Synthetic rubbers

SINGAPORE (ICIS)–Japanese automaker Nissan Motor Corp announced on Tuesday a slate of new cost-saving measures, including job cuts of 11,000, after swinging to a net loss of yen (Y) 670.9 billion ($4.5 billion) in the fiscal year ending 31 March 2025. in Japanese yen (Y) billion 1 April 2024-31 March 2025 (FY 2024) 1 April 2023-31 March 2024 (FY 2023) % Change Net Revenue 12,633.20 12,685.70 -0.4 Operating Profit 69.8 568.7 -87.7 Net Income -670.9 426.6 Global sales stood at 3.346 million units, impacted by intensified sales competition. The latest results come after the collapse of multi-billion-dollar merger talks with rival Honda in February 2025 and follows a November 2024 announcement of 9,000 job cuts. The latest reductions will bring the total job losses at Japan's third-largest carmaker to around 20,000 in the last fiscal year. Nissan also plans to streamline its production by reducing its global plant count from 17 to 10 by 2027. Petrochemicals make up roughly a third of an average vehicle's raw material costs. The automotive industry is a crucial driver of demand for chemicals such as polypropylene (PP), nylon, polystyrene (PS), and styrene butadiene rubber (SBR). Nissan said that it expects business to "continue be challenging with intense competition, forex and inflationary pressure". "Yet, our efforts related [to] U.S. Tariff policy under our mitigation strategy, we are prioritizing US-built products, optimizing local capacity, reallocating tariff-exposed production, and working closely with suppliers to localize and adapt swiftly to market demands," the company said. "Given the uncertainty related to tariff environment, the guidance for operating profit, net income and auto free cash flow for the fiscal year are currently to be determined," it added. ($1 = Y147.9)

13-May-2025

SINGAPORE (ICIS)–Here are the top stories from ICIS News Asia and the Middle East for the week ended 9 May. S Arabia's SABIC swings to Q1 net loss amid higher operating costs By Jonathan Yee 05-May-25 11:36 SINGAPORE (ICIS)–SABIC swung to a net loss of Saudi riyal (SR) 1.21 billion ($323 million) in the first quarter on the back of higher feedstock prices and operating costs, the Saudi Arabian chemicals giant said on 4 May. Ethane fuss cools for NE Asia C2, positions reassessed over Labor Day break By Josh Quah 05-May-25 20:24 SINGAPORE (ICIS)–The early May holidays probably could not have come at a more appropriate time for Asia ethylene players, with players noting that the pause in spot discussions was a good time to take stock of positions going into June shipment talks. Malaysia's Lotte Chemical Titan narrows Q1 net loss on improved margins By Nurluqman Suratman 06-May-25 14:46 SINGAPORE (ICIS)–LOTTE Chemical Titan (LCT) narrowed its first quarter (Q1) net loss to ringgit (M$) 125.7 million ($29.7 million) amid improved margins, the Malaysian producer said on 5 May. Singapore's Aster acquires CPSC at undisclosed fee By Nurluqman Suratman 07-May-25 12:33 SINGAPORE (ICIS)–Aster Chemicals and Energy has reached a sales and purchase agreement to acquire Chevron Phillips Singapore Chemicals (CPSC) through its affiliate, Chandra Asri Capital, at an undisclosed fee, the Singapore-based producer said on Wednesday. Vietnam’s economy to slow despite exports jump, lower inflation – Moody's By Jonathan Yee 07-May-25 16:16 SINGAPORE (ICIS)–Escalating trade tensions with the US are casting a shadow over Vietnam’s growth trajectory in 2025, despite continued growth in exports as well as lower inflation. China SM plagued by weak fundamentals and falling feedstock By Aviva Zhang 07-May-25 16:44 SINGAPORE (ICIS)–China’s styrene monomer (SM) prices fell sharply in April, as a result of decreasing crude oil prices and weak end-user demand expectations caused by the China-US tariff conflicts. The domestic market is likely to face headwinds from supply, feedstock and downstream sectors in May. Asia refined glycerine trades to Europe to be spurred by weak Chinese demand By Helen Yan 08-May-25 14:43 SINGAPORE (ICIS)–European demand for refined glycerine may lend support to regional glycerine producers in southeast Asia, who have been faced with persistently sluggish Chinese demand. Asia VAM plant margins to get a lift from westbound trades By Hwee Hwee Tan 09-May-25 13:08 SINGAPORE (ICIS)–Asia’s vinyl acetate monomer (VAM) producers are eyeing improved netbacks from expansion in westbound shipments as regional trade margins narrow into the second quarter. Asia capro remains pressured by weak benzene, cautious demand outlook By Isaac Tan 09-May-25 13:11 SINGAPORE (ICIS)–Spot prices for caprolactam (capro) in Asia continued to soften in the week ending 7 May, weighed down by persistent losses in the upstream benzene market and a lack of recovery in downstream demand. China Apr export growth slows to 8.1% amid tariff uncertainty By Nurluqman Suratman 09-May-25 16:03 SINGAPORE (ICIS)–China's export growth slowed to 8.1% year on year in April from 12.4% in March in US dollar terms, underscoring the increasing impact of US tariffs amid ongoing uncertainty surrounding a potential trade agreement.

12-May-2025

HOUSTON (ICIS)–Rates for shipping containers were stable to higher this week as carriers have reduced capacity by 4-5% along the trade route amid efforts to stop the slide in prices, but capacity could surge and put downward pressure on rates if the Red Sea ceasefire holds. On 6 May, US president Donald Trump announced that a peace deal had been struck between the US and Houthi rebels, which would bring attacks against shipping to an end in the Red Sea. Since the start of 2024, traffic through the Suez Canal has collapsed and remains at roughly half pre-Gaza conflict levels. CONTAINER RATES Rates from online freight shipping marketplace and platform provider Freightos were flat week on week, and supply chain advisors Drewry showed a 4% increase in rates from Shanghai to New York and a 5% increase from Shanghai to Los Angeles, as shown in the following chart. Drewry expects rates to be less volatile in the coming week as carriers are reorganizing their capacity to reflect a lower volume of cargo bookings from China. Judah Levine, head of research at Freightos, said many US importers have paused orders out of China, but shippers (as well as manufacturers) can hold out only so long before consumers will start to see empty shelves or higher prices. Import cargo at the nation’s major container ports is expected to see its first year-on-year decline in over a year and a half this month as the effect of tariffs increases, according to the Global Port Tracker report released today by the National Retail Federation and Hackett Associates as shown in the following chart. Alan Murphy, CEO, Sea-Intelligence, said carriers have reduced capacity by 4-5% in April and May on the transpacific trade lane. “When we look across what was deployed in April and what is scheduled for May combined, blanked capacity accounts for 19% of the total Asia to North America West Coast (NAWC) planned capacity, and 17% of the total Asia to North America East Coast (NAEC) planned capacity, across those two months,” Murphy said. “But a high level of blank sailings does not automatically translate into a large reduction of capacity year on year, if the originally planned level of capacity, without blank sailings, constituted a large increase in capacity deployment on a year-on-year basis,” Murphy said. Kip Louttit, executive director of the Marine Exchange of Southern California (MESC), said the ports of Los Angeles and Long Beach are seeing fewer arrivals than normal. “For example, only 22 arrived the first five days of May, whereas 28.5 arrivals would be normal,” Louttit said. “Only nine are scheduled to arrive in the next three days, whereas 17 in three days would be normal.” 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. LIQUID TANKER RATES UNCHANGED US chemical tanker freight rates assessed by ICIS were steady this week with rates remaining unchanged week on week despite continuing to see downward pressure for several trade lanes. For yet another week, there is downward pressure on rates along the USG-Asia trade lane as charterers are still in wait-and-see mode. Besides contract of affreightment (COA) cargoes, there is very little seen in the market. The tariffs and uncertainty continue to dampen the spot market, pressuring rates. As a result, owners are sending fewer vessels and therefore keeping rates stable for now due to the lack of available tonnage. Similarly, rates from the USG to ARA and all other trade lanes also held steady. Although COA volumes are lower there are also fewer spot inquiries available. Despite the lack of interest, rates remain unchanged as the clean petroleum products (CPP) market continues to remain soft leaving those vessels to participate in the chemical sector and pressuring chemical rates lower. However, several cargoes of styrene, methanol and caustic soda continue to be seen in the market. From the USG to Brazil, this trade lane had seen more inquiries, but there is plenty of available space for the balance of May lending downward pressure to spot rates. This is leaving most owners still trying to fill up prompt partial space to WCSAM and to ECSAM for 2H May. Rates are soft and have lost some ground. During the past week large parcels of MEG and caustic soda were seen in the market and as well as a CPP cargo further demonstrating the length in the market and weighing down on rates. Along the USG to India route the spot market is stable and with its usual slow pace. No new cargoes have been heard from the US. With additional reporting by Will Beacham and Kevin Callahan Visit the US tariffs, policy – impact on chemicals and energy topic page Visit the Logistics: Impact on chemicals and energy topic page

09-May-2025

SAO PAULO (ICIS)–Braskem-Idesa (BI) officially launched the Terminal Quimica Puerto Mexico (TQPM) on Wednesday, according to a notice from the company. After many years in the making, and at some points, serious doubts about the companies involved managing to put together the necessary capital expenditure (capex) for the terminal, in March ICIS could visit the almost-finished facilities. Braskem Idesa’s executives were relieved to finally see the long-running construction almost finished. Up to now, Braskem Idesa has been importing ethane by ship, a system called Fast Track. Before and during that, Braskem also depended on Mexico’s state-owned energy major Pemex for supply of ethane. However, beleaguered Pemex, after years of falling output, rising debts, and mismanagement, did not follow the agreement on several occasions and its ethane supply would fall short of what it had been agreed, leading to Braskem Idesa not having the feedstock needed to produce PE. Sources close to the situation reported to ICIS last year that Pemex only got serious about the ethane supply when threatened with being taken to arbitrage international court – because it is state-owned, that would have been the necessary course of action. As the ribbon was cut on Wednesday, most executives present could now focus on the future – undoubtedly more promising having its own terminal to import the feedstocks needed. Braskem Idesa holds a 50% stake in the terminal with Advario, the Netherlands-based engineering services provider. The terminal will allow BI to import 80,000 barrels/day, enabling the company to operate at 100% of its capacity at its integrated polyethylene (PE) Ethylene XXI complex in Coatzacoalcos, Mexico. The Braskem Idesa cracker in Coatzacoalcos has 1.05m tonnes/year of ethylene capacity and downstream capacities of 750,000 tonnes/year of high-density polyethylene (HDPE) and 300,000 tonnes/year of low-density polyethylene (LDPE). In an interview with ICIS in March, the CEO at TQPM, Cleantho de Paiva, said the terminal would benefit Mexican petrochemicals at large, not just Braskem Idesa, by allowing the feedstocks it was consuming up to now to be released to other producers. "This project has a very important impact on the development of the national petrochemical industry, because it's precisely to complement access to raw materials that we lack today. With a capacity to import up to 80,000 barrels per day of ethane, this will significantly exceed the 63,000 barrels Braskem Idesa currently requires for its operations,” said Cleantho de Paiva. “The issue of the lack of ethane in the country is structural. Since the US is the largest producer and exporter of petrochemical ethane, building this terminal gives us access to import sufficient raw material." "When the terminal comes into operation, Pemex, which currently has an obligation to supply a certain amount to Braskem Idesa, will no longer have it and will be able to direct this raw material to its own petrochemical complexes and resume its operating capacity," he added. Braskem Idesa is a joint venture made up of Braskem (75%) and Mexican chemical producer Grupo Idesa (25%). PE is the most widely used plastic in the world, primarily found in packaging including plastic bags, plastic films and geomembranes. Article thumbnail: The terminal as seen in March Source: ICIS Additional reporting by Johnathan Lopez

07-May-2025

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. China is in the process of drafting its 15th Five-Year Plan (2026–2030) in a geopolitical and economic environment that suggests the need for greater self-reliance. It might be fair to assume this will include a continued push toward petrochemical self-sufficiency. But China is to cap refinery capacity from 2027 onwards due to the rise of electric vehicles. This reduced need for gasoline could mean not enough new naphtha, LPG or other refinery feedstocks to support further petrochemical plant construction. China might instead import more feedstocks from the Middle East or continue to repurpose existing refineries to make more petrochemical feedstock. This is already the direction of travel through Saudi Aramco investments in China. Add rumours of coal-to-chemicals rationalisation and closures of older plants, and the picture gets even murkier. Conflicting reports say either China is slowing petrochemical construction following the trade war —or pressing ahead and raising operating rates to the mid-80% range (up from high-70s post-Evergrande Turning Point). Demand is another major variable. Growth was already slowing before the trade war and could now turn negative in 2025. A document from China Customs (25 April) pointed to possible waivers for US polyethylene and ethane imports—but not for ethylene glycol or propane. Nearly 60% of China’s propane imports came from the US in 2024. With a 125% tariff still in place, China would be unable to replace those volumes quickly, putting PDH propylene production under pressure. This matters: 32% of China’s propylene capacity is now PDH-based, and 70% of propylene is used to make PP. ICIS expects PDH operating rates to fall to below 59% in 2025 (from 70% in 2024). Could this mean a propylene shortage? Not necessarily. Output from crackers, refineries and coal could increase—especially if, as one Middle East source suggests, China pursues greater PP self-sufficiency. Taking into account all these variables, and the extent to which China can export PP based on the level of trade tensions, consider these scenarios for China’s PP net imports in 2025–2028: The ICIS Base Case: They average 3m tonnes/year. Alternative 1: 600,000 tonnes/year with some years of net exports Alternative 2: 1.4m tonnes/year, with again some years of net exports My gut feel is that China will do its best to boost petrochemicals self-sufficiency. But you cannot take my always fallible words as the final words. You must extend and deepen your scenario planning in this ever-murkier environment. Editor’s note: This blog post is an opinion piece. The views expressed are those of the author, and do not necessarily represent those of ICIS.

06-May-2025

SAO PAULO (ICIS)–Here are some of the stories from ICIS Latin America for the fortnight ended on 2 May. NEWSBrazil chems production still impacted by imports despite protectionist measures – Abiquim Brazil’s chemicals production structural woes, such as high production costs, remain while imports continue making their way unabated, despite protectionist measures deployed by the government, according to the director general at producers’ trade group Abiquim. INSIGHT: Mexico’s chemicals revive as tariffs woes ease (part 1)When Donald Trump won the US election with a larger-than-expected majority, Mexican chemicals players started making plans for their businesses under what promised to be a disruptive second term for trade relations between the two countries. Argentina savoring economic spring but recovery for all biggest task still pending – Evonik execAfter years in the doldrums, Argentina's economy is finally going through some sort of “spring” thanks to sectors such as agricultural, mining and energy – but the country, however, is yet to achieve a recovery which works for all Argentinians, an executive at Germany’s chemicals major Evonik said. Mexico’s improved fortunes on US tariffs propping up petchems demand – Entec execMexico’s chemicals fortunes seem to be turning for the better after the country was spared from the most punitive US’ import taxes, according to an executive at chemicals distributor major Ravago’s Mexican subsidiary. INSIGHT: Argentina faces up to rising inflation after currency controls liftedArgentina’s decision to end foreign currency restrictions is set to devalue the peso’s official exchange rate and increase inflation but it was a vital step to normalizing a dysfunctional exchange rate system. Mexico launches antidumping investigation into US PVC importsThe Mexican government officially launched an antidumping investigation into imports of suspension polyvinyl chloride (PVC) resin from the US, following allegations of unfair trade practices that have impacted domestic industry at the end of April. Brazil's Braskem Q1 higher priced PE, PP sales in Q1 cannot offset lower PVC volumesBraskem resin sales in its domestic market dropped by 4% in Q1, year on year, due to lower polyethylene (PE) and polypropylene (PP) sales volumes as the producer prioritized sales with higher added value, the Brazilian polymers major said. Mexico’s Orbia earnings fall again while ‘trying’ to guess potential green shoots – CEOOrbia’s Q1 sales and earnings fell again, year on year, with the Mexican chemicals producer already writing off any significant recovery in 2025 and “trying to figure out” potential green shoots for 2026, its CEO said on Friday. PRICINGLatAm PE international prices steady to lower on competitive US export pricesInternational polyethylene (PE) prices were assessed as steady to lower as US export prices remain competitive. LatAm PP domestic, international prices fall in Colombia, Mexico on cheaper feedstocksDomestic and international polypropylene (PP) prices fell in Colombia and Mexico tracking lower US propylene costs. In other Latin American (LatAm) countries, prices were unchanged. LatAm – Argentina PP domestic price range narrows as distributors try to compete with cheaper imports Domestic polypropylene (PP) price range was assessed as narrower in Argentina. Distributors' prices have fallen to compete with cheaper imports.

05-May-2025

SINGAPORE (ICIS)–Here are the top stories from ICIS News Asia and the Middle East for the week ended 2 May. India RIL oil-to-chemicals fiscal Q4 earnings fall on poorer margins By Nurluqman Suratman 28-Apr-25 11:57 SINGAPORE (ICIS)–India's Reliance Industries Limited (RIL) late on 25 April reported a 10% year-on-year drop in its oil-to-chemicals (O2C) earnings before interest, tax, depreciation and amortization (EBITDA) on poorer transportation fuel cracks and subdued downstream chemical deltas. Asia naphtha market strengthens but uncertainties linger By Li Peng Seng 28-Apr-25 15:01 SINGAPORE (ICIS)–Asia’s naphtha intermonth spread hit a three-week high recently as market sentiment recovered following stronger demand from China, but the market ahead could be choppy on the back of volatile crude oil and trade war uncertainties. PODCAST: MMA market turmoil in China and Asia amid rising supply, weak demand By Yi Liang 28-Apr-25 15:19 SINGAPORE (ICIS)–In this podcast, ICIS analysts Jasmine Khoo and Mason Liang will talk about the current situation and outlook for the methyl methacrylate (MMA) market. INSIGHT: China new energy vehicle industry to continue driving polymer industry development By Chris Qi 28-Apr-25 18:31 SINGAPORE (ICIS)–China's automotive industry has maintained rapid growth over the last few years, with the expansion of the country's new energy vehicle (NEV) sector particularly notable, now accounting for 70% of global production. China’s Sinopec enters $4bn JV with Saudi Aramco unit for Fujian project By Jonathan Yee 29-Apr-25 12:19 SINGAPORE (ICIS)–China’s state-owned Sinopec has entered a joint venture (JV) with an Asian unit of Saudi Aramco to manage the second phase of a refining and petrochemical complex at Gulei in Fujian province, it said on 28 April. Asia glycerine may see restocking after Labour Day holiday By Helen Yan 29-Apr-25 14:34 SINGAPORE (ICIS)–Asia’s glycerine market may see a pick-up in restocking activities after the May Day or Labour Day holiday as Chinese buyers hold back their purchases, given the sluggish downstream epichlorohydrin (ECH) market and uncertainties over the US-China trade war. China Apr manufacturing activity shrinks on US tariffs pressure By Jonathan Yee 30-Apr-25 12:09 SINGAPORE (ICIS)–China’s manufacturing activity shrank in April as export orders weakened amid the intensifying trade war with the US, official data showed on Wednesday. INSIGHT: Rising costs to curtail China PDH runs, mixed impact on C3 derivatives By Seymour Chenxia 30-Apr-25 13:00 SINGAPORE (ICIS)–Chinese PDH producers are likely to lower operating rates as US-China trade tensions drive up propane import costs, which is expected to tighten propylene supply. However, the impact on downstream markets will be mixed due to varying feedstock sources. Asia VAM market to slow as China solar drive eases By Hwee Hwee Tan 02-May-25 11:35 SINGAPORE (ICIS)–Asia’s vinyl acetate monomer (VAM) supply is lengthening as spot demand tied to a major downstream sector is softening into May.

05-May-2025

SINGAPORE (ICIS)–Asia's petrochemical markets are poised for a resurgence in activity following the May Day holidays, with discussions subdued as buyers await signs of recovery and producers restart plants over the coming months. Producers to restart plants, refill inventories after holidays Delayed purchases until after holidays US has contacted China for trade talks – Chinese state media The May Day or Labor Day holiday is celebrated in China from 1-5 May, and in most other Asian countries on 1 May. Japan and South Korea also observe several days of holiday in May. Feedstock propane supply-demand fundamentals are being weighed on by the ongoing US-China trade war, which is affecting the cost of propane imports and could lead to reduced operating rates for propane dehydrogenation (PDH) units. This may tighten propylene supply in the longer term, potentially supporting prices if demand picks up. Demand has been sluggish in the propylene market, weighing prices down as producers maintain low inventories ahead of 1 May. However, after the Labor Day holiday, there is an expectation of increased supply, which may lead to a more balanced supply-demand scenario as they resume normal operations. Separately, the glycerine market in Asia is expected to see a notable pick-up in restocking activities after the holidays. Chinese buyers, who have been holding back purchases due to a sluggish downstream epichlorohydrin (ECH) market and uncertainties surrounding the US-China trade war, are likely to return to the market. “We will wait until after the Labor Day holidays before we commit to any purchases as we expect the downstream ECH market to slow down after the holidays,” a Chinese buyer said. The ECH market, a key downstream sector for glycerine, is anticipated to experience a price drop after the holidays due to demand remaining weak amid the US-China trade war. Asia's butyl glycol (BG) import prices were assessed as lower this week amid a bearish market sentiment amid unimproved demand conditions. In southeast Asia, the glycol ethers market is undergoing price adjustments as producers lower offers in anticipation of the Labor Day holidays. China's export prices for propylene glycol ether (PGE) also softened as sellers looked to increase sales before the holiday. Meanwhile, propylene glycol prices are expected to remain stable as market participants await the outcomes of the holiday period. In China, domestic prices have held steady, but the overall sentiment remains cautious due to the impact of the holiday on production and logistics. The stability in pricing reflects balanced supply-demand fundamentals, though any unexpected disruptions post-holiday could lead to short-term volatility. PRODUCERS ADJUSTING OUTPUT The acetic acid market is experiencing softening spot prices due to lengthening supply as plants restart operations following maintenance turnarounds. However, the holiday period is likely to further influence supply dynamics, with some producers adjusting output to manage inventory levels. In China, a new plant tied to a downstream ethylene vinyl acetate (EVA) unit has come online. It is among other plants in Asia with a combined capacity of nearly 1.8 million tonnes/year which have either already restarted or are restarting in May, EVA-linked vinyl acetate monomer (VAM) demand is generally expected to slow as June approaches, when a pricing policy in China – which has spurred a rush in solar panel installations across the country – comes into effect. Concerns of slowing demand were kept on the boil in Asia ethyl acetate (etac) markets amid fluid developments surrounding trade tensions between the US and China, and its potential ripple effect on sentiment in the days ahead. Notably, market players were conscious of weakening product spreads or etac production margins. Eroding margins have thus left regional suppliers with little room to scale back asking levels, despite the current market climate that was viewed as largely skewed towards buyers. EYES ON POSSIBLE TRADE TALKSAs the US-China trade war persists, both sides have indicated a willingness to engage with each other on trade talks. On Friday, a spokesperson of China’s Ministry of Commerce said that senior US officials have “repeatedly expressed their willingness” to negotiate with China on tariffs, according to state media outlet CCTV. The spokesperson said that the US has sent requests hoping to talk to China, and the Asian country is currently evaluating them. “China's position is consistent. If we fight, we will fight to the end; if we talk, the door is open,” the spokesperson said. Meanwhile, US President Donald Trump has maintained that trade talks are ongoing between the two largest economies in the world, which Chinese state media denied. Amid US tariffs, manufacturing activity continued to remain sluggish across Asia, including China and Japan. In April, China's manufacturing activity shrank as export orders weakened due to the escalating trade war with the US. The official purchasing managers' index (PMI) dropped to 49.0, indicating contraction, down from 50.5 in March. Japan's manufacturing PMI rose to 48.7 in April from 48.4 in March, marking the tenth consecutive month of contraction. Focus article by Jonathan Yee Additional reporting by Seymour Chenxia, Helen Yan, Julia Tan, Joy Foo and Matthew Chong and Melanie Wee.

02-May-2025

SAO PAULO (ICIS)–Brazil’s chemicals production structural woes, such as high production costs, remain while imports continue making their way unabated, despite protectionist measures deployed by the government, according to the director general at producers’ trade group Abiquim. Andre Passos said chemicals plant capacity utilization remains at lows hovering around 60%, an unsustainable rate for the long term which requires Brazil focuses more on the feedstocks available for  its chemicals industry, and increasing natural gas production remains Brazil’s pending task, said the Abiquim head. While Brazil’s state-owned energy major has become a key global crude oil producer, successive governments in Latin America’s largest economy have sidelined natural gas production despite the country’s large reserves of it. As US natural gas production boomed in the 2010s, the petrochemicals industry went through a revival thanks to the abundant and cheap supply of ethane or propane – one of the routes for chemicals production – for decades to come. As the US’ ethane-based production boomed, production via crude oil’s naphtha route – predominant still in Latin America, as well as Europe and Asia – became less competitive: that is the crossroads the industry must face in coming years. STILL STRUGGLING, DESPITE STATE HELPAbiquim successfully lobbied in 2024 for the Brazilian government to increase import tariffs on dozens of chemicals, aiming to slow down the entry of cheaper material from abroad – some of it, dumped by large producers such as China and the US. Other market players, big importers such as plastics transformers – represented by trade group Abiplast – or importers of industrial chemicals – represented by trade group Associquim – have said the higher import tariffs have been passed onto customers already. That has been one of the reasons why Brazil's inflation rates are creeping up, the head of Associquim, Rubens Medrano, said in an interview with ICIS,  but Abiquim's Passos said this has not been the case, citing an Abiquim-funded study showing his side of the argument. The cabinet has also implemented or is mulling anti-dumping duties (ADDs) in materials from both the US and China and, on top of that, a tax break for chemicals producers called REIQ was reintroduced by the current administration of Luiz Inacio Lula da Silva. The government has also taken initial steps to expand the natural gas market, easing regulations and mandating Petrobras to step up its game in the sector. Equally, deals to bring more gas from Bolivia’s dwindling reserves were signed in 2024, and chemicals producers are also putting hopes in Argentina’s Vaca Muerta fields. Most of these actions would show results in the medium and long terms. In the here and now, none of them have helped ease chemicals producers’ challenging operating conditions, said Passos. "Nothing has fundamentally changed in our situation in the past few months. The scenario remains the same, perhaps even worsening with [US President Donald] Trump's trade measures, and we continue suffering with low capacity utilization rates: Brazil's chemical production has been on a downward trajectory since 2016,” said Passos. “Up to that point, both chemical production and imports grew in tandem with overall consumption. But a structural shift occurred in 2016: imports continued to increase, capturing more market share, while domestic production began to decline. And so here we are, nine years later, and the clearest indicator is the capacity utilization level of our plants, which has been falling sequentially. From above 80% before 2016, it dropped to 70% and now even below that at around 60%." There are two root causes for this downturn, said Passos, one created abroad and over which Brazil cannot do very little part from imposing hefty import tariffs – US and China overproduction which makes imports into Latin America more likely – and the other, equally hard to crack, is Brazil’s lack of natural gas and, more widely, feedstocks for chemicals production. IT IS (ALMOST) ALL ABOUT GASBrazil's chemical industry's competitiveness problem is directly linked to feedstock costs: 80% of production costs for fertilizers and 50-60% for polymers come from raw materials, Passos explained, and despite some regulatory changes, gas prices remain stubbornly high, around four or five times higher than in the US. And the fundamental issue is, of course, price. US gas prices stand at around $3.30/MMBtu. In Brazil, they are around $15/MMBtu. Passos and Petrobras established a working group in 2023 to study potential chemicals sector-specific programs the energy major could develop, mostly related to natural gas. However, a nearly two-year long silence followed, but Passos said there should be news from Petrobras on this front in a few weeks’ time. "The gas market in Brazil has seen marginal movement. There's been the creation of a free gas market, which was important. But what we see is that gas supply in Brazil remains constant [at not high enough levels]. This price level puts Brazilian producers at a significant disadvantage compared to US competitors – and this gap has existed for years and remains painfully constant,” said Passos. "We've presented [to Petrobras] all the information about the chemical industry, consumption profiles, volumes that could be involved in a natural gas contract, etc. Now, we're waiting for Petrobras's response regarding the product they will offer to the chemical sector as a bloc – our expectation is that Petrobras will present a proposal as soon as this month.” However, Passos acknowledged progress has been slow, adding that no measure by itself is to be a miracle for chemicals production in Brazil as the sector carries on its back decades of its global competitiveness being dented, as other countries’ production rose sharply, gaining market share. Abiquim’s head provided a historical perspective for this. Brazil built its petrochemical industry in earnest from the 1960s on, a model which lasted until the 1980s and based on a partnership between private actors and the Brazilian state through Petrobras. This "Chinese model," as he described it, changed in the mid-2000s, when Braskem – of which Petrobras is the second largest shareholder, with nearly 40% ownership – was formed. But Braskem remains, to this day, fundamentally a polymers producer, a sub-sector in which the global overcapacities are hitting especially hard. "A private company became the majority owner in petrochemical centers and in the manufacture of thermoplastic resins. Petrobras remained a strategic partner, but not the controlling partner. This shift created problems in negotiating raw material prices and availability of ethane and natural gas – there is a dynamic of trying to maximize margins at each stage of the production chain, and this strains the model," said Passos. AND THEN IT IS ALSO ABOUT CHINAChina continues to place competitive pressure on Brazil's chemical industry through what Passos describes as persistent dumping practices, adding that even after import tariffs were hiked, Chinese imports into Brazil have continued as their prices continued to fall, offsetting the higher import tariffs. “And then, due to the tariff war between the US and China currently brewing, freight rates have also plummeted as the reduction in goods trade between the two countries have made more ships available. So, at least in the short term it looks like there will be greater availability of freight in various routes, so shipping prices may fall further. “So, Chinese or US product is expected to continue coming into the Brazilian market, deepening the troubling trends: producers int hose countries will now have cheaper freight rates and cheap product to be exported: this remains the big risk for Brazilian producers." However, trying to see a silver lining in a rather downbeat assessment, Passos said that, if US-China trade tensions escalate, there could be knock-on effects that benefit certain segments, because China has reduced imports of US ethane and propane, the latter also a natural gas-based feedstock used in the petrochemicals industry. “If this scenario continues to worsen, there will also be excess ethane and propane in the US market, therefore the price will fall and that could make more feedstock available for us here in Brazil,” he said. THE NEW HOPE: PRESIQIn April, Brazil’s parliament passed a bill called Special Program for Sustainability of the Chemical Industry (Presiq in its Portuguese acronym) which resembles the US Inflation Reduction Act (IRA) or the EU’s Green Deal plans announced in or after the pandemic – public support in the billions of dollars for companies to set up greener production facilities. Faced with the structural challenges explained, Abiquim lobbied for the bill as it sees it an opportunity for Brazilian chemicals production to jump into the greener future – perhaps its last chance to be a global player the sector, he said. Starting in 2027, after the tax break REIQ expires in 2026, Presiq has budgeted up to nearly reais (R) 4.0 billion/year ($704 million/year) for financial credits, the main target being the acquisition of feedstocks by chemicals producers. It also contemplates up to R1.0 billion for investment credits, which also applies to fertilizer projects, a sector in which Brazil’s trade deficit has only deepened as the country became one of the world’s breadbaskets – around a quarter of its GDP now comes from the agribusiness. Within the nearly R4.0 billion Presiq is to offer in credit lines for chemicals producers to purchase natural gas-based feedstocks, the funding will be distributed between the purchase of ethane, propane and butane (R2.0 billion/year), plus another R1.9 billion/year for the acquisition of ethylene, propylene, and butene, among others, according to figures compiled by Brazil’s gas trade group Abegas. The bill will also offer up to 3% of the value of the investment in expansion of installed capacity, or projects which meet other program guidelines. “The Brazilian chemical sector is facing a delicate moment, aggravated by the trade war between the US and China. The government’s measures to strengthen the national chemical industry such as tariffs and others have helped to slow down the downward trend chemicals production is suffering, and if these measures hadn't been taken, more chemicals plants would have had to shut down,” said Passos. “But Brazil also needed an incentive program mirroring those of our global competitors such as the US or the EU. Of course, China's incentives go further and are basically subsidies unprofitable plants to keep people employed, but that another matter. "More in line with the US or the EU, Presiq will help reduce the deficit in the chemical industry, and it could become an important source of revenue. It will also add value to the country through the sustainable use of natural resources. Presiq could be the chemicals industry’s savior,” concluded Passos. ($1 = R5.67) Front page picture: Chemicals facilities in Brazil Source: Abiquim Interview article by Jonathan Lopez

02-May-2025

SINGAPORE (ICIS)–Manufacturing purchasing managers' indices (PMIs) tumbled across most of Asia in April, led by a decline in new orders amid global trade uncertainty that will likely continue to weigh on exports and production. China, South Korea new export orders contract significantly amid trade uncertainty China's manufacturing PMI falls into contraction, 16-month low in April Production may be shifting to India amid evolving trade landscape This is the first PMI reading since US president Donald Trump imposed 10% baseline tariffs on all countries and a 145% tariff on China; already, six out of eight economies that have reported April data as of 2 May have PMIs in contractionary territory. A robust PMI above the 50-threshold, signaling expansion in a country's manufacturing sector, generally corresponds with increased petrochemical output, as greater industrial activity fuels demand for essential inputs such as plastics, rubbers, and solvents. "Unsurprisingly, export-oriented economies in the region are bearing the brunt of the tariff hit, with new export orders in China and [South] Korea having fallen sharply into contractionary territory," Japan's Nomura Global Markets Research said in a note. The PMIs of domestic-oriented economies such as India and the Philippines, however, are holding up, with the latter experiencing a boost in activity owing to upcoming elections, it noted. "This suggests domestic demand will be pivotal in serving as a growth cushion against external shocks, which means policy stimulus, particularly on the fiscal side, is likely to gain traction," Nomura analysts said. A combination of escalation and de-escalation in tariff policy is likely to breed uncertainty and lead to a slowdown in capital expenditure, they added. South Korea's manufacturing sector health deteriorated more sharply in April,  marking the lowest reading since September 2022 and the third consecutive month of worsening business conditions. April saw a sharper contraction in production levels at South Korean factories, with output falling significantly at the beginning of the second quarter, according to S&P Global. This marked the second consecutive month of declining production, as companies frequently attributed the decrease to falling new orders and the impact of US trade policy. The latter also affected foreign markets, as South Korean goods producers recorded the first reduction in new export orders in six months, it added. Japan’s manufacturing PMI, meanwhile, inched higher to 48.7 in April from 48.4 in March but new orders and new export sales continued to weaken. While consumer goods producers enjoyed a "renewed improvement in the health of its sector," operating conditions weakened for both intermediate and investment goods segments, according to au Jibun Bank. Overall new work fell at a solid pace that was the quickest since February 2024, the bank noted, with firms frequently pointing to "subdued client spending at home and abroad." With manufacturing slowing down and weakening exports, Japan's economic outlook is tilted to the downside, prompting the Bank of Japan to substantially lower its growth forecasts for the year on 1 May. CHINA PMI FALLS BACK INTO CONTRACTIONManufacturing activity in bellwether China fell to a 16-month low in April as the impact of tariffs started hitting producers. China's official April manufacturing PMI fell to 49.0 from 50.5, marking a 16-month low. By category, the most significant monthly decline was in new export orders, dropping to 44.7 from 49.0, illustrating the initial impact of tariffs. Overall, the new orders sub-index decreased to 49.2 from 51.8, and the production sub-index also contracted, to 49.8. The PMI data indicates a potential strengthening of deflationary pressures, Dutch banking and financial services firm ING said. Specifically, the ex-factory price sub-index reached a seven-month low of 44.8, while the raw materials purchase prices sub-index fell to a 22-month low of 47.0. Furthermore, the import sub-index, at 43.4, hit its lowest point since January 2023, suggesting that a significant drop in US demand due to tariffs could intensify price competition among manufacturers, according to ING. A silver lining was a better-than-expected Caixin PMI reading, which surprisingly remained in expansion at 50.4. Markets had been expecting this PMI gauge to underperform, ING said, adding, "this is because the survey sample size traditionally has a larger proportion of exporters and private firms". TARIFFS A LOSE-LOSE PROPOSITIONWhile China appears to be holding up well in the early stages of the tariff test of endurance, there is a "clear negative shock taking place", ING noted. "But, all things considered, survey data suggests the shock may be less than what the more bearish market participants feared." China’s exports to the US represent around 14-15% of total shipments, much of which may have ground to a halt in April, ING chief economist, Greater China, Lynn Song said. "We suspect the shock on Chinese US-bound exports will be significant, causing a double-digit year-on-year decline in both exports and imports," he added. The import frontloading in the first quarter of the year likely enables companies to do this for some time, with varying estimates on how long these inventories would last, ING said. "We expect April's trade to show the biggest decline in terms of China's exports to the US. This is because importers have been in wait-and-see mode, hoping trade talks might lead to lower tariffs," it said. However, once inventories are depleted, assuming there's no easy substitution product available, companies will face a choice between paying tariffs or discontinuing sales, ING added. SIGNS OF PRODUCTION SHIFTING TO INDIAIndian manufacturing surged in April, fueled by the quickest output growth since June 2024 amid strong order books. The HSBC India manufacturing PMI edged up to 58.4 in April from 58.1, signaling the sector's strongest overall improvement in 10 months, driven by accelerated increases in inventories, hiring, and production. "The notable increase in new export orders in April may indicate a potential shift in production to India, as businesses adapt to the evolving trade landscape and US tariff announcements," said Pranjul Bhandari, chief India economist at HSBC. Input prices increased slightly faster, but the impact on margins could be more than offset by the much faster rise in output prices, of which the index jumped to the highest level since October 2013, Bhandari added. Visit the ICIS Topic Page: US tariffs, policy – impact on chemicals and energy Insight article by Nurluqman Suratman

02-May-2025