Easwaran Kanason

Co - founder of NrgEdge
Last Updated: September 3, 2021
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Business Trends
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As Tropical Storm Ida, the ninth-named tropical storm of the season, intensified into a Category 4 hurricane and slammed into Louisiana in late August, it left carnage in its wake. Not that the US Gulf Coast is any stranger to devastating hurricanes, but Ida is one that will have a massive effect on global supply chain by virtue of exactly where it hit.

On its pathway across the Gulf of Mexico, Ida had already caused almost all Gulf oil production to shut down, affecting almost 15% of US output. But Ida was also aimed at a corner of Louisiana and Texas that manufactures 20% of global ethylene supply. With petrochemical giants like ExxonMobil and Dow Inc squarely in Ida’s bull’s-eye, the repercussions on global supply chains depending on plastics will be severe.

Call it a perfect storm of factors, if you pardon the pun. Way before Ida even began developing as a tropical storm, global plastic prices were already sky high. Like the more well-known supply crisis in semi-conductor chips, that is affecting everything from cars to microwaves to toys – there is a shortage of plastics in the world, which has caused prices to spike. Much of this can be traced back to the first Covid-19 lockdowns in 2020, which caused refining activity to scale back considerably. It made sense. After all, why produce gasoline when there is no one driving? But refinery shut-ins also reduced the amount of petrochemical feedstock produced – olefins and aromatics like ethene, propene, benzene and xylene that serve as the raw material for polyethylene (PE), polypropylene (PP) and polystyrene. On the other side of the supply chain coin, changing consumer habits due to the pandemic were moving the market in different ways. The rising of online shopping while in lockdown did manage to boost consumer spending, with the items themselves and their packaging requiring plastics. Food delivery start-ups made major inroads to feed those stuck at home… and all those deliveries require plastic packaging. Meanwhile, the health crisis stemming from Covid-19 and the ensuing global vaccination drive saw demand for plastic materials for syringes, face shields and personal protective equipment (PPE) go through the stratosphere. So much for sustainability in some sense in the wake of COVID 19

With the easing of lockdowns towards the end of 2020, the supply-demand imbalance in petrochemicals and plastics did ease somewhat. But then the Big Freeze in Texas and other winter storms swept across the US hit in February, causing most US petrochemical capacity to shut down. Which, once again, placed huge pressure on petrochemical supply since the US Gulf is one of the major producers of petrochemical feedstocks as a result of the shale revolution and the natural gas liquids (NGL) bonanza producing vast quantities of ethane and propane. Since the early part of 2010s, the US Gulf Coast has invested vast amounts into building up its petrochemical capacity, shipping it as far as China and Europe, who in turn transform them into shampoo bottles, surgical gloves and everything in between.

After the Freeze, US petrochemical producers spent most of the first half of 2021 recovering from the February winter storm shut-downs; a situation then compounded by global shipping constraints, not just the curious case of the Ever Given tanker wedged in the Suez Canal for six days, but an actual chronic lack of container freight capacity. A surge in shipping trade in the first half of 2021 exhausted the supply of cargo container, causing prices to rise sharply on popular routes such as Shanghai to Los Angeles or Shenzhen to Rotterdam. The ongoing Covid-19 crisis continues to compound the issue: the port of Ningbo-Zhoushan in China – the third busiest container port in the world – was shut for nearly two weeks recently after a single positive case. All this means that not only are plastics prices high because of raw materials, but the high cost of freight compounds the issue and makes plastics prices even higher because of all the logistic and supply chain challenges. Then Hurricane Ida hit.

And this is not yet the end of the Atlantic hurricane season. The 2021 hurricane season is already one of the most active on record, having caused over US$50 billion in damages and lost economic activity. More storms and hurricanes could develop, potentially adding fuel to the fire that the petrochemicals sector is enduring right now. Estimates from ICIS suggest that further prolonged disruptions to supply could see prices for key petrochemicals double; polypropylene, for example, could hit an eye-watering US$4,000 per metric ton in this scenario.

Overstretched and under water, the previously quiet plastics crisis is now starting to make headlines. Recent Chinese economic data has fallen short of expectations, precisely because key materials like plastics and semiconductors are in short (and pricey) supply. The momentum of the global economic recovery from Covid is under threat. And just as Hurricane Ida continued to wreak havoc even inland, causing unprecedented flooding and storms in New Jersey and New York, the consequences of Ida on plastics could be far longer and far more wide-ranging than its initial impact area.

End of Article

Market Outlook:

  • Crude price trading range: Brent – US$71-73/b, WTI – US$68-70/b
  • The impact of Hurricane Ida on US crude production has supported global crude prices generally, but there was some easing after as OPEC+ confirmed that it was sticking to its plan to ease supply quotas by 400,000 b/d per month through 2022
  • OPEC’s own internal estimates imply that – even with the supply quotas easing – global oil markets will remain tight over the remainder of 2021, but flip into a surplus in early 2022 and remain there for the rest of next year

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High Oil Prices and Indonesia’s Ban on Oil Palm Exports

Supply chains are currently in crisis. They have been for a long time now, ever since the start of the Covid-19 pandemic reshaped the way the world works. Stressed shipping networks and operational blockages – coupled with China’s insistence on a Covid-zero policy – means that cargo tanker rates are at an all-time high and that there just aren’t enough of them. McDonalds and KFCs in Asia are running out of French fries to sell, not because there aren’t enough potatoes in Idaho, but because there aren’t enough ships to deliver them to Japan or to Singapore from Los Angeles. The war in Ukraine has placed a particular emphasis on food supply chains by disrupting global wheat and sunflower oil supply chains and kicking off distressingly high levels of food price inflation across North Africa, the Middle East and Asia. It was against this backdrop that Indonesia announced a complete ban on palm oil exports. That nuclear option shocked the markets, set off a potential new supply chain crisis and has particular implications on future of crude oil pricing and biofuels in Asia.  

A brief recap. Like most of Asia, Indonesia has been grappling with food price inflation as consequence of Covid-19. Like most of Asia, Indonesia has been attempting to control this through a combination of shielding its most vulnerable citizens through continued subsidies while attempting to optimise supply chains. Like most of Asia, Indonesia hasn’t been to control the market at all, because uncoordinated attempts across a wide spectrum of countries to achieve a similar level of individual protectionism is self-defeating.

Cooking oil is a major product of sensitive importance in Indonesia, and one that it is self-sufficient in as a result of its status as the world’s largest palm oil producer. So large is Indonesia in that regard that its excess palm oil production has been directed to increasingly higher biodiesel mandates, with a B40 mandate – diesel containing 40% of palm material – originally schedule for full implementation this year. But as palm oil prices started rising to all-time highs at the beginning of January, cooking oil started becoming scarcer in Indonesia. The government blamed hoarding and – wary of the Ramadan period and domestic unrest – implemented a Domestic Market Obligation on palm oil refineries, directing them to devote 20% of projected exports for domestic use. Increasingly stricter terms for the DMO continued over February and March, only for an abrupt U-turn in mid-March that removed the DMO completely. But as the war in Ukraine drove prices even further, Indonesia shocked the market by announcing an total ban on palm oil exports in late April. Chaotically, the ban was first clarified to be palm olein only (straight refining cooking oil), but then flip-flopped into a total ban of crude palm oil as well. Markets went haywire, prices jumped to historical highs and Indonesia’s trading partners reacted with alarm.

Joko Widodo has said that the ban will be indefinite until domestic cooking oil prices ‘moderate’. With the global situation as it is, ‘moderate’ is unlikely to be achieved until the end of 2022 at least, if ‘moderate’ is taken to be the previous level of palm oil prices – roughly half of current pricing. Logistically, Indonesia cannot hold out on the ban for more than two months. Only a third of Indonesia’s monthly palm oil production is consumed domestically; the rest is exported. An indefinite ban means that not only fill storage tanks up beyond capacity and estates forced to let fruit rot, but Indonesia will be missing out on crucial revenue from its crude palm oil export tax. Which is used to fund its biodiesel subsidies.

And that’s where the implications on oil come in. Indonesia’s ham-fisted attempt at protectionism has dire implications on biofuels policies in Asia. Palm oil prices within Indonesia might sink as long as surplus volumes can’t make it beyond the borders, but international palm oil prices will remain high as consuming countries pivot to producers like Malaysia, Thailand, Papua New Guinea, West Africa and Latin America. That in turn, threatens the biodiesel mandates in Thailand and Malaysia. The Thai government has already expressed concern over palm-led food price inflation and associated pressure on its (subsidised) biodiesel programme, launching efforts to mitigate the worst effects. Malaysia – which has a more direct approach to subsidised fuels – is also feeling the pinch. Thailand’s move to B10 and Malaysia’s move to B20 is now in jeopardy; in fact, Thailand has regressed its national mandate from B7 to B5. And the reason is that the differential between the bio- and the diesel portion of the biodiesel is now so disparate that subsidy regimes break down. It would be far cheaper – for the government, the tax-payers and consumers – to use straight diesel instead of biodiesel, as evidenced by Thailand’s reversal in mandates.

That, in turn, has implications on crude pricing. While OPEC+ is stubbornly sticking to its gentle approach to managing global crude supply, the stunning rebound in Asian demand has already kept the consumption side tight to match that supply. Crude prices above US$100/b are a recipe for demand destruction, and Asian economies have been preparing for this by looking at alternatives; biofuels for example. In the past four years, Indonesia has converted some of its oil refineries into biodiesel plants; in China, stricter crude import quotas are paving the way for China to clamp down on its status of a fuels exporter in favour of self-sustainability. But what happens when crude prices are high, but the prices of alternatives are higher? That is the case for palm oil now, where the gasoil-palm spread is now triple the previous average.

Part of this situation is due to market dynamics. Part of it is due to geopolitical effects. But part of it is also due to Indonesia’s knee-jerk reaction. Supply disruption at the level of a blanket ban is always seismic and kicks off a chain of unintended consequences; see the OPEC oil shocks of the 70s. Indonesia’s palm oil export ban is almost at that level. ‘Indefinite’ is a vague term and offers no consolation to markets looking for direction. Damage will be done, even if the ban lasts a month. But the longer it lasts – Indonesian general elections are due in February 2024 – the more serious the consequences could be. And the more the oil and refining industry in Asia will have to think about their preconceived notions of the future of oil in the region.

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Market Outlook:

  • Crude price trading range: Brent – US$110-1113/b, WTI – US$105-110/b
  • As the war in Ukraine becomes increasingly entrenched, the pressure on global crude prices as Russian energy exports remain curtailed; OPEC+ is offering little hope to consumers of displaced Russian crude, with no indication that it is ready to drastically increase supply beyond its current gentle approach
  • In the US, the so-called NOPEC bill is moving ahead, paving the way for the US to sue the OPEC+ group under antitrust rules for market manipulation, setting up a tense next few months as international geopolitics and trade relations are re-evaluated

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An online shop is a type of e-commerce website where the products are typically marketed over the internet. The online sale of goods and services is a type of electronic commerce, or "e-commerce". The construction supply online shop makes it all the more convenient for customers to get what they need when they want it. The construction supply industry is on the rise, but finding the right supplier can be difficult. This is where an online store comes in handy.

Nowadays, everyone is shopping online - from groceries to clothes. And it's no different for construction supplies. With an online store, you can find all your supplies in one place and have them delivered to your doorstep. Construction supply online shops are a great way to find all the construction supplies you need. They also offer a wide variety of products from different suppliers, making it easier for customers to find what they're looking for. A construction supply online shop is essential for any construction company. They are the primary point of contact for the customers and they provide them with all the goods they need.

Most construction supply companies have an online shop where customers can purchase everything they need for their project, but some still prefer to use brick-and-mortar stores instead, so it’s important to sell both in your store.

Construction supply is an essential part of any construction site too. Construction supply shops are usually limited to the geographic area where they are located. This is because, in order for construction supplies to be delivered on time, they must be close to the construction site that ordered them. But with modern technology and internet connectivity, it has become possible for people to purchase their construction supplies online and have them shipped right to their doorstep. Online stores such as Supply House offer a wide variety of products that can help you find what you need without having to drive around town looking for it.

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Only the most enthusiastic dry herb advocates will, in any case, contend that smoking has never been proven to cause lung cancer. In case we are being reasonable, we would all agree that smoking anything isn't great for your health wellbeing. When you consume herbs, it combusts at more than 1000 °C and produces more than 100 cancer-causing agents. Over the long run, this causes the development of tar in the lungs and will conceivably prompt chronic bronchitis. Vaporizers take care of this problem which can be found in a good       online vaporizer store.



Rather than consuming dry herbs, vaporizers work by warming them to a point where it is sufficiently hot to evaporate the active ingredients. In particular, the temperatures from vaping are sufficiently cool to stay away from the actual burning of the plant matter which contains the cancer-causing agents. Accordingly, people who vape either dry herbs or e-fluids are less likely to be exposed to the toxins that are found in smoke. 



Vaping produces less smell and is more discreet. 



Every individual who has smoked joints realizes that the smell can now and then draw in the undesirable attention of meddling neighbors! When you smoke, the mixtures and the plant matter are emanated as a part of the thick smoke; this is the thing that creates the smell. 



Vaping herbs actually creates a scent, obviously. Nonetheless, the plant matter stays in the oven. Thus, the little from vaping tends to not stick to the wall and clothes due to there being no real smoke. A decent dry herb vaporizer makes it simpler to enjoy your herbs when you're out and about, however, you don't want everyone to know what you're doing! 



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