SAO PAULO (ICIS)–Brazilian chemicals producers are lobbying hard for an increase in import tariffs for key polymers and petrochemicals from 12.6% to 20%, and higher in cases, hoping the hike could slow down the influx of cheap imports, which have put them against the wall. For some products, Brazil’s chemicals trade group Abiquim, which represents producers, has made official requests for the import tariffs to go up to a hefty 35%, from 9% in some cases. On Tuesday, Abiquim said several of its member companies “are already talking about hibernating plants” due to unprofitable economics. It did so after it published another set of somber statistics – from the producing side, the first quarter showed imports continued entering Brazil em masse. Brazil’s government Chamber of Foreign Commerce (Camex) is concluding on Tuesday a public consultation about this, with its decision expected in coming weeks. Abiquim has been busy with the public consultation: it has made as many as 66 proposals for import tariffs to be hiked for several petrochemicals and fertilizers, including widely used polymers such polypropylene (PP), polyethylene (PE), polyethylene terephthalate (PET), polystyrene (PS), or expandable PS (EPS), to mention just a few. Other chemicals trade groups, as well as companies, have also filed requests for import tariffs to be increased. In total, 110 import tariffs. HARD TO FIGHT OFFBrazil has always depended on imports to cover its internal chemicals demand, but the extraordinary low prices coming from competitors abroad has made Brazil’s chemicals plant to run with operating rates of 65% or lower. More and more, the country’s chemicals facilities are becoming white elephants which are far from their potential, as customers find in imported product more competitive pricing. Considering this dire situation and taking into account that the current government in Brasilia led by Luiz Inacio Lula da Silva may be more receptive to their demands, Abiquim has put a good fight in publica and private for measure which could shore up chemical producers’ competitiveness. This could come after the government already hiked import tariffs on several products in 2023 and re-introduced a tax break, called REIQ, for some chemicals which had been withdrawn by the previous Administration. While Brazil’s chemicals production competitiveness is mostly affected by higher input costs, with natural gas costs on average five times higher than in the US, the industry is hopeful a helping hand from the government in the form of higher import tariffs could slow down the flow of imports into Brazil. As a ‘price taker region’ given its dependence on imports, Latin American domestic producers have taken a hit in the past two years. In Brazil, polymers major Braskem is Abiquim’s commanding voice. Abiquim, obviously, has always been very outspoken – even apocalyptic – about the fate of its members as they try to compete with overseas countries, namely China who has been sending abroad product at below cost of production. The priorities in China’s dictatorial system are not related to the balance of markets, but to keep employment levels stable so its citizens find fewer excuses to protest against the regime which keeps them oppressed. Capitalist market dynamics are for the rest of the world to balance; in China’s dictatorial, controlled-economy regime the priority is to make people feel the regime’s legitimacy can come from never-ending economic growth. The results of such a policy for the rest of the world – not just in chemicals but in all industrial goods – is becoming clear: unprofitable industries which cannot really compete with heavily subsidized Chinese players. The results of such a policy in China are yet to be seen, but subsiding at all costs any industry which creates employment may have debt-related lasting consequences: as they mantra goes, “there is no such thing as a free lunch.” Abiquim’s executive president urged Lula’s cabinet to look north, to the US, where the government has imposed hefty tariffs on almost all China-produced industrial goods or raw materials for manufacturing production. “[The hikes in import tariffs] have improvement the US’ scenario: despite the aggressive advance in exports by Asian countries, the drop in US [chemicals] production in 2023 was of 1%, while in Brazil the index for production fell nearly by 10%,” said Andre Passos. “The country adopted an increase in import taxes of over 30% to defend its market from unfair competition. The taxation for some inputs, such as phenol, resins and adipic [acid], for example, exceeds three digits. “Here, we are suggesting an increase in rates to 20% in most claims … We need to have this breathing space for the industry to recover,” he concluded. As such, the figures for the first quarter showed no sign of imports into Brazil slowing down. The country posted a trade deficit $9.9 billion during the January-March period; the 12-month accumulated (April 2023 to March 2024) deficit stood at $44.7 billion. A record high of 61.2 million tonnes of chemicals products entered Brazil in Q1; in turn, the country’s industry exported 14.6 million tonnes. Abiquim proposals for higher import tariffs Product Current import tariff Proposed tariff Expandable polystyrene, unfilled, in primary form   12.6% 20% Other polystyrenes in primary forms   12.6% 20% Carboxymethylcellulose with content > =75%, in primary forms   12.6% 20% Other polyurethanes in liquids and pastes   12.6% 20% Phthalic anhydride   10.8% 20%   Sodium hydrogen carbonate (bicarbonate)   9% 35% Copolymers of ethylene and alpha-olefin, with a density of less than 0.94   12.6% 20% Other orthophthalic acid esters   11% 20% Other styrene polymers, in primary forms   12.6% 20% Other silicon dioxides   0% 18% Other polyesters in liquids and pastes   12.6% 20% Commercial ammonium carbonates and other ammonium carbonates     9% 18% Other unsaturated polyethers, in primary forms   12.6% 20% Polyethylene terephthalate, with a viscosity index of 78 ml/g or more   12.6% 20% Phosphoric acid with an iron content of less than 750 ppm   9% 18% Dinonyl or didecyl orthophthalates   11% 20% Poly(vinyl chloride), not mixed with other substances, obtained by suspension process     12.6% 20% Poly(vinyl chloride), not mixed with other substances, obtained by emulsion process   12.6% 20% Methyl polymethacrylate, in primary form     12.6% 20% White mineral oils (vaseline or paraffin oils)   4% 35% Other polyetherpolyols, in primary forms   12.6% 20% Other unfilled epoxy resins in primary forms   12.6% 20% Silicon dioxide obtained by chemical precipitation   9% 18% Acrylonitrile-butadiene rubber in plates, sheets, etc.     11% 35% Other organic anionic surface agents, whether or not put up for retail sale, not classified under previous codes 12.6% 23% Phenol (hydroxybenzene) and its salts   7% 20% Fumaric acid, its salts and esters   10 ,8% 20% Plasticizers and plastics.   10 ,8% 20% Maleic anhydride   10 ,8% 20% Adipic acid salts and esters   10 ,8% 20% Propylene copolymers, in primary forms   12.6% 20% Adipic acid   9% 20% Unfilled polypropylene, in primary form     12.6% 20% Filled polypropylene, in primary form   12.6% 20% Methacrylic acid methyl esters   10 ,8% 20% Other ethylene polymers, in primary forms   12.6% 20% Acrylic acid 2-ethylhexyl esters   0% 20% 2-Ethylexanoic acid (2-ethylexoic acid)   10. 8% 20% Other copolymers of ethylene and vinyl acetate, in primary forms   12.6% 20% Other unfilled polyethylenes, density >= 0.94, in primary forms   12.6% 20% Polyethylene with a density of less than 0.94, unfilled   12.6% 20% Other saturated acyclic monoalcohol acetates, c atom <= 8   10. 8% 20% Polyethylene with a density of less than 0.94, with filler   12.6% 20% Triacetin   10. 8% 20% Sodium methylate in methanol   12.6% 20% Stearic alcohol (industrial fatty alcohol)   12.6% 20% n-butyl acetate                                  11% 20% Stearic acid (industrial monocarboxylic fatty acid)   5% 35% Alkylbenzene mixtures     11% 20% Organic, non-ionic surface agents   12.6% 23% Ammonium nitrate, whether or not in aqueous solution   0.0% 15% Monoethanolamine and its salts   12.6% 20% Isobutyl alcohol (2-methyl-1-propanol)     10.8% 20% Butan-1-ol (n-butyl alcohol)   10.8% 20% Styrene-butadiene rubber (SBR), food grade as established by the Food Chemical Codex, in primary forms     10.8% 22% Styrene                                     9% 18% Hexamethylenediamine and its salts   10.8% 20% Latex from other synthetic or artificial rubbers     10.8% 35% Propylene glycol (propane-1, 2-diol)     10.8% 20% preparations 12.6% 20% Linear alkylbenzene sulfonic acids and their salts   12.6% 23% 4,4′-Isopropylidenediphenol (bisphenol A, diphenylolpropane) and its salts   10.8% 20% Dipropylene glycol   12.6% 20% Butanone (methyl ethyl ketone)     10.8% 20% Ethyl acetate                                    10.8% 20% Methyl-, ethyl- and propylcellulose, hydroxylated   0.0% 20% Front page picture: Chemical production facilities outside Sao Paulo  Source: Union of Chemical and Petrochemical industries in the state of Sao Paulo (Sinproquim) Focus article by Jonathan Lopez Additional information by Thais Matsuda and Bruno Menini

LONDON (ICIS)–Market players expressed bearish views on consumption throughout value chains at the recently concluded polyurethanes (PU) exhibition and conference UTECH Europe held on 23-25 April in Maastricht, the Netherlands. Zubair Adam, ICIS’s editor of European toluene diisocyanate (TDI), methylene diphenyl diisocyanate (MDI) and polyols, and Umberto Torresan, ICIS senior analyst for isocyanates and polyols, attended the event. They share their engagements and discuss future developments that will shape demand in Europe for these products. Polyols are reacted with isocyanates to make PUs, which are used to make mattresses, foam insulation for appliances, refrigerators and freezers, home and automotive seats, elastomeric shoe soles, fibres and adhesives. The two main isocyanates, polymeric PMDI and TDI, are used mainly for the production of PU rigid and flexible foams used in insulation, construction, upholstery, mattresses and automotive seats.

LONDON (ICIS)–On 30 April 2024, the European Commission published the results of the first auction for the EU Hydrogen Bank. Further, on 24 April 2024 the commission published its updated terms and conditions for the second auction. ICIS has produced the following summary infogram explaining the results:

SINGAPORE (ICIS)–ICIS analysts Sijia Li, Yvonne Shi, Zhibo Xiao, Lucy Shuai, Joanne Wang and Cindy Qiu discuss the trends in China’s polyolefins and polyester markets. CHINAPLAS is a major annual plastics and rubbers exhibit in Asia which ran on 23-26 April in Shanghai.

SINGAPORE (ICIS)–China’s manufacturing activity expanded for a second month in April amid improved overseas demand, but the rate of expansion weakened amid higher production costs, official data showed on Tuesday. China’s April manufacturing purchasing manager’s index (PMI) moderated to 50.4 in April from 50.8 in March, but remained in expansion territory, indicating that the recovery of industrial activity will continue into the second quarter, data from to the National Bureau of Statistics (NBS) showed. A PMI reading above 50 indicates expansion in the manufacturing economy, while a lower number denotes contraction. The production subindex rose to 52.9 in April from 52.2 in March, hitting a 13-month high, while both new orders and new export orders remained in expansion, indicating that the demand recovery seen in March “was not just a blip”, Dutch banking and financial services firm ING said in a note. “Though economic activities continued to expand, more manufacturers are facing higher costs,” said senior NBS statistician Zhao Qinghe. “The new order index and new export order index for industries including automobiles and electrical machinery and equipment are both above 53, indicating domestic and foreign market demand in related industries has increased.” The employment sub-index was little changed but remained in contraction for the 14th consecutive month, as there continues to be a mismatch between hiring demand and the labor supply, it said. Separately, a joint private-sector survey conducted by Chinese media group Caixin and S&P Global of Chinese manufacturers rose to 51.4 in April from 51.1 in March, marking the sixth successive monthly improvement, with growth the most pronounced in 14 months. The April reading was the highest since February last year as manufacturers’ output and total new orders continued to grow, with the corresponding subindexes reaching new highs since May 2023 and February 2023, respectively. “Price levels remained low. Although the gauge for input costs reached a six-month high, the cost increase was limited,” said Wang Zhe, senior economist at Caixin Insight Group. Improved supplier logistics in April led to shorter delivery times, encouraging manufacturers to increase purchasing and build larger inventories of raw materials and finished goods, he said. “China’s economic performance in the first quarter surpassed market expectations, with steady growth in manufacturing and a gradual recovery in consumption,” Wang said. “Across different product categories, consumer goods were no longer the best performer as investment goods gained momentum in April with increased production and sales, showing signs of the improved downstream gradually benefiting upstream markets.” Focus article by Nurluqman Suratman

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. The thing about petrochemicals is that events in our industry reflect what’s happening in every manufacturing chain and in the broader economy, as we supply indispensable raw materials. China’s exports of electric vehicles (but also traditional fossil-fuel motors) and solar panels have soared. This has occurred as local capacity has also soared – and as manufacturing operating rates in general have declined to record lows on weak domestic demand. China’s polypropylene (PP) exports jumped by 96% in Q1 this year over the first quarter of 2023 to 619,367 tonnes. If the same export momentum was maintained throughout 2024, this year’s total exports would reach 2.5m tonnes compared with 1.3m tonnes in 2023. The early ICIS data for 2024 suggests that this year’s PP operating rate in China will be just 75% compared with the 1992-2023 average of 87% – during the Petrochemicals Supercycle. In 1992-2023, China’s PP capacity as a percentage of demand averaged 79%. This looks set to rise to 140% in 2024-2030. Growing trade tensions – recently underlined by US Treasury Secretary Janet Yellen’s comment that China’s capacity in new green industries was “too big” for the world to absorb – tell us this: China will struggle to grow exports by enough to maintain GDP growth at 4-5% per year. Increasing domestic consumption to achieve the same end also seems very difficult because of the end of the real estate bubble, an ageing population and the just-mentioned trade tensions. “Only 37% of China’s national income is spent by Chinese households on goods and services. That level is lower than anywhere else in the world—except for a few small tax havens and commodity hyper-exporters when prices are high,” wrote Mathew Klein on his The Overshoot blog. Early data for this year suggest that China’s PP demand growth in 2024 will be 2%. Growth in 2023 appears to have been flat. This suggests that demand growth has entered a New Normal of 1-3% per year versus the 1992-2021 Petrochemical Supercycle average of 12%. The China CFR PP price spread between CFR Japan naphtha costs has averaged just $203/tonne so far this year, the lowest since our price assessments for the above three grades began in 2003. I keep reflecting-back on Gillian Tett’s masterful Fool’s Gold, her account of the Global Financial Crisis. In the book, she details how too few bankers, politicians, regulators and financial analysts were able to take a helicopter view of events that led up to 2008 because they were trapped in “silos” of specialist knowledge. This meant that the problems with mortgage-backed securities were largely missed. So I believe has been the case with the events in and surrounding China. Experts in PP and other petrochemicals were good at building plants and in sales and marketing, but not so good at seeing connections between China’s demographics, its property bubble, its relatively weak domestic consumption and the shift in its relationship with the West. 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.

LONDON (ICIS)–Crude prices will likely face downward pressure this week amid rising demand concerns. Investors will be keeping a watch on the US Federal Reserve meeting later this week after worrying GDP and inflation data. Despite a persistent risk premium, continued ceasefire talks between Israel and Hamas could contribute to bearish sentiment. ICIS experts look ahead to the likely factors that will drive oil prices in Week 18.

LONDON (ICIS)–The European and US epoxy resins markets are in a tug of war between margin and cost struggles versus still fragile underlying demand and competition from China and elsewhere in Asia. The US anti-dumping case for epoxy resins against several Asian countries and the EU anti subsidy probe against Chinese wind turbines are also talking points as the West looks to protect its industry against unfair competition. Senior editor Heidi Finch who covers the Europe epoxy market  discusses current and near term expectations with fellow senior editor Tarun Raizada, who covers the US epoxy market. Margin woes, tepid demand and Asia competition weigh on Europe, US epoxy Regulatory cases aim to tackle unfair competition from China, rest of Asia Near-term outlook cautious on demand, macroeconomics; seasonality likely to be diluted Edited by Will Beacham

HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 26 April. LyondellBasell sees continued PE momentum in North America, Europe – CEO Polyethylene (PE) demand in North America and Europe should continue to improve in Q2 and through H2 with consistently healthy demand in packaging, the CEO of LyondellBasell said on Friday. Eastman eyes 2027 startup for second US methanolysis plant, French project timing uncertain Eastman expects to reach a final investment decision (FID) on its second US methanolysis (chemical recycling) plant in Q3, CEO Mark Costa and CFO Willie McLain told analysts during the company’s Q1 earnings call on Friday. Dow sees ‘meaningful’ H2 recovery on PE margins, steady demand improvement – CFO Dow continues to expect a strong second half, mainly driven by higher integrated polyethylene (PE) margins, with Q2 sales also expected to trend higher versus the first half in all three of its segments, its chief financial officer said on Thursday. INSIGHT: Latin America’s nascent EV market increasingly a Chinese affair Latin America’s take-up of electric vehicles (EVs) has started to gain momentum, said the International Energy Agency (IEA) this week, with Chinese producers drawing customers with sharply lower prices than western, established brands. Canada moves ahead with plastics registry as UN plastics pollution session starts in Ottawa Following the conclusion of a consultation period, Canada’s federal government has published a formal notice in the Canada Gazette for its planned Federal Plastics Registry. Styrolution Sarnia closure further tightens North America styrene market INEOS Styrolution’s decision this past weekend to temporarily close its Sarnia, Ontario, styrene unit will further tighten a market already dealing with several outages. Prices are under upward pressure with contract prices the highest since Q3 2023.