Energy

HOUSTON (ICIS)–Newly announced port fees by the US Trade Representative (USTR) are less substantial than the proposal from February, but a shipping analyst expects vessel supply to decrease and rates to climb on certain routes. Theodor Gerrard-Anderson, chemical freight analyst at Lighthouse Chartering, said that most bulk liquid shipowners will not be affected by the USTR’s final plan for port fees on China-linked vessels, but major Chinese operators will see impacts from Annex I. And despite exemptions in Annex II, Gerrard-Anderson anticipates tighter vessel supply and higher rates for vessels transiting the US Gulf. Annexes I and II from the USTR’s final plan are the applicable sections for the bulk liquid transportation market. The effects from Annex I, which focuses on service fees on Chinese vessel operators and vessel owners of China, will be impacted as many of these owners have established a meaningful presence in the US market and maintain large contract of affreightment (COA) portfolios for trading specialty chems and bulk liquid cargoes, Gerrard-Anderson said. Annex II, which essentially impacts the rest of the bulk liquid transportation market, includes exemptions for tankers less than 80,000 deadweight tonnage (DWT) even if they are built in China, and for ships on short sea trades of less than 2,000 nautical miles. Special purpose-built vessels for the transport of chemical substances in bulk liquid forms will not be charged. Another exemption, designed to help maintain US exports, is that ships arriving ballast will not be charged to ensure tonnage is available for export. Analysts at shipping broker NETCO said that most vessels in their segment are exempt under Annex II. On the container shipping side, the softening of the fee structure reduces the risk of severe port congestion and could ease overall upward pressure on freight rates, according to an analyst at ocean and freight rate analytics firm Xeneta. Emily Stausbøll, Xeneta senior shipping analyst, said it is significant that the final proposal has fees levied on a net tonnage basis per US voyage, rather than cumulative fees for every port the ship calls at. "We must look carefully at the potential impact of the revised port fees, but changes will be welcomed by the ocean container shipping industry given the significant criticism levelled at the initial proposal during the public hearing,” Stausbøll said. “The fact fees will not be imposed on every port call is particularly important because it lowers the risk of congestion had carriers decided to cut the number of calls on each service into the US,” Stausbøll said. “This port congestion had the potential to cause severe disruption and upward pressure on freight rates.” Stausbøll said costs could still be very high for Chinese carriers and carriers operating Chinese-built vessels – particularly for ships with the largest capacity. "The latest announcement should still be viewed in the context of the original proposal, which offered dire consequences,” Stausbøll said. “The situation has changed for the better, but it isn't a great victory for the ocean container shipping industry because these fees still add further pressure at a time when businesses are already trying to navigate the spiraling tariffs announced by the Trump Administration." 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.

18-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

LONDON (ICIS)–The European Central Bank (ECB) dropped its key interest rates on Thursday in a bid to stabilize economic activity in the eurozone in the wake of disruption caused by US tariff announcements. The bank cut its rates by 25 basis points, reducing the deposit facility interest rate to 2.25%. Marginal lending rates dropped from 2.90% to 2.65% and the refinancing rate was settled at 2.40% from 2.65%. Rates have fallen consecutively throughout the year, as eurozone inflation came back down to 2.2% in March, nearing ECB target levels of 2%. The prospect of a pause on cuts diminished with the volatility caused on ‘Liberation Day’ on 2 April, when US President Donald Trump’s shift in trade policy defied more moderate expectations. Global markets were riled by President Trump’s dramatic tariff rollout on around 60 countries, before rescinding many of his retaliatory tariffs for many trading partners, including the eurozone. Initially, the eurozone had been hit with a 20% tariff and was taking steps to respond in kind, before both sides agreed to a 90-day pause. The EU remains subject to a 10% baseline tariff, with 25% duties on some automotive parts, steel, and aluminum. This has left economic sentiment weak, with the euro tracking significant gains over the US dollar in response to the volatility. Manufacturing has also been hit by the tariffs, with the International Energy Agency (IEA) predicting oil demand growth to fall from 1.03 million barrels/day to 0.73 million barrels/day in 2025, and the World Trade Organization (WTO) expecting global trade to slow by 0.2% year on year. Click here to visit our topic page on the impact of US tariffs on the chemicals and energy industries

17-Apr-2025

Lack of clarity around EU storage targets 2025 likely to persist Ambiguous wording in proposals may apply to 2025, but depends on outcome of negotiations Parliament committee to vote on 24 April LONDON (ICIS)–The EU's 2025 storage filling targets remain unclear at the start of the injection season but accelerated efforts to adopt negotiating positions may signal policymakers's will to find a speedy compromise. “At this stage, the implementation date of the regulation is still being discussed within the Council and is afterwards still subject to negotiations with the Parliament. Therefore, it is an ongoing discussion between member states for the moment and no decision has been made yet,” an EU official told ICIS about whether new rules were likely to apply to 2025. EU countries’ representatives signed off an approach to amending the bloc’s gas storage rules on 11 April, agreeing to extend targets for two more years but introducing greater flexibility in how countries meet targets. This agreement is a step forward, but negotiations cannot begin until the European Parliament signs off its position in early May. An open question is whether the law’s implementation date could be moved forward, changing rules for 2025. While the TTF Summer ’25 premium to the following winters was as much as €6.4/MWh in January, the summer contract expired at a premium of €0.05/MWh on 31 March, ICIS data showed. The TTF Q3 ’25 premium over Winter ’25 collapsed after 31 March, flipping to a discount of €0.025/MWh on 7 April. The spread widened over the following week, with ICIS assessing the front winter €0.7/MWh above the front quarter on 15 April. Poland, which holds the rotating presidency of member states until June, has expressed a desire to reach a provisional deal by the end of its mandate, but the timescales remain uncertain. MARKET IMPACT Industry association Eurogas called for any new provisions to be made clear and communicated no later than the end of June 2025 in a position paper on 10 April, saying uncertainty around changes to the November 2025 target “creates additional challenges for market operators in making informed decisions.” Eurogas also called for more clarity around lower targets, postponement of deadlines and how flexibility for filling trajectories could work. The body called for the Commission to specify flexibilities in advance to improve predictability for market participants and to confirm how any deadlines would be postponed “rather than making last-minute decisions that could disrupt trading strategies.” EXTENSION NEGOTIATIONS Because the gas storage regulation is what is known as ordinary legislation, it must be agreed between the EU’s co-legislators. This means the Council of the EU, comprised of the member states, and the European Parliament will both adopt positions stemming from the European Commission’s initial proposal and then negotiate a compromise. The European Commission in March proposed to prolong the targets beyond their existing expiry at the end of the year, alongside guidance for the current filling season. The guidance for 2025 signalled the Commission would allow more flexibility in how countries replenish stocks, allowing countries to deviate from intermediate targets in 2025 to fill stocks “at optimal purchase prices”. The Commission said it would consider market developments and those effects before deciding on any enforcement steps, but that the November target was essential to ensure security of supply. The guidance reconfirmed that if a country missed the 90% 1 November target, they should strive to reach it in December and so on – provisions that have been in place since the rules were introduced in 2022. COUNCIL POSITION The text agreed on 11 April is the Polish presidency’s basis for negotiations with the European Parliament. EU countries’ representatives in the Coreper committee signed off the document, the result of multiple drafts based on negotiations at expert level. The agreed text does not specify an implementation date for the amended rules to enter into force. The Council proposes allowing countries to meet the 90% target on any date between 1 October and 1 December and allowing countries to deviate from the target by up to 10 percentage points in “unfavourable” market conditions. The deviation would be allowed under unfavourable market conditions, including examples “such as indications of possible market manipulations, or of trading activities hindering cost-effective storage filling”. The examples of unfavourable conditions include market manipulation and trading activities, which suggests a continued view among policymakers that the market itself it part of the problem. This may signal further interventions and continued uncertainty. It also makes explicit that intermediary targets are indicative. PARLIAMENT POSITION As the Council wrapped up its work ahead of negotiations, the European Parliament’s committee on industry, research and energy (ITRE) held its first debate on the Commission’s proposal on 9 April. The appointed rapporteur, the committee’s chair Boris Budka, is tasked with steering the file through the Parliament. His initial recommendation may no changes to the Commission’s proposed text, but committee MEPs proposed many amendments. Budka and shadow rapporteurs – representatives for the Parliament’s other party groupings – are now working to find a compromise text from proposed amendments. The views of largest political groupings – representing around two-thirds of seats – were aligned, in support of lower filling targets and greater flexibility. This signals a speedy resolution to the parliamentary process. An EU official confirmed be put to a committee vote on 24 April and if approved can move to a vote by the wider European Parliament in the plenary session from 5-8 May. The centre-right EPP group called for the rules to apply for 2025. Andrea Wechsler told the committee that “we call for the immediate application of this regulation in 2025, upon publication, and not 2026”. The EPP view was very similar to the Council’s final mandate, calling for a return to market-based mechanisms, with an 80% target, flexible deadline between October and December, and removal of filling trajectories. The centre-left S&D also advocated for lower targets and abandoning the intermediate targets, but called for punitive measures for failing to reach the targets to help ensure compliance. The Parliament and the Council can then begin trilogue talks once both groups have finalised these negotiation positions, aimed at finding a compromise between both versions. OPEN QUESTION While the Polish presidency’s stated aim is to find an agreement by the end of June, any delay on either side or protracted negotiations risks additional delay and further uncertainty. Another risk is that market participants anticipate changes and delaying injections, causing prices and demand to spike later in the summer. While some EU countries such as Germany have called for lower targets, shippers still need to inject. Germany’s ministry of economy and climate protection (BMWK) told ICIS it supported less rigid storage filling requirements but expected market participants to meet their obligations to fill stocks.

16-Apr-2025

LONDON (ICIS)–Inflation in the UK fell in March from the previous month, partly driven by a fall in motor fuel costs as energy prices eased, official data showed on Wednesday. The Consumer Prices Index (CPI) rose by 2.6% in the 12 months to March 2025, down from 2.8% in the year to February, the Office for National Statistics (ONS) said. Easing price rises for recreation and culture, and motor fuels were the main factors pushing inflation down. The lower rate in March marks a two-month downward trend as UK consumer price rises also fell in February. March inflation in the eurozone was also down month on month, to 2.2% from 2.3% in February, with lower energy prices the biggest driving factor, statistics agency Eurostat confirmed on Wednesday following flash data released on 1 April.

16-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

SINGAPORE (ICIS)–Indorama Ventures Ltd (IVL) is divesting from its indirect subsidiary in Portugal that makes purified terephthalic acid (PTA), the Thailand-listed polyester major said on Wednesday. Its entire stake on Indorama Ventures Portugal PTA (IVPPTA) will be pulled out, it said. IVPPTA has a 700,000 tonne/year PTA plant in Sines, Portugal, which was mothballed in October 2023. The Portuguese company is a wholly owned subsidiary of Indorama Netherlands BV (INBV), IVL’s financial holding company registered in the Netherlands. "After a thorough assessment of market conditions and economic pressures, including high raw material and energy costs, inflationary impacts, and competition from low-cost PTA imports, the company has decided to implement its asset optimization strategy by divesting its investment in IVPPTA," the company said in a statement. The divestment will not affect IVL's operations or financial position, as IVPPTA’s assets were already impaired last year, IVL said.

16-Apr-2025

SINGAPORE (ICIS)–China's economy expanded by 5.4% year on year on the first quarter, unchanged from the previous quarter, official data showed on Wednesday, but the world’s second-biggest economy is generally expected to weaken due to the tit-for-tat trade war with the US. China warns external environment becoming "more complex and severe" March retail sales growth strongest since December 2023 Major banks lower 2025 growth forecasts for China China's economy was “off to a good and steady start,” the National Bureau of Statistics (NBS) said in a statement, as the Q1 figure was above the full-year target of "around 5%", the same target set for 2024. "However, we should be aware that the external environment is becoming more complex and severe, the drive for the growth of effective domestic demand is insufficient, and the foundation for sustained economic recovery and growth is yet to be consolidated," the NBS said. The US and China remain locked in a trade war, marked by steep tariffs: US goods face 125% duties entering China, while Chinese goods are subject to 145% tariffs upon import to the US. The US tariffs on China include 125% reciprocal tariffs and the combined 20% imposed at the start of February and March. In Q1, China's value-added industrial production rose by 6.5% year on year (no hyphens), supported partly by frontloading of export orders. Retail sales, a key gauge of consumption, rose by 4.6% over the same period, with those in March alone posting a 5.9% year-on-year increase, marking the best pace since December 2023. Q1 fixed investment rose by 4.2% year on year in the first quarter as expansion in the manufacturing sector offset a decline in property development. On the trade front, total value of Q1 exports rose by 6.9% year on year to yuan (CNY) 6.13 trillion while imports fell by 6.0% over the same period to CNY4.17 trillion. For March, China's exports jumped 12.4% year on year to $313.9 billion, a sharp acceleration from a 2.3% growth posted in January-February, as factories expedited shipments before US tariffs took effect. TRADE OUTLOOK DETERIORATING Citing rising trade tensions, Japan’s Nomura Global Markets Research now expects China’s 2025 exports to contract by 2.0% from a previous estimate of zero growth. Nomura maintained its 2025 GDP growth forecast for China at 4.5%, below Beijing's official target, anticipating policy measures will be implemented to offset the export decline. China's growth momentum is expected to weaken after the first quarter due to the payback from earlier export boosts, fading consumer stimulus, and "long-protracted property sector woes", it said. Beijing needs to be "a bit more innovative and courageous" in stimulating domestic demand to reach its GDP growth target this year, suggesting short-term fixes are insufficient, Nomura said. Major investment houses including Citi, Goldman Sachs, UBS, and Morgan Stanley have recently lowered their respective 2025 growth forecasts, with the new estimates now ranging from 3.4% to 4.2%, based on data collected by news agency Reuters. Swiss bank UBS on 15 April downgraded its China GDP growth forecast to 3.4% for 2025 from a previous estimate of 4%, on the assumption that tariff hikes between the country and the US will remain in place and that Beijing will roll out additional stimulus, according to a Reuters report. The bank also expected overall Chinese exports to fall by 10% in US dollar terms in 2025. TARIFF UNCERTAINTY PERSISTS The White House on 15 April stated that US President Donald Trump is open to making a trade deal with China, but Beijing should make the first move. "The ball is in China's court: China needs to make a deal with us, we don't have to make a deal with them," White House press secretary Karoline Leavitt told a press briefing. The Trump administration on 14 April imposed new export restrictions on US tech giant Nvidia’s H20 artificial intelligence chips to China, highlighting the company would require a license to export to China for the indefinite future, with concerns that “the covered products may be used in, or diverted to, a supercomputer in China”. Trump also on 14 April launched a probe into the need for tariffs on critical minerals, the latest action in an expanding trade war that has targeted key sectors of the global economy. The order calls for the US commerce secretary to initiate a Section 232 investigation under the Trade Expansion Act of 1962 to “evaluate the impact of imports of these materials on America’s security and resilience,” according to a White House fact sheet. China on 14 April imposed its own restrictions on purchases on Boeing aircraft and related aircraft parts. "While the US White House Press Secretary said that ‘the ball is in China’s court’ in terms of making the first move and offer, China would most certainly want any genuine negotiations to take place on equal footing rather than on any unilateral conditionality," said Michael Wan, an analyst at Japan's MUFG Research. Chinese president Xi Jinping in currently in Malaysia from 15-17 April, as part of a regional tour which includes Vietnam and Cambodia. Xi was previously in Vietnam on 14-15 April. In an exclusive article for Nhan Dan, the official newspaper of Vietnam’s Communist Party, published ahead of his state visit, Xi wrote that “trade war and tariff war will produce no winner, and protectionism will lead nowhere”. Vietnam was slapped with one of the highest levels of US “reciprocal” tariffs, at 46%, although Trump has currently paused their implementation for 90 days for all countries except China. Chinese and Vietnamese state media on14 April reported that 45 agreements were signed but the content of the agreements was not disclosed. Focus article by Nurluqman Suratman Visit the ICIS Topic Page: US tariffs, policy – impact on chemicals and energy. Thumbnail image: At Qingdao Port in Shandong province, China, on 15 April 2025.(Costfoto/NurPhoto/Shutterstock)

16-Apr-2025

The following text is from a white paper published by ICIS called 'Can Russian gas return to Europe after arbitration awards?' You can download the pdf version of this paper here. Written by: Aura Sabadus and Andreas Schroeder Graphs by: Yashas Mudumbai Recent geopolitical events have led to discussions around the potential resumption of Russian pipeline gas flows to Europe. However, complex legal and reputational challenges could make the process very difficult. In this Q&A, ICIS reviews the arbitration cases brought against Gazprom, explaining the difficulties facing those seeking to renegotiate contracts and analyses some scenarios for the possible return of Russian gas. HOW MANY ARBITRATION CASES HAVE BEEN INITIATED? Since Gazprom cut pipeline gas supplies to Europe following Russia’s invasion of Ukraine in 2022, more than 20 EU buyers initiated arbitrations, claiming financial damages in excess of €18 billion and, in some cases, the termination of contracts. Over the last year, several companies such as Germany’s Uniper and RWE or Austria’s OMV were awarded damages. In Uniper’s case, for example, the arbitration tribunal awarded €13 billion, one of the highest ever, and terminated the company’s long-term contracts amounting to 18.5 billion cubic meters (bcm), which were due to expire in 2030. ICIS has verified and compiled a list of the arbitration cases covering around 100bcm of gas, equivalent to two thirds of the annual volumes delivered by Gazprom under long-term contracts. In some cases, covering approximately 20bcm/year, contracts have already expired since 2022. In others, amounting to over 28bcm/year, companies were awarded financial claims and had contracts legally terminated, but some agreements covering around 30-35bcm/year may still be pending. The largest claims in terms of financial damages and contracted volumes were reportedly made by Germany, followed by Italy, France and Austria. These contracts had expiry dates between 2030-2040. The list compiled by ICIS is not exhaustive as proceedings are secret and many companies had been keen to protect the confidentiality of contractual terms. When excluding the contracts that can be accounted for, as well as those which remain active, there are still around 38-40bcm/year tied up in agreements under arbitral proceedings, but which ICIS could not verify from publicly available information. RUSSIA HAS MADE COUNTERCLAIMS. DO THEY MATTER? Unless companies had assets in Russia prior to the start of war and the ensuing 2022 energy crisis, counterclaims brought by Gazprom in Russian courts are unlikely to be considered by companies active in western jurisdictions, lawyers interviewed by ICIS said. Publicly available information indicates that by mid-March 2025, Gazprom had initiated 15 counterclaims in Russian courts. NEXT STEPS? With most legal proceedings now concluded, buyers have several choices. One option is to turn the page completely on Russian imports. In some cases, such as Lithuania, Poland or Finland, the return of Russian gas supplies is unlikely, at least for the foreseeable future. These countries have managed to put in place alternative solutions such as expanding or building LNG regasification capacity, signing new LNG contracts or, in Poland’s case completing the Baltic Pipeline designed to bring gas from the North Sea. Finland’s Gasum initiated arbitration for its 2.5bcm/year contract, due to expire in 2031, amid disagreement with a Russian demand to pay in rouble in 2022 as well as with regards to certain terms in the contract. The arbitral tribunal ordered Gasum and Gazprom Export to continue their bilateral contract negotiations but these were unsuccessful. As a result, Gasum terminated its long-term contract with Gazprom Export on 22 May 2023. In other cases, such as Uniper’s, where the financial compensation is significant, the claimant could consider recouping the sum. Lawyers interviewed by ICIS said one option would be to arrest Gazprom’s remaining receivables. However, most of these assets are now in former Soviet countries or Turkey, which may ultimately prove challenging to seize. The other option would be to secure payments in kind whereby Gazprom would agree to deliver gas to the equivalent value of the compensation owed to the buyer. HOW MUCH GAS COULD BE RENEGOTIATED FOR FUTURE IMPORTS? Energy lawyer Alan Riley told ICIS that, in theory, volumes could be as high as those that had been lost in 2022. In reality, however, these could be much smaller or even impossible to secure. This would be because there may be some companies uninterested in renewing a business relationship with Gazprom. Secondly, there are also reputational considerations at stake. Many companies would not want to be associated with Gazprom or might fear that with a new US administration willing to sanction Russian companies in the upcoming years, they may become collateral victims. Others, however, may be inclined to consider renegotiating some of the volumes, particularly if Russia is ready to offer significant discounts for an extensive period of time. Riley said Gazprom could offer prices at US Henry Hub level, which would help to bring down soaring energy costs for western European economies reeling from the 2022 energy crisis. WHAT ARE THE CHALLENGES FACING COMPANIES LOOKING TO RESUME IMPORTS? More than 100bcm of gas delivered by Russia prior to 2022 has now been replaced by spot volumes or mid-term contracts with LNG or pipeline suppliers. While the European supply picture remains tight at least for the remaining months of 2025, there are several factors that will determine whether Russian gas would make a comeback any time soon. These relate to companies’ strategies, Gazprom’s commercial and legal constraints, EU regulations, availability of supply routes and global competition. COMPANIES’ STRATEGIES While many companies will be tempted to resume negotiations for gas from Russia, many will also be mindful of collateral issues. For example, some companies which held supply contracts with Gazprom were also shareholders in projects such as Nord Stream 1 or financial investors in Nord Stream 2 – both pipelines connect Russia to Germany for gas deliveries. If the Nord Stream pipelines, which were sabotaged in 2022, are repaired and brought back into commercial use, a question remains as to whether companies would have an interest in resuming imports via these routes. In some cases, where contracts were terminated following arbitral proceedings, companies are no longer legally required to return to the project. However, it’s unclear whether others, which held supply contracts with Gazprom for volumes delivered to Germany and were also financial investors in Nord Stream 2 or shareholders in Nord Stream 1 would seek to resume imports. WHAT ARE GAZPROM'S CHALLENGES? Gazprom’s challenges are equally complex. On the one hand, it’s interested in regaining its European market share, having been unable to diversify elsewhere. On the other, the risks of returning would be significant because if it were to conclude new deals, other companies holding financial claims against Gazprom would immediately seek to seize its European revenue. This means Gazprom would either have to conclude deals with all previous buyers or allow another Russian entity to step in. To leverage its way back into the market, Gazprom or any other Russian entity may also have to offer significant price discounts to undercut competitors. Such an option would prove challenging particularly for Gazprom, which is undergoing financial difficulties at the moment. Furthermore, new global LNG capacity which is expected to enter operation next year could also pressure gas prices, giving Gazprom or other Russian entities limited flexibility in terms of offering discounts. WHAT ARE THE POSITIONS OF THE EU AND THE US? The EU set a 2027 deadline for the phaseout of Russian fossil fuel imports. Nevertheless, it has repeatedly postponed publishing the relevant roadmap, arguably expecting to get a better understanding of discussions related to arbitrations or the return of any of the supply routes including Ukraine, the Nord Streams or Poland’s Yamal pipeline which runs from Russia, through Poland to Germany. The roadmap is considered essential because it will ultimately define whether companies can resume Russian imports and, if so, in what quantities and over what period of time. While more than a third or 35bcm of the gas supplied by Russia has been displaced by US LNG, it’s unclear to what extent US producers will be able to retain and even increase their European market share, particularly in the light of a growing transatlantic political rift. Russian LNG and pipeline gas to Europe went down from 160bcm in 2018 to 51bcm in 2024. In contrast, US LNG went up from 25bcm in 2021 to 59bcm in 2024. Hence, 34bcm of US LNG fills the ‘Russian gap’ of 109bcm. For US producers, retaining a foothold in Europe will be of critical importance as the share of US LNG in the EU’s total imports reached a record 24% in March 2025. However, as US President Donald Trump is now pushing for a rapprochement with Russia and the negotiation of a peace deal with Ukraine, one issue on the agenda may be the return of some Russian flows to Europe. The US President will be forced to strike a fine balance between protecting the interests of US producers and making concessions to Moscow. SUPPLY ROUTES Even if companies were to agree on volumes, duration of contracts, price and other sensitive contractual terms, their ability to resume these flows will depend on the availability of import routes. Prior to Russia’s war in Ukraine, Gazprom was using four transport corridors – Ukraine, Nord Stream 1, the Yamal pipeline to Germany via Poland and TurkStream 2 transiting the Black Sea and Turkey. There have been discussions about the possible resurrection of the Nord Stream lines or the return of transit via Ukraine after a five-year agreement expired on 1 January 2025. Although there are reports of high-level talks involving Trump and Russian counterparts for the possible return of one of at least one of the Nord Stream 2 pipelines that remains intact, the legal complexities that need to be addressed are formidable. A first hurdle relates to the debt restructuring of Gazprom subsidiary Nord Stream AG. The company was given until 9 May to present a plan to repay its debt or face bankruptcy. Even if it’s successful in persuading the Swiss court it is in a position to pay, the next difficulty would be to obtain the outstanding certification for its company Gas for Europe. The German company was established in January 2022, following amendments to the EU’s Third Gas Directive, which would require Swiss-based Nord Stream 2 AG to establish a German subsidiary to act as an independent transmission system operator for the section of the pipeline operating in German territorial waters. Considering ongoing geopolitical tensions as well as the fact that Germany had to spend billions of euros to bail out Uniper and subsidize end consumer prices following the Russian-triggered energy crisis of 2022, the likelihood of granting approval to Nord Stream 2 under current conditions is low. The Federal Ministry for Economic Affairs and Climate Action (BMWK) is reportedly preparing for the possible demand from the United States for the activation of the two Nord Stream 1 and 2 gas pipelines. The German government rejects the idea of resuming Russian gas deliveries via the Nord Stream pipelines in the Baltic Sea but it is unknown what position it would take if faced with US demands to bring it back online. Yamal Another route that could be considered is the 35bcm/year Yamal pipeline, transiting Belarus and Poland for deliveries in Germany. Prior to the crisis, the Polish section was owned by EuRoPol Gaz, a joint venture between PGNiG (currently under PKN Orlen), Gazprom and Gas Trading, a company majority owned by PGNiG, making the Polish side, the majority stakeholder. After Gazprom reduced and then stopped deliveries altogether in 2022, Poland sanctioned Gazprom’s share in EuRoPol Gaz. In response, Russia sanctioned EuRoPol Gaz, which meant that gas could no longer be delivered via this route. Since 2022, both Poland and Russia initiated legal proceedings against each other, claiming each financial damages amounting to $1.5 billion. Resurrecting the transport route would therefore depend not only on solving the legal disputes but also on the normalisation of political relations between Poland Russia, which is unlikely given current circumstances. Ukraine The third route – Ukraine – would have been the most likely option for the resumption of transit considering the sheer capacity of the transmission network, which can ship more than 100bcm/year to Europe. Nevertheless, ongoing war-related risks and the recent destruction on the Russian side of the border of the Sudzha metering station, a critical piece of infrastructure measuring gas inflows leaving Russia and entering Ukraine, could block the return of transit in the immediate future. Given the ongoing war conditions, Kyiv may be looking to demand a share of Russia's sales revenue to be paid to Ukraine as part of compensation for war-related damages. TurkStream Finally, Russia’s remaining option to send gas to Europe is TurkStream 2. However, with nearly 16bcm of active contracts in place, the pipeline is working close to full capacity. This means it would either have to expand TurkStream at a time when its revenue has been sharply falling or persuade Turkey to increase border capacity on the adjacent Strandzha border point with Bulgaria. The border point was previously used to import Russian gas shipped north to south until 2020. The entry capacity of this border point was over 15bcm/year but the reverse capacity, shipping gas from Turkey to Bulgaria, has an estimated 4bcm/year. Nevertheless, the Turkish incumbent and gas grid operator, BOTAS, said it could double it. Parallel upgrades would have to be carried out in the neighbouring Bulgarian gas transmission system to decongest the network and accommodate additional imports. HOW MUCH RUSSIAN GAS COULD RETURN TO EU MARKET? From a purely technical perspective, there are very generous limits to Russian supplies into Europe. • The Ukraine transit (via Sudzha) could bring more than 100bcm/year. • The opening of a Nord Stream 2 string could bring 27.5bcm pipeline gas. • A reactivation of the Polish Yamal pipeline could add some 30bcm/year. • A stop of EU sanctions against Gazprom’s Arctic LNG could bring some 13Mt LNG/year (~18bcm) of Russian LNG to the global market with Europe as most attractive destination. ICIS believes a return of Russian pipeline gas and LNG to Europe will not be hindered by technical limitations but is challenged for political considerations. ICIS Gas Foresight suggests that a return of Russian gas would have severe implications for LNG imports into Europe. In a model-based scenario analysis ICIS tested a combined activation on January 2026 of: • Ukraine gas transit with 15bcm/year • Nord Stream II gas pipeline string with 27.5bcm/year • Arctic LNG with 13Mt/year export capacity An additional annual 375TWh (34bcm) of Russian gas supply would bring LNG imports into Western and Central Europe down by some 365TWh (33bcm) in 2026 and reduce average gas prices by more than 5% according to model results. A potential return of Russian gas into Europe hinges on the reactivation of commercial activities between European energy corporations and a Russian entity. Looking at Gazprom’s suspended gas supply contracts, the theoretical potential is large. More than 100bcm/year could flow to Europe if the suspended commercial contracts would be reactivated. ICIS Gas Foresight's base case view assumes that Russian pipeline gas supplies will be restricted to Balkan countries as well as Hungary and Slovakia. LNG continues to flow to Europe and makes up the lion's share of more than two-thirds of Russian deliveries into Europe as of 2025 and for the future.

15-Apr-2025

Several CCGT units with 62-63% efficiency are due to be commissioned in Italy between 2025-2026 This is likely to widen Italian supply margins and pressure the clean spark spread A trader told ICIS that the new capacity (located in northern Italy) could reduce net imports from France LONDON (ICIS)–Several highly efficient combined-cycle gas turbine (CCGT) units are due to be commissioned from mid-2025 to 2026, which is likely to widen Italian supply margins and thus pressure power prices and the clean spark spread (CSS). According to ICIS Analyst Luca Urbanucci, these highly efficient units will have a lower short-run marginal cost than most of the Italian gas fleet, and their commissioning will lead to “a further reduction of the Italian clean spark spread in upcoming years”. CLEAN SPARK SPREAD The high efficiency of these new units in the 62-63% range means that they will sit lower in the merit order than less efficient Italian gas-fired units and thus exert pressure on the market clearing price. These units will generate around 30% less CO2 than their less efficient counterparts and therefore benefit economically from lower carbons costs as well as decreased fuel usage. An Italian CCGT with 61% efficiency currently captures a premium CSS of €20.12/MWh compared to the €3.70/MWh CSS of a CCGT with typical 50% efficiency, accounting for €2/MWh of operating and transport costs. The new CCGTs are thus expected to run at a profit for more hours without having to rely on capacity market or balancing payments. However, the bulk of the Italian gas fleet, which has less than 50% efficiency, is likely to face lower spark spreads. The Italian CSS will face further pressure in upcoming years as the extra supply provided by these new gas-fired units pressures electricity prices. Luca Urbanucci pointed out that a further consequence of this will be that “the older Italian gas units will have fewer hours in which they can run at a profit and consequently will reduce their generation”. A trader who spoke to ICIS agreed with this, stating that “the Italian market is already very tight at the moment and several [gas-fired] plants are struggling to generate; these new units will make it even tighter because of their high efficiency". PRICE EFFECT According to Urbanucci, the extra supply that will derive from the future commissioning of these CCGTs “has likely already been factored in by the market in pricing the Cal ’26 and Cal ’27 Italian power products”. In other words, the future commissioning of these units is already visible in the backwardation pattern shown by the Italian far curve. ICIS' 9 April assessment of the Italian Cal ’26 power product showed €97.16/MWh, while the Cal ’27 product was cheaper at €85.05/MWh. However, according to Urbanucci, “there will likely be a bearish effect on Italian power prices in the months when the units are actually commissioned and begin to generate, given the uncertainty surrounding the precise start-date”. The first trader was in agreement with this sentiment, stating that “it is likely that the market will start to price these units in with more conviction when they actually come online”. According to ICIS long-term analytics forecast, average Italian yearly power prices are set to fall from €127.04/MWh in 2025 to €109.72/MWh in 2027. NORTHERN ZONE The new CCGT units are all concentrated in the north of Italy. This is to be expected, says Urbanucci, given that the Italian northern zone is the Italian power zone with the highest population, industrial activity, and electricity consumption. According to Urbanucci, the new northern CCGT capacity is “unlikely to have a significant impact on Italian power imports, given that French nuclear and Swiss hydropower will nonetheless remain more competitive pricewise”. On the other hand, a second trader suggested that the new Italian capacity “could reduce the net power import, though it is unlikely to flip Italy into an exporting position”.

14-Apr-2025