Susceptibility to supplies from China is one of the major concerns

In the past and present there have been times that the reliance on the imports of China have cost the end-use industries dear and for several intermediates and fine chemicals globally the closure of several units in China had led to soaring prices and have also caused delays and disruptions to production which was schedules here. According to one of researched report, the pharmaceutical industries in India have time and again been grieved, as the susceptibility to imported raw materials such as active pharmaceutical ingredients (APIs) and their intermediates are mostly from China.

Moreover, squirts in prices were recently seen in some naphthalene-based dye intermediates like H acid and in China its derivatives was attributed to closure of several manufacturing units.

As per the industry experts, to the chemical industry or to India the dependence on China for import of key raw materials is not only one of its kind and nowadays in the global market, China controls more than 80%. However, the reliance on imports from China is a contemplation of the developments in that country and to create an enabling framework the changes in the Indian pharmaceutical, agrochemical industries and the collective failure of policy makers are here, which will look after a much larger Indian fine chemicals industry.

As per the researched report, the shift in focus of several majors in pharmaceutical and agrochemical markets of India is one of the major reasons for the growing role for Chinese producers in these two industries. Nevertheless, for APIs, technical agrochemicals and their intermediates most of the Indian producers have evacuate their manufacturing base in order to focus on the part of the value chain which will bring them the best value.

On the other hand the leading Indian pharma companies have still continue to make APIs and have got lot more careful about their product line up and have opt to outsource or import the rest. Similarly, leading companies in agrochemicals are also putting more awareness to get their products registered and acknowledged amid farmers.

However the sway of China as a supplier of key raw materials not just to India but to the global pharmaceutical industry is dubious to moderate sooner, in spite of anxiety expressed on this count.

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Asia the key driver of growth for petrochemical sector of Qatar

Qatar which is known as one of the largest liquefied natural gas producer of the world has branch out its exports away from the oil and gas sector and amid demand from the region fuelling investment and expansion projects, Asia remains an important driver of growth for petrochemical sector of Qatar. Moreover in the Gulf region it is the second largest exporter of chemicals representing 17% of total chemical exports of Gulf Cooperation Council (GCC),as per the Gulf Petrochemicals & Chemicals Association.

According to the Ministry of Development Planning and Statistics, supplies of energy to widen their industrial bases are being used by countries like Qatar and to enhance exports of non-energy goods such as chemicals with petrochemicals and refining activity building up to 40% of manufacturing output.

By the year 2020, plans are taking place to invest around USD 25 billion in petrochemical capacity to produce 23 million tons, in compare to the capacity 16.8 million tons produced in the year 2012, which clutches the rights to market, sell and distribute chemical and polymer products of Qatar globally, according to the industry experts.

As per the recent researched reports, one of the long-term expansion plans has been embarked by the petrochemical industry, based on the assumption that the demand from other emerging markets such as India and China will continue to develop. Whereas the second major expansion process is the USD 6.5 billion Al Karaana plant, which is 80:20 joint venture between the state-owned Qatar Petroleum and Shell, that is due to come on line in the year 2018. The Al Karaana unit will have a production capacity of 2 million tons that will add 25% petrochemical output to Qatar.

However, after an annulment of the USD 6 billion Al Sejeel petrochemicals plant the long-term outlook is less certain but by the end of the decade one of the megaprojects has been targeted to come on line. According to the industry experts, in the medium term prospects for petrochemicals producers are positive, that are helped by the rising demand and the sluggish velocity of new capacity being brought on line in North America.

Moreover, the demand of for high-density polyethylene has significantly increased above global GDP growth for a short time and Asia is noted for the strongest demand growth. Whereas over the next five years the demand growth for high density polyethylene in China is expected to somewhat slow down and is still expected to be above 6%. Moreover the unrelenting growth coupled with moderately few new capacity additions of China is expected to impel rising exports in particularly from the Middle East.

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Global petrochemical prices slumped by 4 per cent in October

The $3 trillion-plus global petrochemical industry witnessed a 4 per cent fall in October as upstream energy prices continued their downward spiral. Petrochemical prices fell from $1,384/mt in September to $1,324/mt.  On a year-on-year basis, petrochemical prices slipped 2 per cent from the same month in 2013.

Prices have fallen 10 per cent since October, around $8/mt a day, after a short period of price rise. The steep decline in prices comes at a time when crude and naphtha prices have also been falling. Brent prices declined by 10 per cent in October, while naphtha prices fell by 15 per cent.

Petrochemicals are used by a large number of industries, including construction, pharmaceuticals, aviation, electronics and are used to make plastic, nylon, rubber and other consumer goods.

Prices of olefins, hydrocarbon compounds that function as the building blocks to petrochemical products used to produce consumer products, also declined in October. Ethylene prices slumped by 6 per cent to $1,324/mt, while propylene prices fell by 1 per cent to $1,311/mt.

Polyethylene also slipped by 2 per cent in October and polypropylene prices slipped by 1 per cent during the same period.

Aromatics are scented hydrocarbons with benzene rings. Prices of this compound fell steeply in October. Benzene prices declined by 7 per cent to $1,181/mt, while toluene prices dropped 8 per cent to $991/mt and paraxylene fell by 12 per cent to $1,603/mt. The paraxylene market registered the largest fall.

The falling petrochemical prices were accompanied by a sluggish global equity market. The Nikkei 225 and Dow Jones Industrial Average saw a rise of 2 per cent in October and the London Stock Exchange Index fell by 2 per cent during the same period.

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Sanctions against Iran persists, Britain will not encourage Iran trade

In the conference which was held on 15^th – 16^th October, 2014 is noted as one of the largest gathering of Iranian commercial officials which takes place in London. The conference which took place last month in October, 2014 aim to attract capital, which Iran badly needs owing to its long isolation under international sanctions. On the other hand, as world powers endeavor to achieve a deal with Iran on its nuclear programme sooner than its deadline on 24^th November, 2014, the Europe-Iran Forum is being held at a politically susceptible moment.

According to the sources, Britain still does not persuade to trade with Iran and has withdrawn all the commercial support for trade, in spite of an easing of tensions, since Iranian President Hassan Rouhani has sighted as a realistic member of the clergy, in 2013 it succeeded the fiercely anti-Western Mahmoud Ahmadinejad.

Nevertheless, the country wants to diversify beyond pharmaceuticals to oil from technology to everything, amid a population of close to 80 million and more of its young people going into higher education.

According to one of the researched report, in the year 2015 the Iranian economy in the current fiscal year will rise up to 1.5% mounting to 2.2% and this rise marks a ricochet from a 1.9% decline in 2013. But before the sanctions bit it remains far from 5% growth rates achieved.

Nevertheless, isolation of Iran remains far over for all the improvement in the diplomatic mood under Rouhani. Last year in 2013, Tehran struck a preliminary nuclear agreement with the world powers which is known as the P5+1 (the United States, United Kingdom, Germany, France, Russia, and China, facilitated by the European Union), endearing a limited slackening of the sanctions. However the country made a little progress before the deadline on reaching a final settlement was being discussed in New York in the month of September, 2014.

According to the industry expert, a major investment attraction is being represented by Iran through a liquid and well-developed stock market and diversified economy, however this achievement of Iran might take some time.

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Petrochemical industry to facilitate storing solar energy

A new study has shown how electrolysis (the process of passing via water to separate hydrogen from oxygen in H2O) electricity could generate hydrogen to store renewable energy. The solar panels would provide extra electricity for electrolysis, producing hydrogen in the day. At night the hydrogen generated would be combined with oxygen in the air to produce electricity.

Chemical engineers at Stanford have modelled a catalyst that could possibly enable producing large amounts of pure hydrogen by means of electrolysis. Currently, pure hydrogen is derived from natural gas; industrial hydrogen is mostly used for petroleum refining and fertilizer production.

The research team intend to use electrolysis to derive H2 from water and then use the process to conserve solar energy. However to make this method industrially successful the research team must come up with a cost-effective way.

Electrolysis is typically a simple experiment: place two metal electrodes in water, and pass electricity through these electrodes which makes them acts as catalysts to split water molecules into hydrogen and oxygen gas. Platinum is a perfect catalyst for water-splitting process. However to transform this method into an industrial process a low-cost electrode must be used. Thus the aim of the research team is to make H2 without using precious metals.

The team intends to go further than using electrolysis to replace the existing demand for hydrogen. At present there is no economically viable and large-scale method to store solar energy. This research team thinks that electrolysis could convert gallons of water into batteries for preserving solar energy. With the help of electricity, electrolysis will break the chemical bonds that hold H2O together.

Breaking the chemical bonds of H20 will result in the production of a hydrogen ion- a proton with no electron to create a balance. A good H2 catalyst will provide the proton with a place to stick until it can use an electron to form a hydrogen atom on the catalyst surface and then combine with a neighbouring hydrogen atom to come off as H2. This method needs a catalyst with the right stickiness because if the binding is not strong then the ions wouldn’t stick and if the binding is too strong then the ions will never be released.

Platinum is the best catalyst but is quite expensive. In 2013, the Stanford engineers came across a type of molybdenum sulphide, typically used for petrochemical processing, that had some of the properties to act as a cheap yet effective alternative to platinum.

Petrochemical processing has certain similarities to electrolysis as petroleum feed stocks consist of a substantial fraction of heavy molecules. Petroleum refineries rely on catalytic reactions that use hydrogen to break these heavy molecules into lighter molecules.

Electrolysis also involves breaking water molecules or their chemical bonds. However, the researchers soon found a better way of producing hydrogen from water.

Petroleum processing includes scrubbing sulphur out of fuels in order to reduce acid rain, during which some of the sulphur atoms get integrated into petroleum processing catalysts, thereby boosting the activity of the catalysts. This scrubbing process armed the team with another idea- if they added sulphur atoms to a good catalyst, it would function as a better electrode for generating pure hydrogen.

The team decided to lace molybdenum phosphide with sulphur atoms, which resulted in the production of a new catalyst molybdenum phosphosulfide. This new catalyst was much more effective at creating hydrogen than its precursor. This catalyst was much more resilient, which is an extremely important property for a catalyst used in an industrial process. This new catalyst is also stable and has the efficiency similar to that of platinum.

Now the team at Stanford is trying to further improve the catalyst. The team has been relying on environment friendly methods, but these methods have been developed on the basis of concepts borrowed from petrochemical plants.

It is enthralling to see researchers link two totally different areas of technology for such a noble purpose.

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Major expansion of Petrochemical industry is scheduled in Qatar

Qatar which is one of the richest state per-capita in the world and as per the year 2012 the country has established nearly 15 billion barrels of oil reserves and around more than 5% of gas fields of the global resource. In terms of its petrochemicalindustry, Qatar is at second position in the midst of Gulf Co-operation Council (GCC) countries. Moreover for the country the petrochemical industry is a key source of hard earning which ranks behind the crude oil and the liquefied natural gas (LNG) sectors.

According to the industry experts, over next 5-10 years the country has a greater petrochemical expansion plans than any other country in the region and the expansion of the petrochemical industry will bring in growing revenue and produce numerous new jobs in the coming years.

According to the industry experts, in the petrochemical industries the country is taking good steps to prolong their success and with this it is taking action against the potential threats from the international souk. Moreover at the same time from low cost shale gas as a feedstock, most of the US manufacturers are gaining benefits as these will make the US the cheapest place in the world to produce petrochemicals.

In the coming years the US tactics to spend around USD 100 billion in the petrochemical facilities and it much prone to flow into the Asian market once the product starts to come on-stream by setting it in an unswerving competition with the product from the Middle East.

According to the sources, the current production of petrochemicals in the small nation state intends to boost surplus twice in order to reinforce its traction in the industry. Moreover in the Gulf region the construction of the two largest petrochemical projects is at present on track and due to the high outlay of these projects the government remains the largest shareholder in petrochemical investments.

In past few years the petrochemical industries in Qatar have seen a noteworthy rise and most of the Petchem companies based in this country have a few really big decisions in front of them as they are facing the choice of defending their markets in Asia against the low cost US product in the midst of a budding impact on price and margin.

Furthermore for the development and expansion of the chemical and the domestic petrochemical industries, the country plans to invest around USD 25 billion and in the year 2012 major petrochemical manufacturers Shell oil companies and the Qatar Petroleum had affirmed the plan to build up an olefins project in Ras Laffan Industrial City at a total outlay of USD 6.4 billion.

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Crude oil prices sold by ISil from the capture oilfields between Iraq and Syria

A colossal swathe of territory between Syriaand Iraq that is control by the Islamic State of Iraq and Levant (Isil) is reportedly selling crude oil from the seizure oilfields on the black market at less than half the global international prices, earning themselves over £1 million/day, according to the industry experts from the Middle East. As on 22^nd August, 2014 the existing market price for a barrel of Brent Crude that is a foremost standard price for oil that is purchased worldwide stands at approximately around USD 102/barrel and their crude oil sold by the Isis militants is between USD 25/barrel and USD 60/barrel.

Moreover, the global oil prices had lingered unpretentious in spite of the black market oil supply generated by Isis, as quantities traded in the black market are minimal. According to the industry experts, in Iraq around seven oil fields and two refineries and also in the eastern provinces of Syria around 60% of oil fields are begin allegedly controlled by the Isis militants.

Furthermore the crude which is being transported to Iran via Kurdistan, Jordan via the Anbar province, Kurdistan region of Iraq, local market of Syria and Turkey via Mosul are also begin controlled by the militants apart from controlling a number of smuggling routes. However, in comparison to 9 million barrel/day from Saudi Arabia, the ISIS militants are reportedly smuggling around 30,000 barrel/day of oil.

Despite the fact that the capacity is small, it is disquieting and noteworthy and through the sale of oil it is able to generate almost USD 2 million/day and also finance its operations. Since the territory is under ISIS control, the regions between Iraq and Syria have become apparent as the ideal black market to sell the oil.

Nevertheless, the countries such as Turkey have overlooked towards the practice and in the Southern region of Turkey, pressure from international ought to be accumulate to wrap up the black markets, however historically the Southern region of Turkey, Eastern Syria and Northern Iraq is well-known for smuggling.

According to the sources, if the ISIS can cope up to lynch on their vast other than fragile holdings, it can pull in over USD 700 million/year in the course of a amalgamation of smuggling crude oil and smaller quantities of refining itself at its refineries in Syria as projected by few experts. As per the industry experts, during winter in Eastern Europe the demand for black market oil is expected to reach your zenith and in the coming weeks Isil is prone to thrust in more oil.

As the Southern region of Iraq is its dominant producer the collision will be minimal in the short to mid-term, however oil trading by ISIS so far has remained local with buyers in Syria, Jordan, Iran and Turkey via truck owners and middlemen network.

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Fracking Link has shoddily impact the health of infants

The word ‘fracking’ which is also known as hydraulic fracturing is a well intrusion performed on an oil or gas well, in order to increase the production by improving the flow of hydrocarbons from the drainage area into the well bore. As an allegedly bio-hazardous industry fracking has already attracted controversy, as the early researches have marked that this practice has increase the risk of infant birth defects living near the fracking sites.

Over past few decades in the U.S., the use of fracking a method to extract gas through which chemicals, water and sand are pumped into the ground to discharge trapped fuel deposits has been increased significantly and about 5 years ago the country had produce oil for around 5 million per day and today it produces 7.4 million due to fracking.

According to the research conducted in the month of January 2014 by Lisa McKenzie of the Colorado School of Public Health had discovered that number of congenital heart defects in the infants born to mothers living close to gas wells in Colorado.

Furthermore, two more studies that have not been looked closely shows that in the Pennsylvania, United States new born babies born close to fracking sites were more prone to have low birth weight, which is a sign of developmental problems. Moreover local authorities in Utah which is one of the states of United States are examining a rise in stillbirths after tests, where they found hazardous levels of air pollution from the oil and gas industry.

However, with the rising fracking wells that were also examined by few researchers were resulted in the incidence of neurological defects despite the fact that it was only at high levels of exposure, also premature birth, low birth weight and oral clefts were scrutinize by the researchers for a correlation.

One of the studies that was conducted in Colorado where fracking in five cities of Colorado were banned or drilling within municipal boundaries were also sought long-term moratorium after wells popped up near schools and backyards and industry were also pushed back.

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Europe’s economy in a fragile state

The fragile economy of Europe is likely to be affected by the never ending conflicts in Ukraine and Iraq. While, the economies of Britain and the US grow strongly, output in the euro bloc has come to a standstill. Germany is losing its hold and Italy is plagued by recession.

The global markets have been affected by the sanctions fight between Russia and the West as well as the US air strikes to stop Islamist militants in Iraq. The sanctions war between Moscow and the European Union and the growing concern over Russia’s invasion of eastern Ukraine have slowed down the economic growth.

Moscow supplies nearly a third of the European Union’s gas needs, Europe has strong trade ties with Russia. Thus, the increasing political conflicts in Ukraine and Iraq could have a major impact on the already weak economy of Europe.

Europe’s sluggish economy may help the US come to the forefront. Investors will test the strength of US rebound, while others are in search of reassurance that the recovery will stick even when central banks make borrowing expensive.

In Britain, unemployment rates may decline but earnings are expected to be lower than the previous year. The situation is similar in the United States. The cost of living is much higher than wage growth.Thus, to trust the recovery of the economies of the US and UK, wages need to rise in line with credit.

China’s economy has witnessed improved growth in the second quarter as the government has taken steps to improve construction of railways and public housing. However, the declining property prices and the high local government debts are slowing down the economy. The government will have to bring in deeper reforms to help push the economy forward. 

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Iranian government announces new economic policy package

The Iranian government recently announced its new economic policy package to help the country emerge from stagflation. This policy is focused on expanding domestic demand, resolving financial shortages and obstacles faced by the country as a result of the western sanctions.

The government is also looking to improve Iran's economic efficiency, especially considering the access to limited resources.

The government plans to boost the economy through a number of financial and foreign exchange policies, and at the same time improved ease of doing business will also help develop the economy.

The new economic policy will help stimulate economic growth through channeling economic resources towards the most efficient economic sectors in order to boost exports and reduce dependence on oil revenues. It focuses on four main areas-

• Macroeconomic policies

• Policies on ease of doing business

• Financial policies

• Economic stimulants

The government has been working toward reducing the rising inflation through monetary regulation and macroeconomic stability. The new policy has helped the government reduce inflation over the past 12 months from 37.5% to 27.7%.

The dual currency exchange system has impacted the economy, which the government hopes to resolve by stabilizing the currency exchange regime and bring down costs in the manufacturing sector.

The government hopes that stable currency and predictable inflation could lay the foundation  for macroeconomic stability.

The new economic policy will focus on eliminating dual currency exchange regime, lowering currency exchange regulations and improve the flow of foreign investment.

Financial restrictions by the banks in their lending to the manufacturing sector has also affected growth, primarily becuase of the increasing government debt.

The repayment of debt could help boost credit expansion and domestic production.

The government is planning to improve ease of doing business through less intervention in the market in terms of pricing goods and services. SMEs have had restricted access to financial resources and bank credits. Thus the banking and credit policy included in the new policy will help regulate the banking sector.

Non-oil exports will help improve domestic demand and reduce dependence on oil revenues and diversify the country's financial resources.

The oil, gas and petrochemical sectors hold a crucial position in the Iranian economy. Backward and forward linkages with several sectors across the economy could help boost production and growth.

This new policy will put emphasis on boosting energy production and consumption efficiency. The Iranian government has adopted the following policies-

• Investment in roads and public transport, introduction of 17,000 buses and 37,000 taxis across the country

• Improving the efficiency of the national railways

• Increasing the country’s gas exports

• Producing 700,000 barrels of crude oil per day from West Karoun oilfield

• Boosting petrochemical exports from $9.9 billion currently to $12.2 billion in 2014-15

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Global alcoholic raw material market is expected to rise in future

The global alcoholic raw material industries in geographical markets is more or less divided in North America, Europe, Asia and other markets where European region is noted as the largest share of alcohol consumption with an overall sales of 30% revenue that is followed by the North American market. According to the researched report, over a period the constituents market of alcohol globally is projected to experience a steady growth.

Driven by a combination of new trends through changing demandpatterns and emerging economies, the growth of global alcohol raw material market such as colours, flavour and other raw materials are expected to reach USD 1.18 billion by the 2019 which is noted to be up from 989.2 million in 2013.

According to the recent reports done by Frost & Sullivan, due to rising demand for yeast and enzymes, strong growth has been projected in the other ingredients sector of alcohol, however flavor is noted as the major sector of the alcohol raw material market. Geographically in developing regions such as Asia-Pacific focus is projected to boost, as in this region the consumer spending on alcohol is mounting high.

Furthermore, the main components of most alcoholic beverages are Ethanol and water, where Ethanol is the most important alcohol fuel that can be formed by converting the starch substance of biomass feedstock into alcohol.

As per analysts, development of new product is likely to gain swiftness in the ingredients legroom as in the alcohol beverage industry innovation is noted as a key success factor, moreover with consumers embracing legitimacy and sticking to products they know best the customer loyalty and brand image will also coerce growth.

Moreover, as smaller and regional industries have substantial knowledge of the local market, companies with a global presence are likely to firm up with them as it will help them to modify alcoholic beverage production to go well with varying regional and local tastes. Furthermore in next few years, the global alcoholic raw material market will uphold a constant growth along with greater investment potential.

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Middle Eastern oil prices to rise

Growth of OPEC and non-OPEC oil supply is expected to decline within the next 18 months and the average Brent prices for 2014 and 2015 are likely to range from $106-$109 and$103-$108, respectively.

A recent report suggested that Brent prices may increase on the back of tighter supplies. Most research groups were expecting oil prices to decline as a result of strong dollar, slow GDP growth and increasing supplies.

However, Brent crude oil front-month contract rolling prices have average $109/bbl and a number of reasons have been responsible for these high rates. Geopolitical crises and supply issues coupled with depreciation of the dollar by 2 per cent and the rising US inflation have pushed up oil prices.

Non-Opec supply accounted for nearly 4 quarters of the 2 million bpd supply growth on a year-on-year basis, but is currently growing by only a million bpd year-on-year, which will lead to limited supply. Majority of the growth is expected to come from North America and nations like China, Brazil, Russia and Columbia will enjoy only limited gains. Thus, a number of key producers will likely face declines.

WTI is expected to fall below $100/bbl in 2014, while US benchmarks will see downside risks. The WTI crude oil forecast for 2014 and 2015has now been revised to $98/bbl and $96/bbl, respectively.

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Variety of economic policies indicated by the proposals of Union Budget 2014-15

The Indian finance minister Arun Jaitley on 10th July, 2014 had presented the Union Budget 2014-15 in the midst of high expectation from the middle class and industries. According to the market players, across the political spectrum the reaction towards the Union Budget for 2014-15 have been fairly predictable and for most of the chemical industry such as pharma and fertiliser industry were quite disappointing for most of the chemical industries. However the Indian finance minister Arun Jaitley have come up with few comprehensive ideas such emphasis on renewable energy and agriculture, improving the infrastructure by making better ports, roads and rail linkages.

Furthermore talking about curtail on custom duty in the budget proposals, there was diminutive to an unambiguously show for the chemical industry. Basic Customs Duty on a few basic petrochemicals such as ethylene, propylene, butadiene and o-xylene (OX) has been cutback from 7.5% to 5% and 10% to 5% on crude naphthalene. With the decreased in the Basic Customs Duty, producers of naphthalene which produces dye intermediates as well as of naphthalene formaldehyde sulphoxylates which are basically used in the construction industry as a concrete admixture will merriment cheaper imports of crude naphthalene.

Moreover the budget proposals have seen few segments in paints and coating industry, pharmaceuticals industry and fertiliser industry. The coating industry directly and indirectly might be a recipient of the proposals and demand for paints might be certainly collision due to higher tax immunity and incentives for savings which may perhaps abscond more money in the pockets of consumers.

For the pharmaceuticals industry the Union Budget 2014-15 has no specific proposals and have only focused on one part of the segment – health care. The finance minister looks forward to concentrate of healthcare segments by setting up four AIIMS in different parts of the country and number of government medical colleges and also improving public infrastructure that will boast optimistic impacts. Moreover to reinforce the States Drug Regulatory and Food Regulatory systems the Central Government for the first time will provide central assistance by creating new drug testing laboratories and will also make the 31 existing state laboratories stronger. However the Union budget 2014-15 of 2014 for pharma sector is quite growth-oriented, balanced and a realistic budget.

 

This year the Union Budget 2014-15 for the fertiliser industry is to focus to frame a new urea policy and on the fertilizer business the overhaul subsidy regime will have a positive impact. Furthermore the finance minister had declared the conception of an Agriculture Infrastructure Fund of Rs. 100 crore to shore up research and development, in order to give an impetus to investment in agriculture and make the farming more competitive. According to the sources the Finance Minister had further added that the corrosion of the soils was in turn resulted due to concerns regarding inequity in the utilisation of different types of fertilisers that were mounting high. However, according to the researched report the reform for the chemical industry is vital with its long value chains.

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