Chemicals

HOUSTON (ICIS)–US President Donald Trump did not propose any new tariffs on his first day in office, but he did issue an executive order that calls for his administration to conduct the investigations needed to impose them under several sections of the law – in many cases, repeating the same playbook Trump used during his first term in office. While the investigations take place, the US can use the threat of possible tariffs to negotiate agreements. If the negotiations fail, the US would have taken the steps necessary to respond with tariffs. Trump did indicate that he is considering imposing tariffs on Canada and Mexico as early as 1 February. This could rely on using existing laws in unprecedented ways. The US chemical industry is vulnerable to tariffs because it has deficits in commodities such as benzene, melamine and methyl ethyl ketone (MEK). Its large exports of plastics make it vulnerable to retaliatory tariffs. TRUMP LAYS FOUNDATION FOR TARIFFSAmong the investigations that will be launched by Trump's executive order, those into national security could lead to Section 232 tariffs, which Trump imposed on steel during his first term. Discriminatory trade practices would open the door to Section 201 tariffs, which were imposed on washing machines and solar panels. Unfair trade practices could lead to Section 301 tariffs. The US imposed these against numerous Chinese imports. That unleashed a trade war, with China imposing retaliatory tariffs, many of which targeted US exports of plastics and chemicals. POSSIBLE NEW TARIFFSTrump's first-day order pointed to other reviews that his administration could complete faster and lead to new tariffs imposed under different sections of the law. These could fall under the International Emergency Economic Powers Act of 1977 (IEEPA), Section 338 and Section 122. Trump's first-day order did not mention these specific laws, but it did mention national security, discriminatory actions against US products and balance of payment deficits – all issues that these laws were designed to address. These laws could allow Trump to impose tariffs on a faster schedule. The IEEPA only requires consultation with Congress, and Section 1222 can apparently be imposed unilaterally, according to the American Action Forum (AAF), a think tank. THREAT OF CANADIAN, MEXICAN TARIFFS ON 1 FEBRUARYTrump would need such speed if he were to impose 25% tariffs on Canada and Mexico goods on 1 February, a possibility that he mentioned on Monday, according to CNBC and other publications. Drug trafficking and immigration could provide the national security basis needed under these laws. REVISITING THE PHASE 1 AGREEMENT WITH CHINATrump's first-day order called for a review of the Economic and Trade Agreement to determine if China is living up to its end of the deal. The agreement is more commonly known as the phase one deal, and the two countries signed it in January 2020. It included commitments by China to purchase more goods from the US; to adopt policies that will protect intellectual property; and to reduce pressure on companies to transfer technology. China has not fulfilled its import commitments under the agreement, and Trump's order said the country could impose additional tariffs in response. US CHEMS VULNERABLE TO TARIFFSUnless Trump carves out exceptions, his proposed tariffs on China and Mexico could raise costs for US chemical producers. Canada provides US refiners with heavier grades of oil that are not produced in sufficient quantities domestically for the nation's refineries. Canadian oil complements the light grades of oil that the US produces in abundance from its shale fields. Regional US markets may rely on Canadian imports because they are closer than the more distant sources along the US Gulf. Those customers will have to reroute their supply chains if they want to avoid tariffs. For the broader tariffs that Trump proposed in his campaign, they could prompt countries to impose retaliatory duties on US shipments of plastics and chemicals. The US is vulnerable to such tariffs because it has large surpluses of many plastics and chemicals, such as vinyl acetate monomer (VAM), methanol, ethylene glycols (EG), polyethylene (PE) and polyvinyl chloride (PVC). Tariffs on Chinese imports of rare earth materials would increase production costs for catalysts. Tariffs on fluorspar and hydrofluoric acid (HF) could increase costs for US producers of fluorochemicals and fluoropolymers. Insight article by Al Greenwood (Thumbnail shows cranes and containers, which make up important infrastructure used in international trade. Image by Costfoto/NurPhoto/Shutterstock)

21-Jan-2025

HOUSTON (ICIS)–Ports in Houston and New Orleans were closed on Tuesday because of winter weather and are likely to remain closed through Wednesday. Port Houston closed all facilities on Tuesday, and they will remain closed through Wednesday because of a winter storm that brought snow and icy conditions to the region. Container terminal truck gates closed Monday afternoon and vessel operations were suspended later that evening. “We potentially will resume vessel operations at the container terminals on Wednesday evening, if conditions allow,” port officials said around midday on Wednesday. Port Houston has committed to opening gates at 7 am on Saturday to assist customers with ingate closing at 5 pm. At Port NOLA in Louisiana, a freeze plan was enacted on Sunday that halted water flow to terminals, which is expected to resume on Wednesday. The New Orleans terminal said it was closed on Monday for the Martin Luther King Jr holiday. “We will determine opening the gates on Saturday, 25 January once the weather has passed,” terminal operators said. Container and breakbulk operations at Ports America are closed today and on Wednesday. Port Freeport said it expects vessel activity to be limited on Tuesday because of the weather. Port Houston is the busiest port in vessel and barge movements and the largest US port by tonnage, with more than 200 docks and 270 facilities. It is also the top US port for petroleum and the fifth largest container port in terms of TEUs (20-foot equivalent units) in 2022. The port is also home to the largest petrochemical manufacturing complex in the nation. 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. They also transport liquid chemicals in isotanks.

21-Jan-2025

HOUSTON (ICIS)–Cold weather in the US Gulf Coast on Tuesday is expected to disrupt petrochemicals operations in Texas and Louisiana as companies take preventive measures. Temperatures fell sharply overnight from Monday and are expected to stay lower than the average for the time of the year in coming days, with potential rain, sleet and snow. The Houston metropolitan got snow in the early hours of Tuesday. The city is to record freezing temperatures all nights this week to Friday (see bottom table). CHEMICALS PLANTSUS Gulf Coast crude and petrochemicals players’ memories of the last disrupting cold snap in 2024 and winter storm Uri in 2021 are still fresh, with many fearing similar disruption this week as key petrochemicals hubs in the area are set to witness a similar cold snap. In such a scenario, companies have done all they could to minimize the disruption, although some factors could be outside their control despite the preparations. Germany’s chemicals major BASF said in a written response to ICIS late on Monday that its operations in Freeport, Texas, would “continue to run at as much capacity as possible” but conceded that potential snowfall could greatly complicate access to and from the site. As of Monday, BASF said: “[Due to the snow] roads possibly being impassable. As a result, BASF will have ride out crews arriving Monday evening and remaining until conditions improve, which is expected to be on Wednesday late morning,” said a spokesperson for the company. “Non-critical employees will work from home. The BASF site in Vidalia, Louisiana, will idle operations beginning Monday evening with a planned restart of Wednesday at noon.” As Houston recorded heavy snowfall overnight, BASF was enquired again about its impact on Freeport, but the company had not responded to the request at the time of writing. BASF’s spokesperson added the company’s sites in Geismar and North Geismar, in the state of Louisiana, would continue to run as normal. In another written response to ICIS, a spokesperson for Brazil’s polymers major Braskem said the company had activated its severe weather preparedness plan for its assets in La Porte, Seadrift, and Oyster Creek, all in Texas. “We will continue to monitor the severe weather and follow our protocols to ensure our team members and assets are safe during this time. We are working with our clients to minimize the impact of this weather event,” it added. A spokesperson for CPChem also said the company was monitoring the weather and “taking steps to prepare” its plants for any potential impact. A spokesperson for European chemicals major INEOS said the company's olefins, polyethylene (PE) and polypropylene (PP) units "have initiated winter storm" protocols. LyondellBasell would not comment. A spokesperson for the company said to ICIS: “As a matter of practice, we don’t provide specific details about our units, operational status, production figures, or supply for competitive reasons.” Pre-emptive shutdowns and operational disruptions reported so far include: BASF TotalEnergies cracker shuts down due to weather Formosa shuts Louisiana PVC unit ahead of freeze GCGV Portland, Texas, EG site down ahead of freezing temperatures Indorama's Clear Lake, Texas, EG site down for winter weather Indorama Lake Charles cracker shut due to weather Indorama shuts Port Neches, Texas, cracker ahead of winter storm Indorama's Port Neches, Texas, EG unit down ahead of winter weather Ingleside, Texas, cracker shut before winter storm LACC Lotte/Westlake Louisiana cracker and EG unit down ahead of winter weather Lyondell Channelview, Texas, crackers flaring on operations issues Lyondell La Porte, Texas, cracker sees weather-related flaring THREAT OF POWER OUTAGES AND GAS OUTAGESWhile industrial plants can avoid direct damage from cold weather, they can still be subject to power outages or the loss of natural gas supplies. If the forecasts for sleet and snow hold true, then this could cause powerlines to snap. Spikes in demand for heating can overwhelm the power grid in Texas, leading to widespread blackouts. Chemical plants and refineries rely on electricity to power motors and pumps. As of Tuesday, power supply should be sufficient to meet demand through 28 January, according to the Electric Reliability Council of Texas (ERCOT), which manages the flow of electricity in most of the state. The electricity grid in Texas was holding up reasonably well as of Tuesday morning, with nearly 48,000 power outages recorded according to Poweroutage.us. The figure is reasonably low for Texas' grid standards and was much lower than the more than 80,000 outages reported in California, a US state with similar population to Texas which is still reeling from wildfires around Los Angeles. Cold temperatures can also affect the flow of natural gas, potentially causing freeze-offs during which water or hydrates freeze or can create blockages. One such freeze-off caused on Monday a shutdown of a scrubber at an amine treater in Winkler county in west Texas, according to a filing with the Texas Commission on Environmental Quality (TCEQ). Low temperatures could disrupt operations at the plants that process natural gas. Since 2021, cold weather has disrupted US natural gas production during every winter, according to the Energy Information Administration (EIA). PROLONGED STRETCH OF FREEZING TEMPERATURESThe following table shows the weather forecast for the Houston metropolitan area this week, with temperatures listed in Fahrenheit first and, in brackets, in Celsius. Tuesday Wednesday Thursday Friday High 36 (2.2) 42 (5.6) 48 (8.9) 52 (11) Low 22 (-5.6) 29 (-1.7) 29 (-1.7) 37 (2.8) Source: National Weather Service Eric Berger, an analyst at Houston’s weather blog Space City Weather, said on Tuesday that infrastructure disruption should have cleared by Wednesday morning, although in some locations it may last practically all day. “After a cold start, high temperatures on Wednesday are expected to reach 40 degrees [Fahrenheit] or even a little warmer under sunny skies. The combination of mostly sunny skies and sublimation should allow for roads to mostly dry out, but for some locations, this may not happen until after noon,” said Berger. “I realize the uncertainty is no fun, but such snow and ice events are relatively rare in Houston, so we are working on limited data about local roads and their response to icy conditions. Most of Houston will fall into the upper 20s [Fahrenheit] on Wednesday night.” Front page picture: Houston's suburbs after heavy snowfall overnightSource: Adam Yanelli/ICIS Additional reporting by Al Greenwood, John Donnelly and Melissa Wheeler

21-Jan-2025

SINGAPORE (ICIS)–Shares of petrochemical firms in Asia and China’s commodity futures markets closed mixed on Tuesday, with no immediate announcement of new tariffs from the US on the first day of Donald Trump’s second term as president. South Korea’s LG Chem closed 4.75% lower in Seoul , while Japan’s Mitsubishi Chemical finished 1.85% higher in Tokyo. China’s state oil and gas firm PetroChina was down 1.40%, while chemicals major Sinopec ended down 1.62% in Hong Kong. The CSI 300 Index, a benchmark for Chinese mainland shares, edged up 0.08% to close at 3,832.61. Japan's benchmark Nikkei 225 rose by 0.32% to settle at 39,027.98, while South Korea's KOSPI Composite Index ended 0.08% lower at 2,518.03. Hong Kong's Hang Seng Index finished the session 0.91% higher at 20,106.55. Singapore's Straits Times Index (STI) was trading 0.27% lower at 3,797.61 at 08:44 GMT. Analysts said that markets have already pre-digested the “Trump effect”. In his presidential campaign, Trump had threatened to impose tariffs on all US imports. His first four-year term as US president in 2017-2021 sparked the US-China trade war. In China, six out of nine petrochemical futures markets posted declines on Tuesday.   CNY/tonne 21-Jan % change from previous session Linear low density polyethylene (LLDPE)                                   7,808 -0.3% Polyvinyl chloride (PVC)                                   5,304 0.6% Ethylene glycol (EG)                                   4,753 -0.2% Polypropylene (PP)                                   7,400 -0.7% Styrene monomer (SM)                                   8,520 0.0% Paraxylene *                                   7,420 -0.1% Purified terephthalic acid (PTA)*                                   5,192 -0.2% Methanol*                                   2,591 0.6% Polyethylene terephthalate  (PET)*                                   6,388 -0.2% Sources: Dalian Commodity Exchange, *Zhengzhou Commodity Exchange Overall trading activity in China’s petrochemical markets is waning as many players have suspended trading to prepare for the upcoming Lunar new year holiday, which will last eight days from 28 January. ($1 = CNY7.28) Additional reporting by Nurluqman Suratman

21-Jan-2025

HOUSTON (ICIS)–US President Donald Trump proposed no new tariffs on his first day of office, and instead instructed his administration to investigate the nation's trade deficit and other areas of trade policy. The absence of any tariff proposal marks a contrast to his campaign platform and his subsequent threats after winning the election. Tariffs would expose the US chemical industry to disruptions in trade flows, increased costs for chemicals in which the nation has deficits and the threat of retaliatory tariffs on its  exports of polyethylene (PE), polyvinyl chloride (PVC) and other plastics and chemicals. Instead of proposing tariffs, Trump issued a memorandum that called for the following: The Secretary of Commerce to investigate the nation's deficit and its consequences to the economy and to national security. The Secretary of the Treasury to investigate the creation of an External Revenue Service to collect tariffs and duties. The US Trade Representative to investigate any unfair trade practices. The US Trade Representative to prepare for the July 2026 review of the United States-Mexico-Canada Agreement (USMCA), which is the name of the countries' trade agreement that replaced NAFTA. The US Secretary of the Treasury to investigate exchange rates. The US Trade Representative to review and recommend revisions to existing trade agreements. The US Trade Representative to negotiate bilateral or sector-specific agreements to open markets. The Secretary of Commerce to review policies and regulations regarding antidumping and countervailing duty laws. A review of several trade issues with China, including the Economic and Trade Agreement. This is also known as the phase one agreement, under which China failed to fulfil its import commitments. The absence of first-day tariff proposals does not mean that Trump will not make any later in his presidency. In some cases, the US president has the authority to propose them even without investigations. For example, the International Emergency Economic Powers Act (IEEPA) of 1977 allows the president to propose tariffs that would address a severe national security threat. It requires only a consultation with Congress. During Trump's presidential campaign, he proposed the following tariffs: Baseline tariffs of 10-20% on all imports. Tariffs of 60% on imports from China. A reciprocal trade act, under which the US would match tariffs that other countries impose on its exports. After winning office, he threatened to impose tariffs of up to 25% on imports from Canada and Mexico and up to 10% on imports from China. Thumbnail image: Inauguration Ceremony for President Donald Trump in Washington, District of Columbia, United States – 20 January 2025 (By Chip Somodevilla/UPI/Shutterstock)

21-Jan-2025

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. Please don’t hide you your head beneath the sheets and hope that the scary slide, the first in today’s blog post, will somehow magically go away. It is what it is. Don’t waste anymore time in thinking that China’s economy is going to rebound sufficiently to absorb these vast surpluses in 2025. Then, as I discuss in today’s post and you can see from slides and two three this is what polymers producers need to do get through this crisis: Get more accurate capacity and production information ahead of your competitors in order to reduce losses by taking full advantage of short-term shifts in markets. Be ahead for your competitors on predicting new antidumping measures, safeguard duties and standard import duty changes. More closely monitor bilateral and multilateral trade negotiations. What are your government contacts like? You may need to engage more vigorously in lobbying for trade protection. Trump’s trade policy on China is unpredictable—from a potential trade war to improved relations. Build scenarios that reflect this wide range of potential outcomes. Track currency movements more closely. Build scenarios on the dollar as the Trump presidency doesn’t inevitability mean a stronger greenback. But the end of the 1992-2021 Chemicals Supercycle isn’t just about China: In a much more uncertain geopolitical environment, expect continued disruption of supply chains – for example, the Houthis and the Red Sea access to the Suez Canal. This isn’t necessarily going to go away because of the Israel-Gaza ceasefire. The climate change crisis is the “here and now”, affecting seasonal demand and pricing patterns – for example the impact on India of more intense and unpredictable monsoons. Recent droughts have significantly affected shipments through the Panama Canal, reducing water levels in Gatún Lake and forcing authorities to impose restrictions on vessel size and transit capacity. We are lucky in that the greatly increased complexity has occurred as a technology develops which will enable to model this complexity while saving a great of time and so costs. This is of course artificial intelligence which is as important a breakthrough as the inventions of steam power, electricity and the internet. But as an FT video highlights (see a link in the blog), two-thirds of desk-bound workers are not using AI at all. CEOs have bought the equivalent of Ferraris (state-of-the-art AI) without giving their employees driving lessons. Watch this space as I experiment with AI (I am giving myself driving lessons). Let’s discuss how AI can transform your chemicals business. Editor’s note: This blog post is an opinion piece. The views expressed are those of the author, and do not necessarily represent those of ICIS.

21-Jan-2025

HOUSTON (ICIS)–Temperatures along the US Gulf Coast should fall well below freezing later in the week and remain there for a prolonged stretch, threatening operations at chemical plants and refineries. Temperatures already reached freezing on Sunday, according to the National Weather Service. Temperatures should fall further Monday night, with a chance of rain, sleet and snow. Houston could get snow on Tuesday before temperatures plunge to 18 degrees Fahrenheit (-8 degrees Celsius). Temperatures will fall below freezing on Wednesday and Thursday nights. GULF COAST PLANTS WERE NOT BUILT FOR COLDUntil recently, temperatures rarely fell below freezing along the Gulf Coast, so it was unlikely that chemical companies designed their plants to be more resilient during frigid weather. Since 2021, freezes have become annual events along the Gulf Coast, and companies have started taking precautions. Dow escaped the freeze of December 2022 largely unscathed. However, during that same 2022 cold spell, TotalEnergies did shut down its polypropylene (PP) operations in La Porte, Texas, even though it took all possible precautions to prepare for the cold weather. THREAT OF POWER OUTAGES AND GAS OUTAGESEven if plants avoid damage from cold weather, they could still shut down if they lose power or natural gas. If the forecasts for sleet and snow hold true, then this could cause powerlines to snap. Spikes in demand for heating can overwhelm the power grid in Texas, leading to widespread blackouts. Chemical plants and refineries rely on electricity to power motors and pumps. As of Monday, power supply should be sufficient to meet demand through 26 January, according to the Electric Reliability Council of Texas (ERCOT), which manages the flow of electricity in most of the state. The following chart shows ERCOT's power forecast. Source: ERCOT For natural gas, cold temperatures can cause freeze-offs, during which water or hydrates freeze and create blockages. One such freeze-off caused on Monday a shutdown of a scrubber at an amine treater in Winkler county in west Texas, according to a filing with the Texas Commission on Environmental Quality (TCEQ). Low temperatures could disrupt operations at the plants that process natural gas. Since 2021, cold weather has disrupted US natural gas production during every winter, according to the Energy Information Administration (EIA). PROLONGED STRETCH OF FREEZING TEMPERATURESThe following table shows the weather forecast for the Houston Hobby Airport. Figures are listed in Fahrenheit and Celsius. Monday Tuesday Wednesday Thursday Friday High 39 (4) 33 (1) 37 (3) 47 (8) 52 (11) Low 28 (-2) 18 (-8) 24 (-4) 29 (-2) 40 (4) Source: National Weather Service (Thumbnail shows ice that was caused by low temperatures. Image by David J Phillip/AP/Shutterstock) (recast paragraph 6 with context)

20-Jan-2025

HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 17 January. INSIGHT: Trump bump to boost US GDP growth I am reminded every four years when there is a new US administration of the 1966 Western action movie, “The Good, the Bad and the Ugly” starring Clint Eastwood, Eli Wallach and Lee Van Cleef as the good, the bad and the ugly. It is in this vein that we will review new policies from the incoming administration and their likely impact on the economy and the chemical industry. Crude buoyed by cold weather, sanctions, China recovery – oil CEO The rally in crude markets could get continued support from cold weather, sanctions and a recovery in demand from China, the CEO of US crude producer Hess said on Tuesday. Latest US sanctions could hit Russia oil supply – IEA The latest tranche of US sanctions on Russia’s oil trade could affect flows from the country, while weather-related production shut-ins in North America could also impact global supply, the International Energy Agency (IEA) said. 2025 chemicals demand outlook highly uncertain on geopolitics – LANXESS CEO After two years of a severe downturn, the global demand outlook for chemicals in 2025 is extremely uncertain pending geopolitical and policy developments with a new US administration, upcoming elections in Germany and US-China relations, said the CEO of Germany-based specialty chemicals producer LANXESS. US steadies 2025 growth outlook as Europe struggles – IMF Global economic growth this year is expected to increase modestly compared to 2024, the International Monetary Fund (IMF) said on Friday, as stronger expectations of US growth offset an increasing bearish outlook for Europe. INSIGHT: US is adding no new ethylene capacity for first time since 2010 The oversupply of chemicals has caught up with one of the world's lowest cost producers. In 2025, the US will add no new ethylene capacity, the first time since 2010. INSIGHT: US tariffs on Canadian oil would harm the US and Canada US President-elect Donald Trump is expected to quickly move forward with his proposed 25% tariff on all imports, including oil and energy, from Canada and Mexico after taking office on Monday 20 January.

20-Jan-2025

LONDON (ICIS)–Click here to see the latest blog post on Chemicals & The Economy by Paul Hodges, which highlights Cefic’s report on the existential crisis facing Europe’s chemical industry. Editor’s note: This blog post is an opinion piece. The views expressed are those of the author and do not necessarily represent those of ICIS. Paul Hodges is the chairman of consultants New Normal Consulting.

20-Jan-2025

HOUSTON (ICIS)–Rates for shipping containers from east Asia and China to the US edged lower this week as carriers have reduced short-term rates to both coasts to stimulate demand ahead of Lunar New Year (LNY). Analysts at freight forwarder Flexport said that pre-LNY demand has slowed, resulting in low carrier vessel utilization rates and a softening market. Rates from Shanghai to New York fell by 4% from the previous week and rates from Shanghai to Los Angeles fell by 5%, according to supply chain advisors Drewry and as shown in the following chart. Drewry expects spot rates to decrease slightly in the coming weeks due to increased capacity. Global average rates fell by 3%, as shown in the following chart. Flexport analysts said that space remains constrained following the pre-LNY rush, especially on fixed allocations, but some strings still have open space, especially to the West Coast and, to a lesser extent, the East Coast. Carriers have planned 11% blank sailings during the LNY period, aligning with network adjustments. 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. They also transport liquid chemicals in isotanks. USG-ASIA CHEM TANKER RATES TICK LOWER US chemical tanker freight rates assessed by ICIS were steady to lower for most trade lanes this week, with slight decreases on the US Gulf (USG) to Asia trade lane. There are bigger gaps of vessel space showing in January. Therefore, there are a backlog of outsiders looking for opportunities, which weighed on spot rates this week, pushing them lower. From the USG to Rotterdam, there has been a lull in activity on this route as contract space for January is soft, leaving players looking for additional cargoes to complete space for a few tanks. Styrene monomer, glycol and methanol has been said to be a popular commodity within this trade lane. As a result, smaller parcel freights have taken a steep drop from January loadings, while larger parcel sizes seem destined for the same and rates decreasing, according to a broker, various glycol and methanol cargos have keen interest along this route. From the USG to Brazil, there are a few outsiders open for the end of January to early February, along with some regulars with some small pocket space. This trade lane is expected to face some downward pressure as the list of fully open vessels presently continues to grow, according to a broker. Meanwhile from the USG to the Mediterranean, there is still a bit of open space, and the market quotes continue to come in for February. This route after a bit of uncertainty is seeing rates steadying for the balance of open space. On the other hand, bunker prices were higher this week following the rise in energy prices. With additional reporting by Kevin Callahan

17-Jan-2025