LONDON ICIS (ICIS)–The soda ash market narrative reminds one of Dickens’ A tale of two cities: “It was the best of times, it was the worst of times […]we had everything before us, we had nothing before us.” From the vertiginous highs of the post-pandemic boom to the slumbers brought in by high borrowing costs, soda ash players are navigating rougher seas with lows elongated compared to typical cyclical troughs and highs that had exhausted anyone involved in selling the molecule for over two years. Likewise, the promises of a boom in consumption via the lithium carbonate to support lithium-ion battery-run electric vehicles is also tempered by the idea that global oversupply could through the molecule back into the depressed mode and low margin era it has known for decades. Demand from the all-important flat glass applications servicing the construction and auto industries have stabilized after a year-long slow decline and is likely to remain slower in H2. Regionalism is at all-time highs, and supply from China is once again in the line of fire. ICIS soda ash editors Anne-Sophie Briant-Vaghela from Europe, Helen Lee from Asia, and Bill Bowen from the US talk about the changing market conditions as China switches from net exporter to net importer in Q1-Q2. Edited by Meeta Ramnani

SAO PAULO (ICIS)–Brazil’s importers of chemicals are lobbying the cabinet not to implement the hikes to import tariffs proposed by the country’s producers, represented by trade group Abiquim. Brazil’s Chamber of Foreign Commerce (Camex), a body under the government’s umbrella, concluded on 30 April a public consultation about import tariffs on chemicals. In it, Abiquim presented more than 60 proposals to hike import tariffs, while individual companies presented dozens more. In total, the proposals contemplate hikes in import tariffs in more than 100 products, most of them to be raised from 12.6% to 20%. Some proposals, however, aim to raise some import tariffs from 9% to 35%. A decision by Camex is expected in coming weeks. IMPORTERS MOBILIZEA key actor lobbying against the tariff hikes is Brazil’s plastics transformers trade group Abiplast, who benefit from imports into the country. Abiquim often describes those imports as coming into Brazil at “depredatory prices” which are putting some national production chains at risk due to unfair competition. China’s overcapacities continue casting a shadow in the global chemical industry, and Latin America’s historical trade deficit in the sector makes the region the perfect ground for Chinese producers to send their product, at times below costs of production. On the other hand, Abiplast and consumer groups have said a hike in import tariffs would only increase prices for consumers and industrial players alike and would only benefit Brazil’s chemicals producers. “There should be no increase in import tariffs as this is not a viable solution at this moment, nor at any time in the future. An increase would result in direct increases in prices in the Brazilian market,” said to ICIS a spokesperson for the trade group. Earlier in May, sources in Brazil’s chemicals sector said to ICIS it would be unwise to hike import tariffs right now, as the country reels from severe flooding in Rio Grande do Sul, which has a strong plastics sector, and when more imports may be needed. The floods have brought the state’s industrial fabric to a standstill, although the petrochemicals hub of Triunfo, near Porto Alegre, restarted in mid-May albeit at a slow pace as infrastructure in the state is still heavily disrupted. Abiquim, however, remains unrelentless in its request for fast action, arguing that the restart at Triunfo, with Brazil’s polymers major Braskem leading the way, will be enough to guarantee supply, without the need for more imports. Braskem has a commanding voice in Abiquim. “We don’t agree [with any pause in the hike, if finally approved, because of the floods’ effect]. Braskem resumed operations last week and, furthermore, the high level of predatory imports [in past months] mean that resin producing companies had sufficient stocks to supply the market,” said to ICIS a spokesperson at the trade group. Abiquim is hopeful it will gain the day. His lobbying to the government has gone as high as President Luiz Inacio Lula da Silva, with whom the trade group and a few chemicals producers met last week in Brasilia to make their case for the import tariffs hike. Lula’s center-left cabinet has been since the start more friendly towards chemicals producers than his predecessor Jair Bolsonaro, who favored a more free-market line. In 2023, the cabinet hiked import tariffs for several polymers twice, and reintroduced a tax break for chemicals called REIQ. Lula’s Workers’ Party (PT) main constituency is industrial workers, to whom the President promised during the electoral campaign to create more and better paid industrial jobs. Propping up domestic chemicals production would fall within that line of action. However, after Lula’s meeting with Abiquim, the backlash followed. According to a report by Brazilian daily Valor, Abiplast and 15 other trade groups have requested their own meeting with the President, hoping to stop the proposed increases in import tariffs. Among others, the groups opposing the hike include those representing sectors such as personal care, cleaning products, rubber articles, non-woven fabrics, paints, mattresses, toys, electronics, pharmaceutical products, food, polyolefin fibers, fabrics and clothing, footwear and civil construction. The groups said they were aiming to show to the President the “importance of tariff balance in maintaining industrial activities” in Brazil. BIG (AND CLOSED) CHEMICALS SECTORBrazil’s chemicals demand has always surpassed domestic supply, and around half of the country’s needs are covered by imports. That has been the case in the past few years. What has made the past year extraordinary is China dumping its product in Latin America, depressing prices – and margins for local producers. The fact that a 215-million market such as Brazil has not developed a bigger chemicals industry is surprising. Moreover, the country produces mostly commodity chemicals, which are to suffer from global downturns more than the higher-margin specialized grades. A source at Brazil’s chemicals industry, who deals with Braskem on a regular basis, was not impressed with Abiquim or Braskem’s strong stance in favor of higher tariffs. The source said it preferred to remain anonymous because “creating animosity by going against” the company’s position could put its business relationship at risk. “This [request for higher tariffs] is the cry of business mediocrity, which sees import restrictions as the solution to its productivity and technology problems. A country must not be built on protectionism but on investment in technology, productive capacity, creativity, and scale,” said the source. “Brazil’s political class has never prioritized competition as a source of development. Businessmen want to be alone in their businesses and the Federal Government wants to keep only Petrobras [in the crude oil sector] as a form of political financing.” Petrobras is the state-owned energy major, which holds a commanding position in the market despite other foreign players having some licenses to explore for and produce crude oil. The source added that when import tariffs are hiked generally, for all foreign potential exporters to Brazil, that is very different to potential anti-dumping duties (ADDs) imposed against a certain country – in this case, potentially China. “If the request was about ADDs on China’s product, this would be reasonable. But Abiquim and Braskem’s request for hikes in import tariffs will affect all imports and this is not correct … We need more competition, not less. With more competition, some companies would have to close their doors indeed,” it said. “Other companies, however, those which are more efficient, intelligent and audacious, would grow. Competition is always good and bringing foreign companies to compete in the local market would be interesting. Whenever and invariably private companies need the government to survive, there is a decrease in productivity and investments in new technologies.” However, the government’s ears are so open to chemicals producers’ demands that, on top of two import tariffs hikes in 2023 and the reintroduction of REIQ, earlier this year the cabinet announced the imposition of ADDs on US’ polypropylene (PP). The measure was taken even though PP imports into Brazil only represented 5% of the total in 2023 – 26,000 tonnes out of nearly 510,000 tonnes. Braskem is Brazil’s sole producer of PP as well as polyethylene (PE), the two mostly widely used polymers. A second source in the Brazilian chemicals distribution sector said the import tariff hikes could benefit all parts of the chain – apart from producers, distributors and transformers as well – but only if all players rise prices in line with the increase in the import tariffs. “If the tariffs are finally hiked, it could represent a problem for us at first if Braskem lowers its prices, for instance – my product acquired pre-import tariff hike would be more expensive and I would have difficulty placing it in the market,” said the distribution source. “If Braskem does not lower its prices immediately, I would be able to maintain my prices. But if prices drop, I would be facing higher costs and lower selling prices: my margins would be greatly squeezed.” Focus article by Jonathan Lopez Additional reporting by Bruno Menini

HOUSTON (ICIS)–Energy Transfer plans to acquire WTG Midstream for $3.25 billion, the latest deal in an ongoing consolidation of the industry that provides feedstocks to chemical plants. Energy Transfer is acquiring WTG from affiliates of Stonepeak, the Davis Estate and Diamondback Energy, it said on Tuesday. The deal should close in Q3 2024. The deal includes eight natural gas processing plants that have a total capacity of 1.3 billion cubic feet/day. Two additional plants are under construction that will add another 400 million cubic feet/day of capacity, with the first starting up in Q3 2024 and the second in Q3 2025. Natural gas processing plants extract ethane and other natural gas liquids (NGLs) from raw gas produced from oil and gas wells. The NGLs are then shipped to fractionators which extract the individual products. Ethane and other NGLs are the main feedstock that US crackers use to make ethylene. The deal also includes a 20% stake in the Belvieu Alternative Natural Gas Liquid (BANGL) pipeline. The BANGL will stretch for 425 miles (683 km) and will have an initial capacity of 125,000 barrels/day, expandable to more than 300,000 barrels/day. It will connect the Permian basin to the fractionation hub in Sweeny, Texas, on the Gulf Coast. The pipeline could be completed in H1 2025. Other partners in the pipeline include MPLX and Rattler Midstream, a company formed by Diamondback Energy. SURGE IN MIDSTREAM M&AEnergy Transfer’s acquisition is the latest in a surge of deals in the midstream industry. The following lists some of the more recent mergers and acquisitions (M&A). Phillips 66 agreed to buy Pinnacle Midland Parent from Energy Spectrum Capital for $550 million ONEOK is buying NGL pipelines from Easton Energy for $280 million EQT is acquiring Equitrans Midstream in a deal that the Wall Street Journal valued at $5.5 billion Energy Transfer completed its $7.1 billion merger with Crestwood Equity Partners in November 2023 ONEOK completed its $18.8 billion acquisition of Magellan Midstream Partners in September 2023 Phillips 66 completed a deal for additional units of DCP Midstream, raising its stake to 86.8% The deals come amid a flurry of new projects being built by midstream companies, which includes processing plants, pipelines, fractionators and terminals. When completed, the infrastructure will provide feedstock to petrochemical plants in the US and the world. Thumbnail shows pipeline. Image by Global Warming Images/REX Shutterstock

LONDON (ICIS)–Expectations OPEC+ will extend production cuts at a meeting on 2 June could see benchmark crude prices rise this week. The beginning of the US driving season is likely to also provide reprieve to recent demand concerns. ICIS experts outline five factors that could drive crude prices in week 22.

BARCELONA (ICIS)–Chemical distributors are seeing signs of a sequential improvement in demand, but increasing geopolitical volatility threatens any recovery, according to the head of trade group Fecc. Sequential improvement in demand, destocking winds down Red Sea disruption highlights continuing fragility of supply chains Geopolitics creates growing instability and volatility Europe chemicals need political support Permitting needs to speed up to enable low carbon energy transfer South Korea chemicals under intense pressure to consolidate Click here to download the 2024 ICIS Top 100 Chemical Distributors. In this Think Tank podcast, Will Beacham interviews Dorothee Arns, Director General of Fecc (European Association of Chemical Distributors), ICIS Senior Consultant Asia John Richardson and Paul Hodges, chairman of New Normal Consulting. Editor’s note: This podcast is an opinion piece. The views expressed are those of the presenter and interviewees, and do not necessarily represent those of ICIS. ICIS is organising regular updates to help the industry understand current market trends. Register here . Read the latest issue of ICIS Chemical Business. Read Paul Hodges and John Richardson’s ICIS blogs.

LONDON (ICIS)–Click here to see the latest blog post on Chemicals & The Economy by Paul Hodges, which looks at how chemical prices are starting to slide in Asia and Europe Editor’s note: This blog post is an opinion piece. The views expressed are those of the author and do not necessarily represent those of ICIS. Paul Hodges is the chairman of consultants New Normal Consulting.

SINGAPORE (ICIS)–Recycled polymers markets in Asia face different market dynamics, driven by various factors such as additional capacities, inflationary pressures and support from downstream demand. Asia R-PET trade to gain support from new extrusion capacities within Asia, long-haul markets Asia R-PE could continue to perform poorly in H2 amid cheaper virgin PE prices, inflationary pressures impacting finished good demand Asia R-PP could garner support from automotive sector uptake; trade expected to be moderate until end of 2024 In this podcast, Asia recycling senior editor Arianne Perez discusses what lies ahead in the recycled polymers markets, in terms of trends and opportunities.

SINGAPORE (ICIS)–Sustainable finance is a key interest for companies seeking to enter the recycled plastics market in Asia or to expand their current capacities. Despite the various financial instruments available, the absence of a clear entry point often results in uncertainty for firms. In this podcast, ICIS analysts Chua Xin Nee and Joshua Tan explore the different types of sustainability-related loans available and their successful use cases. (This podcast first ran on 10 May.) Tan will be speaking at the Sustainability and Circular Economy breakout session of the Asia Petrochemical Industry Conference (APIC) 2024 in Seoul, South Korea, on 31 May. His presentation is entitled “Asian recycled polymers – short-term hiccups to long-term optimism”. Visit ICIS during APIC ’24 on 30-31 May at Booth 13, Grand Ballroom Foyer of the Grand InterContinental Seoul Parnas in South Korea. Book a meeting with ICIS here.

Moldovan gas market and incumbent Moldovagaz undergo major changes related to market and transit Coupling with Romanian market would help speed up implementing daily balancing Political developments may determine the direction taken by the market. LONDON (ICIS)–Moldova’s best chance to consolidate its gas sector is to couple up with the Romanian market, the CEO of the gas incumbent Moldovagaz told ICIS on 24 May 2024. Speaking on the 25th anniversary of the company, which is majority owned by Russia’s Gazprom, Vadim Ceban said the country and Moldovagaz were facing major changes including the establishment of a competitive market, an internal reshuffle and not least the future of the Russian gas transit from 2025. Ceban said the key step towards establishing a competitive gas market in line with EU rules would involve setting up a functional balancing market. Nevertheless, he warned Moldova would struggle to introduce balancing operations in the immediate future because this would entail scaling up the deployment of smart metering and ensuring there were enforceable penalties for imbalances. To fast-track the process, Moldova should consider coupling the market with Romania’s, which already has a daily balancing market and benefits from the experience of a variety of participants including domestic producers and suppliers, Ceban said. As an EU candidate member, Moldova is expected to implement rules related to establishing market competition, unbundle transmission operations and consolidate institutions. UNPRECEDENTED CHANGES The country is going through unprecedented changes, transitioning from being fully dependent on Russian supplies in 2021 to buying volumes from a range of sources on all regional markets. Last year, it also divested transmission operations, which had been historically held under the Moldovagaz umbrella. These were transferred to Vestmoldtransgaz, a company majority owned by the Romanian gas grid operator, Transgaz, and which is the main stakeholder in the Iasi-Ungheni pipeline connecting the two countries. Trading has already been picking up on an organised platform hosted by the Moldovan branch of the Romanian gas exchange, BRM, and more liquidity is expected to build up as various segments of consumers are deregulated and new companies enter the market, including from abroad. Earlier this month, the Romanian state producer Romgaz opened a new branch in Moldova, expecting to trade locally and support Moldova’s security of supply. Nevertheless, although Romanian traders welcome tighter relations with Moldova, they have also warned that Romania itself would need to improve its market conditions as the government continues to interfere by regulating wholesale and retail prices. TRADING Moldovagaz itself is considering the organisation of operations in a way that its current subsidiary Transautogaz could focus on trading on the free market, while another branch, Flacara Albastra, would be tasked to supply consumers on the regulated market, Ceban said. Moldovagaz is responsible for supplying gas to households, which cover the bulk of the market. This is part of the company’s public service obligation introduced by the government. Ceban insists Moldovagaz should not be seen as a market monopoly because its historical objectives since its foundation on 24 May 1999 were to guarantee security of supply for the country. In fact, the company has been changing so much that it secured natural gas on the BRM East Energy platform for delivery in May at a price that was slightly lower than the gas secured under the long-term Russian contract. He also insisted the state-wholesaler Energocom which has been taking an increasingly important role in the market over the last three years should overhaul its operations to ensure that trading on the free market is separated from its main responsibility to build up stocks for security of supply. RUSSIAN GAS TRANSIT Ceban agreed the company was also facing the challenge of securing gas for Transnistria, a Russian-controlled breakaway state internationally recognised as being part of Moldova from 2025. The region on the left bank of the River Dniester currently receives around 2 billion cubic meters annually via Ukraine. However, as Ukraine’s own transit agreement with Russia’s Gazprom expires on 1 January 2025, and Kyiv is adamant it will not renew the contract, Moldovagaz is already exploring alternative options to secure the gas coming in reverse from Turkey. Ceban said an abundance of supplies in the Balkan region and Romania is already helping Moldova to secure gas at heavily discounted prices. “Until a few years ago Moldova was buying at TTF plus, now it can secure the gas at TTF minus,” he said. Nevertheless, many of the objectives that need to be achieved will also depend on the political direction that the country takes following presidential and parliamentary elections this and next year, Ceban conceded.