Petrochemical Update is now Reuters Events - LEARN MORE
US-China Trade War unlikely to be resolved in 2019, ExxonMobil’s Baytown fire resolved, US sets record for natgas use in power sector
Our pick of the downstream industry news you need to know.
US-China Trade War unlikely to be resolved in 2019
Analysts at Goldman Sachs no longer think the U.S. and China will manage to negotiate a trade deal ahead of the 2020 presidential election.
“We had expected a final round of tariffs targeting remaining Chinese imports at a 10% rate,” Economist Jan Hatzis, wrote in a note to clients. “But news since President Trump’s tariff announcement last Thursday indicates that U.S. and Chinese policymakers are taking a harder line, and we no longer expect a trade deal before the 2020 election.”
Goldman’s reversal comes during escalating tensions between the world’s two largest economies, including the U.S. labeling China as a currency manipulator, and Beijing suspending purchases of American agricultural products, which the American Farm Bureau called a huge “body blow” to farmers.
US President Donald Trump announced on 1 August that 10% tariffs will be imposed on additional $300bn imports from China starting 1 September. He further threatened that these tariffs could go up to 25%
The announcement came a day after high-level negotiations concluded in Shanghai failed to produce a clear resolution to the year-long trade war between the world’s two biggest economies.
“Such a move seriously violates the consensus reached by heads of the two countries in Osaka and deviates from the correct track and is not conducive to solving the problem. The Chinese side is strongly dissatisfied and resolutely opposed,” the ministry said in a statement.
Between July 2018 and May 2019, the US has slapped tariffs on $250bn worth of Chinese products, while China imposed the same on $110bn worth of US goods.
The risk now is that the trade war is approaching the point at which it causes a severe economic slowdown or even a recession.
Reports of China pulling out of US agriculture sent stocks to their worst day of the year on 5 August.
“Now we have a trade situation that is going off the rails as the side effects multiply due to the ramping up of the use of tariffs and we are only further apart from any resolution with the Chinese,” Peter Boockvar, chief investment officer at Bleakley Advisory Group wrote in a note to clients on 5 August.
“The policy of using tariffs as a tool to address our legitimate beefs with the Chinese has failed miserably.”
Fire at ExxonMobil’s olefins unit contained
ExxonMobil issued an all-clear on 3 August after a fire erupted at its olefins plant in Baytown, Texas on 31 July. 66 people sought out treatment for non-life threatening injuries, but no one required hospitalization.
The plant has resumed normal operations.
The Baytown site has a capacity of 3.64m tonnes/year of ethylene and 960,000 tonnes/year of propylene.
It was the second fire this year at the Baytown olefins plant, about 25 miles (40 km) east of Houston.
A previous fire in March stemmed from a leaky pipe and lasted only 30 minutes, with no injuries.
US sets new daily record high for natural gas use in power sector -EIA
The U.S. likely set a new daily record on Friday, July 19, of 44.5 billion cubic feet (Bcf) for natural gas consumption by electric power plants, according to S&P Global Platts, the U.S. Energy Information Administration (EIA) said.
U.S. power sector natural gas consumption exceeded the previous record of 43.1 Bcf—set on July 16, 2018—on five days in July. Higher-than-normal temperatures and relatively low natural gas prices contributed to increased natural gas consumption by electric generators.
Higher electricity demand for air conditioning during a heat wave from July 15 through July 22 drove the increased power generation, especially from natural gas-fired generators. Although the highest temperatures occurred during the weekend, most states east of the Rocky Mountains experienced warmer-than-normal weather in the days leading up to the heat wave. From July 16 through July 21, the average maximum temperature exceeded 85°F in most parts of the country.
Relatively low natural gas prices have also led to higher natural gas-fired generation this summer. According to Natural Gas Intelligence, natural gas spot prices at the Henry Hub in Louisiana averaged $2.33 per million British thermal units (MMBtu) from July 16 through July 21. So far this summer (June 1–August 1), Henry Hub prices have averaged $2.31/MMBtu, 19% lower than during the same period last year.
In recent years, many natural gas-fired generators have come online throughout the country, especially in the PJM Interconnection, the regional transmission organization (RTO) responsible for managing wholesale electricity in 13 states and the District of Columbia.
Based on data in the U.S. Energy Information Administration’s Preliminary Monthly Electric Generator Inventory, more than 12 gigawatts (GW) of new natural gas-fired electric generation capacity―primarily highly efficient combined-cycle units―have entered service in PJM since the beginning of 2018.
The new capacity has increased total natural gas-fired capacity in the region by 17% and accounts for 55% of the total natural gas combined-cycle capacity added in the nation.