Chemicals

LONDON (ICIS)–Trading interest dipped on the European Group I base oils market this week, as the ongoing US trade tariffs made some market participants hesitant. The growing lack of clarity has become an unwelcome aspect of market conditions. This week, domestic Group I prices failed to show any movement, with pricing information heard in the market within published ICIS ranges. Some traders were also away from their desks ahead of the Easter holiday. Brightstock remained in tight supply, while demand for SN500 rose slightly. SN150 continued to face competition from re-refined base oils in Europe, though less than in previous months. A source voiced concerns over the growing volatile situation in wider commodity markets as financial and currency markets react to news from The White House. “The market is crazy and we need to see what will happen,” they said. “Stability would be nice,” they added. The US tariffs upheaval is bound to ripple into all commodities, though some impact is indirect. Furthermore, retaliatory measures from the EU would impact US goods heading to Europe. But base oils are exempt from tariffs, along with oil and oil products. But an impact may be felt in the base oils market if the wider world demand outlook suffers and if the global economy is hit. Long-term commitments in contracts are also being avoided in other chemical markets. Last week’s announcement of a 90-day pause on the implementation of the latest tariffs round, except for China, partly eased investors’ concerns. With the US-China trade war escalating and new US sanctions being announced on Iran, crude oil prices were also reacting. With base oils being derived from vacuum gasoil, a key oil product, this may mean some indirect impact on the base oils market. On Thursday, crude oil prices were on the rise as the new US sanctions targeted the export of Iranian oil, focusing on shippers and importers in China. Base oils are used to produce finished lubes and greases for automobiles and other machinery.

17-Apr-2025

HOUSTON (ICIS)–The US is taking steps that could lead to tariffs on imports of up to 50 critical minerals, many of which are used to make catalysts for key processes used by refiners and chemical producers. If the US ends up imposing the tariffs on the critical minerals, then they would take the place of the reciprocal tariffs. REFINING CATALYSTS AND AROMATICS MARKETSFluorspar is used to make hydrofluoric acid, a catalyst used in alkylation units. These units convert isobutane and propylene into alkylate, a high-octane blendstock. Cerium and lanthanum are used to make catalysts for fluid catalytic cracking (FCC) units. These units convert gas oils into gasoline and refinery grade propylene (RGP). If the US imposes tariffs on these catalysts and if the tariffs cause large enough price increases, then refiners could alter their operations to reduce their costs. If refiners lower alkylation operating rates, they may rely on other high-octane blendstock such as toluene or mixed xylenes (MX). Changes in alkylation and FCC rates would concurrently affect supply and demand for RGP. ANTIMONY AND PETChinese restrictions on antimony already have led producers to propose price increases for polyethylene terephthalate (PET), which relies on the mineral as a catalyst. If the US imposes tariffs on antimony, then it would further increase prices from the other countries that export the mineral to the US. BISMUTH AND POLYURETHANESBismuth is used as a catalyst for making polyurethanes. One such bismuth-based catalyst won an innovation award. OTHER CATALYSTSIridium, neodymium, rhodium, ruthenium, ytterbium and yttrium are all used to make catalysts, according to the US Geological Survey (USGS). Palladium and platinum are used in catalytic converters in automobiles. TIO2 AND PAINTS MARKETSThe US also considers titanium and zirconium as critical minerals. It is unclear if the US would impose tariffs on titanium metal or titanium oxide. However, the US list of critical minerals implies that the tariffs could include titanium oxide. Titanium oxide is the feedstock that is used to make titanium dioxide (TiO2), a white pigment that is used to make paints opaque. Producers of paints and coatings are already facing higher costs from US tariffs on steel. In 2023, Sherwin-Williams estimates that plastic and metal containers made up 15% of its product's costs. A tariff on titanium oxide would further increase costs for paints and coatings producers. Zirconium is a byproduct of processing mineral sands that contain titanium. TiO2 producers Tronox and Chemours operate such mines. Tronox's are in Australia and South Africa, and Chemours has mines in the US states of Florida and Georgia. FLUORSPAR AND FLUOROMATERIALSFluorspar is also the upstream feedstock for fluorochemicals and fluoropolymers. Polyurethane foams use fluorochemicals as blowing agents. Fluoropolymers include Teflon. These are becoming increasingly important in 5G equipment, semiconductor fabrication plants and lithium-ion batteries. Fluoropolymers are also used as membranes in hydrogen fuel cells and chlor-alkali plants. BARITE, CESIUM USED IN OIL PRODUCTIONBarite is used to make drilling mud. Cesium is used to make cesium formate drilling fluids, which are used by oil and gas producers. FLAME RETARDANTSAluminum and antimony are used to make flame retardants. INVESTIGATION TO PRECEDE ANY TARIFFSBefore the US imposes any tariffs on critical minerals, it will conduct an investigation under section 232 of the Trade Expansion Act of 1962. The US has used that section to impose tariffs on other products such as steel and aluminium. The scope of the investigation will include the 50 minerals deemed critical by the USGS, processed critical minerals and derivative products. Derivative products include semi-finished goods and final products "such as permanent magnets, motors, electric vehicles, batteries, smartphones, microprocessors, radar systems, wind turbines and their components and advanced optical devices", according to the order. The secretary of commerce will have 180 days to submit a final report of the investigation to the president. Recommendations will include tariffs and policies the US could adopt that would promote more production of critical minerals. LIST OF CRITICAL MINERALSThe following table shows the minerals that the US considers critical. Aluminium Magnesium Antimony Manganese Arsenic Neodymium Barite Nickel Beryllium Niobium Bismuth Palladium Cerium Platinum Cesium Praseodymium Chromium Rhodium Cobalt Rubidium Dysprosium Ruthenium Erbium Samarium Europium Scandium Fluorspar Tantalum Gadolinium Tellurium Gallium Terbium Germanium Thulium Graphite Tin Hafnium Titanium Holmium Tungsten Indium Vanadium Iridium Ytterbium Lanthanum Yttrium Lithium Zinc Lutetium Zirconium Source: USGS Insight article by Al Greenwood (Thumbnail shows a fuel pump that dispenses gasoline, which relies on critical minerals for production. Image by Shutterstock.)

17-Apr-2025

LONDON (ICIS)–The European Central Bank (ECB) dropped its key interest rates on Thursday in a bid to stabilize economic activity in the eurozone in the wake of disruption caused by US tariff announcements. The bank cut its rates by 25 basis points, reducing the deposit facility interest rate to 2.25%. Marginal lending rates dropped from 2.90% to 2.65% and the refinancing rate was settled at 2.40% from 2.65%. Rates have fallen consecutively throughout the year, as eurozone inflation came back down to 2.2% in March, nearing ECB target levels of 2%. The prospect of a pause on cuts diminished with the volatility caused on ‘Liberation Day’ on 2 April, when US President Donald Trump’s shift in trade policy defied more moderate expectations. Global markets were riled by President Trump’s dramatic tariff rollout on around 60 countries, before rescinding many of his retaliatory tariffs for many trading partners, including the eurozone. Initially, the eurozone had been hit with a 20% tariff and was taking steps to respond in kind, before both sides agreed to a 90-day pause. The EU remains subject to a 10% baseline tariff, with 25% duties on some automotive parts, steel, and aluminum. This has left economic sentiment weak, with the euro tracking significant gains over the US dollar in response to the volatility. Manufacturing has also been hit by the tariffs, with the International Energy Agency (IEA) predicting oil demand growth to fall from 1.03 million barrels/day to 0.73 million barrels/day in 2025, and the World Trade Organization (WTO) expecting global trade to slow by 0.2% year on year. Click here to visit our topic page on the impact of US tariffs on the chemicals and energy industries

17-Apr-2025

SAO PAULO (ICIS)–Brazil's chemicals industry is facing its worst performance in 30 years, with the producing companies in the sector operating at just 60% of installed capacity during January and February, the country’s trade group Abiquim said. According to the Abiquim-Fipe Economic Monitoring Report (RAC), all key indicators showed a decline in the two-month period, year on year: production fell by 5.6%, domestic sales dropped 0.8%, and national demand for industrial chemical products decreased by 4.0%. As domestic producers' market share diminishes, imports continue reaching Brazil’s shores at pace, with the country’s chemicals trade deficit continuing to increase. In the 12 months to February 2025, it reached $49.59 billion, up from $48.68 billion in the same 12-month comparable period a year prior. Imports now represent 49% of total domestic demand, with significant increases in thermoplastic resins (28.3%), other inorganic products (26.7%), and organic chemicals (25.1%). IDLENESSChemical plants’ 40% idleness average level in January-February was the worst recorded since data collection began in 1990, said the trade group, which represents mostly chemicals producers. Some product groups posted even higher idleness rates, such intermediates for fertilizers (44%), intermediates for plastics (48%), intermediates for synthetic fibers (41%), and intermediates for plasticizers (61%). February’s results were particularly concerning, with production plummeting 10.1% compared to January, domestic sales decreasing 4.5%, and national apparent consumption dropping 17.1%. Abiquim said companies attributed this poor performance to operational problems, idle units, plants in hibernation, low demand, raw material restrictions, electricity supply variations, and fewer operating days in February. Despite the clouds, prices for chemical products rose 5.1% between January and February 2025, with real prices increasing 3.6% when accounting for inflation. In dollar and euro terms, real prices are 11.3% and 11.2% higher, respectively, compared to 2024. Abiquim’s executive president, Andre Passos, preferred to see the glass half full – despite all evidence pointing to it being half empty – and said two state programs for the chemicals sector had the potential to turn things around by the end of this decade and “save” Brazilian chemicals. Passos said the breaks on some input materials, called REIQ, including provisions linking tax incentives to investments, was a re-implementation linked to investments to create new or expand existing capacities. Passos added that, only in 2025, companies could invest up to Brazilian reais (R) 1 billion thanks to the provisions included in the REIQ bill. ‘SAVE THE SECTOR’This week Abiquim focused on another bill, the Special Program for Sustainability of the Chemical Industry (Presiq). The Presiq acronym may be heard more often from now on if what Abiquim’s Passos said about it comes to pass – if implemented in full and correctly, Presiq could become the savior the struggling chemicals industry has for years been looking for. Earlier in April, Brazil’s parliament passed what could be considered the country’s response to the EU Green Deal or to the US IRA, now in danger of extinction: widespread tax incentives for companies going greener and embracing low-carbon processes and technologies. Presiq itself is an ambitious project which, beyond attracting more low-carbon investments, aims to bring the sector to near full capacity, targeting 95% utilization rates by the end of this decade. Presiq has two financial lines – one aimed at credits for the purchase of less polluting inputs and raw materials, such as natural gas versus other more polluting fossil fuels; secondly, the program will offer investment credits of up to 3% of invested value for petrochemical plants and chemical industries committed to expanding installed capacity. Starting in 2027, Presiq budgeted up to R4 billion for financial credits, and up to R1 billion for investment credits. “The Brazilian chemical sector is facing a delicate moment, aggravated by the trade war between the US and China. The government must take urgent measures to strengthen the national chemical industry, just as its international competitors have done with incentive programs,” said Passos. "The new law [Presiq] will help reduce the deficit in the chemical industry, and it could become an important source of revenue. It will also add value to the country through the sustainable use of natural resources. This plan can save the sector." Front page picture: Chemicals facilities in Brazil Source: Abiquim ($1 = R5.93)

16-Apr-2025

SINGAPORE (ICIS)–US “reciprocal” tariffs are prompting a shift of trade flows and supply chains as market players in Asia seek alternative export outlets for some chemicals, while overall demand remains tepid amid growing fears of a global recession. US-China trade war 2.0 keeps market players on edge Regional traders wary amid US’ 90-day tariff suspension SE Asia prepares for US trade talks as China president visits Vietnam, Malaysia, Cambodia Trades across the equities and commodities markets last week have been highly volatile since the start of April in the wake of US President Donald Trump’s reciprocal tariffs, the highest of which was imposed on China. The higher-than-expected tariffs sparked concerns over a possible global recession that sent crude prices slumping last week, dragging down downstream aromatics products such as benzene and toluene. Trump had raised the reciprocal tariffs for China three times in as many days – from 34%, to 84% and to 125% on 9-11 April – with China responding in kind. Including the combined 20% tariffs imposed in the past two months, the US’ effective additional tariffs for China stand at 145%. In the polyethylene (PE) market, prices are softening as US-bound export orders shrink, while polypropylene (PP) exports from China to southeast Asia look set to decline. Most polyolefin players in Asia and beyond are currently attending the 37th International Exhibition on Plastics and Rubber Industries (Chinaplas) in Shenzhen, China, which will run up to 18 April. Some China-based market players said the event could provide them an opportunity to explore alternative markets by deepening their relationships with buyers in southeast Asia. Exports of chemicals and plastics used in automobiles to the US, meanwhile, are likely to shrink as well amid auto tariffs from the world’s biggest economy. Apart from PP, exports nylon, butadiene (BD), and styrene butadiene rubber (SBR) to the US are expected to decline. Trump, on 14 April, said he is considering possible exemptions to his 25% tariffs on imported automobiles and parts. His tariffs on all car imports took effect on 3 April, while those on automotive parts will take place no later than 3 May. The automotive sector is a major downstream industry for petrochemicals. China’s PE imports from the US spiked in early 2025 but this is expected to reverse sharply because of the trade war between the two countries. However, China has a substantial number of naphtha and coal-based PE plants starting up in 2025 with a combined PE capacity of more than 8 million tonnes, which should reduce the country’s dependence on imports. The US will also need to redirect surplus PE to alternative markets amid dwindling Chinese demand. Market players expect demand in the second quarter to be worse than the first three months of 2025 amid hefty US reciprocal tariffs hanging over countries in Asia when Trump’s three-month pause lapses. Implementation of the US’ reciprocal tariffs were suspended on 9 April, for 90 days, providing some reprieve to about 60 countries, except China. Freight rates between China and the US have already decreased due to the trade war as demand evaporates. However, vinyl acetate monomer (VAM) prices in India are bucking the general downtrend and have firmed up as the chemical is not directly subjected to US tariffs. VAM is primarily used in the production of adhesives, textiles, paints and coatings. SE ASIA PREPARE TRADE TALKS The 10-member ASEAN group pledged that they will not impose retaliatory tariffs on the US following an emergency meeting, opting to negotiate with the US. Among the nations scheduled for talks with the US are Vietnam, Thailand and Indonesia – all of which were slapped with high tariffs of up to 46%. Thailand intends to scrutinize imports more thoroughly to prevent cheap imports from China entering the country, as the US has warned against such “third-country” methods of evading tariffs. Anti-dumping duties are also being considered by Malaysia and Indonesia against China to counter an expected rise in cheap imports to their countries. Trade flows are still expected to change as China steps up talks and partnerships with the EU, as well as with southeast Asian countries such as Malaysia, Vietnam and Cambodia. While several Asian nations are lining up for discussions with the US government, China and the US have yet to schedule a meeting, heightening concerns of economic headwinds in the coming year. Singapore has revised down its GDP growth forecast for 2025 to between 0-2% on account of the US-China trade war, and other countries are expected to follow suit. Before the pause on reciprocal tariffs, the World Trade Organization (WTO) had forecast trade growth to contract by 1.0% in 2025, from 3.0% previously. Meanwhile, China President Xi Jinping is currently in southeast Asia – with state visits to Vietnam, Malaysia and Cambodia – up to 18 April, to forge stronger economic ties with its Asian neighbors amid an escalating trade war with the US. China posted an annualized Q1 GDP growth of 5.4%, unchanged form the previous quarter, while there is a consensus that the Asian economic giant would weaken from Q2 onward. Focus article by Jonathan Yee Visit the ICIS Topic Page: US tariffs, policy – impact on chemicals and energy. Additional reporting by Samuel Wong, Izham Ahamd, Jackie Wong, Hwee Hwee Tan, Joanne Wang, Lucy Shuai, Jonathan Chou, Angeline Soh, Melanie Wee, Shannen Ng and Josh Quah

16-Apr-2025

SINGAPORE (ICIS)–China's economy expanded by 5.4% year on year on the first quarter, unchanged from the previous quarter, official data showed on Wednesday, but the world’s second-biggest economy is generally expected to weaken due to the tit-for-tat trade war with the US. China warns external environment becoming "more complex and severe" March retail sales growth strongest since December 2023 Major banks lower 2025 growth forecasts for China China's economy was “off to a good and steady start,” the National Bureau of Statistics (NBS) said in a statement, as the Q1 figure was above the full-year target of "around 5%", the same target set for 2024. "However, we should be aware that the external environment is becoming more complex and severe, the drive for the growth of effective domestic demand is insufficient, and the foundation for sustained economic recovery and growth is yet to be consolidated," the NBS said. The US and China remain locked in a trade war, marked by steep tariffs: US goods face 125% duties entering China, while Chinese goods are subject to 145% tariffs upon import to the US. The US tariffs on China include 125% reciprocal tariffs and the combined 20% imposed at the start of February and March. In Q1, China's value-added industrial production rose by 6.5% year on year (no hyphens), supported partly by frontloading of export orders. Retail sales, a key gauge of consumption, rose by 4.6% over the same period, with those in March alone posting a 5.9% year-on-year increase, marking the best pace since December 2023. Q1 fixed investment rose by 4.2% year on year in the first quarter as expansion in the manufacturing sector offset a decline in property development. On the trade front, total value of Q1 exports rose by 6.9% year on year to yuan (CNY) 6.13 trillion while imports fell by 6.0% over the same period to CNY4.17 trillion. For March, China's exports jumped 12.4% year on year to $313.9 billion, a sharp acceleration from a 2.3% growth posted in January-February, as factories expedited shipments before US tariffs took effect. TRADE OUTLOOK DETERIORATING Citing rising trade tensions, Japan’s Nomura Global Markets Research now expects China’s 2025 exports to contract by 2.0% from a previous estimate of zero growth. Nomura maintained its 2025 GDP growth forecast for China at 4.5%, below Beijing's official target, anticipating policy measures will be implemented to offset the export decline. China's growth momentum is expected to weaken after the first quarter due to the payback from earlier export boosts, fading consumer stimulus, and "long-protracted property sector woes", it said. Beijing needs to be "a bit more innovative and courageous" in stimulating domestic demand to reach its GDP growth target this year, suggesting short-term fixes are insufficient, Nomura said. Major investment houses including Citi, Goldman Sachs, UBS, and Morgan Stanley have recently lowered their respective 2025 growth forecasts, with the new estimates now ranging from 3.4% to 4.2%, based on data collected by news agency Reuters. Swiss bank UBS on 15 April downgraded its China GDP growth forecast to 3.4% for 2025 from a previous estimate of 4%, on the assumption that tariff hikes between the country and the US will remain in place and that Beijing will roll out additional stimulus, according to a Reuters report. The bank also expected overall Chinese exports to fall by 10% in US dollar terms in 2025. TARIFF UNCERTAINTY PERSISTS The White House on 15 April stated that US President Donald Trump is open to making a trade deal with China, but Beijing should make the first move. "The ball is in China's court: China needs to make a deal with us, we don't have to make a deal with them," White House press secretary Karoline Leavitt told a press briefing. The Trump administration on 14 April imposed new export restrictions on US tech giant Nvidia’s H20 artificial intelligence chips to China, highlighting the company would require a license to export to China for the indefinite future, with concerns that “the covered products may be used in, or diverted to, a supercomputer in China”. Trump also on 14 April launched a probe into the need for tariffs on critical minerals, the latest action in an expanding trade war that has targeted key sectors of the global economy. The order calls for the US commerce secretary to initiate a Section 232 investigation under the Trade Expansion Act of 1962 to “evaluate the impact of imports of these materials on America’s security and resilience,” according to a White House fact sheet. China on 14 April imposed its own restrictions on purchases on Boeing aircraft and related aircraft parts. "While the US White House Press Secretary said that ‘the ball is in China’s court’ in terms of making the first move and offer, China would most certainly want any genuine negotiations to take place on equal footing rather than on any unilateral conditionality," said Michael Wan, an analyst at Japan's MUFG Research. Chinese president Xi Jinping in currently in Malaysia from 15-17 April, as part of a regional tour which includes Vietnam and Cambodia. Xi was previously in Vietnam on 14-15 April. In an exclusive article for Nhan Dan, the official newspaper of Vietnam’s Communist Party, published ahead of his state visit, Xi wrote that “trade war and tariff war will produce no winner, and protectionism will lead nowhere”. Vietnam was slapped with one of the highest levels of US “reciprocal” tariffs, at 46%, although Trump has currently paused their implementation for 90 days for all countries except China. Chinese and Vietnamese state media on14 April reported that 45 agreements were signed but the content of the agreements was not disclosed. Focus article by Nurluqman Suratman Visit the ICIS Topic Page: US tariffs, policy – impact on chemicals and energy. Thumbnail image: At Qingdao Port in Shandong province, China, on 15 April 2025.(Costfoto/NurPhoto/Shutterstock)

16-Apr-2025

HOUSTON (ICIS)–Container throughput from China’s main ports fell by 6.1% over the past week and cargo bookings over the next three weeks are projected to be down by 30-60% in China and by 10-20% in the rest of Asia as the trade war intensifies. Market intelligence group Linerlytica said the Labor Day holiday in China will further dampen cargo demand in May which could force carriers to cancel additional sailings over the coming weeks to slow the decline in cargo rates. US President Donald Trump initiated the trade war by imposing tariffs with the goal of strengthening supply chains and bringing back domestic manufacturing that has increasingly moved overseas. Lars Jensen, president of consulting firm Vespucci Maritime, noted a survey from television news channel CNBC that showed the effort may be futile. According to the survey, most respondents said bringing back supply chains could double the costs, leading most to instead search for new sources of material from low-tariff countries. More than half of respondents said the main impediment to reshoring is high costs, while 21% said finding skilled labor was the top reason. Instead of moving supply chains back to the United States, 61% of respondents said it would be more cost-effective to relocate supply chains to lower-tariffed countries. ASIA-US CONTAINER RATES Average rates rose last week, reversing the trend that saw prices for shipping containers fall steadily from July 2024. Linerlytica said that three transpacific services have been withdrawn this year, with the MSC Mustang and Premier Alliance PN4 both withdrawn even before they were launched while TS Line’s AWC2 deployed small 1,700 TEU (20-foot equivalent unit) ships on irregular schedules. “These tentative capacity cuts have done little to restore market balance with further turbulence ahead,” Linerlytica said. Linerlytica said that recent tariff concessions are likely insufficient to restore transpacific volumes with about 30-40% of transpacific container imports still effectively halted by the tariffs that remain in place. The trade war is principally affecting carriers with the largest exposure to Chinese transpacific exports to the US, with Hede (100%), Matson (90%), SeaLead (82%), TS Lines (80%) and COSCO (71%) being most at risk from the immediate fallout. The following chart shows transpacific liftings by carrier for this year. Meanwhile, US container imports surged over the first three months of the year as retailers pulled forward volumes to get ahead of the tariffs. But the Global Port Tracker from the NRF and Hackett Associates is predicting import cargo at the nation’s major container ports to drop dramatically beginning next month, as shown in the following chart. “Imports during the second half of 2025 are now expected to be down at least 20% year over year,” Hackett Associates Founder Ben Hackett said. “Even balanced against elevated levels earlier this year, that could bring total 2025 cargo volume to a net decline of 15% or more unless the situation changes.” Container ships and costs for shipping containers are relevant to the chemical industry because while most chemicals are liquids and are shipped in tankers, container ships transport polymers, such as polyethylene (PE) and polypropylene (PP), are shipped in pellets. Titanium dioxide (TiO2) is also shipped in containers. They also transport liquid chemicals in isotanks.

15-Apr-2025

The following text is from a white paper published by ICIS called 'Can Russian gas return to Europe after arbitration awards?' You can download the pdf version of this paper here. Written by: Aura Sabadus and Andreas Schroeder Graphs by: Yashas Mudumbai Recent geopolitical events have led to discussions around the potential resumption of Russian pipeline gas flows to Europe. However, complex legal and reputational challenges could make the process very difficult. In this Q&A, ICIS reviews the arbitration cases brought against Gazprom, explaining the difficulties facing those seeking to renegotiate contracts and analyses some scenarios for the possible return of Russian gas. HOW MANY ARBITRATION CASES HAVE BEEN INITIATED? Since Gazprom cut pipeline gas supplies to Europe following Russia’s invasion of Ukraine in 2022, more than 20 EU buyers initiated arbitrations, claiming financial damages in excess of €18 billion and, in some cases, the termination of contracts. Over the last year, several companies such as Germany’s Uniper and RWE or Austria’s OMV were awarded damages. In Uniper’s case, for example, the arbitration tribunal awarded €13 billion, one of the highest ever, and terminated the company’s long-term contracts amounting to 18.5 billion cubic meters (bcm), which were due to expire in 2030. ICIS has verified and compiled a list of the arbitration cases covering around 100bcm of gas, equivalent to two thirds of the annual volumes delivered by Gazprom under long-term contracts. In some cases, covering approximately 20bcm/year, contracts have already expired since 2022. In others, amounting to over 28bcm/year, companies were awarded financial claims and had contracts legally terminated, but some agreements covering around 30-35bcm/year may still be pending. The largest claims in terms of financial damages and contracted volumes were reportedly made by Germany, followed by Italy, France and Austria. These contracts had expiry dates between 2030-2040. The list compiled by ICIS is not exhaustive as proceedings are secret and many companies had been keen to protect the confidentiality of contractual terms. When excluding the contracts that can be accounted for, as well as those which remain active, there are still around 38-40bcm/year tied up in agreements under arbitral proceedings, but which ICIS could not verify from publicly available information. RUSSIA HAS MADE COUNTERCLAIMS. DO THEY MATTER? Unless companies had assets in Russia prior to the start of war and the ensuing 2022 energy crisis, counterclaims brought by Gazprom in Russian courts are unlikely to be considered by companies active in western jurisdictions, lawyers interviewed by ICIS said. Publicly available information indicates that by mid-March 2025, Gazprom had initiated 15 counterclaims in Russian courts. NEXT STEPS? With most legal proceedings now concluded, buyers have several choices. One option is to turn the page completely on Russian imports. In some cases, such as Lithuania, Poland or Finland, the return of Russian gas supplies is unlikely, at least for the foreseeable future. These countries have managed to put in place alternative solutions such as expanding or building LNG regasification capacity, signing new LNG contracts or, in Poland’s case completing the Baltic Pipeline designed to bring gas from the North Sea. Finland’s Gasum initiated arbitration for its 2.5bcm/year contract, due to expire in 2031, amid disagreement with a Russian demand to pay in rouble in 2022 as well as with regards to certain terms in the contract. The arbitral tribunal ordered Gasum and Gazprom Export to continue their bilateral contract negotiations but these were unsuccessful. As a result, Gasum terminated its long-term contract with Gazprom Export on 22 May 2023. In other cases, such as Uniper’s, where the financial compensation is significant, the claimant could consider recouping the sum. Lawyers interviewed by ICIS said one option would be to arrest Gazprom’s remaining receivables. However, most of these assets are now in former Soviet countries or Turkey, which may ultimately prove challenging to seize. The other option would be to secure payments in kind whereby Gazprom would agree to deliver gas to the equivalent value of the compensation owed to the buyer. HOW MUCH GAS COULD BE RENEGOTIATED FOR FUTURE IMPORTS? Energy lawyer Alan Riley told ICIS that, in theory, volumes could be as high as those that had been lost in 2022. In reality, however, these could be much smaller or even impossible to secure. This would be because there may be some companies uninterested in renewing a business relationship with Gazprom. Secondly, there are also reputational considerations at stake. Many companies would not want to be associated with Gazprom or might fear that with a new US administration willing to sanction Russian companies in the upcoming years, they may become collateral victims. Others, however, may be inclined to consider renegotiating some of the volumes, particularly if Russia is ready to offer significant discounts for an extensive period of time. Riley said Gazprom could offer prices at US Henry Hub level, which would help to bring down soaring energy costs for western European economies reeling from the 2022 energy crisis. WHAT ARE THE CHALLENGES FACING COMPANIES LOOKING TO RESUME IMPORTS? More than 100bcm of gas delivered by Russia prior to 2022 has now been replaced by spot volumes or mid-term contracts with LNG or pipeline suppliers. While the European supply picture remains tight at least for the remaining months of 2025, there are several factors that will determine whether Russian gas would make a comeback any time soon. These relate to companies’ strategies, Gazprom’s commercial and legal constraints, EU regulations, availability of supply routes and global competition. COMPANIES’ STRATEGIES While many companies will be tempted to resume negotiations for gas from Russia, many will also be mindful of collateral issues. For example, some companies which held supply contracts with Gazprom were also shareholders in projects such as Nord Stream 1 or financial investors in Nord Stream 2 – both pipelines connect Russia to Germany for gas deliveries. If the Nord Stream pipelines, which were sabotaged in 2022, are repaired and brought back into commercial use, a question remains as to whether companies would have an interest in resuming imports via these routes. In some cases, where contracts were terminated following arbitral proceedings, companies are no longer legally required to return to the project. However, it’s unclear whether others, which held supply contracts with Gazprom for volumes delivered to Germany and were also financial investors in Nord Stream 2 or shareholders in Nord Stream 1 would seek to resume imports. WHAT ARE GAZPROM'S CHALLENGES? Gazprom’s challenges are equally complex. On the one hand, it’s interested in regaining its European market share, having been unable to diversify elsewhere. On the other, the risks of returning would be significant because if it were to conclude new deals, other companies holding financial claims against Gazprom would immediately seek to seize its European revenue. This means Gazprom would either have to conclude deals with all previous buyers or allow another Russian entity to step in. To leverage its way back into the market, Gazprom or any other Russian entity may also have to offer significant price discounts to undercut competitors. Such an option would prove challenging particularly for Gazprom, which is undergoing financial difficulties at the moment. Furthermore, new global LNG capacity which is expected to enter operation next year could also pressure gas prices, giving Gazprom or other Russian entities limited flexibility in terms of offering discounts. WHAT ARE THE POSITIONS OF THE EU AND THE US? The EU set a 2027 deadline for the phaseout of Russian fossil fuel imports. Nevertheless, it has repeatedly postponed publishing the relevant roadmap, arguably expecting to get a better understanding of discussions related to arbitrations or the return of any of the supply routes including Ukraine, the Nord Streams or Poland’s Yamal pipeline which runs from Russia, through Poland to Germany. The roadmap is considered essential because it will ultimately define whether companies can resume Russian imports and, if so, in what quantities and over what period of time. While more than a third or 35bcm of the gas supplied by Russia has been displaced by US LNG, it’s unclear to what extent US producers will be able to retain and even increase their European market share, particularly in the light of a growing transatlantic political rift. Russian LNG and pipeline gas to Europe went down from 160bcm in 2018 to 51bcm in 2024. In contrast, US LNG went up from 25bcm in 2021 to 59bcm in 2024. Hence, 34bcm of US LNG fills the ‘Russian gap’ of 109bcm. For US producers, retaining a foothold in Europe will be of critical importance as the share of US LNG in the EU’s total imports reached a record 24% in March 2025. However, as US President Donald Trump is now pushing for a rapprochement with Russia and the negotiation of a peace deal with Ukraine, one issue on the agenda may be the return of some Russian flows to Europe. The US President will be forced to strike a fine balance between protecting the interests of US producers and making concessions to Moscow. SUPPLY ROUTES Even if companies were to agree on volumes, duration of contracts, price and other sensitive contractual terms, their ability to resume these flows will depend on the availability of import routes. Prior to Russia’s war in Ukraine, Gazprom was using four transport corridors – Ukraine, Nord Stream 1, the Yamal pipeline to Germany via Poland and TurkStream 2 transiting the Black Sea and Turkey. There have been discussions about the possible resurrection of the Nord Stream lines or the return of transit via Ukraine after a five-year agreement expired on 1 January 2025. Although there are reports of high-level talks involving Trump and Russian counterparts for the possible return of one of at least one of the Nord Stream 2 pipelines that remains intact, the legal complexities that need to be addressed are formidable. A first hurdle relates to the debt restructuring of Gazprom subsidiary Nord Stream AG. The company was given until 9 May to present a plan to repay its debt or face bankruptcy. Even if it’s successful in persuading the Swiss court it is in a position to pay, the next difficulty would be to obtain the outstanding certification for its company Gas for Europe. The German company was established in January 2022, following amendments to the EU’s Third Gas Directive, which would require Swiss-based Nord Stream 2 AG to establish a German subsidiary to act as an independent transmission system operator for the section of the pipeline operating in German territorial waters. Considering ongoing geopolitical tensions as well as the fact that Germany had to spend billions of euros to bail out Uniper and subsidize end consumer prices following the Russian-triggered energy crisis of 2022, the likelihood of granting approval to Nord Stream 2 under current conditions is low. The Federal Ministry for Economic Affairs and Climate Action (BMWK) is reportedly preparing for the possible demand from the United States for the activation of the two Nord Stream 1 and 2 gas pipelines. The German government rejects the idea of resuming Russian gas deliveries via the Nord Stream pipelines in the Baltic Sea but it is unknown what position it would take if faced with US demands to bring it back online. Yamal Another route that could be considered is the 35bcm/year Yamal pipeline, transiting Belarus and Poland for deliveries in Germany. Prior to the crisis, the Polish section was owned by EuRoPol Gaz, a joint venture between PGNiG (currently under PKN Orlen), Gazprom and Gas Trading, a company majority owned by PGNiG, making the Polish side, the majority stakeholder. After Gazprom reduced and then stopped deliveries altogether in 2022, Poland sanctioned Gazprom’s share in EuRoPol Gaz. In response, Russia sanctioned EuRoPol Gaz, which meant that gas could no longer be delivered via this route. Since 2022, both Poland and Russia initiated legal proceedings against each other, claiming each financial damages amounting to $1.5 billion. Resurrecting the transport route would therefore depend not only on solving the legal disputes but also on the normalisation of political relations between Poland Russia, which is unlikely given current circumstances. Ukraine The third route – Ukraine – would have been the most likely option for the resumption of transit considering the sheer capacity of the transmission network, which can ship more than 100bcm/year to Europe. Nevertheless, ongoing war-related risks and the recent destruction on the Russian side of the border of the Sudzha metering station, a critical piece of infrastructure measuring gas inflows leaving Russia and entering Ukraine, could block the return of transit in the immediate future. Given the ongoing war conditions, Kyiv may be looking to demand a share of Russia's sales revenue to be paid to Ukraine as part of compensation for war-related damages. TurkStream Finally, Russia’s remaining option to send gas to Europe is TurkStream 2. However, with nearly 16bcm of active contracts in place, the pipeline is working close to full capacity. This means it would either have to expand TurkStream at a time when its revenue has been sharply falling or persuade Turkey to increase border capacity on the adjacent Strandzha border point with Bulgaria. The border point was previously used to import Russian gas shipped north to south until 2020. The entry capacity of this border point was over 15bcm/year but the reverse capacity, shipping gas from Turkey to Bulgaria, has an estimated 4bcm/year. Nevertheless, the Turkish incumbent and gas grid operator, BOTAS, said it could double it. Parallel upgrades would have to be carried out in the neighbouring Bulgarian gas transmission system to decongest the network and accommodate additional imports. HOW MUCH RUSSIAN GAS COULD RETURN TO EU MARKET? From a purely technical perspective, there are very generous limits to Russian supplies into Europe. • The Ukraine transit (via Sudzha) could bring more than 100bcm/year. • The opening of a Nord Stream 2 string could bring 27.5bcm pipeline gas. • A reactivation of the Polish Yamal pipeline could add some 30bcm/year. • A stop of EU sanctions against Gazprom’s Arctic LNG could bring some 13Mt LNG/year (~18bcm) of Russian LNG to the global market with Europe as most attractive destination. ICIS believes a return of Russian pipeline gas and LNG to Europe will not be hindered by technical limitations but is challenged for political considerations. ICIS Gas Foresight suggests that a return of Russian gas would have severe implications for LNG imports into Europe. In a model-based scenario analysis ICIS tested a combined activation on January 2026 of: • Ukraine gas transit with 15bcm/year • Nord Stream II gas pipeline string with 27.5bcm/year • Arctic LNG with 13Mt/year export capacity An additional annual 375TWh (34bcm) of Russian gas supply would bring LNG imports into Western and Central Europe down by some 365TWh (33bcm) in 2026 and reduce average gas prices by more than 5% according to model results. A potential return of Russian gas into Europe hinges on the reactivation of commercial activities between European energy corporations and a Russian entity. Looking at Gazprom’s suspended gas supply contracts, the theoretical potential is large. More than 100bcm/year could flow to Europe if the suspended commercial contracts would be reactivated. ICIS Gas Foresight's base case view assumes that Russian pipeline gas supplies will be restricted to Balkan countries as well as Hungary and Slovakia. LNG continues to flow to Europe and makes up the lion's share of more than two-thirds of Russian deliveries into Europe as of 2025 and for the future.

15-Apr-2025

HOUSTON (ICIS)–The tariffs imposed by the US and the uncertainty of what will follow has caused a crash in oil prices and is one of the main factors behind a global decline in chemical prices in the days after the country's April announcement of its reciprocal tariffs. The following chart shows the sharp declines among the seven building-block chemicals. Notably, the declines continued even after the US paused the implementation of the higher reciprocal tariffs and settled for the relatively lower 10% rate against most countries. The exception is China, which has been responding to US tariffs with matching rates. The two countries are now imposing triple-digit tariffs on each others' imports. While the US has made exceptions for critical minerals, pharmaceuticals and electronics, China has made none. China's tariffs include the large amounts of natural gas liquids (NGLs) that it imports as feedstock for its propane dehydrogenation (PDH) units and its ethane crackers. LOWER OIL PRICESPrices for plastics and petrochemicals tend to rise and fall with those for oil. Oil prices have been falling since the start of the year, but the decline accelerated rapidly following the April tariff announcements by the US, as shown in the following table. Figures are in dollars per barrel. 2-Jan 1-Apr 14-Apr Brent 75.93 74.49 64.88 WTI 73.13 71.20 61.53 The decline was remarkable because it happened despite the weakening of the US dollar. The US dollar index has fallen by 8% as of 14 April since the start of the year. Oil prices tend to rise when the dollar weakens. This relationship has broken down in part because of plans by OPEC and its allies (OPEC+) to increase May production by an amount much higher than anticipated. But another reason is lower demand. Following the reciprocal tariff announcement by the US, ICIS lowered its forecast for global oil demand by 10%. ICIS also lowered its forecast for Brent oil prices for the rest of the year. Lower oil prices are manifesting themselves in aromatics markets, which are closely tied to crude. Export declined month on month for toluene and other aromatics from South Korea to the US for gasoline blending for March loading. Prices of toluene in India tumbled to fresh three-year lows. FALLING CHEM DEMANDDemand for plastics and chemicals also tends to rise and fall with the economy. Economists have started lowering their forecasts for growth, according to a periodic survey conducted by The Wall Street Journal. Survey participants also increased the chances of a recession. Tariffs will act like a sales tax. Companies and consumers will treat the tax like any other – they will take steps to avoid it by purchasing fewer goods. If one applied the US baseline tariff of 10% to the $3.3 trillion of goods the US imported in 2024, that comes to $3.3 billion in taxes. That represents a lot of potential purchases that US companies and consumers could defer or abandon. RPM International, a US producer of coatings, adhesives and sealants, expects that the slow- to no-growth environment of the past 18 months will persist. RPM's comments are notable because they were made on 8 April, after the US announced its reciprocal tariffs. UNCERTAINTYUncertainty is starting to paralyze some key chemical end markets. The auto industry in the US is already showing signs of this, RPM said. In European polyethylene (PE) markets, buyers are retreating to the side lines rather than committing to volumes in the current climate. “All in all, people are being careful, and that's not just converters that also consumers. People are worried about the future, and it's probably affecting demand further down chain as well," said ICIS markets editor Ben Monroe-Lake. “All in all, people are being careful, and that's not just converters that also consumers. People are worried about the future, and it's probably affecting demand further down chain as well.” REDIRECTED TRADE FLOWSBy imposing such broad tariffs, the US has erected a formidable trade barrier around its economy, which has caused exporters to redirect their shipments to other markets. This is especially true of Chinese exports. The US has created an effective embargo of Chinese imports by increasing its tariffs by 145% in 2025. Even with the recent exemptions adopted by the US, a large portion of Chinese imports will need to find new markets. The following table shows 2024 US general imports from China. Figures are in US dollars. Chapter Description Value 29 Organic chemicals 8,519,224,570 39 Plastics and plastic products 19,290,918,758 All Chapters Total 438,947,386,145 Source: US International Trade Commission (ITC) Similarly, China's 125% tariffs on shipments from the US would cause a large amount of products to be redirected, as shown in the following table. Figures are in US dollars. Chapter Description Value 27 Coal; mineral fuels, oils and products 14,727,138,106 29 Organic chemicals 3,980,594,815 39 Plastics and plastic products 7,452,840,887 All Chapters Total 143,545,739,507 Source: US ITC Given the tariff rates, it's likely that direct trade between the US and China will crater, said Lynn Song, chief economist, Greater China, at ING. Re-arranging global trade flows on such a scale will affect local chemical markets directly and indirectly through the influx of end products made with plastics and chemicals. The world was already contending with an oversupply of chemicals. This will aggravate it Such concerns have already appeared in east Chinese markets for certain grades of linear low density polyethylene (LLDPE) and high density polyethylene (HDPE), which reached multi-year lows. Market players are worried that US tariffs will cause a decline in demand for Chinese products that use these plastic grades. Similar concerns are arising in the Middle East among buyers and sellers of polymeric methylene diphenyl diisocyanate (PMDI) US auto tariffs could cause producers in the rest of the world to reduce output of vehicles and parts. These auto tariffs are global, and they are separate from the reciprocal tariffs. As such, the US auto tariffs are still in effect. If auto producers lower output, that will reduce demand for plastics and chemicals used in auto production, such as polypropylene (PP), nylon, butadiene (BD), and styrene butadiene rubber (SBR) “I may have to tweak my operations if I lose access to the US market, and if so, certainly I would be prudent now not to overcommit on forward deliveries of raw materials including EPDM,” said an auto parts maker in southeast Asia. Ethylene Propylene Diene Monomer (EPDM) refers to a synthetic rubber. DEFLATIONARY SPIRALIf companies expect declines to continue, then they may postpone purchases, setting off a deflationary spiral, in which sellers lower prices each time buyers defer purchases. Such a dynamic could emerge in European ethylene market and its PP market. US TARIFFS COULD MAKE THE COUNTRY THE EXCEPTIONAlthough US prices for building blocks have fallen since the April tariff announcement, many have still raised their expectations for inflation. RPM said on 8 April that the tariffs announced at that time would raise its raw material costs for its US operations by 4.3%. RPM's forecast did not take into account the 90-day pause on tariffs that the US announced on 9 April. That said, others are expecting prices in general to increase. Seasonally adjusted, a net 30% of US small business owners planned price hikes in March, up one point from February and the highest reading since March 2024. CHINA'S NGL TARIFFS MAY CREATE US GLUTChina's tariffs of 125% do not carve out any exemptions for ethane, liquefied petroleum gas (LPG) or other natural gas liquids (NGLs). China imports large amounts of these feedstocks from the US If China maintains the tariffs on NGLs, it could cause a supply glut of these primary chemical feedstocks in the US. The country does not have the chemical capacity to absorb the shipments that would normally go to China, and it is unlikely that the rest of the world can fully offset the loss of China as an export destination. If China maintains its tariffs on US NGLs, ICIS expects that US ethane and propane prices will decline. Insight article by Al Greenwood Additional reporting by Vicky Ellis, Ajay Parmar, Nurluqman Suratman, Isaac Tan, Nel Weddle, Melanie Wee, Kojo Orgle and Jonathan Yee Infographics by Yashas Mudumbai (Thumbnail shows a flask, which commonly holds chemicals. Image by Fotohunter.)

15-Apr-2025

LONDON (ICIS)–Germany’s April business confidence fell at the sharpest rate since the start of the Russia-Ukraine war, driven down by the US government’s recently announced “Liberation Day” trade tariffs. The ZEW economic sentiment indicator for Germany fell by 65.6 points in April from the previous month into negative territory at -14 points, the economic institute said on Tuesday. March’s index had risen sharply month on month on expectations of higher government spending and the recent European Central Bank (ECB) interest rate cut. “The erratic changes in the US trade policy are weighing heavily on expectations in Germany, which have sharply declined,” said ZEW president Achim Wambach. “It is not only the consequences the announced reciprocal tariffs may have on global trade, but also the dynamics of their changes, that have massively increased global uncertainty.” Export-intensive sectors such as automotives, chemicals, and the metal, steel and mechanical engineering sectors are particularly affected, ZEW said. The group’s economic sentiment indicator for the eurozone also fell sharply in April, down by 58.3 points to -18.5 points. ZEW’s current economic situation index for Germany improved slightly but was lower in the eurozone. Both were firmly in negative territory in April at -81.2 points and -50.9 points respectively.

15-Apr-2025