inventory due to current monetary policy and other conditions. Production execution was down compared to the previous month, likely causing revenue declines, putting pressure on profitability. Suppliers continue to have capacity, with lead times improving and shortages not as severe. Sixty-two percent of manufacturing gross domestic product (GDP) contracted in June, up from 55 percent in May. More concerning is the share of sector GDP registering a composite PMI calculation at or below 45 percent — a good barometer of overall manufacturing weakness — was 14 percent in June, 10 percentage points higher than the 4 percent reported in May,” says Fiore.
The eight manufacturing industries reporting growth in June — in order — are: Printing & Related Support Activities; Petroleum & Coal Products; Primary Metals; Furniture & Related Products; Paper Products; Chemical Products; Miscellaneous Manufacturing; and Nonmetallic Mineral Products. The nine industries reporting contraction in June — in the following order — are: Textile Mills; Machinery; Fabricated Metal Products; Wood Products; Transportation Equipment; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; and Computer & Electronic Products.
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