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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

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. US reciprocal tariffs, automotive tariffs to bite Hyundai Steel enters emergency mode due to tariff-induced financial strain 2024 export surplus at risk as global tariff war escalates The South Korean Ministry of Trade, Industry and Energy (MOTIE) convened a meeting with stakeholders on 12 March to strategize in response to the US' newly implemented 25% tariffs on steel and aluminum imports. The MOTIE meeting was organized to "further strengthen the joint public-private emergency response system in preparation for the US administration's steel and aluminum tariff measures, the anticipated imposition of reciprocal tariffs in early April, and tariffs on specific items such as automobiles", the ministry said in a statement. "We will further strengthen the response system ahead of the anticipated imposition of reciprocal tariffs in early April and do our utmost to protect the interests of our industry," industry minister Ahn Duk-geun said. "We will closely conduct high-level and working-level consultations with the US, including the head of the Office of Trade, and monitor the response trends of other major countries to minimize any disadvantages to our industry," he added. South Korea's trade minister Cheong In-kyo is currently in the US from 13 to 14 March to discuss trade issues including reciprocal tariffs and investment projects with his counterparts, MOTIE said in a statement on 12 March. Cheong will meet with officials at the US Trade Representative for consultations on the tariff issue, as well as investment plans by South Korean companies in the world’s biggest economy. According to data from the US International Trade Administration (ITA), South Korea was the fourth-largest exporter of steel to the US last year, accounting for 9% of Washington's steel imports. The northeast Asian country was also the fourth-biggest exporter of aluminum to the US, comprising about 4% of US aluminum imports. Hyundai Steel Co, South Korea's second-largest steelmaker after POSCO, has entered emergency management mode due to increasing market pressures, local media reported on Friday. The company has implemented a 20% salary reduction for all executives, effective 13 March, according to South Korean news agency Yonhap. Further measures include a review of voluntary retirement options for staff, along with plans to drastically reduce operational expenses, including limiting overseas travel. The US tariffs on all steel imports have significantly worsened the company's financial outlook, the Korea Times said. EMERGENCY EXPORT MEASURES The South Korean government on 18 February announced emergency export measures consisting of four pillars: tariff responses; a record won (W) 366 trillion ($253 billion) in export financing; export market diversification; and additional marketing and logistics support. South Korea is a major importer of raw materials like crude oil and naphtha, which it uses to produce a variety of petrochemicals, which are then exported. The country is a major exporter of aromatics such as benzene toluene and styrene. Government officials have expressed concern that export conditions are expected to worsen considerably in the first half of the year but improve in the second half, defining the current situation as “an emergency” and “the last opportunity to maintain the export growth momentum”. South Korea achieved record-breaking exports and a trade surplus in 2024, with exports reaching $683.7 billion and the trade balance showing a $51.6 billion surplus. A major concern is increased risks amid the trade protectionist stance of the US under President Donald Trump which could trigger a full-scale global tariff war. In February, South Korea’s export growth inched up 1% year on year to $52.6 billion, accompanied by the first decline in chip exports in 16 months which offset strong automobile and smartphone shipments. "The first half of the year is expected to be particularly difficult for exports due to the convergence of three major challenges: the launch of the new US administration, continued high interest rates and exchange rate volatility, and intensifying competition and oversupply in advanced industries," according to S Korea’s government ministries. Concerns include falling prices of major export items and a decrease in import demand in key markets as well as expectations of weak oil prices following the end of production cuts by OPEC and its allies (OPEC+) and the US pro-fossil fuel policies. South Korea’s slowing import demand, the US’ increased local production, EU’s electric vehicle market challenges and global contractions in manufacturing and construction markets are also causes for concern. These factors are expected to particularly affect exports of major items such as semiconductors, automobiles, petrochemicals, and machinery in the first half of the year. There are also worries about lower exports in critical sectors due to falling unit prices and oil prices, along with the risk of reduced demand in the US and EU for automobiles and general machinery due to market challenges and the contraction of the construction market. South Korea's GDP growth this year is projected at 1.5%, down from its previous estimate of 1.9% and lower than the 1.6% to 1.7% range indicated in January. For 2024, South Korea's final GDP growth was confirmed at 2.0%, matching the preliminary estimate released in January. The economy is experiencing a slowdown in the recovery of domestic demand, including consumption and construction investment, coupled with continued employment difficulties, particularly in vulnerable sectors, according to the Ministry of Economy and Finance's monthly economic report released in Korean on Friday. "While geopolitical risks persist in the global economy, uncertainties in the trade environment are also expanding, such as the realization of tariff impositions by major countries," it said. "The government will continue to work hard on supporting exports and responding to uncertainties in the trade environment." Focus article by Nurluqman Suratman Thumbnail image: Trade cargo containers at Busan port, South Korea – 1 February 2025. (YONHAP/EPA-EFE/Shutterstock)

14-Mar-2025

HOUSTON (ICIS)–Conflict has caused nations to adopt energy policies that favor security, affordability and reliability over sustainability as they seek to meet rising energy demand for artificial intelligence (AI) among developed countries and rising populations among developing ones. Energy security was brought to the fore by the war between Russia and Ukraine and the subsequent shock to EU industry, according to comments made at the CERAWeek by S&P Global energy conference. Executives at CERAWeek were exuberant about the prospects of rising demand for energy, particularly natural gas. Global demand for oil could reach a plateau by the middle of the next decade, although it could continue to rise as populations grow in emerging economies. RISING ENERGY DEMANDFollowing demand shocks such as war and COVID, governments want  sources of energy that are secure, reliable and affordable. "Energy realism is taking center stage," said Sultan Ahmed Al Jabr, CEO of the Abu Dhabi National Oil Co. (ADNOC). He made his comments at CERAWeek. "Sustainable progress is not possible without access to reliable, affordable and secure sources of energy." Murray Auchincloss, the CEO of BP, noted that every government to which he spoke after his appointment stressed the need for affordable and reliable energy. At the same time, the world will need more energy because of population growth, adoption of middle-class habits in emerging economies and AI. Applications like ChatGPT use up to 10 times the energy of a simple web search, Al Jabr said. By 2030, demand for power from data centers in the US will triple, accounting for 10% of consumption. ADNOC is putting money behind its predictions by establishing XRG, an energy investment company with an enterprise value of more than $80 billion. ADNOC and others expect LNG will play a large role in meeting growing demand for reliable and affordable power. Between now and 2050, LNG demand should rise by 65%, according to XRG. In fact, international gas is one of XRG's three platforms. US energy producer ConocoPhillips is also optimistic about the prospects for LNG, said Ryan Lance, CEO. He sees a growing market shipping low-cost natural gas from North America to higher cost regions in Europe and Asia. OIL HITS PLATEAUUnder current trends, global demand should continue growing slowly until reaching a plateau in the mid-2030s, said Helen Currie, chief economist of ConocoPhillips. In the industrialized world, oil demand is declining, said Eirik Warness, chief economist of Equinor. He expects oil demand to reach a plateau by the end of the decade. One factor behind tapering oil demand is China. It is weaning itself off of petroleum-based fuels in favor of nuclear and renewables for security reasons, said Jeff Currie, chief strategy officer for Carlyle. While these sources of energy have higher upfront costs, they have much lower operational costs when compared with fossil fuels, and they provide a secure source of energy. PROSPECT FOR US OIL PRODUCTIONCEOs at ConocoPhillips and Occidental Petroleum expect US oil production to reach a plateau later in the decade. After that, it should slowly taper using current technology. But energy companies have demonstrated a track record for innovation. If successful, they could extend the production life of US oilfields. Occidental is conducting pilot tests to determine whether it can use carbon dioxide (CO2) in unconventional oil fields like shale, said Vicki Hollub, CEO. The goal is to double oil recovery rates to 20% from 10%. Using CO2 in enhanced oil recovery is already an established technique in conventional fields, and Occidental is building a business around it using direct air capture (DAC). IMPLICATIONS FOR US CHEMSUS ethylene plants rely predominantly on ethane as a feedstock, and its cost tends to rise and fall with that for natural gas. At the least, rising gas demand could establish a floor on prices for the fuel and potentially lead to spikes as supply struggles to keep up with demand. At the same time, prices for petrochemicals tend to rise and fall with those for crude oil. Flat or falling demand for oil could set a ceiling on prices for petrochemicals. CERAWeek by S&P Global runs through Friday. Insight article by Al Greenwood (Thumbnail shows an LNG tanker. Image by Xinhua/Shutterstock)

12-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

HOUSTON (ICIS)–Whether it is dealing with on-again, off-again tariffs, new charges at US ports for carriers with China-flagged vessels in their fleets, or booking passage through the Panama Canal, participants at this year's International Petrochemical Conference (IPC) have plenty to talk about. Last year, shippers were dealing with tight global capacity after carriers began avoiding the Suez Canal because of attacks on commercial vessels by Houthi rebels, the possibility of labor issues at US Gulf and East Coast ports, and fewer slots for passage through the Panama Canal as that region dealt with a severe drought. But 2025 has brought a new series of challenges that will keep logistics and supply chain professionals busy. TARIFFS The US has imposed tariffs of 25% on most imports from Canada and Mexico, effective 4 March, but US President Donald Trump said last week that tariffs on goods from Mexico and Canada that are compliant with the USMCA free trade agreement will be exempt until 2 April. It is unclear what shifts in trade flows will be seen once tariffs are fully implemented, but analysts at Dutch banking and financial services corporation ING still expect global trade to see solid growth amid trade tensions, geopolitical risks and economic nationalism. ING expects trade in goods to grow by 2.5% year on year in 2025, driven by heavy front-loading in the first quarter and increased intra-continental trade throughout the year. “While it is true that some countries heavily depend on the US market, such as Canada and Mexico, global trade is far more diverse and does not solely revolve around the United States,” ING said. According to the World Integrated Trade Solution (WITS) data, which contains trade data among 122 countries, the US accounts for 13.6% of total global exports. Additionally, the reliance on raw materials and critical intermediate products that cannot be substituted, as well as new alliances and potential trade deals speak for continued trade in goods. STRATEGIES FOR ADAPTATION Chemical distributor GreenChem Industries offered suggestions that chemical companies could implement to mitigate the effects of tariffs. These include finding new sources for raw materials in regions with favorable trade agreements, modifying transportation routes and methods to lower costs and enhance efficiency, discovering more affordable chemical alternatives that maintain quality, reevaluating trade agreements to secure more competitive pricing, and investigating the potential for manufacturing within strategic markets to avoid extra costs. USTR HEARING ON NEW PORT CHARGES The office of the US Trade Representative (USTR) is accepting public comment on proposed actions against Chinese-owned ships after a Section 301 investigation determined China’s acts, policies and practices to be unreasonable and to burden or restrict US commerce. The proposal includes proposed service fees of up to $1.5 million per US port call for vessels built in China, and up to $1 million per port call for China-based operators. USTR is now accepting public comment and will hold a public hearing on the proposed actions on 24 March. Some market players feel the proposal is aimed at container ships, but a broker in the liquid chemical tanker space said that if the text of the prosed action remains unchanged, the China-built tankers comprising the fleets of shipping majors Stolt and Odjfell could be targeted. As of now, the proposal would include all commercial vessels calling on US ports. The West Gulf Maritime Association (WGMA) said that currently, there is not enough US inventory to meet the demand for maritime transport nor has the USTR suggested plans for meeting the projected demands. There is also not enough shipbuilding capacity within the US to construct the required hulls. Based on the draft executive order, the USTR will have no more than 180 days to implement the port fee collection program. The WGMA intends to individually and collectively submit comments against the proposed policy as written with recommendations, and they strongly encourage all shipping companies and vessel operators do the same through any means available to them. LIQUID CHEMICAL TANKERS Trade data from 2024 shows that about 25% of US liquid bulk exports and 21% of imports were carried on Chinese-built vessels, which will particularly impact the specialty chemical, vegetable oils and renewable fuels sectors. The fees would mean increasing the number of exports on US-flagged vessels and, given the limited existing US-flagged chemical tanker fleet, this will make any shortfall difficult to make up. Typically, it will take 24-36 months for construction of these type of specialized vessels, therefore the industry will face significant challenges in the meantime. These significant increases would most likely lead to a few different scenarios such as substantial rate increases, fewer port calls and potential supply chain disruptions for US manufacturers relying on specialty chemical imports. As a result, most owners and charterers are taking a wait and see approach while looking for longer term solutions. Liquid tanker spot rates hit their highest over the past decade in 2025 but have fallen from the peaks, according to ICIS pricing history. The following chart shows rates over the past year on the US Gulf-Asia trade route. CONTAINER RATES Rates for shipping containers from east Asia and China to the US have fallen considerable this year as capacity adjusted to diversions away from the Suez Canal and as newly built vessels entered the market. Judah Levine, head of research at online freight shipping marketplace and platform provider Freightos, said that the combination of a seasonal slump in demand and the possible end of frontloading ahead of tariffs likely drove the sharp fall in transpacific ocean rates recently. Container ships and costs for shipping containers are relevant to the chemical industry because while most chemicals are liquids and are shipped in tankers, container ships transport polymers, such as polyethylene (PE) and polypropylene (PP), are shipped in pellets. Titanium dioxide (TiO2) is also shipped in containers. They also transport liquid chemicals in isotanks. PANAMA CANAL Because of a severe drought that lowered levels in the freshwater lake that serves the Panama Canal, the Panama Canal Authority (PCA) was forced to limit daily crossings for the first time in its history. The drought was in part brought about because of the El Nino weather phenomenon, which contributes to less rainfall, especially during what is the typical rainy season. But weather patterns have shifted to La Nina, which brings increased rains and have helped levels at Gatun Lake approach capacity. Gabriel Mariscal, agency business manager at port service provider CB Fenton & Co, said the situation at the Panama Canal is completely different from a year ago. “We are not expecting to have any restrictions this year in regard to transit,” Mariscal told ICIS. “In fact, during a normal summer season, perhaps there could be a draft restriction at the Neopanamax locks, but I think that this year that will not be the case.” Mariscal said the PCA is updating regulations for customer rankings. Customer rankings consider the volumes a shipper moved through the canal over the previous 12 months, as well as the number of tolls they have paid. For example, if there are 10 slots for passage on a given day, and the PCA receives 20 requests for those slots, the higher-ranking customers will get priority. If a shipper is unable to book a slot in the first period (90 days before passage) or the second booking period (14 days before passage) then they go to the auction, where the highest bidder wins. Container shipping companies Maersk and MSC are the highest two ranked customers at present. Mariscal said Maersk has at least three vessels that transit the canal each day. PANAMA TENSIONS WITH US Mariscal said that the new presidential administration under Trump has caused some stress for the central American country. Because of this, he expects extreme care to be taken by the PCA when announcing new rules or regulations so as not to increase tensions. Trump surprised some shortly after his inauguration when he said that the US should reclaim the Panama Canal. A US congressman has since introduced a bill that would authorize the purchase of the Panama Canal. Trump threatened to reclaim the canal if Panama did not take immediate steps to curb what Trump called China’s influence and control over the vital waterway. Panama’s president said in early February the country will not renew its agreement with China’s Belt and Road Initiative (BRI) after a visit from US Secretary of State Marco Rubio. Then, last week a consortium led by private equity firm BlackRock agreed to pay $22.8 billion for port terminal operations from Hutchison Port Holdings (HPH), which includes terminals in Panama. It was Hong Kong-listed CK Hutchison’s ownership of the ports at both entrances to the canal that likely concerned Trump. 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 Visit the Logistics: Impact on chemicals and energy topic page Focus article by Adam Yanelli Additional reporting by Kevin Callahan Thumbnail image shows a container ship passing through the Panama Canal. Courtesy the Panama Canal Authority

11-Mar-2025

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. At 01:30 GMT, Taiwan's Formosa Petrochemical Corp was down 4.2% in Taipei; South Korea’s LG Chem and Hanwha Solutions were down by 3.24% and 4.28%, respectively, in Seoul; and Malaysia’s PETRONAS Chemicals Group (PCG) slipped 2.17% in Kuala Lumpur. Japan's benchmark Nikkei 225 fell by 2.75% to 36,008.90; South Korea's KOSPI Composite was down by 2.18% at 2,514.36; and China's CSI 300 index slipped by 0.39% to 3,928.80, with Hong Kong's Hang Seng Index down 0.88% at 23,573.53. Uncertainty over US President Donald Trump’s tariffs reigns as some levies imposed on Canada and Mexico, such as automotives, were delayed to 2 April; while 25% tariffs on all steel and aluminium imports are set for 12 March. For aluminium, the tariffs were raised from 10% previously. On Chinese imports, the US’ 20% tariffs took effect from 4 March, to which China responded with retaliatory levies on US poultry and agriculture products such as chicken, corn, beef and wheat, which took effect on 10 March. Trump’s actions of announcing the tariffs and then deferring the measure on trading partners – particularly Canada and Mexico – were creating confusion in the equities markets. This uncertainty would add inflationary pressures and raise prices of goods in the world’s biggest economy, analysts said. Oil prices also dipped on Tuesday morning in Asia amid the US tariff uncertainty even as the country threatens to impose further sanctions on Iranian and Russian energy. At 01:40 GMT, Brent crude oil futures were down 0.40% to $69.00/bbl, while US West Texas Intermediate futures fell 0.58% to $65.65/bbl. Thumbnail image: At Qingdao port in Shandong province, China on 6 March 2025. (Costfoto/NurPhoto/Shutterstock)

11-Mar-2025

HOUSTON (ICIS)–The new administration of US President Donald Trump has pivoted wholeheartedly to fossil fuels, with the energy secretary warning on Monday the dangers of focusing solely on climate change while emphasizing the world's continued reliance on oil and natural gas for producing energy. "There is no physical way that wind, solar and batteries can replace natural gas," said Chris Wright, US secretary of energy. He made his comments during the CERAWeek by S&P Global energy conference. At the start of his speech, Wright stressed the ways that fossil fuels dominate the energy industry. Moreover, Wright argued that the world will need more fossil fuels because of rising demand for energy from artificial intelligence (AI) and from consumers in the developing world, who want to adopt middle-class lifestyles. BREAK FROM BIDENWright and Trump mark a sharp break from the previous administration of Joe Biden, which was marked by antipathy towards fossil fuels and incoherence. While Biden was adopting restrictive policies, his energy secretary urged oil producers to make more crude. Such energy contractions are so far lacking in Trump's administration. Wright repeated the president's sentiments and went as far as to pull out a marker and sign an order during a press briefing, something the president has done during the first weeks of his administration. CLIMATE CHANGE TAKES BACK SEATWright said consumers became collateral damage when the previous administration focused on climate change at the expense of promoting reliable and affordable sources of energy. "We will end the quasi-religious policies on climate change that imposed endless sacrifice on citizens," he said. "The Trump administration will treat climate change for what it is," Wright said. It is a global side effect for creating a modern world and the benefits that come with it, and dealing with it is a tradeoff, he said. "Everything in life involves tradeoffs." That said, Wright said he is a climate realist and not a denialist. He highlighted nuclear fission and fusion, both emission-free sources of power. He mentioned advances in geothermal energy and noted the growth in solar power. The administration's policies towards wind energy reflect cost and outrage from people who live near the projects, he said. Wright said the administration does not oppose electric vehicles (EVs), but only the policies that restrict consumer choice and lavish incentives to wealthy people who do not need them. "We need thoughtful, rational policies on energy and honest assessments on climate change," he said. SENTIMENT WILL NOT DIRECTLY BOOST OIL OUTPUTWright's comments went over well with the energy conference, with the audience burst in spontaneous applause. While the US energy industry will welcome a cooperative administration, sentiment alone will not have large or immediate effect on energy production. US oil and gas production grew despite the antipathy and incoherence of the Biden administration because much of it has taken place on the private lands of the Permian basin. Private land is free from federal restrictions and moratoria on leases. Oil and gas producers will gauge demand growth and costs before they increase output. Wright acknowledged that energy companies rely on market signals, and not government decree, to make investment decisions. But the administration can play a role by adopting policies that encourage investment and make it easier for companies to obtain the permits needed to build infrastructure and large-scale projects. TARIFFS VERSUS ENERGYOne contradiction in the administration is its embrace of fossil fuels and tariffs as a central tool in economic and industrial policy. If the US adopts tariffs, they will increase costs of steel and aluminium, key raw materials for oil and gas production. They would also increase costs of imported grades of heavy oil. US refineries are built to process heavier grades of crude. If faced with tariffs, US refiners could pay the tax or find alternative suppliers that could still cost more. Otherwise, refiners would need to underutilize their plants or invest in costly retrofits that would allow them to process larger amounts of domestically produced lighter grades of oil. Wright said the US is still in the early stages of its tariff proposals, but vigorous dialogue about their effect on the economy is taking place behind closed doors. Oil and natural gas are important for the chemical industry because they are the predominant source of feedstock and energy. Chemical prices tend to rise and fall with those for gas. In the US, feedstock costs tend to rise and fall with those for natural gas because ethylene plants predominantly rely on ethane as a raw material. CERAWeek by S&P Global runs through Friday. Insight article by Al Greenwood Thumbnail shows an oil pump jack. Image by Shutterstock.

10-Mar-2025

HOUSTON (ICIS)–The US is still in the early stages of its tariff proposals, which could increase the costs of the steel and aluminium needed for oil and gas production, but vigorous dialogue about their effect on the economy is taking place behind closed doors, the secretary of energy said on Monday. "I think we are early in this," said Chris Wright, secretary of the US Department of Energy. He made his comments during the CERAWeek by S&P Global energy conference. "We have, behind closed doors, vigorous debates on tariffs," Wright said. "It's definitely not a quasi-religious, dogmatic thing. It's a dialogue." While the debate on tariffs is in its early days, Wright said he is optimistic about the outcome of the policies of the new administration because of the business background of the president and the record of his first term of office in 2016-2020. CLASHING POLICIESThe administration has enthusiastically expressed support for oil and gas production in the US with President Donald Trump saying "Drill, baby drill" during his speeches. At the same time, the government has embraced tariffs as a key tool of economic and industrial policy. This includes tariffs on steel and aluminium, key raw materials needed in the oil and gas industry. On 12 March, the US will impose tariffs of 25% on all imports of steel and aluminium, a move that will remove exemptions that it granted to some countries. The US will expand the tariff to cover more products made of steel and aluminium. In early April, the US said it would introduce retaliatory tariffs on imports from the rest of the world. These tariffs will consider what the US considers non-tariff trade barriers, such as value added tax (VAT) systems. The US could also go ahead in early April on proposals to impose 25% tariffs on all imports from Mexico, 10% tariffs on all energy imports from Canada and 25% tariffs on most other imports from Canada. The US is also considering imposing 25% tariffs on imports from the EU. These countries are major suppliers of steel and aluminium to the US. Already, higher costs in materials as well as labor have raised costs for several fuel and chemical projects. US-based chemical producer Westlake stressed that it would conduct a cost analysis to take inflation into account before it would consider expanding a joint venture cracker. More companies could give more large-scale projects second thoughts if tariffs cause further inflation in raw materials. Oil and natural gas are important for the chemical industry because they are the predominant source of feedstock and energy. Chemical prices tend to rise and fall with those for gas. In the US, feedstock costs tend to rise and fall with those for natural gas because ethylene plants predominantly rely on ethane as a raw material. CERAWeek by S&P Global runs through Friday. Thumbnail shows Chris Wright, secretary of the US Department of Energy. Image by ICIS.

10-Mar-2025

SINGAPORE (ICIS)–Here are the top stories from ICIS News Asia and the Middle East for the week ended 7 March. China Feb manufacturing activity rebounds on seasonality By Fanny Zhang 03-Mar-25 11:47 SINGAPORE (ICIS)–China's official manufacturing purchasing managers' index (PMI) in February marked a return to expansion territory after a soft January reading as factories resumed operations after the Lunar New Year (LNY) holiday. INSIGHT: China set to maintain "around 5%" growth target By Nurluqman Suratman 04-Mar-25 11:00 SINGAPORE (ICIS)–China's "Two Sessions" this week will be closely watched as the government work report is released, outlining the country's policy priorities for the year amid escalating trade tensions with the US. UPDATE: ADNOC, OMV agree on polyolefins JV worth $60 billion By Jonathan Yee 04-Mar-25 16:45 SINGAPORE (ICIS)–Austria’s OMV and the UAE’s Abu Dhabi National Oil Co (ADNOC) on Tuesday agreed to form a $60 billion joint venture (JV) by combining polyolefins businesses Borouge and Borealis following two-year talks. Asia acetic acid market softens on easing supply, downstream turnarounds By Hwee Hwee Tan 05-Mar-25 14:05 SINGAPORE (ICIS)–Asian spot prices for acetic acid imports and exports are being dampened by lengthening supply and softening demand tied to a downstream sector. China targets record 2025 budget deficit to rev up economy By Fanny Zhang 05-Mar-25 14:50 SINGAPORE (ICIS)–China has set its 2025 fiscal deficit target at a record yuan (CNY) 5.66 trillion ($780 billion), equivalent to around 4% of GDP, to fund the government’s stimulus measures and ensure the world’s second-biggest economy would post a 5% growth. Thai central bank lowers interest on slower economic growth, global trade tensions By Jonathan Yee 05-Mar-25 15:34 SINGAPORE (ICIS)–Slower than expected economic growth and downside risks such as escalating global trade tensions spurred by US trade policy led Thailand’s central bank to cut its key interest rate by 0.25 percentage points to 2.00 on 26 February, the Bank of Thailand (BOT) said. PODCAST: Asia propylene demand curbed by weaker PO margins By Damini Dabholkar 06-Mar-25 00:07 SINGAPORE (ICIS)–The northeast Asian propylene import markets have been weighed down by lengthening supply amid restarts at propane dehydrogenation (PDH) units. However, lower affordability levels from derivatives such as propylene oxide (PO) have also curbed import demand. China PP suppliers persist with export end goal amid margin challenges By Jackie Wong 06-Mar-25 11:08 SINGAPORE (ICIS)–Despite poor margins for polypropylene (PP), suppliers in China are expected to continue to persevere with their plans to expand their export sales network and win market shares in southeast Asia. South Korea Feb inflation eases amid growing economic headwinds By Nurluqman Suratman 06-Mar-25 13:50 SINGAPORE (ICIS)–South Korea's headline inflation eased in February, giving the central bank flexibility to loosen monetary policy to boost economic activity amid a slowdown. Thai PTTGC hopes to snap out of losses; eyes US ethane feed for crackers By Nurluqman Suratman 07-Mar-25 14:46 SINGAPORE (ICIS)–Imports of US ethane feedstock will be a key component of Thai producer PTT Global Chemical's (PTTGC) broader strategy to recover from recent losses, alongside initiatives to enhance competitiveness and expand into high-value businesses.

10-Mar-2025

HOUSTON (ICIS)–The US government is coming to embrace tariffs as a central part of its economic and fiscal policies, a development that could see such measures persist and threaten margins for the nation's chemical producers. Countries on the receiving end of US tariffs may retaliate by imposing duties on US exports of chemical and plastics. Such exports are vulnerable to retaliatory tariffs because of the magnitude of the US trade surplus in these products and because the world has excess petrochemical capacity. During his state of the union address, US President Donald Trump explained how tariffs are part of his strategy to increase the country's manufacturing base. TARIFFS FOR NEGOTIATIONS AND POLICYThe US already has used tariffs as a negotiating tool. In these cases, the tariffs went away once the US achieved its goals. Colombia agreed to accept migrant deportations after the US threatened to impose tariffs. The US agreed to a one-month pause on proposed tariffs after Canada and Mexico agreed to additional steps intended to address illicit drugs. The nation's proposed reciprocal tariffs could conceivably be removed if countries remove their tariffs on imports or address what the US considers to be trade barriers. Once tariffs become fundamental components of economic policy, it is likely that they will persist. TARIFFS BECOMING KEY PART OF US ECONOMIC POLICYDuring his state of the union address, Trump said manufacturers will add capacity in the US to avoid tariffs being imposed on their products. While producers do not pay the tariffs, the duties do make their products more expensive than those made by domestic manufacturers. The foreign producers could lower their prices to offset the tariffs, abandon the market or add capacity in the US to avoid the tariffs. The following lists some of Trump's comments about tariffs and economic policy: "They will come because they won't have to pay tariffs if they build in America." "All that was important to them was they didn't want to pay the tariffs, so they came, and they are building, and many other companies are coming." (Trump said this after after discussing the plans by TSMC to invest $165 billion in the US.) "If you don't make our product in America, however, under the Trump administration, you will pay a tariff, and in some cases, a rather large one. Other countries have used tariffs against us for decades, and now it's our turn to start using them against other countries." USING TARIFFS FOR SECURITY AND REVENUEAn executive order from 20 January requested that Trump's administration study the creation of an external revenue service to collect revenue generated from tariffs and duties. During Trump's state of the union address, he expressed concerns that the nation's security could be threatened by its reliance on foreign supplies of aluminium, copper, lumber and steel. "I have also imposed a 25% tariff on foreign aluminium, copper, lumber and steel, because if we don't have, as an example, steel and lots of other things, we don't have any military, and frankly we just won't have a country very long," he said. US TARIFFS MAY BE HERE TO STAYWhat's significant isn't whether tariffs achieve any of these long-term goals of raising government revenue, enhancing security or promoting economic growth. What matters is that the US sees tariffs as a critical tool for achieving these long-term goals. Tariffs are not going away. The tariff delays that the US announced on some imports from Canada and Mexico are not terminations. Once the delay expires, the US could impose the tariffs. So far, the US is showing no signs of abandoning tariffs as a policy tool or backing down on the reciprocal tariffs that it plans to impose on 2 April on all imports. The reciprocal tariffs will consider duties as well as what the US considers to be nontrade barriers, such as value-added taxes (VAT). "The reciprocal tariffs will go into effect on April 2, and he feels strongly about that. No matter what. No exemptions," said Karoline Leavitt, White House Press Secretary. "He said they should get on it, start investing start moving, shift production here to the United States of America where they will pay no tariff. That's the ultimate goal. " Insight article by Al Greenwood Thumbnail shows capitol. Image by Lucky-photographer

07-Mar-2025