Chemicals

LONDON (ICIS)–Click here to see the latest blog post on Chemicals & The Economy by Paul Hodges, which looks at the changes underway in oil markets. 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.

17-Mar-2025

LONDON (ICIS)–Here are some of the top stories from ICIS Europe for the week ended 14 March. European naphtha slides as demand wanes, refineries roar back Sentiment in Europe's naphtha spot market was weighed down by upstream crude volatility, weak blending demand and limited export opportunities in the week to 7 March despite ample liquidity in the physical space. Flagship Maasvlakte POSM plant to close in October – union The largest propylene oxide/styrene monomer (POSM) production complex in Europe is expected to close in October, union FNV said on Tuesday, after an agreement was reached between operator LyondellBasell and employees at the site. Europe chems stocks claw back losses as markets firm despite tariffs European chemicals stocks firmed in early trading on Wednesday as markets rebounded from the sell off of the last week, despite the onset of US tariffs on aluminium and steel and Europe’s pledge to retaliate. 'Game changer' for Europe PE as EU plans retaliatory tariffs on US European polyethylene (PE) players are braced for a potentially big impact from the EU’s retaliatory tariffs on plastics from the US, in the latest twist of the growing trade war. INSIGHT: Can the chemicals sector tap into Europe’s rearmament era? Europe’s drive to drastically ramp up defence spending is likely to drive a wave of investment into the region’s beleaguered industrial sector, but existing military spending patterns and technical requirements could limit uplift for chemicals.

17-Mar-2025

SINGAPORE (ICIS)–Here are the top stories from ICIS News Asia and the Middle East for the week ended 14 March. Asia petrochemicals under pressure from China oversupply, US trade risks By Jonathan Yee 10-Mar-25 12:42 SINGAPORE (ICIS)–Sentiment in Asia’s petrochemical markets remains cautious with prices of some products – particularly in the southeastern region – were rising on tight supply, amid escalating trade tensions between the US and its major trading partners, including China. Asia petrochemical shares track Wall Street rout on US tariff, recession worries By Jonathan Yee 11-Mar-25 11:30 SINGAPORE (ICIS)–Shares of petrochemical companies in Asia tumbled on Tuesday, tracking Wall Street’s rout overnight on fears of a US recession caused by tariffs. Asia naphtha bull-run intensifies; potential risks ahead By Li Peng Seng 12-Mar-25 13:21 SINGAPORE (ICIS)–Tight supplies and stronger-than-usual demand have driven Asia’s naphtha intermonth spread to nearly a year's high on 11 March, but upcoming cracker maintenance and rebounding arbitrage volumes could derail the current bull-run. Asia caprolactam spot prices decline, China plant operating rates reduce By Isaac Tan 12-Mar-25 20:32 SINGAPORE (ICIS)–Caprolactam (capro) spot prices in Asia-Pacific declined in the week ended 12 March 2025, driven by weak benzene costs and sluggish downstream demand. China EVA industry: navigating capacity expansion amid demand uncertainty By Chris Qi 13-Mar-25 11:27 SINGAPORE (ICIS)–China's ethylene vinyl acetate (EVA) industry is expected to brace for a second wave of capacity expansion during 2025-2027. The country is now the world's largest EVA producer following intensive plant start-ups during 2021-2023. BLOG: A Different Kind of Downturn: Why This Cycle Won’t Simply “Right Itself” By John Richardson 13-Mar-25 11:55 SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. INSIGHT: Poor demand dominates Asian isocyanates markets, oversupply caps Mideast gains By Shannen Ng 13-Mar-25 13:00 SINGAPORE (ICIS)–Soft demand for key isocyanates polymeric methylene diphenyl diisocyanate (PMDI) and toluene diisocyanate (TDI) in Asia and the Middle East is expected to persist throughout March, with lengthy supply also likely to weigh on sentiment. South Korea prepares full emergency response as US tariffs take effect By Nurluqman Suratman 14-Mar-25 12:51 SINGAPORE (ICIS)–South Korea is initiating full emergency response measures as US steel and aluminum tariffs take effect, aiming to mitigate the impact on its economy, which is already grappling with weak exports and domestic consumption.

17-Mar-2025

TORONTO (ICIS)–Canada’s new prime minister, Mark Carney, will focus on diversifying the country’s trade relationships and improving its security, he said on Friday after officially taking over from Justin Trudeau. The new government’s top priority would be “protecting Canadian workers and their families in the face of unjustified foreign trade action”, he said with reference to the US tariffs on goods from Canada. Canada would be “building here at home” to become stronger while working “with different partners” abroad, he said. Carney plans to travel to France and the UK next week to talk about trade diversification and security with European leaders, he said. Although he has no immediate plan to meet US President Donald Trump, Carney was looking forward to speaking with Trump “at the appropriate moment”, he said. Canada joining the USCarney explicitly rejected Trump’s repeated suggestions that Canada should join the US as its 51st state. Following a G7 foreign ministers meeting in La Malbaie in Canada’s Quebec province on Friday, US Secretary of State Marco Rubio told reporters that Trump's position is that Canada would be better off joining the US "for economic purposes." Asked about these remarks, Carney said: “It’s crazy, [Trump's] point is crazy, that’s it.” “We will never, ever, in any shape or form, be part of the United States”, he said. Regarding the trade conflict, Carney reminded that Canada was the largest client of the US in many industries. “We respect the United States, we respect President Trump”, he said. Canada understood Trump’s priority to address “the scourge of fentanyl”, which was also a problem in Canada. It also understood the importance Trump places on American workers and jobs, Carney said and went on to say: “We want him [Trump], and his administration, to understand the importance we put on Canadian workers and jobs”. Carney noted that Trump was a “successful businessman and deal maker”, and he expressed the hope that the US will understand Canada’s position. As for Canada’s consumer carbon tax, Carney said that the new government would move quickly to abolish it. Carney said previously he would retain Canada’s industrial carbon pricing. Carbon pricing has been important in attracting investments in low-carbon projects, led by Dow’s Path2Zero petrochemicals complex under construction in Alberta province. He did not say when he will call an election. Carney, who is a former governor of the Bank of England and the Bank of Canada, does not have a seat in parliament. In the wake of Trudeau’s resignation announcement on 6 January and the trade conflict with the US, Carney’s Liberal Party has caught up with the opposition Conservatives in opinion polls about the next federal election. Elections must be held before the end of October. Please also visit US tariffs, policy – impact on chemicals and energy Thumbnail photo of Canadian Prime Minister Mark Carney; source: Liberal Party of Canada

14-Mar-2025

The following text is from a white paper published by ICIS called Trump peace talks bring further uncertainty over Russian oil and LNG sanctions. You can download the pdf version of this paper here. Written by: Aura Sabadus, Barney Gray, Andreas Schroeder, Rob Songer As US president Donald Trump pushes for Ukrainian-Russian peace negotiations, it is uncertain whether he might seek to strengthen or unwind some of the sanctions imposed on Russian oil and LNG over the last three years. Trump has also been pursuing a blend of tariffs and sanctions, complicating an already difficult landscape. This latest ICIS paper proposes to help companies navigate a complex environment, reviewing the impact of new tariffs and existing sanctions on markets, the likelihood that they may be scrapped and asks whether unilateral European sanctions on Russian oil and gas could be just as effective.  INTRODUCTION US President Donald Trump’s second term has ushered in a whirlwind of economic measures sparking volatility across markets and shaking the global economy. Since his return to power at the end of January, US trade policies have focused on a blend of tariffs and sanctions targeting import partners, Canada and Mexico but also political adversaries, Iran and Venezuela. From this vantage point, his wider economic measures have the potential to spur inflation and a global economic slowdown that could weaken energy demand at a time of surging global oil and gas supply, weighing heavily on prices. With events unfolding at rapid speed as policies are announced and rolled back within days or even hours, it is becoming increasingly difficult for companies to assess the direction that oil and gas markets will take in the longer-term. Perhaps the biggest wild card in this unpredictable environment is the US’ position on Russian oil and LNG sanctions. On 7 March, the US president said he was strongly considering an array of tariffs and sanctions on Russia but many observers do not exclude the possibility of a u-turn on restrictions as Washington has been doubling down on efforts to conclude a peace deal with Moscow over Ukraine. These sanctions could be eased either during peace negotiations or once the war ends. SANCTIONS AND LOOPHOLES Since Russia invaded Ukraine in February 2022, the US together with the EU and the UK imposed over 20,000 sanctions, targeting primarily its oil sector. Nevertheless, despite the sweeping sanctions, Russia still made close to €1tr in oil and gas sales since the start of the war, as the two account for up to half of Russia’s tax revenues, according to estimates from the Centre for Research on Energy and Clean Air (CREA). Although the US and the EU introduced limited restrictions on Russian LNG, the country lost most of its European pipeline gas market share after cutting close to 80% of its exports following the invasion of Ukraine. Following the expiry of the Russian-Ukrainian pipeline gas transit agreement at the beginning of 2025, the Russian share of LNG and gas in Europe is 11%. Since then, the shortfall has been plugged primarily by the US, which now accounts for nearly a quarter of European gas supplies. RECORD IMPORTS In January alone, a record 58% of LNG imported into Europe came from the US, while Russia’s market share including pipeline and LNG exports accounted for 11%, dropping from close to 40% in 2021. While Europe has become increasingly dependent on the US, the same could be said about the US, as 80% of its LNG exports have been heading to Europe in recent months, according to ICIS data. With US LNG production set to double in the second half of this decade, unwinding sanctions against Russia’s Arctic LNG2 project would create direct competition to US producers. In contrast, by removing some of the sanctions on the oil sector, the Trump administration might hope to offset the inflationary effect of tariffs through falling oil prices and greenlight the return of US companies to Russia. Meanwhile, with the EU and the UK pledging to weaken Russia economically as part of efforts to help Ukraine negotiate from a position of strength, the onus would be on Brussels and London to continue sanctions on their own but that raises questions about their effectiveness. An EU transshipment ban prohibiting the transfer of Russian LNG via European terminals could have the perverse impact of redirecting these LNG volumes into European markets when it comes in force at the end of this month. Last year, more than 50% of Russian LNG exports ended up in Europe, which means that with the trans-shipment ban even more volumes could enter the market just as the EU is preparing to announce a roadmap for the scheduled 2027 Russia fossil fuel import phaseout. TARIFFS Donald Trump’s administration has had a profound impact on the global crude market in only a few short weeks. His mix of tariffs on friendly countries and sanctions on adversaries have led to ramped-up volatility and uncertainty with a distinct bearish tinge. Tariffs against Canada and Mexico announced in February, paused for a month and reintroduced in March only to be suspended again, have sparked fears of a global trade war. Canada is the US’ largest source of imported crude, representing over 4 million barrels/day or 62% of total imports in 2024. US refiners rely on Canada’s heavier, sour grades for which many US Gulf Coast refiners are specifically adapted to process. The US has placed a tariff of 10% on Canadian imports, adding more than $5/barrel to the current cost of Canada’s Western Canadian Select export grade. This will adversely impact refiners’ margins and may encourage them to seek replacement barrels from overseas, boosting demand for non-tariffed Middle Eastern or Brazilian grades. While the majority of Canada’s export pipeline infrastructure is dedicated to serving US customers, Canada is likely to ramp up exports through its Trans Mountain pipeline on the Pacific coast targeting Asian customers. Such a move could compete with Middle Eastern exports to Asia as higher volumes of Canadian grades find their way to South Korea, China and Japan. US tariffs on Mexican imports are a more punitive 25%, impacting around 465,000 barrels/day. While Mexican imports could dip in the short term, most Mexican production is coastal and offshore, and the country has the option to reroute exports more readily than Canada. However, with Mexico’s OPEC+ partners starting to return 2.2 million barrels of production cuts to the market over the next 18 months from April, surplus Mexican oil on the global market is likely to pressure prices. Meanwhile, with OPEC+ seeking to increase monthly production by around 138,000 barrels per day, US sanctions will try to remove supply from Iran. Iranian production dipped sharply under Trump’s first term only to rally again during president Biden’s tenure to 3.26 million barrels/day in 2024. While US sanctions could pare this back by 1.0 million barrels/day, offsetting global supply gains elsewhere, it is likely that this number is optimistic as consumers in China and India continue to ignore US sanctions on Iran. The US is likely to be more successful sanctioning Venezuelan imports which currently average around 220,000 barrels/day. Since Trump cancelled Chevron’s license to operate in the country, imports of Venezuelan oil are now likely to cease completely with these barrels competing in the global heavy, sour market. RUSSIAN SANCTIONS US president Donald Trump's tariffs and sanctions policies so far this year have weakened oil prices. These policies, along with likely increased supply of competing grades from Canada, Mexico and the Middle East, mean medium and heavy-sour benchmark oil prices could weaken even further this year. One implication is that president Trump may sacrifice the growth of the US oil sector for lower oil prices as a net benefit to the US economy. Should he also relax sanctions on Russia, the prospect of up to 0.6 million barrels/day of spare capacity hitting the market comes closer to reality, which could tank prices. What decision the Trump administration takes regarding Russian oil and gas will be pivotal for global markets, determining not only immediate price movements but also the long-term direction of the industry. Recent diplomatic events suggest the US is sympathetic to Moscow’s cause, as it pushes for an immediate peace deal with Ukraine. Many observers say that lifting sanctions could be detrimental to US oil and LNG producers and could have major oil price downside. Since the start of Russia's full-scale invasion of Ukraine, western partners, including the US, UK and the EU have introduced over 20,000 sanctions against Russia, expecting to dissuade it from pursuing its aggression against Ukraine. Most of these sanctions target its oil and LNG sectors, which account for more than a third of Russia's annual revenue. They took the form of either sanctions on production and services, or a price cap designed to limit revenue while not creating global supply imbalances. These were bolstered by a comprehensive package introduced in the final days of the previous Biden administration, directed at 183 oil tankers, some of which overlap with the 90 vessels blacklisted by the UK and another 80 sanctioned by the EU. Since the G7 plus Australia introduced a $60/bbl cap on the price for seaborne Russian-origin crude oil, prohibiting service providers in their jurisdictions to enable maritime transportation above that level, Russia has built a shadow fleet of tankers stripped of ownership, management and flagship to help circumvent the restrictions. It spent over $10 billion in acquiring the vessels and is thought to have earned around $14 billion in sales, according to CREA. CREA also noted the comprehensive sanctions on oil production might cut up to $20 billion from Russia’s oil and gas revenue forecast of $110 billion this year. Following tougher US sanctions introduced earlier this year, India and China halted the purchase of Russian oil.  But the effectiveness of sanctions lies not only in their enforcement but also in the perception that they would be imposed. With Donald Trump driving the US increasingly towards Russia, that perception will be diluted, raising questions about the effectiveness of the sanctions in the longer-term. LNG SANCTIONS To date, the most wide-reaching sanctions to be imposed on Russian LNG ships and infrastructure have been through the US treasury. The most significant European sanctions, clamping down on LNG ship-to-ship (STS) transfers in European ports, come into effect at the end of March and are intended to reduce Russia’s ability to supply its Arctic LNG to markets outside Europe. However, they could result in increasing European imports of Russian LNG, since less will be able to be exported. To minimize disruption to the US’s European allies, US treasury sanctions did not target the established 17.4 million tonne per annum (mtpa) Yamal LNG and 10.9mtpa Sakhalin 2 liquefaction plants. Nor did they initially target much Russian shipping, although this soon followed. HITTING LNG PRODUCTION Instead, measures were aimed squarely at the 19.8mtpa Arctic LNG2 (ALNG2) liquefaction plant, which was sanctioned before it had loaded a commercial cargo, as were two giant brand-new floating storage units (FSUs), each with a storage capacity of 362,000cbm. These two FSUs, named Saam and Koryak, were intended to be installed as storage hubs at Murmansk in Europe, and Kamchatka in Asia, respectively, allowing laden Arc7 ice-class vessels to shuttle cargoes away from icy conditions, so they could be reloaded via STS transfers onto more lightly winterised vessels. In keeping with the theme of sanctions targeting new, rather than existing Russian infrastructure, four newbuilds built by South Korea’s Samsung Heavy Industries (SHI) called North Air, North Way, North Mountain and North Sky were all sanctioned, preventing them from being put to work at the neighbouring Yamal LNG facility. However, four more vessels also intended to perform this role but arriving slightly later from another South Korean shipyard – Hanwha Ocean – have only recently been delivered. As a result, these four vessels – called North Moon, North Light, North Ocean and North Valley –  managed to escape the last of the Biden-era sanctions and are being used for Yamal LNG STS operations. The operator of Arctic LNG2 turned to smaller, older vessels to try to circumvent the loading ban, and these vessels – which were characterized by regular changes to their names, flags and byzantine ownership structures – were also sanctioned. Finally, in January 2025, the outgoing Biden administration slapped sanctions on existing liquefaction plants for the first time, seemingly calculating that their small sizes would not greatly inconvenience buyers. These were the 1.5mtpa Portovaya midscale and 0.66mtpa Vysotsk small-scale liquefaction plants, along with two Russian-owned vessels, the Gazprom-chartered Pskov, since renamed Pearl, and Velikiy Novgorod, which Gazprom used to load Portovaya cargoes. As it stands, some 15 LNG vessels are the subject of US treasury sanctions, according to ICIS LNG Edge, including Saam and Koryak. It should also be noted that less specific sanctions targeting technology transfers have also meant that five Arc-7 carriers that were being completed in Russia’s Zvezda shipyards, their hulls having been built in South Korea by SHI, are yet to be commissioned, two years after they were supposed to be delivered. In addition, a further ten SHI hulls have since been cancelled, which will likely slow down future Arctic LNG projects planned by Russia. Given the Trump administration’s current cordiality to Russia and antagonism towards Ukraine, it seems unlikely at this stage that further sanctions on LNG vessels will be implemented. Instead, it is arguable that existing sanctions now stand more chance of being rolled back. The sanctioned vessels are as follows: UNWINDING SANCTIONS? With the US pivoting towards Russia, there are two questions that will dominate discussions in global oil and gas markets: Will the US unwind the sanctions imposed so far and, if so, can unilateral European sanctions be equally effective? Alexander Kolyandr, a sanctions specialist and non-resident senior fellow at the Washington-based Center for European Policy Analysis (CEPA) said several conditions must be taken into consideration. Firstly, with Trump’s tariff policies likely to lead to inflation that would hit both his blue-collar Rust Belt electorate and tech companies in California, lifting some sanctions on Russian oil production could pressure crude prices, offsetting the impact of tariffs, he said. As steep price falls could hit current and future oil output, such a measure would have to be weighed against the interests of US producers. Kolyandr said the blacklisting of Russian oil companies Gazprom Neft and Surgutneftegas has a relatively minor impact because their combined production is around one million barrels per day, or less than a tenth of Russian overall production. More critical are sanctions against the so-called shadow fleet that has been carrying 78% of Russian seaborne crude oil shipments in in 2024, according to a report by the Centre for Research on Energy and Clean Air (CREA). When EU and UK sanctions are added to those imposed by the US, the number of blacklisted oil tankers increases to 270, around a third of Russia’s shadow fleet. APPROVAL Kolyandr said another factor that will determine the unwinding of US sanctions is ease of removal. “Some sanctions derive from CAATSA (Countering America's Adversaries Through Sanctions Act), which need Congressional approval and are more difficult to remove and some were introduced through emergency acts, which are easier to unwind,” Kolyandr said. Although sanctions against Russian LNG are limited in scope, the likelihood of removing them, particularly against the Arctic LNG2 project , is lower as adding more LNG to a production glut that is expected to build up in coming months would hit US producers. However, it is unlikely the US Office of Foreign Assets Control (OFAC) will seek to expand the scope of sanctions beyond Arctic LNG2 and the smaller Portovaya and Vysotsk to the bigger Yamal LNG and Sakhalin II exports as these would create major disruptions in a global LNG market set to remain tight in the mid-term. EUROPEAN SANCTIONS If the US did unwind critical sanctions against Russia’s oil and LNG shadow fleets as well as against oil production, could European measures prove as effective? Some observers believe that a possible US exit from the G7 price cap would not pose a problem to Europe because most of the Russian oil dodging the cap is exported via EU-controlled chokepoints in the Baltic Sea, giving the bloc leverage to control and enforce the cap. Russian LNG exports are equally critically dependant on European insurance. In 2024, 95% of LNG volumes were transported on vessels insured in G7 + countries. More than half of these vessels belonged to UK and Greek companies, making them vulnerable to European leverage, according to CREA. Ongoing price volatility and tight market conditions expected for the rest of the year will likely leave the EU unable to join the UK in banning Russian LNG imports, at least for the time being. However, the EU could work with Ukraine to ban remaining land-based oil exports to Hungary, Slovakia and Czechia via the Druzhba pipeline. The expansion of the Transalpine Pipeline from Italy to the Czech Republic could help replace some of the volumes transiting Ukraine. FINANCIAL MARKETS To restart Russian oil and gas operations, western companies would need access to markets, where the major global financial centres of the EU and UK could also exert pressure. On March 13, there were reports that a waiver introduced by former president Joe Biden exempting 12 Russian banks used for oil payments may have lapsed on March 12 without being renewed. As the waiver lapsed, the May Brent future price fell below $70/bbl but regained some of the lost premium the following day to hover around that level. Kolyandr said that in the case of Gazprombank, which had received a separate exemption to allow payments from pipeline gas buyers from Turkey, the waiver may still be on for now. By: Barney Gray, Aura Sabadus, Andreas Schroeder, Rob Songer

14-Mar-2025

HOUSTON (ICIS)–The new administration of US President Donald Trump is giving chemical companies a break on regulations and proposing tariffs on the nation's biggest trade partners and on the world. RELIEF FROM RED TAPEThe new administration marks a sharp break from the previous one of the former president,Joe Biden. He proposed a wave of regulations towards the end of his administration that increased costs while providing little benefit to the chemical industry. Several proposed rules under that previous administration will likely fall by the wayside, said Eric Byer, president and CEO of the Alliance for Chemical Distribution (ACD), a trade group that represents chemical distributors. So far under Trump, the regulatory climate has been mostly positive, Byer said. Trump pledged to reduce regulations, and late in his campaign, said he would purge 10 regulations for every one introduced by his administration. The government is conducting earnest analyses of the economic effects of rules, something that the previous administration had glossed over, Byer said. LESS RIGID ENVIRONMENTAL RULESThe Environmental Protection Agency (EPA) is reviewing how it evaluates existing chemicals for safety under its main program, known as TSCA. Among items it could review is the whole chemical approach that the agency adopted under the previous administration. That approach made it likely that the EPA would determine that a chemical posed an unreasonable risk. Such a finding would expose the chemical to more restrictions. For environmental regulations in general, the EPA announced numerous reviews of existing regulations that could have far-reaching effects on costs. The following lists some of the regulations under review: The National Emission Standards for Hazardous Air Pollutants (NESHAPs). The standards for chemical manufacturing will be among those that the EPA will initially review. The greenhouse gas reporting program. The Risk Management Program (RMP). One RMP rule compromised plant safety by requiring companies to share information that had been off limits since the 9/11 terrorist attacks, according to trade groups. The Technology Transitions Program. Currently, the program restricts the use hydrofluorocarbons (HFCs), which are used to make refrigerants and blowing agents for polyurethanes. Terminating the environmental justice and diversity, environment and inclusion (DEI) arms of the EPA. Environmental justice has made it harder to build chemical plants. Particulate matter national ambient air quality standards (PM 2.5 NAAQS). The review could lead to guidance from the EPA that increases both the flexibility and clarity of permitting obligations for chemical plants, according to the ACC. A rule by the previous administration that intended to account for what it described as the social cost of carbon. The Waters of the US Rule. The EPA wants to review the rule to reduce permitting and compliance costs. ENDING FAVORABLE EV RULESThe EPA is reviewing the tailpipe rule that was adopted by the previous administration. The tailpipe rule gradually reduced the carbon dioxide (CO2) emissions of automobiles. Critics have said that this and other regulations from the previous administration were so strict, they acted as bans on vehicles powered by internal combustion engines (ICE). The EPA will also review the standards for model years 2027 and later light-duty and medium-duty vehicles. The Department of Transportation (DOT) wants to reset the Corporate Average Fuel Economy (CAFE) standards, which critics say unduly favor electric vehicles (EVs) by being too strict. SUPERFUND TAX MAY BE RESCINDEDThe Republican controlled government could repeal the Superfund tax, which was imposed in 2022 on several building-block petrochemicals and their derivatives. Confusion arose over how to calculate the taxes for the derivatives. The government also seems to lack the resources to administer the program. So far, legislators have introduced bills in both legislative chambers that would repeal the tax, including Senate Bill 1195 and House of Representatives Bill 640. These would likely need to be part of a larger tax bill. Byer of the ACD said the repeal will not be easy. However, it does have a chance to succeed, and the effort is getting traction among legislators. The ACD, the ACC and the American Fuel & Petrochemical Manufacturers (AFPM) were among the trade groups that signed a letter urging Congress to repeal the tax. TARIFFS POSE RISK TO CHEMSThe tariffs adopted and being proposed by the US could increase costs of imports of steel and aluminium needed to build new plants and repair existing ones. They also increase the costs of minerals used to make catalysts as well as regional imports of plastics and chemicals. US tariffs also expose its chemical industry to retaliatory tariffs. US tariffs could cause short term logistical disruptions because companies will be re-arranging supply chains to avoid the taxes and to secure materials from new suppliers that could be farther away. "I think we will see some near-term reconfiguration of moving products because of the tariffed countries, predominantly China, Mexico and Canada," Byer said. "Either way, people will reconfigure. My hope is that the reconfiguration part will only last a few weeks to a few months at most so we can get back to just doing straight on trade deals and supply chain movements without to deal with tariff stuff." Hosted by the American Fuel & Petrochemical Manufacturers (AFPM), the IPC takes place on 23-25 March in San Antonio, Texas. Insight article by Al Greenwood Thumbnail Photo: US Capitol. (By Lucky-photographer)

13-Mar-2025

Additional reporting by Luka Dimitrov Plans for new 1GW Albanian-Italian power cable will likely help with increasing Italian power demand The project also involves the development of 3GW of renewable capacity in Albania and up to 1GW of new data centers in Italy The interconnector is expected to be completed in 2028 LONDON (ICIS) – A new 1GW subsea power cable between Italy and Albania, expected to come online in 2028, is likely to boost Italian demand in upcoming years, traders told ICIS. “The feasibility study for the project is currently underway and the results will determine its prospects”, the Albanian energy ministry said at the start of March. On 15 January Italy, Albania, and the United Arab Emirates signed a cooperation deal to build a 1GW subsea power cable between Italy and Albania. The deal, valued at more than €1 billion, will connect the Albanian port of Vlore with the Italian region of Puglia, the narrowest point between Albania and Italy. NEW ALBANIAN RENEWABLES The project signed by the three countries includes the development of 3GW of new renewable capacity in Albania, a large part of which is to be exported to Italy via the undersea power cable. On 24 February, the Italian energy company Eni announced it had signed an agreement with the Emirati companies Masdar and TAQA Transmission to be “a preferred off-taker” of the new Albanian renewable energy transmitted to Italy. Hydropower currently accounts for almost all of Albania’s domestic electricity generation. “Albanian power producer KESH is every week looking to buy energy due to low hydro stocks. The new project with renewable build-up will be a game changer for Albania and KESH as it will save costs and boost exports,” a local trader told ICIS. Albania is currently a net importer of electricity, but its increasing renewable capacity and new interconnection with Italy could see it switch to a net exporter in upcoming years, Balkan traders said. Indeed, Albania’s Energy Minister Belinda Balluku claimed on social media that the agreement would “play a significant role in increasing the country’s energy capacities, as well as supporting Albania’s goal of becoming a net exporter”. RISING ITALIAN DEMAND Traders expect the new cable to boost Italian power demand, which is set to rise by 2030 driven by data centers, EV and industrial sector expansion. In 2024, Italy imported a net total of 79.6GW from Greece, 97.5GW from Montenegro, and 67.8GW from Slovenia. In 2025 so far, Italy has continued to import more electricity than it exports to the Balkans. This trend is likely to continue amid rising Italian demand. Italian power demand totaled 312.3TWh in 2024 according to the Italian TSO Terna, and is forecast rise to 355.7TWh by 2030, ICIS analytics shows. Italian data center demand is forecast to nearly double within the same time-period, rising from 3.64TWh in 2024 to 7.01TWh in 2030. In February, Eni also signed a letter of intent with the Emirati groups MGX and G42 to develop data centers in Italy with a planned IT capacity of up to 1GW.

13-Mar-2025

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. The 1992–2021 Chemicals Supercycle was driven by unique conditions—China’s rapid expansion, globalization, and a massive, debt-fueled boom. That era is over. The industry now faces structural shifts that will reshape markets for decades. What’s different this time? Trade wars & protectionism – China’s economic slowdown is driving aggressive exports, leading to record antidumping measures on chemicals and polymers. Will the trend continue? Climate change & migration – Gaia Vince’s Nomad Century predicts 1.5 billion climate migrants by 2050. How will this shift global chemicals demand? Changing demand patterns – As industries relocate and cities adapt, will traditional GDP-driven demand forecasting still hold? These aren’t just short-term disruptions—they mark a fundamental shift in global petrochemicals. The companies that understand and adapt will be the ones that thrive. Waiting for a return to the old normal isn’t a strategy. The industry is changing—stay ahead of it. 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.

13-Mar-2025

HOUSTON (ICIS)–The threat of additional US tariffs, retaliatory tariffs from trading partners, and their potential impact is fostering a heightened level of uncertainty, dampening consumer, business and investor sentiment, along with clouding the 2025 outlook for chemicals and economies. The US chemical industry, a massive net exporter of chemicals and plastics to the tune of over $30 billion annually, is particularly exposed to retaliatory tariffs. Chemical company earnings guidance for Q1 and all of 2025 is already subdued, with the one common theme from the investor calls being little-to-no help expected from macroeconomic factors this year. Tariffs only cloud the outlook further. Tariffs have long been a feature of US economic and fiscal policy. In the period to the 1940s, tariffs were used as a major revenue source to fund the federal government before the introduction of the income tax and were also used to protect domestic industries. After 1945, a neo-liberal world order arose, which resulted in a lowering of tariffs and other trade barriers and the rise of globalization. With the collapse of the Doha Round of trade negotiations in 2008, this drive stalled and began to reverse. Heading into this year’s International Petrochemical Conference (IPC) hosted by the American Fuel & Petrochemical Manufacturers (AFPM), it is clear that the neo-liberal world order has ended. Rising geopolitical tensions and logistics issues from COVID led many firms to diversify supply chains, leading to reshoring benefiting India, Southeast Asia, Mexico and others, and to the rise of a multi-polar world. It is also resulting in the rise of tariffs and other trade barriers around the world, most notably as US trade policy. FLUID US TRADE POLICYThe US administration’s policy stance on tariffs has been very fluid, changing from day to day. It is implementing 25% tariffs on steel and aluminium imports on 12 March and has already placed additional tariffs of 20% on all imports from China as of 4 March (10% on 4 February, plus 10% on 4 March). On 11 March, the US announced steel and aluminium tariffs on Canada would be ramped up to 50% in retaliation for Canadian province Ontario placing 25% tariffs on electricity exports to the US. Later, Ontario suspended the US electricity surcharge, and the US did not impose the 50% steel and aluminium tariff. The US had placed 25% tariffs on imports from Canada (10% on energy) and Mexico on 4 March but then on 5 March exempted automotive and then on 6 March announced a pause until 2 April. China retaliated by implementing 15% tariffs on US imports of meat, fish and various crops, along with liquefied natural gas (LNG) and coal. Canada retaliated with 25% tariffs on C$30 billion worth of goods on 4 March and then with the US pause, is delaying a second round of tariffs on C$125 billion of US imports until 2 April. Mexico planned to retaliate on 9 March but has not following the US pause. US President Trump has also threatened the EU with 25% tariffs. We have a trade war and as 1960s Motown artist Edwin Starr sang, “War, huh, yeah… What is it good for?… Absolutely nothing.” Canada, Mexico and China are the top three trading partners of the US, collectively making up over 40% of US imports and exports. The three North American economies, until recently, had low or non-existent tariffs on almost all of the goods they trade. This dates back to the 1994 NAFTA free trade agreement, which was renegotiated in 2020 as the USMCA (US-Mexico-Canada Agreement). A reasoning behind the tariff threats on Canada and Mexico is to force Canada and Mexico to stop illegal drugs and undocumented migrants from crossing into the US. These tariffs were first postponed in early February after both countries promised measures on border security, but apparently more is desired. But the US also runs big trade deficits with both countries. Here, tariffs are seen by the administration as the best way to force companies that want US market access to invest in US production. IMPACT ON AUTOMOTIVEUS automakers are the most exposed end market to US tariffs and potential retaliatory tariffs, as their supply chains are even more highly integrated with Mexico and Canada following the USMCA free trade deal in 2020. The USMCA established Rules of Origin which require a certain amount of content in a vehicle produced within the North America trading partners to avoid duties. For example, at least 75% of a vehicle’s Regional Value Content must come from within the USMCA partners – up from 62.5% under the previous NAFTA deal. Supply chains are deeply intertwined. In the North American light vehicle industry, materials, parts and components can cross borders – and now potential tariff regimes – more than six times before a finished vehicle is delivered to the dealer’s lot. US prices for those goods will likely rise. The degree to which they rise (extent to which tariffs costs will pass through) depends upon availability of alternatives, structure of the domestic industry and pricing power, and currency movements. In addition, some of the Administration’s polices dealing with deregulation, energy, and tax will have a mitigating effect on the negative impact of tariffs for the US. The 25% steel and aluminium tariffs will add nearly $1,500 to the cost of a light vehicle and will result in lower sales for the automotive industry which has been plagued in recent years by affordability issues. If it had been implemented, the 50% tariff on steel and aluminium imports from Canada would only compound the pricing impact. All things being equal, 25% tariffs on the metals would push down sales by about 525,000 units but some of the favorable factors cited above as well as not all costs being passed through to consumers will partially offset the effects of higher metal prices. Partially is the key word. Since so many parts, components, and finished vehicles are produced in Canada and Mexico, US 25% tariffs on all imports from Canada and Mexico would add further to the price effects. The economic law of demand holds that as prices of a good rise, demand for the good will fall. ECONOMIC IMPACTTariffs will dampen demand across myriad industries and markets, and could add to inflation. By demand, we mean the aggregate demand of economists as measured by GDP. Aggregate demand primarily consists of consumer spending, business fixed investment, housing investment, and government purchases of goods and services. Tariffs would likely add to inflation but the effects would begin to dissipate after a year or so. By themselves, the current round of tariffs on steel and aluminium and on goods from Canada, Mexico and China will dampen demand due to higher prices. Plus, as trading partners retaliate, US exports would be at risk. Preliminary estimates suggest the annual impact from these tariffs – in isolation – on US GDP during the next three years could average 1.4 percentage points from baseline GDP growth. Keep in mind that there are many moving parts to the economy and that the more favorable policies could offset some of this and, as a result, the average drag on GDP could be limited to a 0.5 percentage point reduction from the baseline. POTENTIAL GDP IMPACT OF US TARIFFS – 20% ON CHINA, 25% ON MEXICO AND CANADA Real GDP is a good proxy for what could happen in the various end-use markets for plastic resins and the reduction of US economic growth. In outlying years, however, tariffs could support reshoring and business fixed investment. The hits on Mexico and Canada would be particularly. China’s economic growth would be affected as well. But China can shift exports to other markets. Mexico and Canada have fewer options. Resilience will be key to growing uncertainty and will lead to shifting trade patterns and new market opportunities. This is where scenarios, sound planning and strategies, and leadership come into play. US EXPORTS AT RISK, SUPPLY CHAINS TO SHIFTUS PE exports are particularly vulnerable to retaliatory tariffs. The US is specifically targeting tariffs on countries and regions that absorb around 52% of US PE exports – China, the EU, Mexico and Canada, according to an ICIS analysis. Aside from PE, the US exports major volumes of PP, ethylene glycol (EG), methanol, PVC, styrene and vinyl chloride monomer (VCM), along with base oils to countries and regions targeted with tariffs. The US exports nearly 50% of PE production with China and Mexico being major outlets. China has only a 6.5% duty on imports of US PE, having provided its importers with waivers in February 2020 that took rates to pre-US-China trade war levels. The US-China trade war under the first US Trump administration started in 2018 with escalating tariffs on both sides, before a phase 1 deal was struck in December 2019 that removed some tariffs and reduced others. After the waivers offered by China to importers in February 2020, US exports of PE and other ethylene derivatives surged before falling back in 2021 from the COVID impact. They then rocketed higher through 2023 and remained at high levels in 2024. Since 2017, the year before the first US-China trade war, US ethylene and derivative exports to China are up more than 4 times, leaving them more exposed than ever to China. With tariff escalation, chemical trade flows would shift dramatically. Just one example is in isopropanol (IPA). Shell in Sarnia, Ontario, Canada, produces IPA, of which over 85% is shipped to the US, mainly to the northeast customers, said ICIS senior market analyst Manny Borges. “It is a better supply chain for the customers instead of shipping product from the US Gulf,” said Borges. “With the increase in tariffs, we will see several customers shifting volumes to domestic producers or countries where the tariffs are not applied,” he added. US IPA producers are running their plants at around 67% of capacity on average and have sufficient capacity to supply the entire domestic market, the analyst pointed out. This dynamic, where US producers supply more of the local market versus imports, would likely play out across multiple product chains as well, especially in olefins where the US is more than self-sufficient. Even as the US is more than self-sufficient in, and a big net exporter of PE, ethylene glycols, polypropylene (PP) and polyvinyl chloride (PVC), it imports significant quantities from Canada. In the event of a 25% tariff on imports from Canada, US producers could easily fill the gap, although logistics would have to be reworked. Hosted by the American Fuel & Petrochemical Manufacturers (AFPM), the IPC takes place on 23-25 March in San Antonio, Texas. Visit the US tariffs, policy – impact on chemicals and energy topic page Visit the Macroeconomics: Impact on chemicals topic page Insight article by Kevin Swift and Joseph Chang

12-Mar-2025

LONDON (ICIS)–European chemicals stocks firmed in early trading on Wednesday as markets rebounded from the sell off of the last week, despite the onset of US tariffs on aluminium and steel and Europe’s pledge to retaliate. European markets all rallied on Wednesday as companies clawed back some of the losses seen, brought on by growing concerns that global political tensions could spiral into multiple trade wars. Escalating tensions between the US and Canada has driven down markets over the last couple of days, exacerbated by Canada moving to tariff electricity exports and the US doubling steel and aluminium tariffs on the country in response, to 50%. US President Donald Trump reversed the 50% tariffs decision later on Tuesday, but the moved forward with the imposition of 25% global duties on steel and aluminium on Wednesday. European Commission President Ursula von der Leyen said on Wednesday that the bloc would respond proportionately to the measures, but not necessarily at US aluminium and steel. Estimating the value of the tariffs at $28bn, von der Leyen pledged to respond with countermeasures worth €26bn, without setting out what products are expected to be caught in the dragnet. The measures will start on 1 April and expected to enter fully into effect on 13 April, she added. “Over the next two weeks, we will consult with key stakeholders to help us shape this new package,” she said. “The objective is to counterbalance the increased trade value affected by the US tariffs, while minimising the impact on European businesses and consumers. But the disruption caused by tariffs is avoidable if the US Administration accepts our extended hand and works with us to strike a deal,” she added. The tariffs had been clearly signalled ahead of time, giving markets breathing space to price them in, and the EU is a relatively minor exporter of steel and aluminium to the US compared to neighbours Canada and Mexico. Commodity prices also firmed in midday Europe time trading on Wednesday, on the back of the weakening US dollar. The STOXX 600 chemicals index was trading up 1.44% compared to Tuesday’s close, recovering some of the ground lost over the last few days, with Arkema, AkzoNobel, Air Liquide and Fuchs Petrolub among the big gainers. Wider European markets all rallied, with the STOXX Europe 50 index up 1.05%, Germany’s DAX up 1.78% and Italy’s FTSE MIB up 1.43%. US markets tentatively joined the rally in early trading, with the Dow index trading up 0.11%while the S&P 500 firmed 0.85%. The value of the S&P 500 has decline over 8% in the last month. Focus article by Tom Brown

12-Mar-2025