The Urethane Blog
June 19, 2024
Billionaire Jim Ratcliffe Says Europe’s Chemical Industry Is a Mess
Francine Lacqua, Rachel Graham and Alex Longley, Bloomberg News
, Wood Mackenzie Ltd
(Bloomberg) — The high cost of energy and carbon have left Europe’s petrochemical industry struggling to compete with the rest of the world, according to Jim Ratcliffe, head and founder of industry giant Ineos Group.
“Europe’s a mess for petrochemicals today,” Ratcliffe said in an interview with Bloomberg TV. “Everybody’s leaving petrochemicals in Europe, which I’ve never seen in my working life before.”
Europe’s soaring energy costs after Russia’s invasion of Ukraine forced swaths of capacity to close, pressured by output from regions where production was cheaper, particularly Asia and the US. Ratcliffe said energy prices in Europe are five times higher than those in North America, making production in the region uneconomic.
Chemicals are key to the supply of plastics and products that are used in everything from textiles to electronics and construction. As well as being pivotal to industrial growth, the sector accounts for almost 10% of European manufacturing, with about 597 billion euros ($640 billion) of sales before the downturn.
Since 2022, there has been a spate of cuts to chemicals capacity in the region. BASF SE is curbing operations at Germany’s biggest chemicals site. Exxon Mobil Corp. is mothballing its operation at its biggest oil-processing plant in France, while LyondellBasell announced a review of its European operations in May.
Ratcliffe, who is Britain’s second-richest man with a net-worth of more than $15 billion, said Ineos’s own profits have mirrored the shift, with the majority of earnings now coming from the US. Twenty years ago they mostly came from Europe, he said.
Over 70 business and industry leaders, including Ratcliffe, earlier this year called on the European Union to cut energy costs and the regulatory burden of green rules to help the region remain competitive. Parts of the chemicals sector won’t currently be included in the bloc’s carbon border adjustment mechanism when it comes into effect, a scheme designed in part to protect the region’s industry.
“Energy is really important for an economy at the end of the day,” he said. “Places like America are in a great place for manufacturing because they’ve got cheap energy, they’ve got no carbon taxes.”
Permanent Closures
The comments mirror those from major industry groups, who have warned that Europe’s chemical output has plunged.
“Production has collapsed massively in the last two years,” a spokesperson for VCI, Germany’s chemicals lobby group said. Production has over the last two years fallen to levels not seen since the global financial crisis and will likely never recover to where it was before Russia’s invasion of Ukraine, they said.
It’s worth noting that the picture isn’t entirely one-sided.
Ineos is investing in an ethane cracker — one of the types of plant involved in making plastics — in Antwerp that’s set to become operational in mid-2026. Other petrochemical-focused units are also expected to come online in Europe in the next few years, according to Mohamed Chilmeran, research analyst for oils & chemicals at Wood Mackenzie Ltd.
Still, when considering Europe’s overall petrochemical capacity, closures will outpace additions going forward, Chilmeran said.
The crisis is also far from confined to mainland Europe, with the UK also seeing a collapse in its chemicals output. Ineos operates the Grangemouth chemicals plant in Scotland, but Ratcliffe said the nation’s industry has all-but collapsed.
“There’s not much chemical industry left in the UK,” Ratcliffe said. “It’s finished.”
June 17, 2024
Covestro close to granting Adnoc in-depth due diligence – report
Tue, 11th Jun 2024 12:15
(Sharecast News) – Covestro is reportedly close to granting Abu Dhabi National Oil Co. access to in-depth due diligence in expectation of an improved takeover bid, signalling fresh impetus for the talks between both parties after a year of negotiations.
Bloomberg cited people familiar with the matter as saying the German company plans to hold a supervisory board meeting on Wednesday to discuss the issue. It was understood that both firms made progress in recent weeks hashing out key aspects of a combination.
Adnoc has signalled it may slightly sweeten its latest non-binding offer of €60 per share – equivalent to €11.3bn ($12bn) – should the due diligence go well, sources told Bloomberg.
It was understood that the in-depth due diligence, if granted, will likely take place this month and any potential bump would only come in July. Covestro was said to be hoping that it may lead Adnoc to sweeten its bid by around €1 or €2 per share.
Such a step would break an impasse after Adnoc’s most recent bid failed to win over some parts of Covestro’s supervisory board, which refused to give the Abu Dhabi-based energy giant access to core parts of the data room, people familiar with the matter said late last year.
Bloomberg reported earlier this year that to work around the deadlock, Covestro responded to hundreds of questions about its operations Adnoc had asked for. But with the lack of tangible progress to getting a deal done, Covestro’s share price has declined since, increasing pressure on the firm’s management.
A representative for Adnoc declined to comment to Bloomberg while a spokesperson for Covestro said the company is in ongoing discussions with Adnoc “in accordance with our constructive and open-minded manner and in the interests of our company, our shareholders interests of our company, our shareholders and all other stakeholders”.
“As usual, the progress and outcome and the outcome of such discussions will depend on the ability of both parties to agree to agree on issues where they have differing views,” the spokesperson said. “We will continue to report on the outcome of our discussions.”
Earlier on Tuesday, markets blog Betaville said in an “uncooked alert” that Adnoc may have rekindled takeover talks with Covestro. It said there was speculation that Adnoc had recently been tapping up lenders for a debt financing package.
June 12, 2024
Leggett & Platt to close High Point plant
By Larry Adams
June 11, 2024 | 1:03 pm CDT
As part of a restructuring plan announced in January, Leggett & Platt is closing a High Point, North Carolina, facility, resulting in 158 jobs lost.
The action, reported in Furniture Today, affects the plant at 1629 Blandwood Drive in High Point. Leggett & Platt said the closure will be permanent and that the first people to lose their jobs will occur in July and the remaining staff will be let go by the end of September.
According to the Triad Business Journal, of the 158 positions, 134 are in production and production support, while nine are clerical and administrative, and 15 are in management spots.
In January, Leggett & Platt announced it was implementing a restructuring plan that will see the closure of 15 manufacturing and distribution facilities primarily in its Bedding Products segment and to a lesser extent, in its Furniture, Flooring & Textile Products segment.
The plan calls for the consolidation of manufacturing and distribution and reduce the number of its plants from 50 to 30 to 35 in its bedding products segment, and a small number of production facilities in home furniture and flooring products to “better align capacity with regional demand and drive operating efficiencies.”
In Furniture, Flooring & Textile Products we plan to consolidate a small number of production facilities in Home Furniture and Flooring Products to better align capacity with regional demand and drive operating efficiencies.
The 141-year-old supplier of bedding components and private label finished goods; home and work furniture components; and products for a diverse range of industries.
June 10, 2024
China TDI Market Review & Outlook (May-June 2024)
PUdaily | Updated: June 5, 2024
Market Review – May 2024
China TDI market remained range-bound in May, showing weakness followed by a slight strengthening. Due to suppliers’ settlement prices for April being close to market trends and mostly lower than market expectations, coupled with weak demand, traders actively offered discounts to stimulate sales. Post the May Day holiday, the market continued its weakness with prices falling rapidly. As TDI prices hit their lowest level dating to 2021 and approached some TDI suppliers’ cost lines, inquiries and purchases increased. Downstream manufacturers sought lower-priced goods. TDI prices stabilized in early May. With subsequent supply controls or trading halt by major suppliers such as Wanhua Chemical and Covestro, low-priced goods reduced and traders slightly raised their offers. However, low prices disappeared after a slight rebound following the bottoming out of the TDI market. Purchasing enthusiasm waned, resulting in narrow market fluctuations. Towards the end of the month, impacted by suppliers’ bullish stance and tightening supply, traders adopted a cautious approach and made small price increases. Despite this, the trading atmosphere was still tepid. Besides, the demand was pent up in the off season. Transactions were sluggish, resulting in a market stalemate.
Market Outlook – June 2024
China TDI market is expected to remain subdued and stable in June. In terms of supply, BASF Shanghai commenced facility maintenance on May 22 for 25 days, resulting in no inventory pressures. Its settlement price for May is also slightly higher than market expectations, providing a mild boost to the market. But other suppliers are running steadily without short-term maintenance plans. Besides, June is the traditional off-season for downstream industries like foam. And there is no significant increase in overseas demand. Consequently, it is expected that the market will remain relatively loose in June, with downstream manufacturers’ acceptance of high prices being low. Barring unforeseen circumstances such as force majeure, a significant price surge is unlikely to occur. Nonetheless, with persistently high production costs for TDI arising from high toluene prices, the current prices for TDI are nearing the cost lines of some suppliers and hitting record highs in recent years. The likelihood of a significant price decline is also low. It is forecasted that Chinese TDI market will remain subdued and stable in June, with prices experiencing narrow fluctuations.
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