Butadiene and c4s

MUMBAI (ICIS)–India’s Supreme Petrochem Ltd (SPL) expects to commission the first phase of its 70,000 tonne/year acrylonitrile butadiene styrene (ABS) plant in Nagothane in April-June, a company source said on Wednesday. Another 70,000 tonne/year ABS unit will be added at the site in the western Maharashtra state, in the second phase of the project, the source said. SPL expects the two phases to cost Indian rupees (Rs) 8.5 billion ($98 million), when the project was announced in 2023. “Mechanical completion of the first phase of our mass ABS project is expected by end of March 2025 and commissioning is scheduled for the first quarter of financial year 2025-26,” the source said. The company’s fiscal year begins in April. “There is an available market for domestically manufactured product,” the source said, citing that “nearly over 50% of the country’s ABS requirement or around 140,000 tonnes, is currently being imported”. Separately, the company plans to invest Rs8 billion to build a greenfield petrochemical complex at Karnal in the northern Haryana state. It plans to build a 100,000 tonne/year polystyrene (PS) unit and a 50,000 tonne/year expandable PS (EPS) unit, along with downstream products such as including 3D panels, PS sheeting, extruded PS, among others. “Pre-project activities for that site are going on right now,” the source said. “The new projects will meet increased demand for PS and EPS in domestic and export markets in the years ahead,” he added. SPL can produce more than 300,000 tonnes/year of PS; 118,000 tonnes/year of EPS and other downstream products at its two facilities at Nagothane in Maharashtra; and Manali in the southern Tamil Nadu state, according to the company’s website. ($1 = Rs87.13)

05-Feb-2025

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

SINGAPORE (ICIS)–China has imposed a 15% tariff on coal and liquefied natural gas (LNG) imports from the US, and a 10% tariff on US crude oil and heavy machinery, effective 10 February. The retaliatory tariffs were announced by China’s State Council on the day that the US’ additional 10% tariffs on Chinese goods took effect. “The unilateral imposition of tariffs by the US side seriously violates the rules of the World Trade Organization (WTO) and is not only not conducive to solving its own problems, but also undermines the normal economic and trade cooperation between China and the United States,” it said in a statement on Tuesday.

04-Feb-2025

Correction: In the ICIS story headlined “INSIGHT: US tariffs unleash higher costs to nation's chem industry” dated 3 February 2025, the wrong volumes were used for the following imports: Canadian ethylene-alpha-olefin copolymers, having a specific gravity of less than 0.94; Canadian polyethylene having a specific gravity of 0.94 or more, in primary forms; Canadian polyethylene having a specific gravity of less than 0.94, in primary forms; Canadian polypropylene, in primary forms; Canadian mixed xylene isomers; Mexican polypropylene, in primary forms; and Mexican cyclohexane. The US did not import cyclohexane from Mexico in 2023. A corrected story follows. HOUSTON (ICIS)–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. For Canada, the US will impose 10% tariffs on imports of energy and 25% tariffs on all other imports. For Mexico, the US imposed 25% tariffs on all imports but the countries' presidents said on Monday the tariffs are being paused for a month. For China, the US will impose 10% tariffs on all imports. US IMPORTS LARGE AMOUNTS OF PE FROM CANADAUS petrochemical production is concentrated along its Gulf Coast, which is far from many of its manufacturing hubs in the northeastern and midwestern parts of the country. As a result, individual states import large amounts of polyethylene (PE) from Canada – even though the nation as a whole has a large surplus of the material. Even Texas imports large amounts of PE from Canada – despite its abundance of plants that produce the polymer. In addition, polyester plants in North and South Carolina import large amounts of the feedstocks monoethylene glycol (MEG) and purified terephthalic acid (PTA) from Canada. The US as a whole imports significant amounts of polypropylene (PP) and polyvinyl chloride (PVC) from Canada – again, despite its surplus of these plastics. The following table lists some of the main plastics and chemicals that the US imported from Canada in 2023. The products are organized by their harmonized tariff schedule (HTS) code. HTS PRODUCT MEASUREMENT VOLUMES 3901.40.00 Ethylene-alpha-olefin copolymers, having a specific gravity of less than 0.94 kilograms 1,319,817,405 3901.20.50 Polyethylene having a specific gravity of 0.94 or more, in primary forms kilograms 1,088,071,523 3901.10.50 Polyethylene having a specific gravity of less than 0.94, in primary forms kilograms 420,561,390 2917.36.00 Terephthalic acid and its salts kilograms 407,710,439 2905.31.00 Ethylene Glycol kilograms 329,542,378 3902.10.00 Polypropylene, in primary forms kilograms 271,201,880 3904.10.00 Polyvinyl chloride, not mixed with any other substances, in primary forms kilograms 188,800,413 2902.44.00 Mixed xylene isomers liters 746,072 2905.12.00 Propan-1-ol (Propyl alcohol) and Propan-2-ol (isopropyl alcohol) kilograms 87,805,095 3901.30.60 Ethylene-vinyl acetate copolymers kilograms 71,372,396 Source: US International Trade Commission (ITC) IMPORTS FROM MEXICOMexico is not as large of a source of US petrochemical imports as Canada, but shipments from the country are still noteworthy. The following table lists some of the main plastics and chemicals that the US imported from Mexico in 2023. HTS PRODUCT MEASUREMENT VOLUMES 2917.36.00 Terephthalic acid and its salts kilograms 69,230,708 3901.10.50 Polyethylene having a specific gravity of less than 0.94, in primary forms kilograms 34,674,435 2915.24.00 Acetic anhydride kilograms 25,294,318 3904.10.00 Polyvinyl chloride, not mixed with any other substances, in primary forms kilograms 24,005,371 2915.31.00 Ethyl acetate kilograms 18,855,544 3901.20.50 Polyethylene having a specific gravity of 0.94 or more, in primary forms kilograms 14,469,582 3902.10.00 Polypropylene, in primary forms kilograms 8,849,478 Source: US International Trade Commission (ITC) IMPORTS FROM CHINAChina remains a significant source for a couple of noteworthy chemicals despite the effects of the tariffs that US President Donald Trump imposed during his first term in office. The following table shows 2023 US imports from China. HTS PRODUCT MEASUREMENT VOLUMES 29152100 Acetic acid kilograms 21,095,566 39093100 Poly(methylene phenyl isocyanate) (crude MDI, polymeric MDI) kilograms 206,642,886 Source: US International Trade Commission (ITC) China's shipments of plastics goods are more significant. OIL TARIFFS WILL HIT US REFINERSCanada and Mexico are the largest sources of imported crude oil in the US, and the heavier grades from these countries complement the lighter grades that the US produces in abundance. Those imports help fill out refining units that process heavier crude fractions, such as hydrocrackers, cokers, base oil units and fluid catalytic cracking (FCC) units. Refiners cannot swap out heavier Canadian and Mexican grades with lighter US grades. Instead, they will need to pay the tariffs or find another supplier of heavier grades, possibly at a higher cost. The following table shows the largest sources of imported crude in 2023. Figures are listed in thousands of barrels/day. COUNTRY IMPORTS % Canada 3,885 59.9 Mexico 733 11.3 Saudi Arabia 349 5.4 Iraq 213 3.3 Colombia 202 3.1 Total US imports 6,489 Source: Energy Information Administration (EIA) US refiners could take another hit from higher catalyst costs. These are made from rare earth elements, and China remains a key source. TARIFFS TO RAISE COSTS FOR FERTILIZERCanada is the world's largest producer of potash, and it exports massive amounts to the US. It is unclear how the US could find another source. Russia and Belarus are the world's second and third largest potash producers. Together, the three accounted for 65.9% of global potash production in 2023, according to the Canadian government. Canada accounts for significant shares of other US imports of fertilizers. The following table lists some of Canada's fertilizer shipments to the US in 2023 and shows its share of total US imports. Figures are from 2023. HTS PRODUCT MEASUREMENT VOLUME % 31042000 Potassium chloride metric tonne 11850925 88.8 31023000 Ammonium nitrate, whether or not in aqueous solution metric tonne 295438 76.6 31024000 Mixtures of ammonium nitrate with calcium carbonate or other inorganic nonfertilizing substances metric tonne 29203 75.7 31055100 Mineral or chemical fertilizers, containing nitrates and phosphates metric tonne 1580 66.1 31022100 Ammonium sulfate metric tonne 947140 49.6 31052000 Mineral or chemical fertilizers, containing the three fertilizing elements nitrogen, phosphorus and potassium metric tonne 147850 41.4 Source: US ITC SUPPLY CHAIN SNARLSIf US companies choose to avoid the tariffs and seek other suppliers, they could be exposed to delays and supply chain constraints. Other companies outside of the petrochemical, plastic and fertilizer industries will also be seeking new suppliers. The scale of these disruptions could be significant because Canada, Mexico and China are the largest trading partners in the US. The following table lists the top 10 US trading partners in 2023 based on combined imports and exports. Country Total Exports ($) General Imports ($) TOTAL Mexico 322,742,472,406 475,215,965,697 797,958,438,103 Canada 354,355,997,349 418,618,659,183 772,974,656,532 China 147,777,767,493 426,885,009,750 574,662,777,243 Germany 76,697,761,127 159,272,068,221 235,969,829,348 Japan 75,683,130,214 147,238,042,342 222,921,172,556 South Korea 65,056,093,590 116,154,470,335 181,210,563,925 UK 74,315,228,810 64,217,031,774 138,532,260,584 Taiwan 39,956,725,574 87,767,403,487 127,724,129,061 Vietnam 9,842,922,146 114,426,076,081 124,268,998,227 Source: US ITC RETALIATIONUS petrochemical exports would be tempting targets for retaliation because of their magnitude and the global capacity glut. China, in particular, could impose tariffs on US chemical imports and offset the disruptions by increasing rates at under-utilized plants. So far, none announced plans to target chemicals on Sunday. Canada's plans to impose 25% tariffs on $30 billion in US goods does not include oil, refined products, chemicals or plastics. That batch of tariffs will take place on February 4. Canada will impose 25% tariffs on an additional $125 billion worth of US goods following a 21-day comment period, it said. The government did not highlight plastics or chemicals in this second batch of tariffs. Instead, it said the tariffs will cover passenger vehicles and trucks, including electric vehicles, steel and aluminium products, certain fruits and vegetables, aerospace products, beef, pork, dairy, trucks and buses, recreational vehicles and recreational boats. In a statement issued on Sunday, Mexico's president made no mention of retaliatory tariffs. Instead, she said she will provide more details about Mexico's response on Monday. China said it will start legal proceedings through the World Trade Organization (WTO) and take corresponding countermeasures. RATIONALE BEHIND THE TARIFFSThe US imposed the tariffs under the nation's International Emergency Economic Powers Act (IEEPA), which gives the president authority to take actions to address a severe national security threat. In a fact sheet, Trump cited illegal immigration and illicit drugs. Saturday's executive order is the first time that a US president imposed tariffs under IEEPA. Prior IEEPA actions lasted an average of nine years. They can be terminated by a vote in Congress. Insight article by Al Greenwood (Thumbnail shows containers, in which goods are commonly shipped. Image by Shutterstock)

03-Feb-2025

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. Canada, Mexico vow to retaliate against US tariffs China warns of unspecified countermeasures Trade war jitters send Asian bourses tumbling Trump signed on 1 February executive orders on the tariffs, firing the first shots of a potential new trade war, just days into his presidency. Prices in $/bbl as of 06:12 GMT) Latest Previous Change Brent April 76.41 75.67 0.74 WTI March 73.94 72.53 1.41 US WTI crude rose by more than $1/barrel amid fears of a disruption in crude supply from two of the US' largest suppliers – Canada and Mexico. Effective 4 February, the US will apply a 25% duty on goods from the two countries, while a 10% levy applies on Chinese goods. Following the announcement, Canada and Mexico declared their intentions to retaliate against the tariffs, while China pledged to challenge the US tariffs at the World Trade Organization (WTO). For the Canadian energy sector, the Trump administration decided to impose a tariff of only 10%. Canada is a key supplier of crude oil to the US, with the US importing around 4 million barrels/day from Canada or 61% of total imports. This crude oil is a heavier crude, on which many US refineries are configured to run on, particularly in the midwestern region of the country, according to Dutch banking and financial information services provider ING. “Given the importance of Canadian oil to the US, it is not surprising to see that WTI is trading stronger this morning,” ING said. In a statement on 1 February, American Fuel & Petrochemical Manufacturers (AFPM) president and CEO Chet Thompson said: "American refiners depend on Canadian and Mexican crude oil to produce the affordable, reliable fuels consumers need every day." “We are hopeful a resolution can be quickly reached with our North American neighbors so that crude oil, refined products and petrochemicals are removed from the tariff schedule before consumers feel the impact.” ING said: “More broadly, an escalation in trade tensions is not supportive for risk assets with it souring sentiment and raising concerns over the impact it could have on global growth, which means the strength in crude oil prices may be short-lived.” “The strength in the US dollar will also likely provide some headwinds not just for oil but the broader commodities complex.” The dollar index, which measures the strength of the US dollar against six major global currencies, rose to 109.60 in early trading on Monday, up from 108.370 in the previous session. The stronger US dollar saw the Indian rupee (Rs) plunging to a record low of Rs87.1450 on Monday, breaching the Rs87-per US dollar mark for the first time. Since October last year, the rupee has lost nearly 4% of its value. Japan’s yen (Y) was more resilient, losing 0.2% to Y155.53 per US dollar. EYES ON CHINA Apart from filing a complaint with the WTO, China's commerce ministry announced that it would take unspecified countermeasures to US’ fresh tariffs. No immediate tariffs were announced as the world's second-biggest economy is in the middle of its Lunar New Year holiday, with its markets due to re-open on 5 February after an eight-day break. “Seeing that the tariff hike is with an additional 10%, which is relatively small – don’t forget that tariffs against Chinese goods entering the US have been in place for the last 7 years – we expect that the initial retaliation from China's side is likely to be mild,” ING said. “We do feel that if pushed into a corner, China's retaliation could be stronger than what most expect, but at this stage we haven't reached that point yet,” it added. “Overall, the path to avoid a more destructive US-China trade war is a narrow one.” ING expects “a very modest impact on China’s growth” from Trump’s initial move. In 2024, China’s exports to the US grew by 4.9% to $524 billion, bringing its trade surplus with the US to $360 billion, partly due to some front loading of exports toward the end of the year ahead of promised US tariffs, according to ING. “Another 10% tariff will further squeeze low margin exports to the US and likely will price out a portion of exports,” ING said. “The more vulnerable sectors will likely be those with easy replacements, such as textiles and certain electronics and machinery goods.” Separately, the 25% tariff hike on Mexico will disrupt one of China's primary export re-routing channels, according to ING. As a result, China may redirect exports to alternative markets, such as ASEAN and Latin American countries, if the US tariffs on Mexican goods remain or escalate, it said. “China is likely to focus on boosting trade ties with other countries to help offset a more protectionist US,” ING added. Trade war jitters sent bourses in Asia tumbling along with shares of petrochemical firms on Monday. At 06:00 GMT, Japan's Mitsui Chemicals and Asahi Kasei was down 2.96% and 3.17% in Tokyo, respectively, while South Korean producer LG Chem slumped by 6.53% in Seoul. Japan's benchmark Nikkei 225 index was 2.0% lower at 38,686.96, while South Korea's KOSPI fell by 2.80% at 2,446.46. Taiwan’s Formosa Petrochemical Corp fell by 6.00% in Taipei, while Thailand producer PTT Global Chemical was 2.33% lower in Bangkok. On the first trading day after the Lunar New Year holidays, Taiwan's benchmark TAIEX slumped by 3.56% to 22,689.05, while South Korea's key KOSPI fell nearly 3.00% at 2,443.10. Hong Kong's Hang Seng Index fell by 1.07% to 20,008.78, while Japan's bellwether Nikkei 225 was down by 2.75% at 38,485.37. Focus article by Nurluqman Suratman (updates stock and oil prices, adds details throughout) Thumbnail image: At Qingdao Port in Shandong province, China on 29 January 2025. (Costfoto/NurPhoto/Shutterstock)

03-Feb-2025

SINGAPORE (ICIS)–Oil prices surged, while shares of petrochemical firms in Asia tumbled on Monday after US President Donald Trump imposed tariffs on China, Canada and Mexico. Trump signed on 1 February executive orders on the tariffs, firing the first shots of a potential new trade war, just days into his presidency. US crude rose by more than $1/barrel amid fears of a disruption in crude supply from two of the US' largest suppliers – Canada and Mexico. Product Latest Previous Change Brent April 76.30 75.67 0.63 WTI March 73.87 72.53 1.34 Canada and Mexico supply around a quarter of the crude oil processed by US refiners, primarily for production of fuels such as gasoline and heating oil, according to the US Department of Energy. Effective 4 February, the US will apply a 25% duty on goods from the two countries, while a 10% levy applies on Chinese goods. Energy products from Canada will be hit with a 10% duty, but Mexican energy imports will be charged the full 25%. Canada and Mexico announced their own plans for retaliatory tariffs on the US. China’s Ministry of Commerce said on 2 February that it will file a complaint against the US at the World Trade Organization (WTO), as well as take necessary countermeasures to safeguard its interest. Markets in China remain closed on 3-4 February for the Lunar New Year holidays and will re-open on 5 February. Trade war jitters sent bourses in Asia tumbling along with shares of petrochemical firms on Monday. At 01:30 GMT, Japan's Mitsui Chemicals and Asahi Kasei was down 2.11% and 2.08% in Tokyo, respectively, while South Korean producer LG Chemfell by 5.05% in Seoul. Japan's benchmark Nikkei 225 index was 2.24% lower at 38,686.96 while South Korea's KOSPI fell by 2.80% at 2,446.46. Thumbnail image: At Qingdao port in Shandong province, China on 29 January 2025. (Costfoto/NurPhoto/Shutterstock)

03-Feb-2025

SINGAPORE (ICIS)–Here are the top stories from ICIS News Asia and the Middle East for the week ended 31 January. Inflationary pressure continues to dampen Asia recycling demand By Arianne Perez 27-Jan-25 09:53 SINGAPORE (ICIS)–Annual inflation rates posted in December 2024 across major Asian markets were mostly showing gains month on month, keeping demand for recycled plastics sluggish. Asia petrochemical trades wane; Trump’s tariff threat weighs on Feb outlook By Jonathan Yee 27-Jan-25 11:11 SINGAPORE (ICIS)–Trades in Asia’s petrochemical markets have slowed down ahead of the Lunar New Year holiday, with a general oversupply in the region and the threat of US tariffs clouding the outlook in February. China industries contract in January; official PMI falls to 49.1 By Nurluqman Suratman 27-Jan-25 12:29 SINGAPORE (ICIS)–China's official manufacturing purchasing managers' index (PMI) slipped back into contraction mode, with a January reading of 49.1, as factory activity wound down ahead of the eight-day Lunar New Year holiday, official data showed on Monday. Asia SBR, PBR trades stall amid uncertain demand, strong BD cost By Ai Teng Lim 28-Jan-25 11:29 SINGAPORE (ICIS)–Spot imports discussions in Asia of various synthetic rubber grades are stalling, not just because of extensive holiday market closures, but also due to shaky downstream demand prospects and mounting feedstock butadiene (BD) cost pressures. Asia melamine outlook hinges on post-Lunar New Year cost, demand support By Joy Foo 28-Jan-25 14:48 SINGAPORE (ICIS)–China’s melamine market stabilized from mid-January, driven by bullish signals in China's urea market. This put a pause to a broad downtrend in the melamine market that began in H2 October 2024. India PVC prices at two-year low; market eyes government spending boost By Aswin Kondapally 29-Jan-25 15:34 MUMBAI (ICIS)–India's polyvinyl chloride (PVC) prices plunged to a more than two-year low in the second half of January, owing to sluggish demand along with uncertainty over the exact timeline for the implementation of antidumping duties (ADDs). Asia naphtha demand to find support from Q1 cracker start-ups By Li Peng Seng 31-Jan-25 12:28 SINGAPORE (ICIS)–Asia’s naphtha demand will be supported post-Lunar New Year as new crackers starting up in China would temporarily mitigate concerns about impending trade wars exacerbating weak petrochemical margins.

03-Feb-2025

LONDON (ICIS)–In a changing financial and political landscape, the global base oils market is wavering between new capacity from the east and closely watching the US for new developments. 2025 looks set to bring new challenges and opportunities for investors. Widening spread between approved and unapproved Group III material Wave of new capacity, with plants particularly in Singapore and India adding competition to Group I Tight supply of Brightstock and shifting spread between domestic and export volumes US dollar rally making euro purchases more costly Potential for US tariffs on Canada and Mexico and possible impact on crude flows ICIS experts Samantha Wright, Mike Connolly and Sophie Udubasceanu discuss the top five drivers to watch in 2025 Base oils are used to produce finished lubes and greases for automobiles and other machinery.

30-Jan-2025

SAO PAULO (ICIS)–Brazil’s chemicals distribution sector posted healthy activity in 2024 as manufacturing finally gained traction, but conditions are set to worsen in 2025 amid high inflation, high borrowing costs, and a government too prone to spend, according to the CEO at Brazilian chemicals distributor Activas. Laercio Goncalves added that he was not too concerned about the prospect of US tariffs on Brazilian goods – credit ratings agency Moody’s forecasts by mid-2025 the US will impose a 5% general tariff on them – although he lamented “the world is becoming more closed” and protectionist. Activas employs 150 workers at eight Brazilian sites. In 2024, it posted sales of Brazilian reais (R) 700 million ($118 million), flat year on year. Goncalves said the company is looking to expand by starting up a ninth distribution facility in Brazil’s south, where it already has a considerable presence with six out of its eight distribution facilities. Headquartered in Sao Paulo, Activas operates in that state its main facility in Maua and a smaller one in Sao Bernardo do Campo. Four more distribution facilities are in the country’s southern industrious states: Duque de Caxias (main petrochemicals hub in Rio de Janeiro state), Joinville (Santa Catarina), Caxias do Sul (Rio Grande do Sul), and Ibipora (Parana). In the country’s north, Activas operates two facilities in Cabo de Santo (Pernambuco) and Maceio (Alagoas). Activas sales 2024 2023 2022 2021 In million R 700 700 750 1,000 ‘REALISTIC TARGET’Goncalves remains committed to bringing Activas back to the R1.0 billion sales mark it posted in 2021, when chemicals prices shot up in the aftermath of the pandemic-induced lockdowns. He said he is confident the company can achieve that within a few year, but the CEO recognized that the 2021 sales figure was much about inflated prices and not much about actual larger volumes. “We already reached that level of sales [R1.0 billion] during the pandemic, so this is a realistic goal. For 2024, we had made a conservative business plan and indeed Q1 2024 was a very complicated quarter. At the time, a year ago or so, we were quite pessimistic: economic policy changes at home, wars abroad… everything was skewing the risks downside,” said the CEO. “So, after drawing up that rather conservative forecast for 2024, we started working internally on how to increase profitability. Sometimes it was reducing volumes of certain products while focusing on the most profitable lines, and by working operationally like that we managed to turn the year around – the second and third quarters were very good.” Activas, like other Brazilian distributors such as Quimica Anastacio, were able to ride on the manufacturing bonanza in Brazil in 2024, which together with booming agriculture and healthy services propelled GDP growth to around 3.5%. In 2023, GDP had grown by 3.2%. For 2025, Activas expects its sales could grow above the average growth of 2% expected by the Brazilian chemicals industry overall. BRAZIL: WRONG WAYWhile admitting that Activas and the industry’s performance in general sharply improved in the past two years, which coincided with the first two years of President Luiz Inacio Lula da Silva’s term, Goncalvez leaves no doubt he is not keen on a government he perceives as high spending and too interventionist. "A left-wing government… overtaxes. It puts the businessman against the wall all the time," he said, adding that the cabinet should be more focused on propping up industrial investments, rather than tax them. However, Goncalves not only shows disappointment at Lula economic policy, he widens the criticism to the country’s industrial investment strategies over the past 50 years – or, rather, the lack of them. Activas’ CEO, despite all the criticism, also gave overriding support to the key measure affecting Brazilian chemicals in 2024, which came from a protectionist measure: the increase in import tariffs for dozens of chemicals, mostly of them from 12.6% to 20%, in October, which are expected to greatly prop up domestic producers’ earnings. “Import tariffs in Brazil were a highly relevant topic in 2024 and are expected to continue impacting the market in 2025, especially with the application of ADDs [anti-dumping duties] due to oversupply and dumping practices by China. These measures have a positive side, as they protect the national industry, benefiting both producers and local distributors,” said the CEO. “In the case of Activas, higher import tariffs strengthened our positioning in the domestic market. On the other hand, as we also import some product lines, such as ABS [acrylonitrile butadiene styrene] and PET [polyethylene terephthalate], some of these measures may bring specific challenges to our operation.” Goncalves said he had also good eyes to the possibility of Braskem’s Novonor controlling stake to be acquired by a consortium of Brazilian banks, with involvment of the country's state-owned investment bank Bndes, as it would reinforce the Brazilian chemicals industry overall as well as its global footprint. “As direct partners [Activas is one of Braskem’s official distributors in Brazil], we view this change positively, as we believe that the government's presence can bring stability and foster strategic investments in areas such as technology and sustainability, benefiting the entire production chain,” said Goncalves. “In addition, this perspective strengthens the competitiveness of the local industry, creating opportunities for innovation and the development of solutions aligned with the demands of the domestic and foreign markets. We are confident that, with solid governance and a long-term vision, Braskem will continue to play an essential role in the growth of the industry.” PROTECTIONISM ON THE RISEWhile on the one hand Goncalves admitted protectionism is back in the agenda like never before in the past 70 years, he was glad to see public opinion and policy makers delve into “Important discussions” about what industrial fabric countries are willing to have and willing to support in times of global oversupply for many industrial goods. And, once again, the Activas CEO leaves no doubt about his political preferences from the perspective of businesses and who, in his view, would contribute to a more thriving economy. “Current global trade policies reflect a changing scenario. The new wave of protectionism, driven by leaders like Trump, has brought to the fore important discussions about the search for a balance between protecting national interests and maintaining global trade flows,” said Goncalves. “We maintain a positive view of these changes. We are seeing a weakening of the left in many regions, which paves the way for economic policies that are more aligned with growth and competitiveness.” MANAUS: UNRESOLVEDSince ICIS last interviewed Goncalves in 2023, he said nothing has improved regarding Brazilian chemicals companies' complaints about imports entering the country via the Free Economic Zone of Manaus, in the northern state of Amazonas. The concerns are shared by production and distribution sides alike. Manaus, the state’s capital, created a Free Zone in the 1960s to prop up development there, and taking advantage of the region’s waterways. However, many of the imports entering via Manaus are not directed to manufacturing in Amazonas itself but are just re-packaged and sold on. In theory, the tax incentives resulting from the Free Zone would only apply to imports which are later transformed in the region to produce Brazilian goods, creating employment and income for the state coffers. In practice, many of the imports are sent south to the industrial hubs of Sao Paulo, Rio Grande do Sul, or Rio de Janeiro, without paying the due taxes. “The Manaus free trade zone represents an entrenched economic anomaly in Brazil, where decades of improper product imports have become normalized despite repeated political attempts at reform,” said Goncalves. “Previous Federal governments’ attempts at reform were decisively blocked [the state of Amazonas has the exclusive right over the free zone], underscoring the zone's significant political protection. “With tax gains approaching 30%, the economic incentives for maintaining the status quo remain overwhelmingly strong, rendering meaningful reform seemingly impossible despite clear systemic irregularities.” This interview took place at Activas' offices in Sao Paulo last week. Front page picture source: Activas’ facilities around Brazil Picture source: Activas Interview article by Jonathan Lopez

28-Jan-2025

SAO PAULO (ICIS)–Colombia became over the weekend the first Latin American country to get a taste of President Donald Trump’s immigration policy mixed with unconventional diplomacy after the country refused landing to two flights with repatriated Colombian migrants. After refusing the aircrafts entry, in a few frantic hours on Sunday (26 January), Colombian goods heading to the US were on the verge of facing a 25% tariff. The Latin American country, a traditional US ally in the region although with more strained relations as of late due to the policies of Colombian left-leaning President Gustavo Petro, backed down and said it would accept deportations to be carried out under US terms. The move by the US came as a surprise to most analysts in Latin America, who have spent weeks forecasting soon-to-be-implemented tariffs on Mexico and, outside Latin America, on Canada – the two countries form the free trade zone under the USMCA trade agreement. Colombia had been mostly absent from the equation as the first country potentially subject to tariffs, especially as the country's exports to the US are a daily staple on many US tables – coffee, avocado – as well as in the country's car tanks. Colombia's state-owned energy major Ecopetrol exports to the US are a key part of its business, with daily shipments between 130,000-140,000 barrels/day (see bottom table). Ecopetrol and its subsidiary producing polypropylene (PP) Esenttia had not responded to a request for comment at the time of publishing. The chemicals section at Colombia’s industrial trade group Andi had not responded to a request for comment at the time of publishing either. BUSY SUNDAYOn Sunday afternoon, Trump posted on his own social media platform, called TruthSocial, a message explaining that “socialist” Petro had not allowed the flights to land on Colombian soil, “jeopardizing” the US’s national security. “I have directed my Administration to immediately take the following urgent and decisive retaliatory measures: Emergency 25% tariffs on all goods coming into the US,” said the US president. “In one week, the 25% tariffs will be raised to 50%.” Trump added that the US would issue a travel ban and revoke visas for the Colombian government officials as well as “all allies and supporters”, including visa sanctions on all members of Petro’s political party, Colombia Humana. He added there would be enhanced customs and border protection inspections of all Colombian nationals and cargo on national security grounds, as well as the imposition of financial sanctions. By the end of the day, Colombia’s foreign minister, Luis Gilberto Murillo, spoke to reporters to explain the country’s new position, adding he would travel himself to Washington in coming days to hold “high-levels meetings” to follow up on the agreements reached on Sunday. “We have overcome the impasse with the US government… As a result of the joint work that led to the exchange of diplomatic notes between the two governments, we will continue to receive Colombians who return as deportees, guaranteeing them decent conditions as citizens with rights,” said Luis Gilberto Murillo. “The Colombian government, under the directive of President Gustavo Petro, has the presidential plane ready to facilitate the return of the compatriots who were to arrive in the country today in the morning on deportation flights. Colombia confirms that diplomatic channels of dialogue will be maintained to guarantee the rights, national interest and dignity of our citizens.” White House press secretary Karoline Leavitt said on social media platform X, formerly Twitter, “The government of Colombia has agreed to all of President Trump's terms, including the unrestricted acceptance of all illegal aliens [migrants] from Colombia returning from the US, including on US military aircraft, without limitation or delay." “Today’s [Sunday] events make clear to the world that America [the US] is respected again. President Trump will continue to fiercely protect our nation's sovereignty, and he expects all other nations of the world to fully cooperate in accepting the deportation of their citizens illegally present in the US.” NEALRY $54 BILLION IN TRADEThe US and Colombia signed a free trade deal in 2006 which was fully implemented in 2012. In 2022, the US’s trade in goods and services with Colombia stood at $53.5 billion, with exports from the US at $28.7 billion and imports at $24.8 billion, according to figures by the US government. The US posted a trade surplus in its favor of $3.9 billion. The US economy is key to Colombia. According to figures from the US government, the country is Colombia’s largest trading partner, accounting for 34% percent of the Latin American country’s total trade. Meanwhile, Colombia is a top 10 supplier of crude oil to the US, a market which is dominated by the state-owned energy major Ecopetrol, which also produces petrochemicals directly and via subsidiaries such as Essentia, which produces PP. The two countries’ traditionally friendly relationship is reflected in these words from the US government about their bilateral trade deal: “The tariff reductions in the [free trade] agreement will expand exports of US goods alone by more than $1.1 billion, supporting thousands of additional US jobs. The agreement provides significant new access to Colombia’s $166 billion services market, supporting increased opportunities for US service providers,” said the US cabinet on the site dedicated to the free trade deal with the Latin American country. “Colombia is a fast-growing market of 45 million consumers, and the agreement will help strengthen the Colombian economy and promote its growing middle class, thereby bolstering a steadfast strategic partner in this Hemisphere. The agreement helps cement our broader relationship with a country that plays an increasingly important role in the region and around the world.” US crude imports by country of originIn barrels/day 1- Canada 4,339,000 2- Mexico 526,000 3- Saudi Arabia 810,000 4- Iraq 209,000 5- Colombia 136,000 6- Brazil 178,000 7- Nigeria 56,000 8- Venezuela 521,000 9- Ecuador 69,000 10-Libya 32,000 Source: US Energy Information Administration (EIA) Front page picture: Ecopetrol’s refinery in Barrancabermeja, some 400 kilometers (250 miles) north of Bogota Picture source: Ecopetrol  Additional information by Ignacio Sotolongo

27-Jan-2025