Latest market news

Lack of Cop 28 chemicals, plastic focus puzzling

  • Market: Petrochemicals
  • 24/11/23

Plastics production is a huge contributor to global CO2 emissions, but there are no signs that the sector will be discussed at Cop 28, writes Will Collins

The apparent absence of a focus on plastics in discussions during the upcoming UN Cop 28 climate summit is puzzling, considering the role that chemicals and plastics production play on both sides of the debate.

On one hand, the petrochemicals industry is the world's third-largest industry sub-sector in terms of direct CO2 emissions, according to energy watchdog the IEA. Petrochemical feedstocks are "the main long-term pillar of oil demand", the IEA says. But on the other hand, plastic can contribute to lower carbon emissions in various applications, including as a lightweight alternative material for car parts or packaging, or by prolonging the shelf life of perishable items to reduce food waste.

But a lack of globally harmonised regulation is impeding investment. A greater forum for discussing chemicals and plastics at Cop 28 could accelerate progress, but plastics do not feature on the Cop 28 presidency schedule — although there will be multiple events at the summit, some of which may focus on plastics.

Baby steps

The proliferation of sustainability commitments in the plastics industry accelerated in 2017 and 2018, when the "Blue Planet effect" focussed public discourse around plastic waste in the environment, particularly the seas. But the discussion has evolved since then ,with the carbon benefits of recycled and bio-based feedstocks now an equally prominent part of discussions.

Many of the largest global petrochemical and polymer producers have announced measures to reduce their carbon footprints, including by producing more recycled or non-fossil based plastics. Argus recently examined some of these pledges and found that the firms surveyed have committed to market a total of around 17mn t/yr of products with some recycled or bio-based content by 2030. This is not a small volume, and the companies surveyed do not account for all producers that have made sustainability commitments. But measures will need to continue to be scaled up to be effective in the context of estimated global plastic production of more than 350mn t/yr in 2021. This will require significant investment and likely a trusted framework around which future developments can be focussed.

Many producers are taking other steps to reduce their Scope 1 emissions — those directly from an organisation's activity. Some are switching away from fossil fuels as a source of heat and power, including Brazilian firm Braskem, which has replaced steam-based turbines with electric motors at its Sao Paolo steam cracker. And collaborations involving Dow, Shell, Sabic and BASF are developing electrically heated steam cracker furnaces, which could reduce emissions by up to 90pc.

But again, scale will be the key. Such changes are not cheap and firms will look for assurances that investments will not make them uncompetitive against peers that retain traditional production processes.

Brick by brick

Tackling emissions in chemicals and plastics is multi-faceted and require a large number of investment decisions. The polymer producers surveyed by Argus own or are partners in around 60 mechanical and chemical recycling projects, but the combined input capacity of these projects is only around 3.5mn t/yr.

Scaling up will require many more projects, with many more investors to be brought on side. Convincing multiple decision-makers that investments are worthwhile and financially viable is more likely to be challenging.

The UN global plastics treaty negotiations, which recommenced in Nairobi this week, have the stated aim of harmonising the patchwork of regulations governing the sale, disposal and recycling of plastics, which can differ widely between and even within regions. But it is a mammoth task. The global nature of the chemical and plastic industries, and the fact that they are spread across a huge number of disparate applications, add to the complication. The EU's prolonged negotiations about how to apply mass balance accounting to attribute chemically-recycled content in plastics is another example of how agreements can be difficult because such a large number of stakeholders are involved in the discussions.

The exclusion of petrochemicals and polymers from the EU's initial Carbon Border Adjustment Mechanism (CBAM) also hints at the difficulty of applying regulations to such a wide-ranging industry. Proponents would argue that including the industries in CBAM would give it confidence that investments in greener processing technologies would not make them uncompetitive in the global market. Opponents might point to a potential to disrupt imports, upon which Europe relies for a number of chemical and polymer products.

The petrochemicals industry cannot rely on legislators to make the case for investment. It needs to demonstrate viable technologies for investors and legislators to get behind. For example, an EU decision on mass-balance accounting will not drive investment on its own unless chemical recycling and the supply chain around it can be shown to work on a commercial scale.

But clear, unilateral regulations are needed to help firms assess whether to invest in projects that could improve sustainability, and ensure that improvements take place globally rather than piecemeal or region by region. Discussion at Cop 28 about how to support the petrochemical and plastic industries to lower their negative climate impact, while preserving these benefits, would surely be valuable.


Sharelinkedin-sharetwitter-sharefacebook-shareemail-share

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News
13/12/24

E-PVC buyers build stocks ahead of US tariffs

E-PVC buyers build stocks ahead of US tariffs

Houston, 13 December (Argus) — Emulsion-grade polyvinyl chloride (E-PVC) producers and buyers are racing to build inventories ahead of potential US tariffs on imported goods, according to market participants at the Vinyl Week conference this week in Louisville, Kentucky. President-elect Donald Trump has said he would impose 25pc tariffs on all goods imported from Canada and Mexico after he takes office next month, and that he would raise tariffs on Chinese imports by 10pc. Tariffs on Mexican imports are of particular concern to buyers who rely on the country for some imported E-PVC, also known as specialty or paste PVC. Some US buyers at the conference sponsored by the Plastics Industry Association said a more expansive tariff policy would not only raise delivered prices for E-PVC, it also would also be inflationary for everyday goods. Higher prices could reduce consumer spending power and cut demand for E-PVC in flooring or automotive manufacturing. Other buyers of E-PVC said a more focused scope for tariffs that centered on supporting industry in the US could be beneficial. One flooring producer said tariffs could allow it to recapture market share for products like luxury vinyl tile that have been increasingly dominated by imports from countries like China. Flooring is one of the two largest end use consumers for E-PVC. Suppliers are taking precautions, even if the tariff policy proves to be limited. European producers with extensive warehouse networks in the US have been exporting even greater volumes to North America ahead of potential tariffs that Trump threatened during his campaign, as well before a potential resumption of dockworker strikes in mid-January. US distributors are building inventories of Mexican imports in order to beat the threatened tariffs. US dependence on E-PVC imports deepened after Orbia closed its 60,000 t/yr Pedricktown, New Jersey plant in the fourth quarter with plans to supply US cusomers from its plant in Marl, Germany. The closure leaves the US E-PVC manufacturing capacity at around 156,000 t/yr. While the E-PVC market is more niche compared to the suspension-grade market used in pipe production, the US is structurally short on supply for specialty resins. Many E-PVC buyers with operations on both sides of the Atlantic expect US demand growth to be stronger than in Europe. Some European producers have been raising operating rates above 70pc because exporting excess volume to the US was a viable option. Tariffs could challenge that strategy as higher import prices for US buyers would pressure export prices, and European producers are not inclined to cut prices, market participants said. If Trump does not implement his promised tariffs, E-PVC buyers and producers alike generally agreed that US market demand would be stable to up slightly in 2025. By Aaron May Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Find out more
News

US PET recycling rate rose in 2023


13/12/24
News
13/12/24

US PET recycling rate rose in 2023

Houston, 13 December (Argus) — The 2023 US recycling rate for PET bottles rose to 33pc, its highest level since 1996, according to data from the National Association for PET Container Resources (NAPCOR). The US collected 1.96bn lbs of PET bottles for recycling in 2023, up by 2.7pc from 1.91bn in 2022, even while fewer bottles were produced, according to NAPCOR. Overall PET bottle production was 5.95bn lbs in 2023, a 9.8pc drop from 2022. The rPET content rate in US bottles reached a high of 16.2pc in 2023, up from 13.2pc in 2022. Total US rPET content in bottles reached 966mn lbs in 2023, up from 870mn lbs in 2022. NAPCOR said the increase in collection demonstrates increased demand for rPET across the US. Overall North American PET bottle recycling rates also increased in 2023, reaching a high of 41.3pc. Despite the increase in recycled production in 2023, it was a tough year for recyclers due to a drop in consumer spending, which tightened the amount that bottlers and brands were willing to spend on recycled material. By Zach Kluver Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Mexico’s industrial output falls 1.2pc in October


13/12/24
News
13/12/24

Mexico’s industrial output falls 1.2pc in October

Mexico City, 13 December (Argus) — Mexico's industrial production dropped by 1.2pc in October, driven by declines in manufacturing and mining, statistics agency Inegi said today. The seasonally adjusted industrial activity indicator (IMAI) reversed a 0.6pc increase recorded in September, surprising analysts who had expected a smaller contraction. Banorte had forecast a 0.1pc decline, while the market consensus pointed to a 0.6pc decrease. The sharper-than-expected downturn was largely attributed to a 1.9pc drop in manufacturing, which accounts for 63pc of the IMAI. This followed growth of 1pc in September and 0.4pc in August. Within manufacturing, transportation manufacturing — a key segment making up 12pc of the sector —fell by 4.3pc, reversing a 2pc increase in September and a 1pc uptick in August. Despite this decline, light vehicle production reached 382,101 units in October, up from 378,583 in September, on track to set a new annual record . Mexican auto industry association AMIA told Argus the drop in transportation manufacturing was unrelated to light vehicle production. Instead, Alejandro Cervantes, director of quantitative economic research at Banorte, suggested the decline could be linked to trucks and heavy-duty equipment manufacturing. "Despite [being] a negative month for industrial activity and possibly for aggregate economic activity, the fact is that we have seen a strong rebound in the production of vehicles," said Cervantes. Mining, which makes up 12pc of the IMAI, contracted by 1.9pc in October, following a 1.2pc decline in September. Oil and gas extraction fell by 0.9pc, marking its fourth consecutive month of contraction. In contrast, construction — accounting for 19pc of the IMAI — increased by 0.5pc in October after a 1.1pc increase in September. By James Young Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Revolution acquires Michigan film recycler


12/12/24
News
12/12/24

Revolution acquires Michigan film recycler

Houston, 12 December (Argus) — Arkansas-based film recycler Revolution Sustainable Solutions has acquired Michigan-based film recycler Island Plastics, expanding its total input capacity to more than 300mn lbs/yr. Island Plastics recycles post-consumer low-density and linear low-density polyethylene (rLDPE/LLDPE), with an input capacity of over 25mn lb/yr. Revolution said the acquisition would help the company expand its customer offerings of post-consumer food grade clear rLDPE. Revolution declined to disclose financial terms of the deal. Last year, Revolution acquired a letter of no objection from the US Food and Drug Administration for its recycled linear low-density polyethylene (LLDPE), allowing its product to be used for food contact purposes. In January this year, Revolution acquired Canadian agricultural film recycler PolyAg. By Zach Kluver Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Brazil PVC imports drop in Nov after tax hike


12/12/24
News
12/12/24

Brazil PVC imports drop in Nov after tax hike

Sao Paulo, 12 December (Argus) — Brazil's polyvinyl chloride (PVC) imports in November fell by 20pc from a year earlier after the government raised import taxes in mid-October. PVC imports in November fell to 35,945t, down from 45,175t in the same period last year, according to data from Brazilian trade ministry database Comexstat. In terms of value, November PVC imports fell by 22pc on the year to $31mn. Brazil raised tariffs on imports of polymers to 20pc effective 15 October from 12.6pc previously, in response to producers' request for trade protection. Imports from Colombia, historically the top PVC supplier to Brazil, remained the largest in November, but volumes fell by 18pc from a year earlier. PVC imports from the US fell by 38pc in the period. On the other hand, resin imports from Argentina and Egypt increased from November 2023, with PVC delivery volumes increasing by 55pc and by 65pc, respectively. Year-to-date imports still point to increased volumes and values. Brazil's PVC imports in January-November rose by 34pc from a year earlier to 500,803t, up from 374,425t in the same period last year. The value of those imports rose to $421mn from $325mn a year earlier. The top suppliers in the period were Colombia, the US, Egypt and Argentina. To bolster the competitiveness of plastic resins made in the country, Brazil's major PVC producers, Braskem and Unipar Carbocloro, have jointly asked the Brazilian government to increase the 8.2pc anti-dumping tariff imposed on US-produced PVC. By Fred Fernandes Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Generic Hero Banner

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more