Recycling in focus: Navigating plastics and metals circularity in 2023

The recovery of China's economy is the only major bright spot visible for 2023, according to Martin Brudermüller, BASF's chairman and CEO. "I see only one positive spark as we look forward this year, and that is China coming back," Brudermüller said March 22, speaking at the World Petrochemical Conference by S&P Global in Houston. "If you look into their second quarter, the mood is getting better already," he said. "It comes from the fact that after the Chinese New Year, the second wave of COVID did not come. So I hope that we have a situation a little like in 2008, where actually China was bailing out the world." Brudermüller, speaking at a panel discussion with Dan Yergin, vice chairman of S&P Global, and Jim Fitterling, CEO of Dow, described the chemical industry, along with the global economy, as "now slipping into a demand crisis. Because the backlog of COVID has gone, you see now that people, with inflation, are spending less, buying less goods, and less chemicals. That's how we started this year. Overall we have a pretty difficult environment." The Russia-Ukraine war can be viewed as a "local conflict" in the middle of Europe -- but with "massive repercussions all over the world, questioning energy supply, supply chains, totally reshuffling energy prices and a lot of other questions," Brudermüller said. The geopolitical environment between Western governments and China also concerns him, he acknowledged. Although there is "a lot of stuff we don't like that's happening in China, on the other hand, you only can solve global problems together with China," he said. "If you think about decarbonization, how should we achieve it without China? Yes, we can step up competitiveness, and yes, we can also criticize certain things, but the third thing is cooperation." In 2030, China is forecast to represent about 50% of the global chemicals market, Brudermüller said. "If you are conservative and you plan for something like 4% GDP growth for China -- which is on the low side -- you conclude that 75% of the additional chemical demand generated until 2030 is from China," he said. "So for that reason, can we abandon 50% of the market? This is the fundamental question... There is a risk to being in China, but there's also a huge risk not to be in China." Relearning supply chains Fitterling highlighted that about 30% of petrochemical exports currently flow from the US to China. "The increment of growth is higher in China," he said. Fitterling also flagged the long-term lack of investment up until now in US manufacturing. "We want to have a growing manufacturing economy here in the US ... but until the shale gas revolution, we weren't interested too much in having a growing manufacturing economy here," he said. "Now you've got to relearn what the supply chains are for that manufacturing economy," Fitterling said. "[The US] has an aspirational policy, which says we want to reshore manufacturing, but now we have some realities we've got to deal with, which is we don't have the natural resources to support that. It's not that the aspirational policy is wrong, but if you get yourself too far ahead on the aspirational side, you can't afford it." If foreign policy starts to cut off relationships, "you're just hurting yourself," he added. "You're hurting all of the industries that have now become dependent on China. So it's a tough balancing act to manage right now." IRA reaction Brudermüller also said the US Inflation Reduction Act reflects "fundamentally different philosophy behind policies" between Europe and the US. "Europe generates a regulatory framework to enforce transformation," he said. "The Americans generate a business case to facilitate transformation. The major difference is that the Europeans take a lot of taxpayers' money to fund your capex, while the IRA goes on [operating expenses] ... this is certainly the better model to accelerate." Brudermüller described the IRA as a "wake-up call. Everyone got the message quite quickly," he said. The IRA scheme is easy to understand and will attract investments, including investments away from Europe. "If you don't have predictability in Europe, about chemical law, energy cost, and permitting processes, which is making you hesitant to invest," Brudermüller said. "And the market is slow to grow. That's why some of the projects will move to the US, and that is certainly an alarm bell for Brussels."

The global petrochemical industry is grappling with the aftermath of COVID-fueled demand. The supply squeeze in 2020 and 2021 that led to soaring prices has been doused by economic uncertainty and oversupply, leaving producers with hard decisions about output and buyers with lots of options. S&P Global Commodity Insights’ global polymer lead Kristen Hays speaks with Chemical Week editors Rob Westervelt and Clay Boswell to break down how the markets got here and what’s coming up. Don’t miss them at World Petrochemical Conference in Houston next week as well. Related: Chemical Week More listening options: No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P).

China's National People's Congress has set the stage for the country's post-pandemic economic recovery and long-term roadmap under new leadership. On March 5, retiring Prime Minister Li Keqiang set a conservative 5% GDP growth target for 2023, which is higher than the 3% achieved in 2022, and will help support commodities demand. But it also signals an uphill task for Beijing in sustaining modest growth amid broader economic restructuring, financial risks from the property sector and global uncertainties. Click here to see the full-size infographic

CERAWeek 2023: March 6-10 Witness as delegates and leading industry icons from world over share their views on Energy, Climate and Security in CERAWeek 2023 by S&P Global. With over 5000 delegates from 1300 and more companies gathering at a single stage across more than 680 sessions, capture the impact of CERAWeek 2023 through our live streaming sessions. VIEW HERE

WPC 2023: March 20-24 The premier petrochemical event, WPC 2023 will cover a comprehensive outlook on energy and feedstocks, economy, commodity chemicals, specialty chemicals, intermediates, related customer markets and beyond. In addition to help gain insight into end-to-end chemical markets, World Petrochemical Conference 2023 offers new exciting tracks on carbon intensity, carbon markets, clean fuels, and clean tech. KNOW MORE HERE

The EU’s Carbon Border Adjustment Mechanism is set to have far-reaching impacts on world trade and the wider energy transition. Phasing in from 2026, CBAM will levy a carbon tax on imports of selected energy intensive materials and products into the EU, removing the gap between the EU’s ETS carbon price and the export country of origin’s carbon price. Analysis by S&P Global Commodity Insights shows Canada, Brazil, South Africa and Turkey will be most exposed to the mechanism, with iron and steel by far the biggest sector targeted. Click to see the full-size infographic Related Insight Blog entry: CBAM, ETS reform to impact fertilizer trade Related podcast: How will the EU's Carbon Border Adjustment Mechanism affect global trade and carbon pricing? More listening options:

Austrian petrochemical company Borealis is taking an optimistic approach to market fundamentals in 2023, despite lower polyethylene and polypropylene margins at the end of 2022 as a result of higher energy costs and weak demand in some end-segments, CEO Thomas Gangl told S&P Global Commodity Insights. Gangl, alongside CFO Mark Tonkens, pointed towards a less depressed macro-economic outlook as a reason for a more positive approach to long term market dynamics, with recessionary fears yet to materialize in contrast to wider market expectations. Despite clarifying that market conditions for polyolefin material were expected to remain illiquid in the first half of 2023, Gangl said: "It is a market which is developing in the right direction". Commenting further on the outlook for 2023, Gangl said "We do think that the sales volumes will be slightly higher than in 2022," adding that operating rates were also expected to increase. Contextual Optimism Wider geo-political and up-stream market dynamics were also cited as cause for short- and long- term optimism by Gangl and Tonkens, with both citing stabilizing energy costs and more flexible COVID 19 restriction policy in China as potential factors for provoking growth in the sector across 2023. Despite that, some macro-economic pressures were stressed as a continuing factor into 2023, with the cost-of-living crisis particularly highlighted as a depressive factor for end user demand for durable plastics, as consumers reassess where they spend. A divergence in derivative industries was also noted by Borealis, with stable buyer interest observed in energy, business, healthcare and automotive sectors, while demand from consumer product and infrastructure industries remains sluggish. "Margins have been under pressure, especially for the commodity areas," Gangl said, adding: "When we talk about energy, healthcare and automotive, we see very stable and good demand [...] on the other hand, consumer products and infrastructure has been much more challenging to get the volumes there and to achieve margins". The optimism offered by Borealis speaks to the wider uncertainty seen across European polypropylene and polyethylene markets in recent weeks, with market participants offering a variety of perspectives on future market dynamics. Activity across both markets has been muted across 2023 so far, with consumers reluctant to engage in transactional activity due to weak demand across the value chain, leading to limited consensus regarding outlook for the rest of the year. "If you do n't like it, you should go and do something else" Tonkens said in response to the wider contextual pressures throughout polyethylene and polypropylene markets, adding that "is a bit painful sometimes, but it is the journey, you need to get up stronger". PP homopolymer spot pricing stood at Eur1,195/mt ($1,437/mt) FD NWE on Feb. 3, stable on the day and up 7% on the week according to S&P Global Commodity Insights data, with consumers reducing contractual intake in favour of competitively priced spot material. Low density polyethylene spot prices stood at Eur1,220/mt FD NWE on Feb. 3, unchanged on the day and week with transactional activity limited across the market. Record profits cushion quarterly margin decreases In its financial results released Feb. 3, Borealis said its Q4 European PE indicator margin declined by 19% to Eur370/mt compared to Eur458/mt a year earlier, the company's PP indicator margin saw a larger decrease of 42% year-on-year at Eur398/mt. Overall PE and PP margins in 2022 were down by 33% and 34%, respectively. Sales volumes of PE were down by 3% compared to Q4 of 2021, whilst PP sales volumes fell by 19%. Despite the fall in margins, Gangl noted record net profits of Eur2.1 billion across the year for Borealis, alongside improved quarterly sales volumes of polyolefins in Q4 2022. Noting that "this was achieved in an environment of geopolitical strife, rising inflation, market volatility, the lingering pandemic effect" Gangl said that "perception is changing at the moment...the confidence is getting better".

Ali Amin-Javaheri , co-founder and CEO of chemical digital marketplace Knowde, joins the podcast to discuss how digital marketplaces are gaining traction in the chemical sector. "We've seen the success of marketplaces across every sector imaginable," Amin-Javaheri said. "It would be shortsighted to think that our industry is any different." Knowde drew attention to the potential of digital marketplaces in chemicals when it raised $72 million in Series B funding from several leading Silicon Valley venture capital firms in August 2021. He assesses growing digital adoption in chemicals, gaining the confidence of buyers and suppliers after fits and starts on earlier internet platforms, and how VC firms view investment in the chemical sector. This Chemical Week podcast was produced by Jameson Crouteau. No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P).

Some European countries could struggle to meet the EU's 2030 recycled plastic targets, Antonello Ciotti, president of Petcore Europe, a Brussels-based group representing the PET value chain, said in an interview in which he discussed the main issues facing the recycled PET market ahead of the annual Petcore conference. Impact of the single-use plastics directive The single-use plastics directive being implemented by the European Union states that by 2025, 25% of plastic material in PET bottles must be of recycled origin. "This target makes sense," Ciotti told S&P Global Commodity Insights, pointing to Eunomia data that states as of 2020 the average collection rates of PET bottles in Europe allows to feed up to around 23% of recycled material back into future PET bottles. Forecasting forward to 2025, Ciotti believes that Europe should be able to cope with the goals set out in the directive. However, going forward to later goals within the single-use plastics directive, such as 30% of plastic in PET bottles should be made up of recycled material in 2030, Ciotti said some former Eastern European countries will struggle. He attributed this not to the capacity of recyclers able to produce recycled PET products, but to lower collection rates in those countries. Ciotti said the best route to combat collection rate issues is deposit schemes for recycling, which are already in place in some places like Germany, being implemented across Europe. Ciotti said "the way societies are organized" is a key point to implementation. He pointed to an inherent issue with deposit schemes, namely, the need for dedicated space for the deposit areas within shops. The "population of countries such as Italy and Spain rely more heavily on small shops to purchase their groceries," Ciotti said, which wouldn't have the space and funds to cope with the deposit system. On the other hand, countries such as the UK and Germany have "larger retail chains that would be able to provide the space and funds necessary to commit to the deposit system," Ciotti said. Ciotti also said he believed the implementation of recycling policies within Europe is more top-down rather than being generated by the masses. He said during the current economic climate, people are more concerned about the price of the bottle they are purchasing, rather than if it is environmentally sustainable. Ultimately, the "final consumer cares about recycling content but does not want to pay more for it." Imports interact with EU policy, sustainability desires Europe's growing focus on sustainability, coupled with increasing prices for recycled PET during the first half of 2022, saw many imports heading to Europe, Ciotti said. With mandatory recycling content policies a rarity outside Europe, flow was opened globally into Europe. The key difficulty facing imports into Europe are certification issues, as the import material may not be up to the standard required by European consumers, Ciotti said. He also said the question posed about imports at the moment was how to offset the carbon footprint of global travel with the environmental benefits of recycled PET. "The pollution from transport is much higher than production of plastics in Europe," Ciotti said. Moving forward, Ciotti hopes that European policy explicitly dictates the input into recycled material should be from a European source rather than any source. Environmentally friendly policy drives R-PET prices The price rises seen for recycled PET in the first half of 2022 were due to decisions made by brand owners in order to become more environmentally friendly, Ciotti said. This move inflated demand for R-PET, raising the price far above the price paid for virgin PET. Platts, part of S&P Global Commodity Insights, assessed recycled PET clear flake at Eur2,150/mt FD NWE June 30, with prices falling to Eur1,500/mt FD NWE by Dec. 30. Virgin PET was assessed at Eur1,730/mt FD NWE July 6, with values falling to Eur1,280/mt by Jan. 4. While this price trend can be partly attributed to normal R-PET seasonal demand, Ciotti said "recession in September 2022 made people less concerned about recycling," bringing a drop in demand for R-PET products as consumers focused on affording everyday items. Also, several big brands reversed their goals of high recycled content in their products, leading to reduced R-PET demand. "All brand owners were pushing to go over the 50% minimum target required by 2025," Ciotti said. "When they realized the price delta between the virgin and recycled was too wide, they reduced their targets. Some brands were aiming for 100% recycled content." Prices are not expected to bounce back to mid-2022 levels, Ciotti said. But this depends on "what the consumers are ready to pay for the extra cost for recycled content." The greenwashing issue Ciotti highlighted a key issue, greenwashing, he thought was facing the recycled plastics industry. He describes greenwashing as when "someone pretends to improve the sustainability of their product but is not." Ciotti uses an example of a "PET half liter bottle being replaced with a carton box, which takes more energy to recycle." He said the European Commission indicated that 42 percent of claims of sustainability by textile companies were exaggerated, false or deceptive. He added he hoped more would be done to tackle greenwashing. The annual Petcore conference takes place in Brussels Feb. 1-2.

S&P Global Commodity Insights takes a closer look at the trends shaping key chemical markets in the months ahead. After grappling with logistical issues, war, low demand and oversupply in 2022, the market’s focus has pivoted to the easing of COVID-19 restrictions in China, with participants looking for signs the demand-supply balance is getting back on track in the first half of 2023 LAUNCH REPORT

Polypropylene is expected to welcome fresh additional supplies in 2023, which would contribute to rising price competitiveness between regions, as producers vie for global market share. Upstream propylene will likely be bogged down by lackluster and weak downstream margins, further highlighting the theme of feedstock cost advantages amid the current high oil price scenario. China braces for a supply glut from PDH startups In Asia, Chinese demand is expected to start the new year on a weak note as buying appetites will likely taper as the Lunar New Year nears. The prevailing oversupply for propylene and PP will likely persist into the first half of 2023 on high upstream refinery run rates and low downstream converter activity. "PP inventory levels at end-2022 are lower than 2021 but still much higher compared to previous years so it is hard to measure where actual demand stands," an industry source said. "Nonetheless, Middle East refinery-based PP plants are unlikely to reduce PP production in order to increase market share." Southeast Asia's recovery, on the other hand, hinges on the reinvigoration of the Chinese economy as the region is hampered by currency devaluations, ample supply, and rising costs of living due to a wave of subsidy reductions in fuel, electricity, and food costs in 2022. Some reprieve is expected in the Indonesian and Malaysian markets leading up to Eid al-Fitr in H2 April 2023, but downturns in crude oil markers could see prices drop to a new floor. "We expect greater volumes of cargoes coming into Southeast Asia from the Middle East, especially amid weak global demand, [and given] its advantage over regional suppliers in terms of feedstock costs," a source based in Southeast Asia said. South Korea's spot propylene supply, meanwhile, is set to decline amid waning production margins, with producer YNCC delaying the restart of its 450,000/mt No.1 cracker to January and LG Chemical shutting down its 450,000/mt No. 2 cracker in Q2. However, a supply glut is expected in China, as five propane dehydrogenation plants with a total name plate capacity of 2.85 million mt is scheduled to come online in 2023. Bearish sentiment in Europe to continue, macroeconomics to depress demand Europe's bearish propylene market will likely continue into 2023 amid weak demand and a lack of market competitiveness. "Everything is still in a depressive motion...this will continue," a trader said. While prices recovered from record lows of Eur460.50/mt FD NWE on Sept. 13, following tighter supply due to cracker outages and strikes, spot activity remained subdued as consumers reduced contractual volumes to a minimal in light of macroeconomic pressures. These weak demand fundamentals are expected to pick up from seasonal lows over Christmas in the initial stages of H1 2023 but inflation and the ongoing Russia-Ukraine war will likely extend overall market length. The prevailing disconnect between term and spot market pricing is expected to persist as energy and feedstock price volatilities limit sellers' pricing maneuverability in negotiations for the former. The ambiguity and pessimism for propylene extends to downstream PP as an uneasy balance between strong production costs and weak demand is expected to continue well into the new year. The market has seen consistent pressure from energy prices and weak demand throughout H2 2022, resulting in widespread illiquidity. This was compounded by increased availability of lower cost imported material from the Middle East and Asia. US propylene may receive support from new PP plants Prices in the US propylene market may be supported in H1 2023 but downstream PP demand is unlikely to outpace fresh supplies from new capacities. Prompt polymer-grade propylene prices sank more than 60% over March-December 2022 as rising interest rates and high inflation siphoned demand for downstream polypropylene. PP prices fell 56% during that same period, as demand for durable goods remained minimal, while Asian-origin resin was priced more competitively than US Gulf Coast exports. Nevertheless, the December start up of ExxonMobil's new 450,000 mt/year PP unit at its Baton Rouge, Louisiana, complex could boost propylene demand. "Hearing propylene has reached its low," a market source said. "Flat to slightly up for December and January, then projected upward through Q2, then flat Q3 and slightly up Q4." Enterprise Products Partners' new 750,000 mt/year propane dehydrogenation unit under construction in Texas is slated to start up in Q2 2023, which will increase US PDH capacity to 3 million mt/year. North America is not expected to see additional new capacity until 2024 when Formosa Plastics is slated to complete a new 250,000 mt/year unit in Point Comfort, Texas. In addition to the new ExxonMobil capacity, Inter Pipeline started up a 525,000 mt/year PP unit in Calgary, Alberta, in July. Rob Stier, senior lead of global petrochemical analytics with S&P Global said PP demand was not expected to keep up with the growing global capacity, even if severe weather events like hurricanes interrupt output. "There are way too many plants starting up to absorb any bullish demand scenario you can come up with," Stier added.

Global butadiene demand is likely to turn the corner in the first half of 2023, with prices seen rising and export opportunities to the US set to emerge despite nagging fears of a recession. Butadiene prices globally have been depressed in 2022 amid global economic headwinds, but plant turnarounds in the US -- which would trigger export opportunities from Europe to the US -- as well as limited outflows from Asia may buttress the case for more resilient demand in 2023. US demand may improve amid turnarounds In the US, two large butadiene producers plan to shut for turnarounds in Q1 while a third key producer is expected to be out of the market in Q2, limiting the availability of product in the region. "There are some supply issues in the US so that means there is an outlet for European cargoes to go to the US in Q1. I think everybody is expecting the first half of the year to be much more depressed and gradually become better in the second half. It will be correlated to the economy," a butadiene producer in Europe said. European export prices crashed towards the end of 2022, as sellers desperately looked to other regions to place excess volumes. With the arbitrage wide open to the US as the new year starts, traders will be keeping a close eye on export opportunities due to the planned turnarounds. The US is expected to receive more imports from Asia, Europe as well as Brazil, a frequent exporter to the US. Since 2021, the US has seen a heavy influx of Brazilian, European and Asian cargoes, filling supply gaps in the domestic market, especially when domestic producers had limited availability due to turnarounds and maintenances. However, US butadiene import prices are expected to be capped by limited domestic consumption and wide international supply in the first half of 2023, as well as lower feedstock costs. "Everything is really slow right now. I'm betting the spot will follow the contract price soon. I think the demand is picking up a little bit on the C4 side though," said a market player in the US. "Turnarounds may result in an increase in demand for local C4 as I've had a few parties looking to purchase for the upcoming months," the source said, adding the price may see an uptrend if supply becomes an issue in the near future. Cracker runs remain lower in Europe, Asia In Europe, the supply and demand imbalance is expected to continue for most of H1 despite producers operating at reduced rates, as downstream demand continues to underperform in the region. In Asia, market participants expect overall supplies to remain heavy despite expected lower steam cracker operations, as new butadiene plants are due to start up in Asia in H1. An interest to move cargoes to the US may remain in H1 in Asia, but lower steam cracker operations, as well as high freight costs may limit such opportunities. Downstream sentiment remains gloomy Despite the positive cues, downstream players in Europe witnessed demand for key butadiene derivative -- such as SBR, ABS and adiponitrile -- decline across the final quarter of 2022, as recessionary fears across Europe pushed consumers to cut down on purchases of discretionary and high-ticket items, while high input costs stemming from Europe's energy crisis impacted the competitiveness of derivatives produced in the continent. And without an imminent solution to deal with Europe's energy needs, the picture remains gloomy for the downstream market. In the US, sources believe the market activity in Q2 2023 will depend on the renewal of consumer interest. "If the market continues tracking lower and producers return from their maintenances, supply will be more than sufficient making prices drop again," a regional trader said. Spot demand in Asia may pick up at the start of next year as cracker owners rush to fill supplies. Asian steam cracker owners were heard planning to keep operations lower for 2023 -- possibly an average of 70%-80% -- which would likely limit spot exports from key producers, such as South Korea. "Because of planned operating rate cut, the producers do not have much export quantity as they need to supply their local customers," said a market source in Asia. However, market sources said such demand in Asia would likely fade away quickly as China's buying appetite would remain scarce, in line with planned butadiene plant startups. Market participants are also closely monitoring possible butadiene demand from China following the inauguration of a new 400,000 mt/year ADN, plant by Invista in Shanghai. Butadiene is a key feedstock for ADN, which is further processed to produce nylon 6,6. Market sources, however, said it is still unclear whether the new plant would run at full capacity as demand outlook for nylon 6,6 for auto-used airbags is seen depressed amid lower automobile factory operations in Asia. Demand recovery in Asia also depends on China's COVID-19 regulations, as easing policy would help boost economic activities, which, consequently, would push chemical demand.

Oil demand from the petrochemicals sector is likely to remain robust "no matter which energy transition scenario plays out," said Amin Nasser, Saudi Aramco president and CEO, on Dec. 6, the opening day of the 16th Gulf Petrochemicals and Chemicals Association (GPCA) Annual Forum, being held for the first time in Riyadh, Saudi Arabia. Under a net-zero scenario, petrochemicals could still account for more than half of total global oil demand by 2050, said Nasser in a keynote speech. "The more intense the transition, the more important petrochemicals will be to the oil and gas industry, and other industries," he said. The ongoing downstream push by state-owned Aramco to convert more of its crude oil to chemicals was highlighted by Saudi Arabia's energy minister, Prince Abdulaziz bin Salman, as he inaugurated the forum. Flagging the previously stated Saudi Arabian goal to expand Aramco's liquids-to-chemicals capacity to 4 million barrels per day by the end of the decade, the minister said, "We shall deliver it." Aramco will be able to "work for the full chain of chemicals, including specialty products. And every molecule we produce, we will ensure that we use it, consume it, produce it, and send it as a finished product," he said. Aramco recently announced plans for the first large-scale deployment of its crude-to-chemicals cracking technology at the company's S-Oil affiliate in South Korea, and a joint project between Aramco and Sabic to develop a crude-to-chemicals complex at Ras al-Khair, Saudi Arabia. Aramco is the parent of Sabic. "These are major steps forward in our downstream business, and show the power of technical innovations to meet our ambitions. More advanced, more sustainable materials would undeniably strengthen the power of our net-zero ambition and our chemicals strategies," said Nasser. "Our strategy to convert up to 4 million barrels per day of liquids into chemicals by 2030 is beginning to take shape." Nasser went on to highlight to a packed audience what he describes as a crucial component "largely missing from the net-zero debate—the enormous impact that growth in material use will have on reducing global greenhouse gas emissions." Labeling it the materials transition, Nasser said it is "just as important as the energy transition to climate protection ... and especially relevant to the chemical industry and its future strategies. Global net-zero emissions goals will not be met without a successful materials transition." Demand for materials including concrete, iron, and steel is projected to more than double from 79 gigatons in 2011 to 167 gigatons in 2060, Nasser said. But materials production, use, and eventual disposal already account for almost a quarter of all global CO2 emissions, he said. "So the increase in materials use, even if somewhat decoupled from economic growth, will be shadowed by a further rise in CO2 emissions, particularly in hard-to-abate-industries," Nasser said. To help reduce emissions in this growth environment, more durable and more sustainable advanced materials "must be the building blocks of 21st century life," he said. This is where chemistry in action could shape a lower-emission, more sustainable future through a circular carbon economy and better materials efficiency, he said. However, the cost of advanced composite materials is much higher than that of steel, aluminum alloys, and concrete, and Nasser called on the chemical industry to reduce its costs through further innovation. The "big opportunity" for the chemical industry is steadily to supplement existing materials with more durable, sustainable, and lower-carbon alternatives including polymer- and carbon-based materials, he said. "Already, every 1 megawatt of installed renewable energy capacity utilizes 8 to 11 tons of petrochemicals-based materials. This will bring a viable path to a truly sustainable materials future within reach and is exactly why we are strengthening our focus on materials transition at Aramco, making it a central part of achieving our 2050 net-zero ambition." Lower-carbon hydrogen will also play a major role in a variety of applications in the chemical industry, according to Nasser. "It can produce ammonia and methanol, or be used as a clean energy source in steam crackers, and in turn can produce more sustainable fertilizers, plastics, and other industrial products," he said. Aramco and Sabic recently obtained the world's first independent certification for the production of blue hydrogen and blue ammonia. Abdulrahman al-Fageeh, GPCA chairman and CEO of Sabic, said in an opening speech that with global economic growth predicted recently by the International Monetary Fund to fall to 2.7% in 2023 from 3.2% in 2022, concerns about a global recession are already impacting demand for chemicals. The chemical sector usually feels the effects of a recession "two to three quarters before the global economy," he said. "I can tell you ... it has already begun for chemicals." However, the chemical industry "has always managed to overcome the challenges that it is facing. The key to our success is by seizing every opportunity that challenges bring. Through such action, the GCC can shape a sustainable future." This year's annual forum is being held under the overall theme Chemistry in Action: Shaping a Sustainable Future.

Global polyvinyl chloride markets face uncertainty going into 2023 with sluggish demand seen lingering across the regions. PVC prices in Asia and the US fell hard through much of 2022 and may enter 2023 having hit a bottom, market participants in both regions said. However, Chinese demand has yet to rebound from periodic shutdowns despite minor steps to ease its zero-tolerance COVID policies. The US may see more interest rate hikes to combat inflation, which have suppressed domestic PVC demand. Both regions stepped up exports amid thin global demand. And Europe enters the new year facing a recession amid high energy prices and inflation, and no end in sight to the Russia-Ukraine war. "We don't see anything in the next year that will have a sustainable margin recovery other than shutting down," said Rob Stier, senior lead of global petrochemical analytics at S&P Global Commodity Insights. "If there is a recovery, it will be led by the US." Europe faces recession impact Sentiment for European caustic soda and PVC in 2023 was expected to depend on the severity of the recession and its impact on demand. Along the chlorine chain, producer margins were driven by a balancing act between caustic soda and vinyls, with one compensating for the other's losses. Demand for both was strong in 2021 with PVC ahead, but in 2022, PVC demand softened amid economic pain and high energy costs that forced chlor-alkali production cutbacks amid surging caustic soda prices. Chlorine production issues tightened caustic soda availability, prompting hurried orders of US material that briefly pushed US export prices to an all-time high since Platts first began assessing the market in 2004. At the same time European spot PVC prices plunged but remained among the highest in the world going into 2023. Market participants expected further weakness for European caustic soda and PVC in the first half of 2023 as consumers rein in spending and shun big-ticket purchases. "High [caustic] prices are causing demand destruction," a caustic soda trader said in November. Another trader said "a kind of normalization" was emerging in 2023, while in the interim, European producers benefitted from high caustic prices that cross-subsidized PVC. US domestic demand slides prompting more exports Integrated US producers were also entering 2023 running chlor-alkali plants at high rates to capture strong caustic soda prices, while PVC prices and demand softness were expected to linger amid mortgage interest rates inching below 7%, but remained volatile, market sources said. US export PVC prices fell nearly 62% from May 2022, while export caustic soda prices climbed nearly 32% from May to November before retreating. US caustic soda capacity has fallen 9% since March 2021, largely on Olin's string of shutdowns, which has also supported caustic soda pricing. However, the strength in caustic soda prices was expected to soften as well going into 2023, though a decline could be slow. Caustic soda demand and pricing took months to catch up to rising prices in the PVC production chain that began in mid-2020. "It usually comes late to the party, and it stays a little longer," Westlake COO roger Kearns said in November. "We expect to see that again this time." Westlake is among resin producers that have reduced rates and hiked exports in response to softening demand for durable plastics. While a slowdown in US interest rate hikes could prompt an uptick in domestic demand, market participants said a global recovery depends on whether domestic Chinese demand rebounds. That would prompt China to reduce exports, giving US outflows less competition in global markets as customers enter 2023 having destocked inventories in the final months of 2022. "The real driver on this, though, is China. China demand is still quite slow," Kearns said in November. All eyes on potential China demand recovery Asia's PVC market could rebound in early 2023, but market sources said a comeback would likely be limited without a full demand recovery in China . Asian PVC prices dropped sharply through 2022, and December offers came at the lowest since June 2020. Market sources said those levels appeared to spur spot buying, raising expectations that the slide could have reached its bottom. Sources also pointed out spot Asian PVC supplies could hold at lower levels in 2023 compared with 2022 with operations running at reduced rates in line with lesser output by upstream steam crackers. Trading sources expected US-origin PVC flows to Asia to slow down in early 2023. However, US sources said those flows could increase if China's demand rebounds, leading to fewer Chinese PVC exports. China's PVC exports reached a record high 278,374 mt in April, according to customs data. Those outflows slowed later in the year as US PVC export prices fell in tandem with lower Asian PVC prices as well as plunging freight rates, which restored Asian PVC's global competitiveness. By October, China's PVC exports stood at 96,630 mt, the lowest since August 2021, the customs data showed. Some Asian market sources said China was expected to relax strict measures in 2023, but awaited any such official announcements beyond some minor changes in late 2022. Together with high utility costs, China's PVC plant operations declined from 70% to 56% in late 2022.

Platts, part of S&P Global Commodity Insights, has launched new instruments for European toluene and MX on the Platts Editorial Window, or eWindow, communication tool for the European toluene and MX CIF ARA Market on Close assessment processes effective Dec. 5. This allows market participants to directly submit bids and offers for CIF ARA on an outright price basis and as spreads over Eurobob FOB ARA gasoline in the European toluene and MX MOC, through the eWindow communication tool or through an editor, who would then publish the information using the software. The assessments affected are: Assessment name Symbol Mixed Xylene CIF ARA Mo01 spread to EBOB FOB AR swap MXPRA00 Mixed Xylene CIF ARA Mo02 spread to EBOB FOB AR swap MXPRB00 Mixed Xylene CIF ARA Mo01 MXEAB00 Mixed Xylene CIF ARA Mo02 MXEAC00 Toluene CIF ARA Mo01 spread to EBOB FOB AR swap TLPRA00 Toluene CIF ARA Mo02 spread to EBOB FOB AR swap TLPRB00 Toluene CIF ARA Mo01 TLEAB00 Toluene CIF ARA Mo02 TLEAC00 Bids and offers for CIF ARA toluene and MX will generate headlines on Platts Petrochemical Alert. For bids and offers submitted directly through the eWindow communication tool, the cut-off time is 4.05.00 pm London time. Market participants will be able to improve their bids and offers by a minimum $0.25/mt per 20 seconds and a maximum of $1/mt per 20 seconds right up until the close of the MOC at 4:30:00 pm London time. Following any trade, there will be 30 seconds to rebid or re-offer. A one minute extension period will be triggered by any price move or a rebid/re-offer in the 20 seconds prior to the close of the MOC. Bids and offers submitted through an editor for publication must be received by 4:00:00 pm London time. Market participants will be able to improve their bids and offers by a minimum of 25 cents/mt per 60 seconds and a maximum of $1/mt per 60 seconds until 4.28.00 pm London time. A three-minute extension period will be triggered by a rebid/re-offer in the last 20 seconds prior to the close of the MOC. Full information relevant to these assessments can be found in the European Petrochemicals specifications guide here: https://www.spglobal.com/commodityinsights/plattscontent/_assets/_files/en/our-methodology/methodology-specifications/petchemeuropemethodology.pdf Platts expects credit relationships that prevail inside its assessment environment to fully reflect relationships in the markets as a whole. The eWindow provides direct entry and management of credit filters which should mirror those normally applied in the marketplaces. Where Platts editors publish bids and offers on behalf of a company that submits data to an editor, counterparty credit settings are set to "open" for regular participants in the assessment process unless companies have notified Platts in advance of any restrictions. If a counterparty submitting information through an editor has not already notified Platts of any counterparty credit restrictions, it should notify Platts at least one hour prior to the start of the MOC if any counterparty credit filters need to be modified. Please send all feedback and comments to petchems@spglobal.com and pricegroup@spglobal.com. For written comments, please provide a clear indication if comments are not intended for publication by Platts for public viewing. Platts will consider all comments received and will make comments not marked as confidential available upon request.