Covestro: Winter is Coming

Very similar to The Polymerist's comments, this concern about steam generation at Covestro's German plants: 

German materials giant Covestro warned Tuesday that the rationing of gas could see some of its sites shut down, as its CEO stressed the importance of reducing the company’s reliance on fossil fuels.

In a statement outlining the company’s performance in the second quarter of 2022, Covestro said it was undertaking “various measures” to lower, over the short term, its gas requirements in Germany, where the firm’s facilities represent roughly 25% of its worldwide production capacity.

These measures include using oil-based steam generators. “If gas supplies are rationed in the further course of the year, this could result in partial load operation or a complete shutdown of individual Covestro production facilities, depending on the level of the cutback,” the company said.

“Due to the close links between the chemical industry and downstream sectors, a further deterioration of the situation is likely to result in the collapse of entire supply and production chains,” it added.

I cannot imagine the level of disruption in the US if natural gas was suddenly cut off (or reduced!) in the United States. 

The Polymerist; Winter is Coming

The Polymerist is a continued must-read, with last week's comments on the natural gas crunch really key: 

I don’t usually write about natural gas and oil on Tuesdays, but things are developing quickly over in Europe and I’m concerned. If you don’t know there is a major natural gas pipeline called Nord Stream 1 that delivers natural gas to Germany, Europe’s largest economy and chemical producing powerhouse, and it’s been undergoing maintenance since July 11th. Maintenance is normal. A good preventative maintenance program keeps things running smoothly and it usually only last 10-12 days. Natural gas started flowing again on July 21st, but only at 40% of normal levels, which had started before the planned shutdown.

...No matter how you look at this problem this is not a good thing for the European chemical industry. The chemical industry is reliant of natural gas for two primary things:

• Feedstock: steam reforming of methane to make carbon monoxide, steam cracking ethane/propane to make ethylene/propylene)
• Steam generation: applying heat and performing #1

If you ever get a chance to hang out in a large scale chemical manufacturing operation the use of steam is everywhere. Steam is how heat gets moved around (heated oil is also used, but less common) and whenever you need steam it’s often generated at the site. If you want to run a distillation you need steam. If you want to steam crack some stuff, guess what, you need steam. If you want to run your reaction at 200 C or higher you need steam. Without steam the chemical industry for the most part stops running and without the raw materials to make stuff, which the chemical industry makes, then supply chains falter even more than they are now.

There's a lot of room for DOOOOOOOOOOOOOOMMMM in my thinking for chemical manufacturing in the fall, i.e. it feels like China's supply chain/zero COVID disruptions are never-ending and the Ukraine/Russia issues are making things extremely hard for Europe, which means that it's going to be hard for American chemical manufacturing supply chains. I'd like to think that both things won't happen, but I have a much stronger sense that the European situation is going to be brutal. Here's hoping I'm not right. 

Q2 GDP growth was negative

Via the New York Times: 

A key measure of economic output fell for the second straight quarter, raising fears that the United States could be entering a recession — or perhaps that one had already begun.

Gross domestic product, adjusted for inflation, fell 0.2 percent in the second quarter, the Commerce Department said Thursday. That drop followed a decline of 0.4 percent in the first quarter. The estimates for both periods will be revised in coming months as government statisticians get more complete data.

News of the back-to-back contractions heightened a debate in Washington over whether a recession had begun and, if so, whether President Biden was to blame. Economists largely say that conditions do not meet the formal definition of a recession but that the risks of one are rising.

For most people, though, a “recession” label matters less than the economic reality: Growth is slowing, businesses are pulling back and families are having a harder time keeping up with rapidly rising prices.

I am a pretty big stickler for the NBER definition of a recession, i.e. I don't think two quarters of negative growth automatically mean we're in a recession etc etc. But nevertheless, I think I was right - hiring in the fall of 2022 will be worse than that of fall 2021 in the economy as a whole. What does that mean for chemists and hiring? I do not know. We're not seeing (yet) major news of layoffs in either pharma or the chemical industry, so that's good. We shall see...