Polyurethanes

HOUSTON (ICIS)–US-listed shares of chemical companies surged on Monday after the US and China agreed to a 90-day pause on the tariffs they imposed on each other since 2 April. The lower rates take effect on 14 May. For the US, it will lower its 2025 tariffs on Chinese imports to 30% from 145%. The 30% tariff is made up of the 20% fentanyl tariffs that the US adopted earlier in 2025 as well as the 10% baseline tariff that the US has imposed on most of the world. For China, it will cut its 2025 tariffs on US imports to 10% from 125%. The 10% tariff matches the baseline rate that the US has imposed on Chinese imports. China also suspended the non-tariff measures that it has taken since 2 April. The agreement does not mention the tariffs that China had imposed in February on a limited number of US imports, including liquefied natural gas (LNG). Nor does the agreement mention the restrictions on antimony and other minerals that China announced in December 2024 as well as those on bismuth and other minerals announced in February 2025. Monday's pause does not change the tariffs that the two countries adopted during the first term of US President Donald Trump. Still, the agreement removes a substantial amount of tariffs that had brought trade between the two countries to a standstill. The following table shows the major indices followed by ICIS. Index 12-May Change % Dow Jones Industrial Average 42,132.68 883.30 2.14% S&P 500 5,805.53 145.62 2.57% Dow Jones US Chemicals Index 820.86 15.57 1.93% S&P 500 Chemicals Industry Index 876.52 13.94 1.62% PAUSE WILL RESTORE TRADE BETWEEN US AND CHINAPrior to Monday's announcement, trade between the US and China had nearly halted. The US exported large amounts of polyethylene (PE) and monoethylene glycol (MEG) to China. China, in turn, exported large amounts of methylene diphenyl diisocyanate (MDI), polyether polyols and polyester fibre to the US. The following charts show the chemical trade between the two countries. China imported large amounts of chemical feedstock from the US to supply its ethane crackers and propane dehydrogenation (PDH) units. China had supposedly waived its tariffs on US imports of ethane but maintained those on liquefied petroleum gas (LPG). The US imported large amounts of auto parts and other goods that incorporated large amounts of plastics and chemicals. The high US tariffs on Chinese goods caused China to divert shipments to southeast Asia and other parts of the world. Those increased shipments from China displaced locally manufactured goods, leading to a chain reaction that lowered demand for the plastics and chemicals that those local manufacturers used to make those products that were now being supplied by China. US CONTINUES TO ROLL BACK TARIFFSMonday's announcement is the most recent example of the US pausing its tariffs. These started with the pause that the US adopted on the 25% tariffs it imposed on imports from Canada and Mexico. Later, it paused the reciprocal tariffs that it imposed on most of the world on 2 April. The US maintained the 10% baseline tariffs that it announced that same day. The US later announced exemptions on semiconductors and electronics. Recently it reached an agreement with the UK that lowered the sectoral tariffs that the US imposed on automobile and other specific goods. PERFORMANCE OF US CHEM STOCKSThe following table shows the performance of the US-listed shares followed by ICIS. Name $ Current Price $ Change % Change AdvanSix 24.21 1.10 4.8% Avient 38.82 2.02 5.5% Axalta Coating Systems 32.73 1.63 5.2% Braskem 3.77 0.15 4.1% Chemours 11.88 0.82 7.4% Celanese 55.30 4.09 8.0% DuPont 71.17 4.40 6.6% Dow 31.34 1.86 6.3% Eastman 82.06 4.56 5.9% HB Fuller 56.59 2.06 3.8% Huntsman 12.96 0.91 7.6% Kronos Worldwide 7.63 0.35 4.8% LyondellBasell 60.80 3.87 6.8% Methanex 34.61 2.17 6.7% NewMarket 639.35 4.87 0.8% Ingevity 41.95 1.48 3.7% Olin 22.99 1.66 7.8% PPG 113.84 5.08 4.7% RPM International 114.26 3.73 3.4% Stepan 55.99 2.09 3.9% Sherwin-Williams 357.86 6.00 1.7% Tronox 5.78 0.53 10.1% Trinseo 2.62 0.10 4.0% Westlake 86.18 6.18 7.7% Thumbnail shows stock charts. Image by Shutterstock

12-May-2025

HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 2 May. China unofficial proposed tariff exemption list includes US PE, ethane but not EG China’s unofficial proposed tariff exemption list of 131 US products worth around $46 billion, or 28% of total imports, includes polyethylene (PE), along with other chemicals and key feedstock ethane, according to a document obtained by ICIS. US PPG's order patterns remain steady despite tariffs US based paints and coatings producer PPG has so far seen no changes in order patterns from its customers, and it has maintained its full-year guidance despite the tariffs imposed by the US. INSIGHT: US suppliers maintain propane exports despite tariffs China's tariffs on US shipments of liquefied petroleum gas (LPG) have yet to disrupt exports, and the companies that supply the material expect that will remain the case – even if prices fall. INSIGHT: CEOs face new problem as economy weakens, overcapacity worsens As the trade war puts a squeeze on already tepid economic growth, and deepens chromic global overcapacity in chemicals, CEOs may struggle to find fresh markets as they shift product flows to avoid the burden and uncertainty of tariffs. INSIGHT: Mexico renews nearshoring ambitions as tariffs woes ease As Mexico seems to have managed to navigate US President Donald Trump's first 100 days in office relatively unscathed, compared with other emerging, manufacturing hub emerging economies, the country now looks again at its potential as a nearshoring hub. US tariffs may create COVID-like whiplash on chem markets – Huntsman The shock of US tariffs has caused customers to halt chemical purchases due to the uncertain trade policy, and that pause is reverberating throughout chemical chains in ways that resemble the COVID-19 pandemic in 2020, the CEO of US-based polyurethanes producer Huntsman said on Friday.

05-May-2025

HOUSTON (ICIS)–The shock of US tariffs has caused customers to halt chemical purchases due to the uncertain trade policy, and that pause is reverberating throughout chemical chains in ways that resemble the COVID-19 pandemic in 2020, the CEO of US-based polyurethanes producer Huntsman said on Friday. Suppliers are panicking and lowering inventories, preserving working capital, strengthening balance sheets and pursuing other emergency measures, said Peter Huntsman, CEO. He made his comments during an earnings conference call. For example, the company is seeing automobile build rates drop low-single digit percentages, Huntsman said. By the time order patterns trickle through original equipment manufacturers (OEMs) and through to chemical companies, Huntsman is seeing double-digit drops in some order patterns. "It is not unlike what happens when someone tapped the brake on a fast-moving freeway and the car behind them applies greater pressure. Three or four cars further back, cars are literally skidding to a halt," he said. Huntsman does not expect the shock will last. "I would say this scenario is not unlike 2020, where supply chains and inventories froze and the world stood in a state of paralysis as consumers, manufacturers and suppliers tried to make sense of the short term," he said. If that's the case, then the disruptions should resolve themselves in the next few months as the US signs trade deals, companies establish alternate supply chains, and the initial shock of the tariff announcements recedes. Huntsman also noted what he described as a large disconnect between what is being ordered and what is being produced. "How do you match today's drop off in demand with the reality of what is being consumed in the broader market?" Huntsman asked. "The only parallel I've seen in the last 15-20 plus years is really 2020, when we saw a very, very rapid and sudden drop off in COVID and subsequently the bullwhip effect that came back in the later part of 2020 and went all the way to 2021." US MDI MARKET FACES LONG-TERM CHANGESNorth and South America have a trade deficit in methylene diphenyl diisocyanate (MDI), and imports account for 20-25% of total demand, Huntsman said. Most of those imports come from China. Trade tensions could have a longer effect on US MDI markets because of the nature of the tariffs and future duties that the US is considering. Since the first administration of US President Donald Trump, the US has imposed tariffs of more than 30% on Chinese shipments of MDI. During Trump's second term, the US has imposed additional tariffs of 145%. The effect of the tariffs is already choking off Chinese shipments, Huntsman said. More could come. The US International Trade Commission (ITC) is considering antidumping duties on Chinese imports of MDI. A preliminary investigation could be completed by the middle of September, Huntsman said. A final investigation to determine the size of antidumping duties could finish in February. A final ruling could be issued in March 2026. If approved, these duties could be 300-500%, and they could last for five years, Huntsman said. The cumulative effect of tariffs and antidumping duties would erect a formidable trade barrier on Chinese MDI imports. Huntsman does not expect European producers could fill in the gap. Higher manufacturing costs, tariffs and transportation account for an additional $400-500/tonne price difference for European MDI. "I do not see Europe backfilling Asian material that would otherwise be coming into the US. It has not been competitive to do that at least in the last three or four years," he said. HUNTSMAN EXPECTS NO CHANGES ON FOOTPRINTHuntsman does not expect that it will need to make any changes on its manufacturing footprint, he said. Most of the company's sales are derived from locally produced product. Huntsman produces all of its MDI in North America. "We're in an ideal location to benefit from this." In China, all of its MDI supply is produced domestically. Huntsman also makes polyols. (Thumbnail shows polyurethane foam, which is made with MDI, a chemical that could face longer term consequences from US tariffs. Image by Shutterstock.)

02-May-2025

HOUSTON (ICIS)–US based paints and coatings producer PPG has so far seen no changes in order patterns from its customers, and it has maintained its full-year guidance despite the tariffs imposed by the US. PPG's customers did not pull orders forward to the first quarter, and outside of Mexico, PPG did not see any significant changes in demand in the first quarter or in the first four months of the second quarter, said Tim Knavish, PPG CEO. He made his comments during an earnings conference call. "We have not seen evidence of any curtailment of customer orders in our business," he said. While PPG makes paints and coatings, it sells products to many end markets that are key for many chemical products, such as automotive, marine and aerospace. PPG's Q1 organic sales rose by 1% year on year, volumes and pricing rose, and the company gained market share from competitors. PPG shares rose by more than 4% while overall US stock markets fell. LIMITED EXPOSURE TO TARIFFSMost of PPG's operations buy raw materials locally at a rate of more than 95%, Knavish said. This limits their exposure to tariffs. The company has yet to see any significant changes to prices for its raw materials, he added. For two commodity feedstocks, epoxy resins and titanium dioxide (TiO2), PPG already withstood disruptions because these raw materials have been subject to anti-dumping and countervailing duties. Other upstream chemical products have excess supplies, Knavish said. For now, PPG's suppliers are favoring volumes over pricing. If suppliers begin raising prices because of tariffs, PPG will work with customers to reformulate products, substitute costly feedstock and pass through costs through surcharges and other measures. In regards to the threat posed to sales by tariffs, PPG's customers are spread around the world, and it is not heavily reliant on one country or region, Knavish said. Unlike commodity chemical producers, PPG does not rely on a continuous manufacturing process to make its products. It is a batch manufacturer, which makes it easier to adjust production to meet demand. PPG does not expect it will have to idle any of its lines, Knavish said. PROPOSED US TARIFFS HIT PPG MEXICAN BUSINESSIn Mexico, while PPG's store retail sales were solid, its project business weakened because of uncertainty about US trade policy. In February, the US proposed 25% tariffs on imports from Mexico, and the threat caused a slowdown in projects from companies and government, said Tim Knavish. He made his comments during an earnings conference call. That side of the Mexican business should remain soft in the second quarter, but PPG expects a recovery during the rest of the year. Many of the projects in question were already in flight, and PPG has not seen any cancellations. Moreover, the US is limiting the 25% tariffs to imports that do not comply with the trade agreement with its North American neighbors, the US-Mexico-Canada Agreement (USMCA). "We still believe Mexico remains a strong growth country for PPG," Knavish said. AEROSPACE YEARS-LONG BACKLOGPPG's sales to the aerospace industry are benefiting from a years-long backlog in orders caused by the COVID pandemic. This has been a long-term trend, and in addition to coatings, aerospace consumes several plastics and chemicals including synthetic hydraulic fluids and their additives, polycarbonate (PC), fibres in seating, resins in wire and cable, adhesives and electronic chemicals used in avionics. They also use composites made with epoxy resins and polyurethanes for seat cushions. PPG's aerospace backlogs extend to commercial, general aviation, after market and military, Knavish said. Vince Morales, chief financial officer, added that geopolitical turmoil is also increasing demand from the military. EUROPE BEGINS STABILIZINGFor the first time in several months, PPG is seeing some momentum in Europe, Knavish said. Industrial production is stabilizing and better order patterns are emerging in western Europe. Governments could increase spending, and Scandinavia is showing signs of recovery after two difficult years. Even the automobile sector is stabilizing. If the stabilization trend continues and if volumes increase slightly, then the improvement should provide a meaningful boost to PPG's earnings due to past cost cutting in Europe, Knavish said. That said, Knavish stressed that PPG is not expecting a sharp recovery in Europe. PAVEMENT COATINGS SUPPORTED BY INFRASTRUCTURE SPENDINGPPG sees no stop to government infrastructure projects, which are supporting demand for pavement coatings. Also, road crews have a backlog of projects because 2024 had a lot of rain and bad weather. Demand should remain strong through the year, Knavish said. Pavement coatings are made with methyl methacrylate (MMA). AUTOSPPG has gained market share among original equipment manufacturers in the automobile industry, and those share gains should allow the company to outperform the market, for which demand forecast are slightly down, Knavish said. PPG auto refinish business is focusing on the entire system of applying the paints and coatings, which allows it to weather inherent bumpiness in the market. Focus article by Al Greenwood Thumbnail shows paint, one of the products made by PPG. Image by Shutterstock.

30-Apr-2025

HOUSTON (ICIS)–The chemical industry is facing demand-stifling tariffs just as it is in one of its longest downturns in decades, the CEO of US-based Dow said on Thursday. Dow expects Q2 sales will be about $10.4 billion, down from $10.9 billion reported in Q2 2024. The company has intensified its cost cutting measures, announced 1,500 job cuts and delayed its Path2Zero project in Canada. "The reality is our industry is in one of the most protracted down cycles in decades, facing the third consecutive year of below 3% GDP growth," said Dow CEO Jim Fitterling. He made his comments during an earnings conference call. "This has been further exacerbated by geopolitical and macroeconomic concerns, which are weighing on demand globally." Dow highlighted tariffs, which will delay when the chemical industry returns to mid-cycle earnings, said Jeff Tate, Dow chief financial officer. Those tariffs could change trade flows, and could squeeze Dow's margins. Tighter margins could partially offset the benefits from demand, which Dow still expects will rise. TARIFFS DELAYING PURCHASES, STIFLING DEMANDThe tariffs have caused customers and consumers to delay purchases, Fitterling said. "We're just in an environment right now where in the marketplace, if you look at downstream demand, it doesn't matter if it's a consumer or one of our customers or somebody in the B2B world, they're all just kind of taking a wait and see approach. And that has that has an impact on what we think the long term," he said. "Right now, all this activity on tariffs is just stifling the demand." HIGH US MORTGAGE RATES DELAYING HOUSING RECOVERYElevated interest rates for home loans have made housing less affordable for consumers. As a result, home sales have remained depressed, and has dragged down demand for paints, coatings, polyurethanes and other chemical products used in house construction. The slump in house sales is also lowering demand for appliances, furniture and other durable goods because consumers tend to buy these when they move. Fewer home sales mean fewer moves. Tate noted that March marked the 14th consecutive month of year-on-year declines in building permits. SLOWER GROWTH IN AUTO DEMANDGrowth in automobile demand and the transition to electric vehicles (EVs) are slowing, said Karen Carter, Dow chief operating officer. The spike that took place in the US in March was the result of consumers making purchases before tariffs kicked in. China is relying on incentives to prop up its market. In the EU, February new car registrations fell by their largest amount since September 2024. PHARMACEUTICALS, DATA CENTERS REMAIN BRIGHT SPOTSDow continues to see pockets of growth in pharmaceuticals and data centers. Electronics and personal care applications have proven to be resilient end market for the company's Performance Materials & Coatings segment. Q2 OUTLOOKThe following table summarizes Dow's Q2 outlook. (Thumbnail shows polyethylene, a product made by Dow. Image by ICIS.)

24-Apr-2025

SINGAPORE (ICIS)–South Korea's economy shrank by 0.1% year on year in the first quarter as domestic consumption remained in the doldrums amid a prolonged political crisis, while exports fell on US tariffs, central bank data showed on Thursday. On a seasonally adjusted quarter-on-quarter basis, GDP contracted by 0.2% in the first three months of 2025, shrinking for the first time since Q2 2024, the Bank of Korea (BOK) said in a statement. Goods exports from Asia's fourth-largest economy slipped by 0.8% year on year in the first quarter, reversing the 2.6% growth in Q4 2024. Latest data for the first 20 days of April point to further weakness for South Korea's exports, falling by 5.2% year on year. 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. Private consumption, accounting for roughly half of the country's GDP, increased by 0.9% year over year in the first quarter, lower than the 1.6% growth seen in the fourth quarter of 2024. Manufacturing expanded at a slower pace of 0.4% year on year in the first quarter, from the 2.2% growth in the last three months of 2024. South Korea's economy is facing headwinds on multiple fronts. The country is still reeling from the political chaos triggered by former President Yoon Suk Yeol's surprise martial law declaration on 3 December, which lasted just a few hours, and ultimately led to his removal from office on 4 April. South Korea will hold a snap election on 3 June to replace Yoon after the country’s Constitutional Court unanimously upheld a decision by the legislature to impeach Yoon. The trade-dependent economy is also grappling with the impact of the US' broad tariff scheme. A 25% US reciprocal tariff announced for South Korea that was supposed to take effect on 9 April was suspended by US President Donald Trump for 90 days. During this temporary suspension, South Korea is subject to the 10% baseline tariff and its auto industry remains affected by a 25% tariff on automobiles, which is separate from the reciprocal tariff and not paused. The central bank forecasts a slower GDP growth of 1.5% for South Korea this year, after posting a 2.0% growth in 2024. BoK governor Rhee Chang-yong on 17 April, however, said that the growth forecast might still be too optimistic, citing Trump's tariff policy and its sectoral tariffs, as well as levies on China, which is South Korea’s biggest market. Visit the ICIS Topic Page: US tariffs, policy – impact on chemicals and energy. Thumbnail image: At a container pier in South Korea's southeastern port city of Busan on 1 November 2023.(YONHAP/EPA-EFE/Shutterstock)

24-Apr-2025

TORONTO (ICIS)–Canada will continue resorting to retaliatory tariffs against the US – regardless of which party, the incumbent Liberals or the opposition Conservatives, wins the upcoming 28 April federal election. In an election debate on Thursday evening, Prime Minister Mark Carney and Pierre Poilievre, leader of the Conservatives, both said that retaliatory tariffs were necessary to deter the US tariff threat. However, Carney said that Canada could not impose full-scale “dollar-for-dollar” counter-tariffs, given that the US economy is more than 10 times larger than Canada’s economy. Rather, the Liberals would aim at counter-tariffs that have maximum impact on the US, but only minimum impact on Canada. In opinion polls about the elections, the Liberals are currently on track for their fourth consecutive victory since 2015. Carney took over from former Prime Minister Justin Trudeau on 14 March. AUTO EXEMPTION Carney also confirmed that the government will be granting exemptions to its 25% retaliatory tariffs on US autos that took effect on 9 April. The exemptions will apply to automakers that maintain production and investments in Canada, he said. According to information on the website of Canada’s finance ministry, a “performance-based remission framework” would allow automakers that continue to manufacture vehicles in Canada to import “a certain number” of US-assembled, USMCA-compliant vehicles into Canada, free of retaliatory tariffs. The number of tariff-free vehicles a company is permitted to import would be reduced if there are reductions in the automakers’ Canadian production or investments, according to the ministry. The automotive industry is a major global consumer of petrochemicals that contributes more than one-third of the raw material costs of an average vehicle. The automotive sector drives demand for chemicals such as polypropylene (PP), along with nylon, polystyrene (PS), styrene butadiene rubber (SBR), polyurethane (PU), methyl methacrylate (MMA) and polymethyl methacrylate (PMMA). Please also visit the ICIS topic pages:Automotive: Impact on chemicals, and US tariffs, policy – impact on chemicals and energy Thumbnail photo of Stellantis' Canadian auto assembly plant at Windsor, Ontario, where production was suspended because of tariff uncertainties (photo source: Stellantis)

18-Apr-2025

HOUSTON (ICIS)–The US is taking steps that could lead to tariffs on imports of up to 50 critical minerals, many of which are used to make catalysts for key processes used by refiners and chemical producers. If the US ends up imposing the tariffs on the critical minerals, then they would take the place of the reciprocal tariffs. REFINING CATALYSTS AND AROMATICS MARKETSFluorspar is used to make hydrofluoric acid, a catalyst used in alkylation units. These units convert isobutane and propylene into alkylate, a high-octane blendstock. Cerium and lanthanum are used to make catalysts for fluid catalytic cracking (FCC) units. These units convert gas oils into gasoline and refinery grade propylene (RGP). If the US imposes tariffs on these catalysts and if the tariffs cause large enough price increases, then refiners could alter their operations to reduce their costs. If refiners lower alkylation operating rates, they may rely on other high-octane blendstock such as toluene or mixed xylenes (MX). Changes in alkylation and FCC rates would concurrently affect supply and demand for RGP. ANTIMONY AND PETChinese restrictions on antimony already have led producers to propose price increases for polyethylene terephthalate (PET), which relies on the mineral as a catalyst. If the US imposes tariffs on antimony, then it would further increase prices from the other countries that export the mineral to the US. BISMUTH AND POLYURETHANESBismuth is used as a catalyst for making polyurethanes. One such bismuth-based catalyst won an innovation award. OTHER CATALYSTSIridium, neodymium, rhodium, ruthenium, ytterbium and yttrium are all used to make catalysts, according to the US Geological Survey (USGS). Palladium and platinum are used in catalytic converters in automobiles. TIO2 AND PAINTS MARKETSThe US also considers titanium and zirconium as critical minerals. It is unclear if the US would impose tariffs on titanium metal or titanium oxide. However, the US list of critical minerals implies that the tariffs could include titanium oxide. Titanium oxide is the feedstock that is used to make titanium dioxide (TiO2), a white pigment that is used to make paints opaque. Producers of paints and coatings are already facing higher costs from US tariffs on steel. In 2023, Sherwin-Williams estimates that plastic and metal containers made up 15% of its product's costs. A tariff on titanium oxide would further increase costs for paints and coatings producers. Zirconium is a byproduct of processing mineral sands that contain titanium. TiO2 producers Tronox and Chemours operate such mines. Tronox's are in Australia and South Africa, and Chemours has mines in the US states of Florida and Georgia. FLUORSPAR AND FLUOROMATERIALSFluorspar is also the upstream feedstock for fluorochemicals and fluoropolymers. Polyurethane foams use fluorochemicals as blowing agents. Fluoropolymers include Teflon. These are becoming increasingly important in 5G equipment, semiconductor fabrication plants and lithium-ion batteries. Fluoropolymers are also used as membranes in hydrogen fuel cells and chlor-alkali plants. BARITE, CESIUM USED IN OIL PRODUCTIONBarite is used to make drilling mud. Cesium is used to make cesium formate drilling fluids, which are used by oil and gas producers. FLAME RETARDANTSAluminum and antimony are used to make flame retardants. INVESTIGATION TO PRECEDE ANY TARIFFSBefore the US imposes any tariffs on critical minerals, it will conduct an investigation under section 232 of the Trade Expansion Act of 1962. The US has used that section to impose tariffs on other products such as steel and aluminium. The scope of the investigation will include the 50 minerals deemed critical by the USGS, processed critical minerals and derivative products. Derivative products include semi-finished goods and final products "such as permanent magnets, motors, electric vehicles, batteries, smartphones, microprocessors, radar systems, wind turbines and their components and advanced optical devices", according to the order. The secretary of commerce will have 180 days to submit a final report of the investigation to the president. Recommendations will include tariffs and policies the US could adopt that would promote more production of critical minerals. LIST OF CRITICAL MINERALSThe following table shows the minerals that the US considers critical. Aluminium Magnesium Antimony Manganese Arsenic Neodymium Barite Nickel Beryllium Niobium Bismuth Palladium Cerium Platinum Cesium Praseodymium Chromium Rhodium Cobalt Rubidium Dysprosium Ruthenium Erbium Samarium Europium Scandium Fluorspar Tantalum Gadolinium Tellurium Gallium Terbium Germanium Thulium Graphite Tin Hafnium Titanium Holmium Tungsten Indium Vanadium Iridium Ytterbium Lanthanum Yttrium Lithium Zinc Lutetium Zirconium Source: USGS Insight article by Al Greenwood (Thumbnail shows a fuel pump that dispenses gasoline, which relies on critical minerals for production. Image by Shutterstock.)

17-Apr-2025

SINGAPORE (ICIS)–US “reciprocal” tariffs are prompting a shift of trade flows and supply chains as market players in Asia seek alternative export outlets for some chemicals, while overall demand remains tepid amid growing fears of a global recession. US-China trade war 2.0 keeps market players on edge Regional traders wary amid US’ 90-day tariff suspension SE Asia prepares for US trade talks as China president visits Vietnam, Malaysia, Cambodia Trades across the equities and commodities markets last week have been highly volatile since the start of April in the wake of US President Donald Trump’s reciprocal tariffs, the highest of which was imposed on China. The higher-than-expected tariffs sparked concerns over a possible global recession that sent crude prices slumping last week, dragging down downstream aromatics products such as benzene and toluene. Trump had raised the reciprocal tariffs for China three times in as many days – from 34%, to 84% and to 125% on 9-11 April – with China responding in kind. Including the combined 20% tariffs imposed in the past two months, the US’ effective additional tariffs for China stand at 145%. In the polyethylene (PE) market, prices are softening as US-bound export orders shrink, while polypropylene (PP) exports from China to southeast Asia look set to decline. Most polyolefin players in Asia and beyond are currently attending the 37th International Exhibition on Plastics and Rubber Industries (Chinaplas) in Shenzhen, China, which will run up to 18 April. Some China-based market players said the event could provide them an opportunity to explore alternative markets by deepening their relationships with buyers in southeast Asia. Exports of chemicals and plastics used in automobiles to the US, meanwhile, are likely to shrink as well amid auto tariffs from the world’s biggest economy. Apart from PP, exports nylon, butadiene (BD), and styrene butadiene rubber (SBR) to the US are expected to decline. Trump, on 14 April, said he is considering possible exemptions to his 25% tariffs on imported automobiles and parts. His tariffs on all car imports took effect on 3 April, while those on automotive parts will take place no later than 3 May. The automotive sector is a major downstream industry for petrochemicals. China’s PE imports from the US spiked in early 2025 but this is expected to reverse sharply because of the trade war between the two countries. However, China has a substantial number of naphtha and coal-based PE plants starting up in 2025 with a combined PE capacity of more than 8 million tonnes, which should reduce the country’s dependence on imports. The US will also need to redirect surplus PE to alternative markets amid dwindling Chinese demand. Market players expect demand in the second quarter to be worse than the first three months of 2025 amid hefty US reciprocal tariffs hanging over countries in Asia when Trump’s three-month pause lapses. Implementation of the US’ reciprocal tariffs were suspended on 9 April, for 90 days, providing some reprieve to about 60 countries, except China. Freight rates between China and the US have already decreased due to the trade war as demand evaporates. However, vinyl acetate monomer (VAM) prices in India are bucking the general downtrend and have firmed up as the chemical is not directly subjected to US tariffs. VAM is primarily used in the production of adhesives, textiles, paints and coatings. SE ASIA PREPARE TRADE TALKS The 10-member ASEAN group pledged that they will not impose retaliatory tariffs on the US following an emergency meeting, opting to negotiate with the US. Among the nations scheduled for talks with the US are Vietnam, Thailand and Indonesia – all of which were slapped with high tariffs of up to 46%. Thailand intends to scrutinize imports more thoroughly to prevent cheap imports from China entering the country, as the US has warned against such “third-country” methods of evading tariffs. Anti-dumping duties are also being considered by Malaysia and Indonesia against China to counter an expected rise in cheap imports to their countries. Trade flows are still expected to change as China steps up talks and partnerships with the EU, as well as with southeast Asian countries such as Malaysia, Vietnam and Cambodia. While several Asian nations are lining up for discussions with the US government, China and the US have yet to schedule a meeting, heightening concerns of economic headwinds in the coming year. Singapore has revised down its GDP growth forecast for 2025 to between 0-2% on account of the US-China trade war, and other countries are expected to follow suit. Before the pause on reciprocal tariffs, the World Trade Organization (WTO) had forecast trade growth to contract by 1.0% in 2025, from 3.0% previously. Meanwhile, China President Xi Jinping is currently in southeast Asia – with state visits to Vietnam, Malaysia and Cambodia – up to 18 April, to forge stronger economic ties with its Asian neighbors amid an escalating trade war with the US. China posted an annualized Q1 GDP growth of 5.4%, unchanged form the previous quarter, while there is a consensus that the Asian economic giant would weaken from Q2 onward. Focus article by Jonathan Yee Visit the ICIS Topic Page: US tariffs, policy – impact on chemicals and energy. Additional reporting by Samuel Wong, Izham Ahamd, Jackie Wong, Hwee Hwee Tan, Joanne Wang, Lucy Shuai, Jonathan Chou, Angeline Soh, Melanie Wee, Shannen Ng and Josh Quah

16-Apr-2025

HOUSTON (ICIS)–The tariffs imposed by the US and the uncertainty of what will follow has caused a crash in oil prices and is one of the main factors behind a global decline in chemical prices in the days after the country's April announcement of its reciprocal tariffs. The following chart shows the sharp declines among the seven building-block chemicals. Notably, the declines continued even after the US paused the implementation of the higher reciprocal tariffs and settled for the relatively lower 10% rate against most countries. The exception is China, which has been responding to US tariffs with matching rates. The two countries are now imposing triple-digit tariffs on each others' imports. While the US has made exceptions for critical minerals, pharmaceuticals and electronics, China has made none. China's tariffs include the large amounts of natural gas liquids (NGLs) that it imports as feedstock for its propane dehydrogenation (PDH) units and its ethane crackers. LOWER OIL PRICESPrices for plastics and petrochemicals tend to rise and fall with those for oil. Oil prices have been falling since the start of the year, but the decline accelerated rapidly following the April tariff announcements by the US, as shown in the following table. Figures are in dollars per barrel. 2-Jan 1-Apr 14-Apr Brent 75.93 74.49 64.88 WTI 73.13 71.20 61.53 The decline was remarkable because it happened despite the weakening of the US dollar. The US dollar index has fallen by 8% as of 14 April since the start of the year. Oil prices tend to rise when the dollar weakens. This relationship has broken down in part because of plans by OPEC and its allies (OPEC+) to increase May production by an amount much higher than anticipated. But another reason is lower demand. Following the reciprocal tariff announcement by the US, ICIS lowered its forecast for global oil demand by 10%. ICIS also lowered its forecast for Brent oil prices for the rest of the year. Lower oil prices are manifesting themselves in aromatics markets, which are closely tied to crude. Export declined month on month for toluene and other aromatics from South Korea to the US for gasoline blending for March loading. Prices of toluene in India tumbled to fresh three-year lows. FALLING CHEM DEMANDDemand for plastics and chemicals also tends to rise and fall with the economy. Economists have started lowering their forecasts for growth, according to a periodic survey conducted by The Wall Street Journal. Survey participants also increased the chances of a recession. Tariffs will act like a sales tax. Companies and consumers will treat the tax like any other – they will take steps to avoid it by purchasing fewer goods. If one applied the US baseline tariff of 10% to the $3.3 trillion of goods the US imported in 2024, that comes to $3.3 billion in taxes. That represents a lot of potential purchases that US companies and consumers could defer or abandon. RPM International, a US producer of coatings, adhesives and sealants, expects that the slow- to no-growth environment of the past 18 months will persist. RPM's comments are notable because they were made on 8 April, after the US announced its reciprocal tariffs. UNCERTAINTYUncertainty is starting to paralyze some key chemical end markets. The auto industry in the US is already showing signs of this, RPM said. In European polyethylene (PE) markets, buyers are retreating to the side lines rather than committing to volumes in the current climate. “All in all, people are being careful, and that's not just converters that also consumers. People are worried about the future, and it's probably affecting demand further down chain as well," said ICIS markets editor Ben Monroe-Lake. “All in all, people are being careful, and that's not just converters that also consumers. People are worried about the future, and it's probably affecting demand further down chain as well.” REDIRECTED TRADE FLOWSBy imposing such broad tariffs, the US has erected a formidable trade barrier around its economy, which has caused exporters to redirect their shipments to other markets. This is especially true of Chinese exports. The US has created an effective embargo of Chinese imports by increasing its tariffs by 145% in 2025. Even with the recent exemptions adopted by the US, a large portion of Chinese imports will need to find new markets. The following table shows 2024 US general imports from China. Figures are in US dollars. Chapter Description Value 29 Organic chemicals 8,519,224,570 39 Plastics and plastic products 19,290,918,758 All Chapters Total 438,947,386,145 Source: US International Trade Commission (ITC) Similarly, China's 125% tariffs on shipments from the US would cause a large amount of products to be redirected, as shown in the following table. Figures are in US dollars. Chapter Description Value 27 Coal; mineral fuels, oils and products 14,727,138,106 29 Organic chemicals 3,980,594,815 39 Plastics and plastic products 7,452,840,887 All Chapters Total 143,545,739,507 Source: US ITC Given the tariff rates, it's likely that direct trade between the US and China will crater, said Lynn Song, chief economist, Greater China, at ING. Re-arranging global trade flows on such a scale will affect local chemical markets directly and indirectly through the influx of end products made with plastics and chemicals. The world was already contending with an oversupply of chemicals. This will aggravate it Such concerns have already appeared in east Chinese markets for certain grades of linear low density polyethylene (LLDPE) and high density polyethylene (HDPE), which reached multi-year lows. Market players are worried that US tariffs will cause a decline in demand for Chinese products that use these plastic grades. Similar concerns are arising in the Middle East among buyers and sellers of polymeric methylene diphenyl diisocyanate (PMDI) US auto tariffs could cause producers in the rest of the world to reduce output of vehicles and parts. These auto tariffs are global, and they are separate from the reciprocal tariffs. As such, the US auto tariffs are still in effect. If auto producers lower output, that will reduce demand for plastics and chemicals used in auto production, such as polypropylene (PP), nylon, butadiene (BD), and styrene butadiene rubber (SBR) “I may have to tweak my operations if I lose access to the US market, and if so, certainly I would be prudent now not to overcommit on forward deliveries of raw materials including EPDM,” said an auto parts maker in southeast Asia. Ethylene Propylene Diene Monomer (EPDM) refers to a synthetic rubber. DEFLATIONARY SPIRALIf companies expect declines to continue, then they may postpone purchases, setting off a deflationary spiral, in which sellers lower prices each time buyers defer purchases. Such a dynamic could emerge in European ethylene market and its PP market. US TARIFFS COULD MAKE THE COUNTRY THE EXCEPTIONAlthough US prices for building blocks have fallen since the April tariff announcement, many have still raised their expectations for inflation. RPM said on 8 April that the tariffs announced at that time would raise its raw material costs for its US operations by 4.3%. RPM's forecast did not take into account the 90-day pause on tariffs that the US announced on 9 April. That said, others are expecting prices in general to increase. Seasonally adjusted, a net 30% of US small business owners planned price hikes in March, up one point from February and the highest reading since March 2024. CHINA'S NGL TARIFFS MAY CREATE US GLUTChina's tariffs of 125% do not carve out any exemptions for ethane, liquefied petroleum gas (LPG) or other natural gas liquids (NGLs). China imports large amounts of these feedstocks from the US If China maintains the tariffs on NGLs, it could cause a supply glut of these primary chemical feedstocks in the US. The country does not have the chemical capacity to absorb the shipments that would normally go to China, and it is unlikely that the rest of the world can fully offset the loss of China as an export destination. If China maintains its tariffs on US NGLs, ICIS expects that US ethane and propane prices will decline. Insight article by Al Greenwood Additional reporting by Vicky Ellis, Ajay Parmar, Nurluqman Suratman, Isaac Tan, Nel Weddle, Melanie Wee, Kojo Orgle and Jonathan Yee Infographics by Yashas Mudumbai (Thumbnail shows a flask, which commonly holds chemicals. Image by Fotohunter.)

15-Apr-2025