Urea and nitrates

HOUSTON (ICIS)–Nutrien is anticipating that corn plantings will range between 91-93 million acres with the projected increase combined with a shortened fall application season in 2024, supporting their outlook for strong North American fertilizer demand in the first half of this year. The fertilizer producer said in an earnings release that it feels interest in soybean sowings will be strong as well with their projections for upcoming plantings to range from 84 million acres up to 86 million acres this spring. It noted that global grain stocks-to-use ratios remain historically low, and demand remains strong, providing a supportive environment for ag commodity prices in 2025. Not only is the outlook favourable in the US but also in Brazil as Nutrien said generally favorable soil moisture and stronger crop prices are expected to lead to an increase in safrinha corn acreage by approximately 5%. The company said strong grain and oilseed export demand is supporting grower economics. Looking at potash, Nutrien said global shipments rebounded to approximately 72.5 million tonnes in 2024. They were driven by improved supply and supportive application economics that contributed to increased demand in key markets such as China, Brazil and southeast Asia. The producer is forecasting global potash shipments between 71 million tonnes and 75 million tonnes in 2025. It noted that the high end of the range captures the potential for stronger underlying global consumption and the lower end captures the potential for reduced supply availability. Nutrien said it anticipates possible supply tightness with limited global capacity additions in 2025 and reported operational challenges and maintenance work in key producing regions. For global urea and UAN their prices have increased in Q1 of 2025 and are being driven by strengthening demand in key import markets and restricted supply, including continued Chinese urea export restrictions. The producer said global ammonia prices have recently trended lower due to seasonal demand weakness and the anticipation of incremental supply in the US and export capacity from Russia. It does expect North American natural gas prices to remain highly competitive compared to Europe and Asia, with Henry Hub natural gas prices projected to average between $3.25-3.50/MMBtu for the year. Looking at the US nitrogen supply and demand balance the company expects it to be tight ahead of the spring applications, as nitrogen fertilizer net imports in the first half of the 2024-2025 fertilizer year were down approximately 60% compared to the five-year average. Overall nitrogen demand for the spring season is expected to be strong due to the limited fall ammonia application and the potential uptick in corn acreage. For phosphates Nutrien said the markets remain firm, particularly in North America where inventories were estimated to be historically low entering 2025. It is anticipating that Chinese phosphate exports will see levels like 2024, with total exports ranging between 6 and 7 million tonnes. Currently the situation in India with their tight supply should help push demand higher ahead of their key planting season. “The outlook for our business in 2025 is supported by expectations for strong crop input demand and firming potash fundamentals,” said Ken Seitz, Nutrien president and CEO.

20-Feb-2025

HOUSTON (ICIS)–Fertilizer producer CF Industries expects in the near-term that the global nitrogen supply and demand balance will remain constructive as inventories globally are viewed as being below average, with production economics for the industry’s marginal producers in Europe remaining challenged. The company said in a results announcement that global nitrogen pricing was supported in Q4 of 2024 by positive global demand as well as constrained supply availability due in part to natural gas shortages in Iran and Egypt. There was also China’s impact on the market with their continued restrictions on urea exports. Looking ahead at North America, CF is forecasting average US corn returns above soybeans. The producer said this is due in part to improving corn prices from strong corn exports and lower 2024 yield estimates, which is expected to be positive for corn plantings and nitrogen demand in the region. At this time the company expects US corn plantings in 2025 will be approximately 93 million acres, which falls on the lower end of domestic industry projections of between 93 million and 96 million acres being sowed in the weeks ahead. For Brazil there was an uptick in urea imports in 2024 to 8.3 million tonnes, which was 14% higher than 2023. CF said that imports to Brazil are expected to remain strong this year because of forecasted high corn plantings and continued nominal domestic nitrogen production. In India the producer said urea inventory is believed to be low following strong domestic demand for urea, lower-than-targeted domestic urea production and lower urea import volumes in 2024. The company noted that there has been the inability of import agencies to secure targeted volumes in the country’s two most recent urea import tenders and that another urea import tender may be necessary in Q1 of 2025. If that comes forth it will compete for volumes with demand in the northern hemisphere for spring applications. Additionally, CF thinks it is likely that India will tender earlier in its next fertilizer year than in recent years given the lower urea stock position. For Europe there is approximately 25% of ammonia capacity and 20% of the urea capacity is reported in shutdown/curtailment as of January. The producer said it believes that ammonia operating rates and overall domestic nitrogen product output in Europe will remain below historical averages over the long-term given the region’s status as the global marginal producer. Looking at China, the company said the ongoing export controls continue to limit urea export availability from the country. There were less than 300,000 tonnes of urea in 2024 exported, which was 94% lower than 2023. CF has a view that urea exports may resume following China’s domestic spring application season. In Russia exports have increased by 16% through the end of Q3 2024 compared to the same period in 2023, with the producer attributing this to the start-up of new urea granulation capacity and producers favoring urea upgrades over UAN upgrades. Also, it cites the willingness of certain countries to purchase Russian fertilizer, including the US and Brazil. CF said over the medium-term the significant energy cost differentials between North American producers and high-cost producers in Europe and Asia are expected to persist. As a result, the global nitrogen cost structure will remain supportive of strong margin opportunities for low-cost North American producers. Longer-term the company expects the global nitrogen supply and demand balance to tighten as global nitrogen capacity growth over the next four years is not projected to keep pace with expected global demand growth. That rate is projected to be approximately 1.5% per year for traditional applications and new demand growth for clean energy applications. Further the amount of global production is seen as remaining constrained by continued issues over the availability and cost of natural gas.

20-Feb-2025

HOUSTON (ICIS)–Even with potential tariffs coming in two weeks and winter looking like it wants to linger, possibly through much of February in some states, the US fertilizer industry is quite positive over the near-term direction of domestic products, especially urea. Many participants gathered this week at the first major US fertilizer conference where the strong tone that has been developing to start the year was on full display. The current outlook comes from the lift in near term prices and firm sentiment towards there being good consumption of the volumes already positioned as field work begins in more areas over the rest of this month. There is also an upbeat view towards there being solid demand patterns throughout the season if inventory tightness does not impede that flow, with it widely expected that the current conditions and the arrival of the peak spring season will promote further value escalation in the short-term. Further boosting the overall optimism is this season’s corn plantings with estimates remaining elevated and now ranging between 93 million to 96 million acres potentially. The realization of the higher end of that projection is likely dependent on corn prices being supportive over the next several weeks and there being an early start of field work in key states. It was expressed that the current low inventory of products, especially in nitrogen could become a limiting factor with a source saying, “we don’t have enough urea for 95 million to 96 million acres”. That these extra sowings would cause a lift in total fertilizer consumption is not for certain. Some of the increased acreage could be on land considered marginal for growing high yielding corn and farmers could chose to do less than they would on prime land or chose a cheaper option. Or even count on enough nutrient carryover from the last crop. When it came to weighing the impacts that fertilizer and agricultural interests within both Canada and the US might face with tariffs there was significant discussions over whether these measures would be imposed or would they not come forth at all. If so, would it be implemented at the full rate of 25% or be placed at a different level higher or lower, with participants almost evenly split between their viewpoints. Those operating in Canada or with interest in product within the country are definitely more vested in these outcomes than others in the industry and their concerns were sharper. As one source said a large spike in values would be the most immediate hit to the markets and more than anything there is “a lot of uncertainty and it’s changed the way we are selling there”. Some participants are also seeing US retailers becoming more cautious about their further commitments even though supply is tight for nitrogen products. In many areas winter weather is keeping activities quite reduced and could keep the northern areas frozen a bit longer, there was still some optimism that some areas could get underway as March begins. If that materializes that would be deemed an early start in some locations, with there being the mindset that the sooner farmers start the more time for fertilizers to be consumed. For now, field work is only underway in the southern states in places that have been warmer and dry but that is only a small portion of what is ahead for spring applications. It was discussed that there are some wheat inputs that have begun, and it is expected that over the coming weeks even more efforts will start where there is good soil moisture for not only ammonia but also urea and UAN applications.

14-Feb-2025

LONDON (ICIS)–Here are some of the top stories from ICIS Europe for the week ended 7 February. BP puts Gelsenkirchen, Germany refinery, crackers up for sale BP plans to sell its to sell its Ruhr Oel refinery, crackers and downstream assets at Gelsenkirchen in Germany. Surge in natural gas prices highlights problem for chemical producers in Europe The challenges facing petrochemical producers in Europe are well documented, but higher natural gas prices this winter and an increase in liquefied natural gas (LNG) imports highlight just how tough these difficulties are – particularly in comparison with other regions. EU defiant on tariff threats but faltering growth could limit response The European Commission has pronounced itself ready to respond to any tariff measures introduced by the US, but the fragility of the region’s recovery leaves it ill-equipped to fight a trade war. Europe PMMA faces price squeeze from cheap imports, weak demand The polymethyl methacrylate (PMMA) market in Europe faces a price and margin squeeze amid ongoing weak demand and availability of cheap imports. Europe fertilizer sector considers impact of proposed EU tariffs on Russia The announcement by the EU on 28 January that it has adopted a proposal to impose tariffs on a number of agricultural products from Russia and Belarus, as well as on certain nitrogen-based fertilizers, has been welcomed by European fertilizer producers. Urea uptick surpasses expectations as demand continues to outpace supply Expectations of an import tender in India and increasing demand from the US ahead of the start of fertilizer application for the spring will continue to boost demand for urea in the first quarter.

10-Feb-2025

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

03-Feb-2025

MUMBAI (ICIS)–India plans to build a new 1.27 million tonne/year urea plant in the eastern Assam state to cut its reliance on imports, while the government allocating a bigger infrastructure budget in the coming fiscal year ending March 2026. New plant – eighth urea unit of same capacity to be built since 2019 2025-26 infrastructure budget at Rs11.2 trillion Tax cuts to boost consumption amid economic slowdown “Our government had re-opened three dormant urea plants in the eastern region. To further augment urea supply, a plant will be set up at Namrup, Assam,” India’s finance minister Nirmala Sitharaman said during her budget presentation before parliament on 1 February. This will be the eighth plant with the same capacity that will be built in the south Asian country since 2019. It is expected to reduce India’s dependence on urea imports. In fiscal year ending March 2024, India’s domestic urea production was at 31.4 million tonnes, up 20% from the previous year. Amid growing domestic capacity, imports of the material in January-October 2024 declined by 31% year on year to 4.1 million tonnes, official data show. Separately, the government has announced plans to increase its capital expenditure on infrastructure projects by about 1% to Indian rupees (Rs) 11.21 trillion ($129 billion) for 2025-26. While the government had initially allocated Rs11.1 trillion for infrastructure projects for fiscal year 2024-25, it brought down its allocation to Rs10.18 trillion in its revised estimate for the current year. The government has allotted Rs2.72 trillion to the Ministry of Transport & Highways for the development of road infrastructure across the country. The allocation for the Indian Railways has also remained unchanged at around Rs2.52 trillion which will help support the continued development and modernization of India’s rail networks. “Infrastructure development remains a cornerstone of India’s growth strategy, with targeted investments to enhance connectivity and reduce logistics costs,” Sitharaman said. The government also plans to extend Rs1.5 trillion in interest-free loans to states to support infrastructure projects. This is expected to encourage public-private partnerships (PPPs) to develop new roads, highways and metro projects which will increase the consumption of construction-related segments such as cement, steel, paints and various chemical and petrochemical products. Budget allocation for the National Green Hydrogen Mission has been doubled to Rs6 billion from the current fiscal year. It is expected to attract investment and help India achieve its goal of producing 5 million tonnes/year of green hydrogen by 2030. Meanwhile, the government raised the starting point for income taxes to Rs1.2 million/year from Rs700,000/year previously. "The new structure will substantially reduce the taxes of the middle class and leave more money in their hands, boosting household consumption, savings and investment," Sitharaman said. The Indian government aims to keep its fiscal deficit at 4.4% of GDP in the current financial year 2024-25, which is in line with its aim to bring down the fiscal deficit to under 4.5% by 2025-26. India’s GDP growth for 2025-26 is projected to range between 6.3% and 6.8%, according to the Ministry of Finance. The projected GDP growth rate of 6.3-6.8% for 2025-26 will be the lowest since 2020-21, when India registered a negative growth of 5.8%. India’s GDP stood at 9.7% in 2021-22, 7% in 2022-23 and 8.2% in 2023-24. India’s GDP is estimated to grow at 6.4% in the current financial year ending March 2025, down from earlier forecast of between 6.5% to 7% growth. A slowdown is projected due to a weak manufacturing sector, persistent food inflation, and weak urban consumption combined with stagnant job growth. Inflation is expected to decline in fiscal year 2025-26, with the Reserve Bank of India (RBI) projecting inflation to average at 4.6% and 4% in Q1 and Q2 of FY 2025-26, respectively. Focus article by Priya Jestin ($1 = Rs87.15)

03-Feb-2025

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

03-Feb-2025

HOUSTON (ICIS)–Rates for shipping containers from east Asia and China to the US ticked slightly lower this week, while global average rates dropped by 2% as the Lunar New Year holiday began in China. This period usually sees a significant reduction in shipping volumes as factories shut down or cut production in anticipation of the holiday, leading to lower demand for shipping services. Rates to both US coasts fell by 1%, according to supply chain advisors Drewry and as shown in the following chart. Drewry expects spot rates to decrease slightly in the coming week due to the increase in capacity created by the LNY slowdown. The following chart from Drewry shows the decrease in global average rates. Judah Levine, head of research at online freight shipping marketplace and platform provider Freightos, said transpacific rates should continue to face downward pressure before likely rebounding in mid-February. Transpacific rates to the West Coast have dipped by 17% since mid-January, according to Freightos data, but are still more than double levels seen in 2019. Continued diversions away from the Red Sea and the Suez Canal continue to absorb capacity across the market. Even as progress is being made with a ceasefire in the Israel-Hamas conflict, shipping companies are still avoiding the shorter route. Global shipping major Maersk said this week that it will continue to avoid the Suez Canal and Red Sea until safe passage through the area is ensured for the longer term to optimize stability and certainty across supply chains. 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. They also transport liquid chemicals in isotanks. TARIFFS Frontloading of volumes to get ahead of proposed tariff hikes is likely over as US President Donald Trump said on Friday that tariffs will begin on 1 February for Canada, Mexico and China. “This will keep ocean volumes and rates to the US higher than they otherwise would be in Q1 and possibly into Q2 depending on the timing of the increases,” Levine said. “This pull-forward could also be felt in lower volumes and rates after tariffs are introduced.” LIQUID TANKER SPOT RATES STEADY Rates for liquid chemical tankers ex-US Gulf held steady this week. The transatlantic eastbound route saw some activity with monoethylene glycol (MEG) and caustic soda fixed to the Mediterranean, and urea ammonium nitrate (UAN) and ammonia to the UK. There are a few smaller parcels moving on the route, brokers said, but nothing significant as it appears some trader volumes are still being affected in the aftermath of the recent winter storm. On the USG-Asia route, part cargo space has tightened across the regular players, a broker said, with Odfjell showing only 1,000-2,000 tonnes of available space for February. The USG to South America trade lane was quiet this week, brokers said, with contract of affreightment (COA) nominations steady.

31-Jan-2025

LONDON (ICIS)–The European Commission has adopted a proposal to impose tariffs on a number of agricultural products from Russia and Belarus, as well as on certain nitrogen-based fertilizers. In the proposal, the first round of tariffs will come into place on 1 July 2025. For fertilizers, on top of the existing duty of 6.5%, the tariff would be subject to an additional specific duty that would gradually increase, starting at €40/tonne or €45/tonne, depending on the type of fertilizer (corresponding to around 13% in ad valorem equivalent). The duty would increase to a prohibitive level of €315/tonne or €430/tonne respectively, three years after the start of the proposed regulation’s application (a level of about 100% in ad valorem equivalent). In the three-year transitional period, the prohibitive tariffs would also be introduced if imports from Russia and Belarus are above certain specified volumes. The increase in tariffs will not affect the transit of goods to countries outside the EU. The agricultural products affected by the new tariffs constitute 15% of agricultural imports from Russia in 2023 that had not yet been subject to increased tariffs. Once adopted by the European Parliament and the Council, all agricultural imports from Russia would be the subject of EU tariffs. The EU said the tariffs will support the growth of domestic production and the EU's fertilizer sector, which has suffered during the energy crisis. They will also ensure a steady fertilizer supply and, most importantly, for fertilizers to remain affordable for farmers. The proposal includes mitigating measures, should EU farmers see a substantial increase in fertilizer prices. In the press release, the EU expected the tariffs to negatively impact Russian export revenues, thus impacting Russia's ability to wage its war of aggression against Ukraine. Major fertilizer producers in Europe have been lobbying the EU to take immediate action against Russian fertilizer imports. The producers have called on the European Commission to act against the high volume of imports from Russia, in what is described as "unfair trade' due to the impact of Russian and Belarusian imports. They have expressed their frustration that the threat of Russian imports was not being taken seriously and not enough was being done to protect them ahead of the spring campaign which is now underway. A week ago, German fertilizer company SKW Piesteritz said it had been forced to shut one of its two ammonia plants for an indefinite period because of cheap fertilizers from Russia, coupled with high costs in Germany and an unfavorable political climate. Top Five European urea importers 2023 Importing country  Imports 2023 (tonnes)  Russian imports (%) France Customs                         1,671,913 15 Poland Customs                         1,160,717 30 Spain Customs                            997,551 10 United Kingdom HMRC                            977,229 13 Germany Customs                            921,321 37 Calls for a 30% tariff on Russian and Belarusian imports on all fertilizers no later than February was described by one supplier to Europe as “a bold move ahead of the season”. The new season for buying and application is underway in some parts of Europe. In areas where temperatures are higher than normal, urea will be applied in the next 7-10 days. Aside from the impact of cheap Russian fertilizer on the EU, participants are also worried about Europe’s growing reliance on Russia imports, the potential threat to EU food supply and a derailing of the region's plan to decarbonize. It is widely discussed that Russia will push European fertilizer producers out of the market, and replace gas with fertilizer imports. Urea is produced from ammonia and carbon dioxide. It has a 46% nitrogen content, which is the highest nitrogen content of any solid nitrogen fertilizer.  Urea can be applied by itself to the soil or mixed with phosphate and potash. Thumbnail photo source: Shutterstock

29-Jan-2025

SAO PAULO (ICIS)–Argentina’s cabinet drive to shift the economy from staunch protectionism into liberal bastion is increasing fears among chemicals and wider manufacturing players that the country’s beleaguered industrial fabric is yet to suffer further losses in output in coming years. As production costs in Argentina remain higher than in key manufacturing hubs such as China and the US, industrialists fear the country’s battle against inflation – the number one priority of Javier Milei’s administration – is to increase liberalizing measures that could hurt domestic industrial producers. This week, Argentina’s largest industrial trade group, the UIA, called on the government to make use of antidumping duties (ADDs) to protect the country’s manufacturers against unfair competition. The call for an increased use of ADDs comes as the cabinet lowers import taxes, so cheaper production from abroad can make its way to Argentina and, ultimately, lower prices for consumers: winning the battle against inflation will mark Milei’s term, and he is decided to win that battle, at any cost. Consumers may end up being winners in the equation, rightly so after the country’s crisis pushed more than 50% of Argentinians into poverty, according to official figures. But where there are winners, there are losers and, increasingly, chemicals and manufacturing players fear they will on that side of the equation. CHEAP IMPORTS, POTENTIAL PLANT SHUTDOWNSMacroeconomically, Argentina has turned a corner, and consumers are starting to buy into the recovery narrative. This week, the country’s statistics office Indec said output rose in November, both year on year and month on month, although the petrochemicals-intensive manufacturing and construction continued contracting. Moreover, two much-followed indicators compiled by Buenos Aires’ University Torcuato Luca di Tena showed positive trends: consumer confidence is up and, most importantly, its so-called Leading Indicator compiling ten different economic data sources, was showing the economy had entered an “expansionary phase” in the last quarter of 2024. The annual rate of inflation has more than halved in the past twelve months, standing at nearly 118% in December but down from its peak at nearly 300% in mid-2024. The state posted fiscal surpluses in some months of 2024, something unheard of in Argentina for decades, and squeezed consumers are holding off showing their pain in the streets, a well-established tradition in the country. So far, the majority still buys Milei’s disruptive narrative, aware the previous corruption-prone, protectionist system was unsustainable. The overall upbeat mood has made some in the chemicals industry hopeful that sooner rather than later they will also ride the recovery wave. Others, however, are turning increasingly pessimistic about a liberalized economy in which smaller chemicals players will have it very difficult to survive the current global oversupply. In an interview with ICIS this week, Manuel Diaz, the director general at Buenos Aires-headquartered trade group the Latin American Petrochemical and Chemical Association (APLA) and an Argentinian national himself, said the country’s progress in bringing down both inflation and the fiscal deficit has been remarkable. He conceded, however, many chemical companies in the country are now analyzing their outlook as the new liberalizing policies are to force them to adapt to global competition, which was not a factor in the previous protectionist system. There have already been some plant closures. At the end of 2024, US chemicals major Dow, who is the sole producer of polyethylene (PE) in Argentina, shut its polyols plant in San Lorenzo, citing global competitiveness issues. Local producer Rio Tercero’s shut its toluene di-isocyanate (TDI) plant in Cordoba arguing the same. APLA’s Diaz said there could be other plant closures in coming quarters, but they would affect small facilities which are uncompetitive in the global market, but he remained confident about larger facilities, which should weather the storm and come out on the other side still functioning and profitable. “Overall economic expectations are turning positive. In chemicals, the plant closures we have seen in Argentina is something we can also see in other markets, such as Europe. But in Argentina’s case, I think more plant closures will be contained to small facilities whose global competitiveness is difficult with higher production costs,” said Diaz. “In general, companies will try to accommodate a new reality, and I am confident many will be able to do that. Moreover, let’s look ahead: with crude and gas output from the Vaca Muerta fields expected to increase, there is a big potential for chemicals. Also for some fertilizers such as urea.” Diaz’s optimistic assessment is not shared by all other chemicals and wider manufacturing players. In its call this week for a larger use of ADDs to protect domestic production, industrial trade group UIA highlighted how small- and medium-sized enterprises (SMEs) would need extra protection from global markets if they are to keep their activity. Some of those SMEs would be the small chemicals plants Diaz was referring to. According to the UIA, Argentina currently has 94 ADDs in place, 50 of which are directed at products from China. Globally, Argentina occupies the sixth place in terms of ADDs in place, with 5.6% of the total. The country is behind the US (21.5% of the total), India (14.3%), Brazil (7.1%), Turkey (5.9%), and China (5.7%). Meanwhile, a third of total ADDs in the world are directed at China, according to the UIA figures. The 94 ADDs in place in Argentina are still a reminiscence of the previous protectionist system: Milei's intended plans to turn the economy around will be a years-long process. If the President succeeds, it would amount to a “regime change” economically, said metaphorically an economist at Buenos Aires-headquartered Fundacion Capital in an interview with ICIS last year. While the UIA praised changes passed this week by the cabinet simplifying the ADDs application procedures for companies, it also said that without them many companies may go out of business in the current global oversupplied markets for industrial goods. “These tools are essential to combat unfair competition. The impact of these measures is crucial for local SMEs, which face significant challenges, including one of the highest tax burdens in the world, high logistics costs, and difficulties in accessing competitive financing,” said the UIA. “In contrast, products imported from certain countries reach the local market with falsified prices, subsidized at their origin, and with lower labor costs. This situation generates unfair competition that threatens the sustainability of the national industry. “In developed economies such as the US and the EU, these tools have proven effective in protecting local investment and employment.” BUCKING THE TRENDThe 2020s will be remembered by chemicals players as a time of global oversupply which plunged the industry into a years-long downturn. And China will be at the center of those memories, as the country turned from chemicals importer to net exporter – and doing so with distorted trade practices which helped it dampen its excess product abroad. For a couple of years now, Latin America has been at the centre of this global oversupply. The region’s chemicals production can only cover around 50% of its demand, so Latin America’s trade deficit in chemicals makes the region a ‘price taker’ at the mercy of global markets. A prime target, therefore, for Chinese state-controlled, heavily subsidized chemicals producers. The region’s two largest economies, Brazil and Mexico, are large users of ADDs to protect their domestic industries. As observed in the UIA data on ADDs, Brazil is the third country globally with most ADDs in place (7.1%) but Mexico also featured high on the list, in ninth place with 3.8% of the total. The EU and Canada were in seventh and eighth place, with 5.5% and 4.9% of the total, respectively. Amid a rise in protectionism best reflected by the return of Donald Trump to the US presidency, Argentina is bucking the trend aiming to be the champion of liberal policies. The country tried something similar in the 1990s under Carlos Menem’s presidency, an experiment which did not end up well. The current push for liberalization has so far come with a key factor which did not happen in the 1990s: public sector spending is sharply down as Milei aims to trim down the size of state. That was a key factor in 2024 to dampen demand. It remains to be seen whether a more liberalized economy set to be based in services will leave any room for some industry to thrive in Argentina. Chemicals-wise, the country has the advantage of feedstock, but the full benefits of Vaca Muerta will take some years to bear fruit. In the interregnum, many chemical sources fear they may go out of business permanently. Sources who deal with cabinet officials have said to ICIS that when the officials are pushed on how local manufacturing production may suffer under liberalization measures, their response is always the same: in a free market, those who cannot compete should not be in the market. This week, Milei said he would withdraw Argentina from the free trade bloc Mercosur with Bolivia, Brazil, Paraguay, and Urugay if that was a necessary condition to sign a free trade deal with the US. Milei is Latin America’s most staunch supporter of President Trump, although economically their agendas diverge greatly. Milei has in the past referred to Mercosur’s trading rules as having “become a prison” which dwarfs competition. This week, asked in an interview with Bloomberg if he would be willing to leave the bloc, he said: "If that was the extreme condition [to sign other trade deals], yes. There are, however, mechanisms by which it can be done being within Mercosur. So, we say it can be achieved without having to abandon what we have in terms of Mercosur." Mercosur and the 27-country EU signed in December a free trade agreement after more than 20 years in the making which would create a 700-million consumer free trade area. The deal, however, still has to be fully ratified after it sparked protests among some economic sectors, mostly in the EU, such as farmers. The cabinet officials' reasoning about uncompetitive companies going bust in a true free market leaves chemicals sources perplexed and disappointed, but after one year of Milei firmly installed in the Casa Rosada presidential palace, players are starting to assume they may need to change their business model – less production and more trading and/or distribution, for example – if their companies are to survive. “In the next few years, Argentina’s economy will do very well, but not everyone will do well. Exports-wise, oil and gas, mining, or agriculture will boom. Those with stable jobs will be fine, merchants will be fine, importers will be fine, but clearly industrialists will not be fine,” said a chemicals source in Buenos Aires this week. “Industrialists will suffer because the Argentine government has not yet lowered any of the production costs, be it taxes or costs of the corporatist inefficiency that exists in Argentina, and that makes it difficult for them to compete against imported products that are so cheap. “In other words, I think that industry will suffer in coming years and destroy employment. But employment is not part of the conversation today: it’s all about inflation. Until employment is not part of public opinion’s concerns, the government believes it can ride the wave and win the next election. But, along the way, I fear industrial fabric is set to be lost.” Insight by Jonathan Lopez

24-Jan-2025