HOUSTON (ICIS)–The US will impose 20% tariffs on imports from Vietnam and 40% tariffs on transshipments – while Vietnam will charge no tariffs on US imports, according to a trade agreement that the US president announced on Wednesday. “The Terms are that Vietnam will pay the United States a 20% Tariff on any and all goods sent into our Territory, and a 40% Tariff on any Transshipping,” President Donald Trump said on social media. “In return, Vietnam will do something that they have never done before, give the United States of America TOTAL ACCESS to their Markets for Trade. In other words, they will ‘OPEN THEIR MARKET TO THE UNITED STATES,’ meaning that, we will be able to sell our product into Vietnam at ZERO Tariff.” The transshipment tariff would discourage China or other countries using Vietnam as an intermediary to export goods to the US under more favorable trade terms. Meanwhile, tariffs are not paid by the country of origin. Instead, they are a tax levied by the government on the importer of record. The government of Vietnam has not confirmed the tariff rates, but it did say that the negotiating delegations of the two countries had reached a joint statement on what it called “a fair, balanced reciprocal trade agreement”. Vietnam also urged the US to recognize it as a market economy and to lift export restrictions on certain high-tech products. Vietnam is the sixth largest source of imports by value to the US in 2024, with shipments totaling $136.5 trillion. The US had initially proposed tariffs on Vietnamese imports of 46% on 2 April. Those were soon lowered to 10% during a 90-day pause that is scheduled to end on 9 July. VIETNAMESE TRADE DEAL TO HAVE LITTLE IMMEDIATE CHEM EFFECTFor now, the trade deal will have little immediate effect on shipments of plastics and chemicals between the countries. The US imports small amounts of plastics and chemicals from Vietnam. Electronic machinery, parts for nuclear plants and furniture made up more than 60% of the goods the US imported from the country in 2024. Organic chemicals, plastics and rubber each made up less than 5% of total US imports from Vietnam in 2024. For US exports to Vietnam, plastics made up the second largest category, accounting for 6.37% of the total in value. On a volume basis, some of the largest plastic exports from the US to Vietnam include linear low density polyethylene (LLDPE), high density polyethylene (HDPE) and polyvinyl chloride (PVC), according to ICIS. In total, the US exported $11.4 trillion to Vietnam in 2024. US imports will play a larger role in Vietnam’s chemical industry after the completion of the Long Son Petrochemicals Complex, which will include a cracker that can use ethane or propane as a feedstock. The complex will receive ethane from the US under a 15-year deal between Enterprise Products and Siam Cement Group (SCG) which owns the subsidiary that is developing the complex. VIETNAM IS SECOND TRADE DEAL FOR USVietnam joins the UK among the countries that reached trade arrangements with the US since it announced on 9 April a 90-day pause on its proposed reciprocal tariffs on imports from most of the world. Under the UK agreement, the US will preserve its 10% baseline tariffs on imports from the UK. It will relax its sectoral tariffs on UK imports of automobiles and eliminate them on imports of steel and aluminium. The UK made concessions on US imports of ethanol and beef. The US and China are working under a different arrangement under which the two countries agreed to pause their proposed triple-digit tariff increases through to mid-August. The US and Canada seek to reach a trade agreement by 21 July. Thumbnail shows a type of container ship that features prominently in trade. Image by Costfoto/NurPhoto/Shutterstock.

LONDON (ICIS)–On 2 July, a spokesperson for energy supplier E.ON told ICIS that its “international hydrogen imports, hydrogen production, and midstream activities will be deprioritized” as part of the company’s integration of its green gas business into its energy infrastructure solutions (EIS) business unit. E.ON confirmed that this includes the cancellation of its proposed 20MW HydroHarbourEssen plant in Essen, Germany. It was expected to produce 2,300 tons of renewable hydrogen per year by 2027. The company also confirmed it had exited the H2.Ruhr project, a collaboration with Enel, Iberdrola, ABB and SAP to construct a hydrogen pipeline in the Ruhr area of Germany, proposed to initially connect Essen and Duisberg. Announced in 2021, the project targeted delivery of up to 80,000 tons of renewable hydrogen and ammonia per year. This is the latest blow to the German hydrogen industry, after steel manufacturer ArcelorMittal announced last month that it had cancelled its renewable hydrogen-based decarbonisation plans for two of its steel plants in Bremen and Eisenhuttenstadt, despite securing €1.3 billion in subsidies. This was followed by postponements of EWE’s 50MW project in Bremen and LEAG’s 10MW plant in Lusatia. “National and European overregulation undermines the economic viability of renewable energy sources” a spokesperson for EWE told ICIS at the time. “The energy sector and industry cannot shoulder the ramp-up alone. Policymakers must now act swiftly to establish reliable framework conditions and targeted incentives to make investments in hydrogen technologies economically viable.” “Uncertainty regarding availability and prices in a future hydrogen market is high” a spokesperson for LEAG told ICIS. “The end of the German Ampel government last year has indefinitely delayed the implementation of the federal Power Plant Safety Act, a key regulatory pre-condition.” E.ON said that the company “will focus on integrated, B2B [business-to-business] customer-oriented hydrogen solutions within the framework of EIS. This will enable us to create an even more attractive portfolio of solutions to support our B2B customers”. It added that the company is “convinced that green hydrogen will play a role in a decarbonized energy future, especially for hard-to-decarbonize industrial B2B sectors”. In 2024 E.ON had selected technology group Andritz to complete feasibility studies for the HydroHarbourEssen project. Germany targets 10GW electrolyzer capacity by 2030.

Energy regulator designates OPEM as NEMO ahead of market integration Exchange to start spot operations by year-end, traders Moldova must launch a functional electricity balancing market LONDON (ICIS)–Moldova has come a step closer towards EU electricity market coupling after adopting landmark legislation and designating OPEM, a subsidiary of the Romanian state electricity exchange OPCOM, as its nominated electricity market operator (NEMO). The Moldovan parliament has adopted a new electricity law which will transpose key provisions of the Energy Community’s electricity integration package as a preliminary move towards full participation in the EU’s single day-ahead and intra-day markets, according to a statement by the Energy Community on 1 July. The electricity integration package (EIP) enables full market integration of contracting parties into the single European market for electricity. As a contracting party of the Energy Community, an international institution tasked to extend the EU’s single market to neighboring states, Moldova is required to align its electricity and gas market regulations with the EU. Once transposed, the act is expected to help stabilize prices, boost energy resilience, and improve the management of renewable flows, especially following the launch of one of the country’s first green energy tenders earlier this year. The Energy Community said it would continue to work with Moldovan authorities to support the swift adoption of the remaining five network codes and guidelines for electricity markets. These include rules related to forward capacity allocation, capacity allocation and congestion management, electricity balancing, system operation and the network code on emergency and restoration. Under the latest legislation, Moldova is expected to set up a spot market which will then ensure the full coupling of the Moldovan electricity market with those of the EU and neighboring Ukraine, also a contracting party of the Energy Community. The spot market will be launched by OPEM, and traders active regionally say it should be ready before the end of the year. Shortly after the adoption of the electricity law on 26 June, the regulator ANRE designated OPEM as the country’s NEMO, an entity mandated to operate the coupled day-ahead and intra-day integrated electricity markets in the EU. A local market source welcomed the news but said Moldova should first establish its electricity balancing market.

LONDON (ICIS)–Continued regulatory uncertainty over the status of bio-based plastics and pyrolysis oil within the EU is hampering demand from the petrochemicals sector, stalling investment, and fragmenting prices by end-use for both bio-naphtha and pyrolysis oil. Regulation will dictate future end-use share between chemicals and fuel Regulation could turbocharge demand Regulatory uncertainty challenging investment cases and fragmenting markets Regulation has the potential to significantly boost chemicals market consumption for both materials – as it has done for packaging grades of mechanical recycling in Europe – and to speed the transition away from fossil-derived material. Nevertheless, a lack of regulatory clarity and impetus has seen chemicals buying interest in both markets reduce in 2024 and 2025 (albeit from a high base) and made financing for new projects and infrastructure challenging. Differing accounting rules for mass-balance, for example, drastically alter potential profitability, and a lack of clarity makes it challenging to predict return on investment. The impact of the uncertainty has intensified as wider conditions across European chemicals and financial markets have deteriorated in the wake of the energy and cost of living crises. With both sectors remaining nascent, this will likely impact on scalability timeframes for both. For both markets the uncertainty centers on mandatory sustainability targets under the Packaging and Packaging Waste Regulation (PPWR) and End of Life Vehicle Regulation (ELVR) definitions, and mass-balance accounting rules. PPWRUnder the PPWR, the European Commission will be required to review the state of technological development and environmental performance of bio-based plastic packaging within three years of the legislation’s entrance in to force (which occurred in Q1 2025). Following the review, the Commission will be required to bring forth legislative proposals for targets to increase the use of bio-based plastics in packaging. This will include the possibility of bio-based material contributing to recycling targets for food-contact material where recycled material is not available. For pyrolysis oil, there remains lingering uncertainty on definitions under Directive 2008/98/EC – also known as the Waste Framework Directive – which forms the basis of the majority of EU recycling legislation definitions. That directive defines recycling as “any recovery operation by which waste materials are reprocessed into products, materials or substances whether for the original or other purposes. It includes the reprocessing of organic material but does not include energy recovery and the reprocessing into materials that are to be used as fuels or for backfilling operations.” This has left the legal status of chemical recycling uncertain, particularly for pyrolysis, because pyrolysis oil conversion is an intermediate stage prior to conversion into recycled plastics. ELVRThe ELVR, meanwhile, remains at an early stage of its regulatory chain. The European Parliament committee on the environment, climate and food safety and the committee on the Internal Market and consumer protection proposed a series of amendments to the European Commission’s draft revision of its end-of-life vehicle regulation – including the allowance of bio-based material to count towards mandatory recycled targets proposed for the sector. The EU Council, meanwhile, adopted its position on 11 July, which stands in stark contrast. The EU Council is proposing that by seven years and 11 months after the entry in to force of the bill, the Commission should review the environmental performance and technological development of bio-based plastic in vehicles and propose legislation for bio-based plastic targets, sustainably requirements and whether bio-based plastic might count towards or be separate from recycled content targets. There are also differences in the approach to the recycled content targets themselves. The EU Council’s position is for a graduated target with new vehicles needing to contain 15% recycled plastic six years after the regulation comes into force, 20% recycled plastic content after eight years, and 25% after 10 years. For each target 25% of the recycled plastic would need to have originated from end-of-life vehicles. The European Parliament committees’ recommended position is for a 20% recycled plastic target six years after the regulation comes in to force, with 15% of that needing to come from end-of-life vehicles. Its position is to allow both post-consumer and pre-consumer material to count towards the targets, and would allow bio-based plastics and chemically recycled material to count towards these targets. MASS-BALANCE ACCOUNTINGEven if both pyrolysis oil and bio-naphtha are accepted as counting towards both the PPWR and ELVR, given that both are used as a naphtha substitute in a cracker and typically co-processed with virgin naphtha, many see the acceptance of mass-balance as an essential enabler for chemical recycling to count towards recycling content thresholds. There have been different proposed accounting rules for mass-balance, all of which alter the possible recycled polymer output allocations, and therefore profitability throughout the chain, competitiveness against other regions that may adopt different rules, and the sector’s attractiveness to investors. The EU’s Technical Advisory Committee (TAC) had been due to take a decision on mass-balance accounting rules under the single use plastics directive (SUPD) at the end of March 2024. It was understood from players familiar with the matter that the TAC decision was delayed due to ongoing discussions with regulators. It was then expected that a decision would be announced before the end of 2024, but this did not occur. An EU Commission policy advisor confirmed via email to ICIS that “the Commission is preparing an implementing act (planned for Q4/2025) that will extend the calculation, verification and reporting methodology to cover all recycling technologies, including chemical recycling”, under the SUPD. While this would only be applicable directly to the SUPD, it is seen as precedent-setting for other pieces of legislation, and would set out the EU’s general approach, giving some clarity to markets. FUEL LEGISLATION OUTPACING PLASTIC LEGISLATIONLegislation surrounding renewable fuels meanwhile, enjoys greater clarity, and targets under legislation such as the Renewable Energy Directive (RED) III and the ‘fit for ‘55’ package are encouraging the use of both pyrolysis oil (under the fit for ’55 package fuel derived from plastic waste can count towards targets such as those for sustainable aviation fuel (SAF) provided it meets certain criteria such as demonstrating emissions reduction). FRAGMENTATION OF PRICESEurope pricing for bio-naphtha is becoming increasingly fragmented depending on feedstock origin. As the market develops further, fragmentation is expected, based on whether the material is co-processed or not. The main feedstock routes for bio-naphtha include:- Used cooking oil (UCO) Crude tall oil (CTO) Tallow Typically, CTO-derived bio-naphtha trades at a premium to UCO-derived, with tallow showing the lowest achievable values. This is being driven by usage in gasoline blending to meet road fuel mandates, tighter overall supply, and a preference among some brand owners for CTO-derived (which is a by-product of wood pulp production) because of its traceability. Coupled with this, a significant premium is being charged for material accompanied by Life Cycle Assessment (LCA) data in particular, as companies increasingly focus on carbon reduction goals.  ISCC EU certified material commands the highest premium for bio-naphtha with values heard as high as €1,900/tonne ex-works Europe this week. ISCC EU certification verifies compliance with RED III. ISCC+ material meanwhile, is a voluntary certification scheme commonly used for chemical-bound material. Refineries, using bio-naphtha for fuel uses to meet targets under legislation such as the Renewable Energy Directive III (RED III), were understood to be more willing to consider a wider variety of bio-naphtha origins than chemicals. Chemical demand for bio-naphtha is currently concentrated on used UCO- and HVO-derived routes. USE OF TYRE-DERIVED PYROLYSIS OIL TO MEET BIO-FUEL TARGETSTyre-based pyrolysis oil producers are increasingly separating out bio-attributed content and polymer content in pyrolysis oil production, with bio-attributed content attracting premiums compared with polymer-derived tyre-based pyrolysis oil. Prices for bio-attributed material have been heard at up to $1,200/tonne FD Europe for imported material this week, and have been heard at around €1,000/tonne ex-works Europe in recent weeks. Alongside supply shortages, higher prices compared with polymer-derived material are because tyre-based pyrolysis oil is viewed as a relatively cheap source of biogenic content compared to alternatives such as bio-naphtha. Regulation will be a key driver of future overall pyrolysis oil and bio-naphtha demand and investment. Beyond that it will dictate which grades develop the greatest traction and the proportion of the market serving chemicals and fuel usage. The sooner the EU brings clarity to its approach, the sooner these markets will scale. Insight by Mark Victory ICIS is currently researching bio-naphtha pricing in Europe. If you’re interested in learning more, and to share your views on the market, please contact mark.victory@icis.com ICIS assesses more than 100 grades throughout the recycled plastic value chain globally – from waste bales through to pellets. This includes recycled polyethylene (R-PE), recycled PET (R-PET), R-PP, mixed plastic waste and pyrolysis oil.  Thumbnail image credit: Shutterstock

MUMBAI (ICIS)–India has launched an anti-dumping investigation into imports of linear low-density polyethylene (LLDPE) from five countries from the Gulf Cooperation Council (GCC), as well as Malaysia. Imports from Kuwait, Oman, Qatar, Saudi Arabia, the UAE and Malaysia will be probed, based on the notification issued by India’s Directorate General of Trade Remedies (DGTR) on 30 June 2025. The investigation was prompted by a petition from the Chemicals and Petrochemicals Manufacturers Association (CPMA).

SINGAPORE (ICIS)–Asia’s manufacturing sector exhibited signs of further weakness in June, with most economies in the region registering purchasing managers’ index (PMI) readings of below 50, indicating a deepening slump in factory activity. US not keen to extend tariff pause, which expires 9 July for most trade partners Global trade tensions, US tariffs weigh on Asian factories ASEAN manufacturing PMI falls for third month; June reading at 48.6 The downturn, marked by falling orders, reduced output, and job cuts in export-reliant economies such as Taiwan, Vietnam, South Korea, and Indonesia, is largely driven by persistent global trade tensions, according to surveys done by financial intelligence firm S&P Global. Concerns are heightened as the 90-day suspension of the US’ “reciprocal” tariffs is set to expire next week, threatening significant disruption to Asia’s exports to the world’s biggest economy. “The fallout from tariff uncertainty dampened demand and business confidence, as firms scaled back or canceled orders, impacting output, new orders, employment, and purchasing activities,” consulting firm McKinsey & Co noted. While China’s official manufacturing PMI edged up to 49.7 in June from 49.5 in May, it marked the third consecutive month the index has remained below the 50-point expansion threshold. The continued contraction suggests limited impact from the US-China tariff truce achieved in early May, analysts at Japan’s Nomura Global Markets Research said in a note. A 90-day pause on reciprocal tariffs on US’ trading partners ex-China declared on 10 April, is scheduled to expire on 9 July. For China, a separate three-month period of reduced tariffs agreed with the US on 14 May – which set US tariffs at 30% and Chinese duties on US imports at 10% – is set to end around 12 August. Meanwhile, other export-reliant economies like Taiwan and Vietnam saw their PMIs deteriorate in June, with factories reporting continued declines in new orders, output, and staffing as ongoing trade tensions dampen demand. Other Asian nations reporting PMIs that remained firmly in contraction territory were Malaysia and Indonesia. The latter, which is southeast Asia’s biggest economy, was the worst performer in the region, with a June PMI reading of 46.9. Manufacturing and exports heavyweight South Korea posted a PMI reading of 48.7 in June, up from May’s 47.7, but the gauge was still well below the 50 threshold of expansion. South Korea’s exports in June rose by 4.3% year on year to $59.8 billion, reversing the 1.3% contraction in May, although shipments to the US and China remained weak amid tariff uncertainty. The S&P Global ASEAN manufacturing PMI fell to 48.6 in June from 49.2 in May, marking the third straight month that the headline figure has fallen below the 50-mark. The deterioration in the region’s manufacturing health was the worst since August 2021, it said. A sharper decrease in new orders was accompanied by more substantial cuts to staffing levels and purchasing activity, with a marginal decline in production. “Both new orders and output remained in contraction territory since April. Recent figures revealed a sharper decline in incoming new orders for ASEAN goods producers, marking the most significant drop since August 2021,” S&P Global said. INDIA REMAINS BRIGHT SPOT; CHINA SHOWS SIGNS OF RESILIENCE India’s manufacturing sector remains a significant bright spot in Asia, with June PMI hitting a 14-month high of 58.4 in June, largely driven by stronger external demand, according to a private survey conducted by financial institution HSBC in partnership with S&P Global. Robust end-demand fueled expansions in output, new orders, and job creation at Indian factories last month, according to S&P Global. To keep pace with this strong demand, particularly from international markets as evidenced by a substantial rise in new export orders, Indian manufacturing firms reduced their existing stockpiles. This resulted in a continued shrinkage of finished goods stock, it said. For China, a private survey of small-to-medium manufacturers conducted by Chinese media group Caixin indicated an expansion in June, with PMI reading rising to 50.4 from 48.3 in the previous month. The Caixin PMI surveys small and medium-sized enterprises (SMEs) as well as export-oriented enterprises located in eastern coastal regions, while the official PMI is tilted toward larger state-owned enterprises. The headline June PMI reading marked the eighth month of growth in the manufacturing sector out of the past nine months, “showing that market conditions were improving”, said Wang Zhe, senior economist at Caixin Insight Group. “However, external demand remained weak,” Wang said, adding that exports of consumer goods remained under pressure due to additional US tariffs, causing new export orders to contract for a third straight month. LATEST PMI DATA A WARNING SIGN Markets are closely watching Trump’s next move regarding reciprocal tariffs, which were supposed to take effect in April but were paused for 90 days to facilitate negotiations with about 60 trading partners. Trump said on 1 July that he is not considering delaying the 9 July deadline for higher tariffs to resume. Despite the US pledging new trade agreements after 4 July, following broad frameworks with China and Britain, significant uncertainty persists. For Japan, US trade relations appear to be souring, with Trump initiating a new round of brinkmanship, threatening the world’s fourth-biggest economy and a major global car exporter with fresh tariffs over the latter’s reluctance to accept US rice exports. Trump on 1 July said tariffs as high as 30% or 35% could be imposed on Japan – higher than the 24% reciprocal tariffs set in April for the key Washington ally. Trump sounded more optimistic on reaching a trade deal with India, with India’s external affairs minister S Jaishankar saying that a deal will require “give and take” and finding a “meeting ground” ahead of the 9 July deadline. As for China, US Treasury Secretary Scott Bessent announced on June 27 that US tariffs on Chinese imports would now start at 30%, while maintaining a 20% fentanyl levy on China. The “fentanyl levy” is an additional tariff specifically imposed on Chinese imports due to concerns that China is allegedly a source of precursor chemicals used to produce fentanyl, a highly potent synthetic opioid that has fueled a severe overdose crisis in the US. China’s exports to the US accounted for 14.6% of the northeast Asian country’s total exports last year. “The US-China 90-day pause in reciprocal tariffs will end on 13 August, by when we expect a trade deal to be announced or a further extension of the deadline,” said Ho Woei Chen, economist at Singapore-based UOB Global Economics & Markets Research. Insight article by Nurluqman Suratman Thumbnail image: Production scene of Jiangsu Shagang Group Huigang Special Steel Co in Huai’an, Jiangsu Province, China, on 3 January 2025.(Costfoto/NurPhoto/Shutterstock) Visit the ICIS Topic Page: US tariffs, policy – impact on chemicals and energy.

HOUSTON (ICIS)–Rates for shipping containers from east Asia and China to the US will continue to face downward pressure on capacity increases to the major trade lane. Market intelligence group Linerlytica said on Tuesday that carriers have not been able to scale back the large capacity influx introduced on the route since the end of May, when the US reduced reciprocal tariffs on Chinese goods from a prohibitive 145% to a more manageable 30%. Rates from Shanghai to both US coasts on the global Shanghai Containerized Freight Index (SCFI) continue to slide, as shown in the following chart. And capacity is expected to continue rising in July, Linerlytica said, as several carriers have already committed to vessel charters before the current market slump. Judah Levine, head of research at online freight shipping marketplace and platform provider Freightos, said the surge of Chinese goods appears to be losing steam and that carriers likely added too much capacity, especially to the West Coast. Rates from Asia to the West Coast more than doubled from around $3,000/FEU (40-foot equivalent units) from May to June. “But by the end of last week these demand and capacity factors combined to push transpacific container rates down sharply,” Levine said. “Last week’s average of $3,388/FEU is 43% below the June peak, although this price is still 22% higher than the end of May.” Rates to the East Coast behaved similarly although not as dramatically as demand was stronger on the shorter West Coast trade lane, Levine said. Average spot rates from ocean and freight rate analytics firm Xeneta have also fallen dramatically, as shown in the following chart. Peter Sand, chief analyst at Xeneta, said capacity is now more than meeting demand, leading shippers to push back on peak season surcharges. “The Transpacific into US West Coast is the key battleground for carriers when it comes to China exports, so spot rates have fallen harder and faster as they prioritized bringing capacity back onto this trade in the immediate aftermath of the lowering of 145% tariffs,” Sand said. 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. Visit the US tariffs, policy – impact on chemicals and energy topic page Visit the Logistics: Impact on chemicals and energy topic page

SAO PAULO (ICIS)–Mexico is to face the steepest oil production decline globally, with output projected to fall 680,000 barrels/day to 1.29 million barrels/day in the next five years, according to forecasts by the International Energy Agency (IEA) this week. Such a fall in production could potentially transform the country into a net importer of approximately 500,000 barrels daily by 2030, said the IEA. Mexico is set to dominate total oil capacity losses globally and represented the largest single-country capacity reduction worldwide in the IEA’s Oil 2025 report, an annual research report about the crude oil sector. Currently, Mexico produces just below 2 million barrels/day, despite repeated targets for the state-owned energy major Pemex – which dominates the market – to surpass that 2 million barrel/day mark. As output remains pressured, the target does not feature anymore in Pemex’s forecasts. To put the current Mexican output into perspective, just two decades ago the country was churning out nearly 3 million barrels/day. According to the IEA, if Mexico’s crude output is to recover past peaks, it will not do so in this decade: Crude output  (in million barrels) 2024 2025 2026 2027 2028 2029 2030 Mexico 1.97 1.84 1.74 1.60 1.47 1.40 1.29 Source: IEA The Latin American producer posts the largest output drop not only among members of the crude oil producing cartel OPEC+ but also across all global producers – a clear sign of Mexico’s deeply pressured crude oil market. This dramatic decline threatens Mexico’s historical role as a significant regional oil exporter and underscores mounting pressures on Pemex. Mexico’s long-term production decline since the early 2000s posted a brief respite from 2021-2023 as the Quesqui condensate field ramped up operations. However, structural issues have overwhelmed temporary gains, with Pemex severely curtailing planned investments during the pandemic while the previous administration demanded focus on quick crude growth from onshore and shallow-water fields at the expense of larger deep-water reservoirs, said the IEA. The fate of Pemex matters a lot to Mexico’s chemicals sector. The company is not only the main supplier of feedstocks to the industry, but also has several idle petrochemicals assets which several companies would be mulling to revitalize. While some sources in chemicals think Pemex is “beyond remedy”, the country’s chemicals trade group Aniq said in an interview with ICIS that fixing Pemex’s financial and operational issues, giving more certainty to investors and the public at large, could unlock as much as $50 billion in chemicals investments over the next decade. This week, the IEA said: “As of 2024, over half of Pemex’s production came from just seven of its 240 fields. Looking forward, challenges remain with Pemex carrying a high debt load and only one major project slated to see first oil by 2030. Output declined by close to 160,000 barrels/day year on year in H1 2025. “Fiscal changes, large unpaid debts to its suppliers and upstream budget cuts have seen oil rigs slashed from 50 in October 2024 to fewer than 20 in less than six months – although recently some payments reportedly have been made and five rigs have returned to work,” it concluded. Pemex had not responded to a request for comment at the time of writing. Mexico’s ministry of energy (Secretaria de Energia) had not responded to a request for comment at the time of writing. Despite Pemex’s commanding role in Mexico’s crude oil sector, some private producers are expected to offset slightly the overall fall in output. Australia-headquartered miner Woodside plans to start up its 100,000 barrel/day Trion project in 2028. Woodside had not responded to a request for comment at the time of writing. More potential projects include pending final investment decisions (FIDs) by Pemex on the Zama field and the Ku-Maloob-Zaap expansion, but the IEA was skeptical they could be producing oil before the next decade. “The window to see production from these two developments before the end of our forecast [to 2030] is closing,” said the IEA. As well as for time, the Mexican crude sector also faces other pressures such as regulatory uncertainties, financing constraints and technical challenges associated with developing increasingly complex reservoirs, it added. REFININGMexico’s production crisis occurs alongside efforts to boost downstream capacity through domestic refining expansion, but once again Pemex is facing difficulties increasing refinery output while seeking to substitute imports with domestic product production. Its much-publicized but much-delayed 340,000 barrel/day Olmeca refinery in Dos Bocas on the Gulf of Mexico is currently ramping up operations and expected to reach full capacity in 2026, according to the IEA. This downstream expansion represents a major milestone alongside Pemex’s comprehensive overhaul program for six existing refineries, including upgrading units at Tula, Salina Cruz and Salamanca. Supported by approximately $8 billion in planned investments, Mexico aims to achieve self-sufficiency and retail price stability. But the IEA said those expectations may well prove futile because success in refining expansion paradoxically would highlight the crisis itself, because if downstream targets are achieved by 2030, Mexico will need to import crude to cover that demand in refinery capacities. “Mexico aims to secure self-sufficiency and retail price stability via increased production of gasoline, diesel and jet fuel,” said the IEA. “However, if successful by the end of the decade, the expected decline in Mexican crude production will push the country closer to becoming a net crude importer and tighten supplies of heavy sour crude for US Gulf Coast refineries.” The IEA’s expectations that Mexico is to transition from oil exporter to potential importer represents one of the most significant changes in global petroleum markets to 2030, with the implication of such a scenario potentially reaching Latin America and North America, their trade flows and their crude quality balances. Front page picture: Pemex’s Dos Bocas refinery Picture source: Mexico’s Secretaria de Energia 

SAO PAULO (ICIS)–Between now and the end of this decade, the global oil market will undergo its most dramatic change yet with demand forecast to fall on transport electrification and supply expected to continue to rise, especially in the Americas, the International Energy Agency (IEA) said this week. In its Oil 2025 report, the IEA said demand growth will be just 2.5 million barrels/day from 2024 to 2030, before plateauing at around 105.5 million barrels/day by the end of this decade. The US will remain the world’s top producer at over 20 million barrels/day, but its prowess in fossil fuels production may be forced to face other realities. China’s push for transport electrification will continue apace, and globally electric vehicles (EVs) will account for 20% of all sales in 2025: 20 million EVs out of world sales of 100 million vehicles, said the IEA. Amid this shift, the petrochemicals sector will remain the source for demand growth in crude amid urbanization in the emerging economies and growing demand for polymers and other chemical-derived materials. However, the IEA warned that slowing demand for crude from the transport sector will challenge refineries built with the current dominance of transport fuels in mind, and this could result in closures. A DIFFERENT PICTURE IN FIVE YEARSThe IEA noted that an extraordinary boom in US production accounted for 90% of the increase in global supply between 2015-2024, as shale lifted US oil production by more than 8 million barrels/day to over 20 million barrels/day. At the same time, oil demand in China increased by almost 6 million barrels/day and accounted for 60% of the global increase in oil use. “The picture to 2030 looks very different. Following an extraordinary surge in EV sales, the continued deployment of trucks running on liquified natural gas (LNG), as well as strong growth in the country’s high-speed rail network, along with structural shifts in its economy, Chinese oil demand is on track to peak this decade,” said the IEA. “For supply, the pace of expansion in US oil production is slowing as oil companies scale back investments but it nevertheless remains the largest contributor to non-OPEC+ growth in the forecast.” Crude demand and production trends in the world’s two largest economies prompted the IEA to say that the oil markets are going through a “fundamental transformation” as the drivers of global oil supply and demand patterns shift. In figures, the push for the electrification of transport in many countries will displace 5.4 million barrels/day of global oil demand by the end of the 2020s. In the meantime, global oil production capacity is forecast to rise by 5.1 million barrels/day to 114.7 million barrels/day by 2030, led by Saudi Arabia and the US, which will significantly outpace projected demand increases. It will be this expanding capacity amid slowing demand growth that are likely to keep crude prices lower for longer – even forever. In the IEA’s words, sharply higher supply than demand suggests that “prices would have to drop to avoid stock levels which would make the market dysfunctional. “If OPEC+ crude oil supply is sustained at current rates, all else being equal, global oil supply would rise to 107.2 million barrels/day by 2030, 1.7 million barrels/day higher than projected demand, suggesting prices would have to drop to prevent an untenable stock build,” the IEA said. The agency also focused on natural gas liquids (NGL), which are expected to rise sharply – by 2.3 million barrels/day by 2030 – and account for nearly half the total increase in world oil production capacity. A “strategic focus” on natural gas development by producers in the Middle East is projected to boost regional NGL supply by 1.4 million barrels/day to 2030. Meanwhile, independent US producers are set to slow spending, although increasing associated gas from the shale patch is expected to buoy US NGL output by 860,000 barrels/day. Biofuel supply gains led by agricultural powerhouses such Brazil, India and Indonesia are forecast to add another 680,000 barrels/day by 2030. “Crude oil capacity is set to rise by 1.8 million barrels/day globally, led by the UAE (up by 720,000 barrels/day) and Iraq (560,000 barrels/day), while the biggest decline comes from Mexico. Total non-OPEC+ oil supply is forecast to climb by 3.1 million barrels/day by 2030, despite the number of approved projects tailing off after 2027,” said the IEA. PETROCHEMICALS GROW – REFINERIES TO SUFFERWhile the transport sector is slowly expected to shy away from using fossil fuels, petrochemicals will continue to be the dominant source of oil demand growth from 2026 onwards. The IEA forecasts that the global production of polymers and synthetic fibers will require 18.4 million barrels/day of oil by 2030, or more than one in every six barrels. “The refining sector is set to be increasingly challenged by demand growth that is underpinned almost exclusively by petrochemicals produced from non-refined products such as NGLs. Global refined products demand is projected to peak in 2027 at 86.3 million barrels/day, only 710,000 barrels/day above 2024 levels. Thereafter, accelerating declines in gasoline and diesel use outweigh growth in naphtha and jet fuel,” said the IEA. “Despite tepid demand growth projections, 4.2 million barrels/day of new refining capacity is expected globally by 2030, partly offset by 1.6 million barrels/day of closures. Even so, net capacity growth is set to far exceed refined product demand, with increases in Asia, especially China and India, outpacing shutdowns in Europe and the US. “This indicates that more capacity will have to shut, with high-cost plants in Europe and on the US West Coast expected to be hardest hit.” Front page picture source: IEA