Base oils

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Discover the factors influencing base oils markets

Global macroeconomic issues like cost of living and Chinese demand recovery are key influences in base oils markets. How will these factors affect automotive and industrial sectors? To what extent will base oils prices shift and what can indicate a potential shift in production from base oils to gas oil?

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2024 APAC Base Oils Midyear Outlook

In the latter half of 2024, Asia’s base oils market is poised for moderate shifts. Demand in China is likely to recover, with a notable decline in imports. Group II supply is set to increase, despite ongoing maintenance constraints.

Base oils news

BLOG: The first of three things you should do during the rest of this downturn

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. At first glance, the latest ICIS ethylene operating rate forecast is alarming. Even by 2035, global operating rates could still be below their long-term average—potentially marking a 14-year downturn since the Evergrande Turning Point in late 2021. But here’s the good news: This is a live situation, and industry adaptation is inevitable. The future is not set in stone—it will be shaped by the decisions we make today. The Data Speaks • ICIS base case projections show an average 6.3 million tonnes per year of new capacity. • However, by reducing this to 2.5 million tonnes per year, operating rates could return to 87%—the long-term norm. • The question is: When and how will the market rebalance? Plant Closures, Project Delays & Cancellations: The Unknowns Balancing the market means making difficult decisions, but shutdowns and project delays are far from straightforward: • Timing uncertainty – Could the upturn come sooner than expected? • High exit costs – Environmental clean-up and pension liabilities complicate shutdowns. • China’s role – Ageing plants, coal-based capacity, refinery feedstock limits, and regulatory shifts could drive rationalisation, but when and to what extent? • Government intervention – Will policy sustain industries in Europe & South Korea, or will we see major consolidations? Your Three-Point Plan for Success 1. Update the data every six months – Ethylene is just the start. Conduct the same detailed analysis for every product, country, and region. 2. Stay ahead of trade policy – As global trade tensions rise, import tariffs will shift market dynamics. Companies that act early will gain an advantage. 3. Leverage AI & analytics – Cost savings and efficiencies from AI-driven tools like Ask ICIS are already transforming decision-making. What This Means for You Yes, the downturn is severe, but opportunities remain. A data-driven approach will enable your business to adapt, optimise, and position itself for the recovery. Are you ready? 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.

11-Feb-2025

Americas top stories: weekly summary

HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 7 February. INSIGHT: US tariffs unleash higher costs to nation's chem industry The tariffs that the US will impose on all imports from Canada, Mexico and China will unleash higher costs for the nation's chemical industry, create supply-chain snarls and open it to retaliation. UPDATE: China retaliates with tariffs on US coal, crude, LNG China announced on Tuesday that it will levy 15% tariffs on coal and liquefied natural gas (LNG) imports from the US, and a 10% tariff on US crude oil, farm equipment and certain vehicles from 10 February – reviving a trade war between the world’s two largest economies. SHIPPING: US shippers likely to frontload cargos amid 30-day pause on tariffs With the US agreeing to a 30-day pause before proposed tariffs on Canada and Mexico take effect, shipping analysts anticipate a rush to frontload as much cargo as possible over the next month. US Jan auto sales up year on year; analysts expect growth in 2025 with some headwinds US January sales of new light vehicles rose year on year, and market analysts expect sales in 2025 to grow by 1.5-2.0% even with some headwinds including persistently high interest rates and a pushback on electric vehicles (EVs) under the new presidential administration. US tariffs could jeopardize $800 million of Mexican plastics exports Potential US tariffs of 25% on all goods coming from Mexico could hit the country’s plastics sector hard, with exports to the US worth $800million, plastics sector trade group Anipac said this week. UBS sees US imposing further tariffs on China imports in Q3 2025 and 2026 The US implementing 10% additional tariffs on all goods imports from China on 4 February is likely to be just the beginning, with further duties being imposed later in 2025 and 2026, said investment bank UBS’s chief China economist.

10-Feb-2025

Europe top stories: weekly summary

LONDON (ICIS)–Here are some of the top stories from ICIS Europe for the week ended 7 February. BP puts Gelsenkirchen, Germany refinery, crackers up for sale BP plans to sell its to sell its Ruhr Oel refinery, crackers and downstream assets at Gelsenkirchen in Germany. Surge in natural gas prices highlights problem for chemical producers in Europe The challenges facing petrochemical producers in Europe are well documented, but higher natural gas prices this winter and an increase in liquefied natural gas (LNG) imports highlight just how tough these difficulties are – particularly in comparison with other regions. EU defiant on tariff threats but faltering growth could limit response The European Commission has pronounced itself ready to respond to any tariff measures introduced by the US, but the fragility of the region’s recovery leaves it ill-equipped to fight a trade war. Europe PMMA faces price squeeze from cheap imports, weak demand The polymethyl methacrylate (PMMA) market in Europe faces a price and margin squeeze amid ongoing weak demand and availability of cheap imports. Europe fertilizer sector considers impact of proposed EU tariffs on Russia The announcement by the EU on 28 January that it has adopted a proposal to impose tariffs on a number of agricultural products from Russia and Belarus, as well as on certain nitrogen-based fertilizers, has been welcomed by European fertilizer producers. Urea uptick surpasses expectations as demand continues to outpace supply Expectations of an import tender in India and increasing demand from the US ahead of the start of fertilizer application for the spring will continue to boost demand for urea in the first quarter.

10-Feb-2025

Malaysia's Lotte Chemical Titan incurs record Q4 loss; '25 outlook downbeat

SINGAPORE (ICIS)–Lotte Chemical Titan (LCT) incurred its largest-ever quarterly loss, with analysts expecting the Malaysian producer to remain in the red in 2025 amid weak economic conditions and an oversupply of petrochemical products. Indonesia LINE project start-up may be delayed 2025 plant utilization rate projected to drop to 50-55% Market volatility continues amid geopolitical uncertainties, US tariffs in Malaysian ringgit (M$) thousands Q4 2024 Q4 2023 % Change 2024 2023 % Change Revenue 1,793,286 1,855,771 -3.4 7,435,031 7,646,170 -2.8 EBITDA -506,605 -84,409 -816,443 -357,098 Net income -510,074 -186,477 -1,183,406 -702,286 On 7 February, LCT shares on Bursa Malaysia had slumped by 7% to close at a record low of ringgit (M$) 0.535, after the company reported a wider Q4 2024 net loss of M$510 million ($114 million). At 06:02 GMT on Monday, its shares recovered slightly, rising by 0.93% to M$0.540. “LCT is expected to remain loss-making in the coming quarters, as product spreads are unlikely to see meaningful improvement due to persistent supply overhang from significant capacity expansions – primarily in China – outpacing demand growth,” Malaysia-based brokerage TA Securities said in a note. While construction of its petrochemical project in Indonesia is expected to be completed in the first half of this year, commercial operations may be deferred as product spreads may remain unfavorable, the brokerage said. The project called LOTTE Chemical Indonesia’s New Ethylene (LINE) project in Merak, Indonesia is nearing completion and is expected to be fully completed by 2025. It is expected to produce 1 million tonnes/year of ethylene and 520,000 tonnes/year of propylene. In Malaysia, LCT shut in December last year its cracker in Pasir Gudang to “mitigate losses by loading down its operations”. In a statement on 6 February, LCT said that it expects ongoing volatility in the global business environment due to geopolitical factors, including the Russia-Ukraine War, Middle East tensions, and US President Donald Trump's policies. “The sluggish economic performance and oversupply of petrochemical products in China have impacted supply and demand balances,” the company said. Malaysia, Indonesia, and the rest of ASEAN region will remain LCT’s key markets in the foreseeable future due to their strong economic growth. For 2025, Indonesia's growth is expected to reach 5.1%, up from 5.0% in 2024, while ASEAN's growth is projected at 4.7%, up from 4.6% in 2024. Malaysia’s GDP growth, however, is forecast to slow to 4.4%, from 4.8% in 2024, LCT said, citing projections from the International Monetary Fund (IMF). LCT’s plant operating rate for the whole of 2025 is expected to range from 50% to 55%, down from 57% in 2024, subject to periodic adjustments. HIGH PRODUCTION COST WEIGHS ON EARNINGS Q4 group revenue fell due to the depreciation of the US dollar against the ringgit, but was partially mitigated by higher sales volumes, Lotte Chemical Titan said in a filing on Bursa Malaysia on 6 February. A stronger ringgit makes Malaysian exports more expensive for international buyers, particularly those paying in US dollars. In 2024, the ringgit had appreciated by 2.7% against the US dollar, supported by a stronger-than-expected economic growth. Olefins and derivative products’ revenue increased by 2.0% to M$373.5 million on higher sales volume, but the segment’s loss before taxation and impairment widened to M$72.1 million from M$49.2 million in the same period of the previous year. In contrast, the polyolefin products’ revenue declined by 4.7% year on year to M$1.42 billion in Q4 2024, but the segment’s loss to narrow to M$74.3 million from M$148.5 million in the same period last year on improved margins and a reversal of an inventory write-down. Focus article by Nurluqman Suratman ($1 = M$4.47)

10-Feb-2025

Asia top stories – weekly summary

SINGAPORE (ICIS)–Here are the top stories from ICIS News Asia and the Middle East for the week ended 7 February 2025. INSIGHT: South Korea broadens aid for struggling petrochemical industry By Nurluqman Suratman 07-Feb-25 11:29 SINGAPORE (ICIS)–South Korea is streamlining regulations to make it easier for regions densely populated by petrochemical companies to qualify as "industrial crisis response areas", a designation that unlocks government support and financial assistance to mitigate impact of market downturns. Asia PE pipe prices get lift from tighter Mideast supply By Izham Ahmad 06-Feb-25 11:01 SINGAPORE (ICIS)–Deals and offers for polyethylene (PE) pipe grade in China and southeast Asia in the week ending 5 February were mostly firmer. China petrochemical futures mixed amid renewed US-China trade war By Jonathan Yee 05-Feb-25 16:05 SINGAPORE (ICIS)–China’s petrochemical futures markets were mixed on Wednesday after the country reopened following its Lunar New Year holiday, amid a trade war renewal with the US on 4 February. Japan's Asahi Kasei 9-month income surges; basic materials swing to profit By Nurluqman Suratman 05-Feb-25 14:20 SINGAPORE (ICIS)–Asahi Kasei's net income surged by 68.1% year on year in the nine months to December 2024, supported by improved petrochemical prices and lower fixed costs, the Japanese chemicals major said on Wednesday. UPDATE: Oil gains, Asia petrochemical shares fall as Trump starts trade war By Nurluqman Suratman 03-Feb-25 14:16 SINGAPORE (ICIS)–Oil prices jumped while shares of petrochemical firms in Asia tumbled on Monday, after US President Donald Trump imposed tariffs on China, Canada and Mexico. Asia rPE, rPP demand from packaging stays subdued in Q1 By Arianne Perez 07-Feb-25 15:40 SINGAPORE (ICIS)–The use of recycled polyethylene (rPE) and recycled polypropylene (rPP) for the packaging of fast-moving consumer goods (FMCGs) has been weak in general for Q1.

10-Feb-2025

INSIGHT: South Korea broadens aid for struggling petrochemical industry

SINGAPORE (ICIS)–South Korea is streamlining regulations to make it easier for regions densely populated by petrochemical companies to qualify as "industrial crisis response areas", a designation that unlocks government support and financial assistance to mitigate impact of market downturns. Yeosu, Ulsan, Daesan petrochemical hubs to benefit Focus shifts to manufacturing for crisis designation Voluntary business restructuring encouraged This designation also unlocks access to tailored assistance in areas like employment stability, R&D, commercialization, market access, and consulting, according to a Ministry of Trade, Industry and Energy (MOTIE) administrative notice released on 5 February. The new regulation follows a wide-ranging support package unveiled by the government on 23 December 2024, aimed at bolstering the competitiveness of its domestic petrochemical industry, which is facing a global oversupply driven by expansions in China and the Middle East. This policy shift is expected to benefit major petrochemical hubs such as Yeosu, Ulsan, and Daesan, providing them with greater access to resources designed to mitigate economic downturns and to support continued growth within the sector. Previously, the high proportion of the services sector in cities like Yeosu hindered their ability to be designated as industrial crisis response areas. The revised regulations will now assess "regional stagnation" based solely on the manufacturing sector, excluding service industries. This change will allow regions heavily reliant on manufacturing, particularly petrochemicals, to meet the designation criteria more readily. MULTI-PRONGED STRATEGY A cornerstone of the government's latest plan is encouraging voluntary business restructuring, encompassing facility closures, sales, joint ventures, efficiency improvements, and new business acquisitions. To facilitate these changes, the government will implement legal reforms and offer a range of financial and tax incentives. These include extending the grace period for acquiring 100% of holding company shares from three to five years and streamlining merger reviews with the Korean Fair Trade Commission (FTC), the country's regulatory authority for economic competition. A dedicated consultation channel between MOTIE and the FTC will further expedite reviews and support restructuring efforts. Separately, the government plans to provide up to Korean won (W) 3 trillion ($2.1 billion) in financing packages for petrochemical companies seeking to revamp their business portfolios, including expanded access to a W1 trillion business restructuring fund managed by the Korea Development Bank. For designated Industrial Crisis Response Areas, existing loan maturities from policy financial institutions will be extended, principal repayments deferred; national tax payment deadlines extended; and seizure and sale deferred for up to one year. Beyond restructuring, the government is targeting cost reduction. The duty-free period for crude oil used in naphtha production will be extended by a year until the end of 2025 and import surcharges on liquefied natural gas (LNG) used as industrial raw materials will be refunded. A "fast-track" approval process will be implemented for ethane terminal and storage tank construction to facilitate access to cheaper raw materials. Additional cost-saving measures include expanding electricity rate options through distributed power trading and rationalizing safety regulations. The plan will also support R&D focused on shifting production from general-purpose petrochemicals to specialized, high-value-added products. An "R&D Investment Roadmap for 2025-2030" will be unveiled in the first half of this year, and preliminary feasibility studies for high-value and eco-friendly chemical material technology development will be conducted. The support ratio for regional investment subsidies in Industrial Crisis Response Areas will be increased, national strategic and new growth technologies will be identified, and a W50 billion "High-Value Specialty Fund" will be established to promote production of specialty chemicals. DOMESTIC PRODUCERS STRUGGLE South Korea's four largest petrochemical manufacturers – LG Chem, Lotte Chemical, Kumho Petrochemical and Hanwha Solutions – faced continued challenges in 2024. LG Chem reported a net loss of W899.2 billion in the fourth quarter, reversing the net profit of W128.5 billion a year ago due to decreased demand for both petrochemicals and battery materials. It also reported an operating loss of W252 billion in the same period. The company has revised down its capital expenditure plan for the year to W2 trillion-3 trillion from W4 trillion previously as it navigates the market downturn. Separately, as part of its global expansion strategy, LG Chem has secured a deal to supply cathode materials to Prime Planet Energy and Solutions (PPES) – a joint venture of Japanese carmaker Toyota and appliance maker Panasonic – starting 2026. The company will focus on developing eco-friendly materials and technologies that align with PPES' low-carbon vision. Meanwhile, major ethylene producer Lotte Chemical in Q3 2024 reported a loss of W514 billion, on "delayed demand recovery, lower product spreads due to currency depreciation, one-time costs from maintenance at overseas subsidiaries, and rising shipping costs". The company is now pursuing an asset-light strategy, which involved liquidation of its Malaysian synthetic rubber production subsidiary Lotte Ube Synthetic Rubber (LUSR) – a joint venture with Japan’s Ube Elastomer. Based in Johor, Malaysia, LUSR produces 50,000 tonnes/year of polybutadiene rubber (PBR). Lotte Chemical also plans to generate W1.4 trillion in proceeds from sale of stakes in overseas subsidiaries. Synthetic rubber major Kumho Petrochemical Co reported on 4 February a Q4 net income of W61.3 billion, down 33% year on year, due to weak market demand due to a year-end drop in raw material prices; with operating profit shrinking by about 72% to W10 billion despite a 19% increase in sales to W1.8 trillion. Insight article by Nurluqman Suratman ($1 = W1,446) Thumbnail image shows an aerial view of a container pier in South Korea's southeastern port city of Busan. (YONHAP/EPA-EFE/Shutterstock)

07-Feb-2025

BP puts Gelsenkirchen, Germany refinery, crackers up for sale

BARCELONA (ICIS)–BP plans to sell its to sell its Ruhr Oel refinery, crackers and downstream assets at Gelsenkirchen in Germany. The company will start marketing the assets immediately, with the aim of completing the sale this year, according to a statement published on 6 February by the UK headquartered energy giant. According to the ICIS Supply & Demand Database BP operates a refinery and two crackers with combined capacity of 1.065 million tonnes/year of ethylene, as well as units with 645,000 tonnes/year propylene, 430,000 tonnes/year benzene plus cumene, cyclohexane, methanol, toluene and ammonia facilities. BP said the assets for sale include DHC Solvent Chemie in Mulheim an der Ruhr. All refinery owners in Europe are under pressure to rationalise their portfolios thanks to the shift to vehicle electrification and high cost base. There is also intense competition from new refineries starting up in Asia and the Middle East. BP said the move is in line with its strategic drive to deliver a simpler, more focused, higher value company. The company said that it has implemented numerous projects to modernize the infrastructure of the refinery in Gelsenkirchen in recent years.  This includes renewing the power grid and establishing an independent steam supply. The refinery can process crude oils from around the world, produce fuels and also has the potential to manufacture biofuels and process recycled plastics, said bp. Michael Connolly, ICIS principal refining analyst pointed out that the refinery is configured to give a moderately high yield of gasoline, meaning it is not really suited to the future of the European market, where vehicle electrification is hurting demand. He said BP already had plans to reduce the capacity of the refinery from 260,000 bbl/day to 155,000 bbl/day in 2025. “Undoubtedly it would have used Russian crude, but despite having access to seaborne crude, the loss of Russian crude through sanctions would have impacted financials,” he said. The economics of the facility will also be more challenging, as for all European refiners, because cracks or margins for gasoil production have declined to pre-Ukraine war levels, added Connolly. ICIS expects German crude refining capacity to fall from 2.1 million bbl/day in 2020 to 1.8 million bbl/day by 2026 and well off their peak refining capacity of 2.4 bd in 2007. Emma Delaney, BP executive vice president, customers & products said, “BP needs to continually manage its global portfolio as we position to grow as a simpler, more focused, higher-value company. After a thorough review, we have concluded that a new owner would be better suited for the site to take it forward. We are convinced that the refinery can unlock its full potential under new ownership.” Focus article by Will Beacham Graphics by Miguel Rodriguez-Fernandez Thumbnail photo: bp's refinery site in Gelsenkirchen, Germany (Source: BP) Clarification: recasts to explain BP has two crackers at the site.

06-Feb-2025

Brazil chemicals deficit hits $49 billion in 2024 despite higher tariffs by year-end

SAO PAULO (ICIS)–Brazil's chemical industry posted a $48.7 billion trade deficit in 2024 as imports surged to $63.9 billion, driven by “predatory pricing” from US and Asian suppliers, the country’s chemicals trade group Abiquim said. Asian suppliers, moreover, benefited from discounted Russian raw materials and, in China’s case, from heavy subsidies from the state, the trade group added. The overall deficit, while substantial, remained below the 2022 record of $63 billion, though Abiquim noted this was primarily due what it described as “predatory import pricing” which cushioned the “real imbalance” in the trade balance." Import volumes rose 11.5% to 65.3 million tonnes of chemicals, with fertilizer intermediates accounting for 41.1 million tonnes, up 7.4% from 2023. This marked the highest import volume since records began in 1989, as Asian suppliers leveraged cheaper Russian materials amid the war in Ukraine. Abiquim’s CEO said 2024 had been challenging for Brazil’s chemicals producers, although the year was also marked by the higher import tariffs approved for 30 chemical products, which gave the sector a boost in November and December, said Andre Passos. Following October's tariff implementation, domestic production rose 6.35% in the final two months, he added. The trade group’s CEO said higher tariffs were a welcome step but much more needed to be done to protect Brazil’s chemicals producers’ operations and their transition to the green economy. “We know that this [higher tariffs] is just the first step and it is essential to keep facing up to the extremely adverse international scenario, with excess production capacity for chemical products in the world and heavy subsidy programs in the world’s main chemical producers,” said Passos. “We are crossing the gateway to the low-carbon economy and the chemical industry is ready to lead this transition. Low-carbon chemistry is related to the use of technologies that reduce or neutralize greenhouse gas emissions. “Renewable chemistry, carbon capture and storage, and chemical recycling are some examples of this leadership that can be exercised by the Brazilian chemical industry,” he concluded. ASIA DOMINATES Asian suppliers, excluding the Middle East, dominated imports with a 31% share worth $19.6 billion, creating an $18 billion regional trade gap. The deficit with Asia has steadily worsened from $10bn in 2020 to $16.2bn in 2023, said Abiquim, reflecting China’s overcapacities and the country’s switch from net importer to next exporter for most chemicals. Domestic manufacturers faced increased competition across all segments, with imports of resins and elastomers jumping 32.4%, organic chemicals 14.3%, inorganics 9.1%, and other industrial chemicals 9.3%. Import prices averaged 6.3% lower than 2023, leading to domestic plant closures, said Abiquim. Brazilian chemical exports rose 4.3% to $15.2 billion, though volumes dipped 0.2%. The sector maintained its position as the country's third-largest manufacturing exporter, behind food products at $66.5 billion and base metals at $23.2 billion, said Abiquim.

05-Feb-2025

Japan's Asahi Kasei 9-month income surges; basic materials swing to profit

SINGAPORE (ICIS)–Asahi Kasei's net income surged by 68.1% year on year in the nine months to December 2024, supported by improved petrochemical prices and lower fixed costs, the Japanese chemicals major said on Wednesday. in Japanese yen (Y) billions Apr-Dec 2024 Apr-Dec 2023 % Change Sales 2,259.3 2,064.1 9.5 Operating income 164.4 98.5 66.9 EBITDA 299.8 233.4 28.4 Net income 98.5 58.6 68.1 Basic Materials (Core Petrochemicals) Business in Japanese yen (Y) billions Apr-Dec 2024 Apr-Dec 2023 % Change Sales 241.7 219.2 10.3 Operating income 12 -8.4  – The company's basic materials unit swung to an operating profit of Y12 billion ($78.2 millon) in April-December 2024 on the back of higher sales revenues, the company said in a statement. Asahi Kasei has revised its year to March 2025 forecasts for sales and operating income reflect an seasonal dip in demand and increased fixed costs in the final quarter of the fiscal year. Overall sales are now expected to reach Y3.04 trillion, a 9.3% increase from the previous fiscal year. However, this new projection represents a 0.9% decrease from the company's November estimate. Full-year operating income is now projected to reach Y200 billion, up 42.1% from actual 2023 figures, and up by 2.6% from the company’s previous forecast. Asahi Kasei expects its net income for the full year to surge to ¥110 billion, more than double the ¥43.8 billion recorded in the previous fiscal year. The company aims continue to "advance its business portfolio transformation; accelerating studies on structural transformation of petrochemical chain-related businesses centered on basic materials while advancing investment in growth businesses", it added. In January this year, Asahi Kasei ceased operations at its Thailand-based joint venture PTT Asahi Chemical. ($1 = Y153.43) Thumbnail image: At a port in Tokyo, Japan 9 December 2024. (FRANCK ROBICHON/EPA-EFE/Shutterstock)

05-Feb-2025

UPDATE: China retaliates with 15% tariff on US LNG

UPDATE: China retaliates with 15% tariff on US LNG SINGAPORE (ICIS)–China has announced a 15% tariff to be imposed on coal and LNG imports from the United States as a retaliation to US trade tariffs, the country’s Ministry of Commerce said in a statement. “In accordance with the Tariff Law of the People’s Republic of China, the Customs Law of the People’s Republic of China, the Foreign Trade Law of the People’s Republic of China and other laws and regulations and the basic principles of international law, and with the approval of the State Council, additional tariffs will be imposed on some imported goods originating from the United States starting from 10 February 2025.” A 10% tariff will also be imposed on crude oil, agricultural machinery, and a score of other products. US president Donald Trump and Chinese President Xi Jinping are expected to talk this week on trade and other issues. The US has imposed 10% tariffs on Chinese goods starting 4 February. “This will drive even more US volumes into Europe, and leave portfolio players with suboptimal logistical flows,” said Saul Kavonic, oil and gas analyst with research firm MST Marquee. “Chinese buyers will pay the tariffs, so will be trying to minimize the US volumes they take contractually, and swap that out for non-US volumes. This benefits other regional producers such as Australia, who will be seen as relatively more reliable after this. “The negative impact on US LNG from these tariffs will only partly offset the strong appetite from other buyers to procure more US LNG under pressure from Trump to rebalance trade deficits. The tariffs will create material market inefficiencies, which will benefit some LNG traders in the regions. It may push prices higher everywhere on the margin, as flows become suboptimal.” CHINA IMPORTS China imported 4.4 million tonnes of LNG from the United States in 2024, ICIS data shows, out of a total of 79.24 million tonnes. If the tariff is enforced and stays beyond the upcoming negotiations expected this week between US President Donald Trump and Chinese President Xi Jinping, importers could optimize the US-based positions by diverting them elsewhere. However, the imposition of tariffs on energy by the Chinese government fundamentally means higher energy costs for the country, which increases the cost of industrial production and inflationary pressure. The growing tensions in the commercial relationship between the countries could also equate to reluctance by Chinese buyers to commit to new long-term positions with US-based suppliers. Political tensions with the US could turn Chinese buyers to alternative sources of LNG and pipeline gas, including Russia. The move is the latest in a series of tariff exchanges that so far have involved Canada and Mexico in addition to China. The market anticipates that the next wave of tariffs could target members of the European Union. EU states are unlikely to impose retaliatory tariffs on imported energy, as the cost of gas is already growing following the halt of Russian pipeline gas supplies to the region. Roman Kazmin

04-Feb-2025

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