HOUSTON (ICIS)– Persistent inflation could slow or even reverse the recent decline in US mortgage rates, which had made homes more affordable and had the potential to stimulate demand for chemicals and polymers connected to the housing market. Rates on 30-year mortgages have declined in anticipation of the Federal Reserve’s recent quarter-point rate cut. A recovery in home sales would stimulate demand for paints and coatings as well as furniture and bedding, two major end market for chemicals and polymers. If inflation remains elevated, that could limit or reverse the declines in mortgage rates and slow home sales. HOUSING WOESNew home construction requires large amounts of chemistry, but existing home sales are also a significant end market. The existing house market accounts for 80% of the architectural coatings market because such homes get repainted before they hit the market and after they are sold. Consumers typically purchase furniture and bedding when they move, and these end markets account for 35% of polyurethane demand. The existing house market is also much larger, making up more than 85% of total home sales, based on seasonally adjusted annual rates published in July. High mortgage rates and price appreciation have slowed sales of houses in the US. Because consumers are buying fewer homes, they are moving less. The percentage of the US population that moved in the past year reached 12.1%, the lowest level since at least 2006, according to the US Census Bureau. Lower mobility is dragging down demand for furniture and bedding, and depressed house sales is restricting demand for architectural coatings. US furniture producer Hooker Furnishings adopted a cost-cutting and consolidation program that includes shutting down a warehouse in Savannah, Georgia.  Serta Simmons Bedding is shutting down two plants in the US since emerging from Chapter 11 bankruptcy protection in June 2023, according to reports from Furniture Today, a trade journal. US mattress retailer American Mattress filed for bankruptcy protection under Chapter 11. US mattress retailer Sleep Fit Corp filed for Chapter 7 bankruptcy. Typically under Chapter 7, a company sells off its assets and no longer operates. US paints and coatings producer Sherwin-Williams lowered its 2025 earnings guidance because sales volumes for architectural coatings were worse than expected. Mortgage rates have recently declined, but it is unclear whether that trend will continue. PERSISTENT INFLATION MAY BLUNT EFFECT OF LOWER RATESPersistent inflation could keep mortgage rates elevated even if the Federal Reserve continues to lower its benchmark interest rate, known as the federal funds rate. That already happened in 2024 when the Federal Reserve last cut its benchmark interest rate by a total of 1 point during its last three meetings in 2024. Market anticipation of those earlier cuts brought 30-year mortgage rates down towards 6%. When inflation proved persistent, mortgage rates rose above 7%. Since then, mortgage rates have fallen as the market became confident that the Federal Reserve would resume cutting its benchmark rate, as shown in the following chart: Source: US Federal Reserve The central bank did reduce rates by a quarter point on Wednesday, and its published forecasts show two more quarter-point cuts could take place this year and one more in 2026. However, the Federal Reserve cut its benchmark rate in response to the nation’s weakening job market and despite its own expectations that core inflation will remain above 3% this year and exceed 2.5% in 2026. Both are well above its target of 2%. Participants in the surveys the Fed conducts for its most recent Beige Book told the central bank tariffs are starting to increase prices, especially for inputs used to make finished goods. Federal Reserve Chairman Jerome Powell said tariffs could prove to be a one-time jolt to prices. “A reasonable base case is that the effects on inflation will be relatively short-lived in a one-time shift in the price level,” he said. “It is also possible that the inflationary effects could instead be more persistent, and that is a risk to be assessed.” The danger is that inflation remains elevated and halts or reverses the recent decline in mortgage rates. Another danger is that the government deficit keeps mortgage rates elevated. In this scenario, the US would fund the debt by issuing more longer-term Treasury securities such as 10-year notes or 30-year bonds. Rising supply of government debt would lower prices for Treasury notes and bonds. Yields would rise because they are inversely related to price. Mortgage rates tend to follow those of debt with similar terms. OTHER FACTORS THREATEN HOUSE SALESEven if inflation and mortgage rates fall, other factors could depress house sales. The main reason behind the Federal Reserve’s interest rate cut is the weakening job market. If the job market remains weak, consumers will likely prefer to save money instead of spending it on a home. House prices have appreciated rapidly, with the median price of an existing house sold in July was $422,400, up 51% from $280,000 in July 2019, according to the National Association of Realtors (NAR). Mortgage rates may not fall low enough to make homes affordable to large part of the population. Insight by Al Greenwood Thumbnail shows a home. Image by ICIS.

LONDON (ICIS) — Hydrogen market participants based in Germany and the Netherlands speaking to ICIS have expressed mixed positions around the future balance of supply and demand in each market. In the Netherlands, Dutch parties mention risk of oversupply, resulting in project development uncertainty due to low offtake opportunities. In Germany, following the country’s high hydrogen ambitions in the transport sector, parties believe the market could be short. This possibility was brought into sharper focus earlier this year amid a spate of cancelled and indefinitely delayed projects in the country. Against this backdrop, and with infrastructure links and tariff regimes for their use progressing across each member state, market parties are weighing up the potential to export hydrogen from the Netherlands to Germany. RED III Renewable fuels of non-biological origin (RFNBO), also known as renewable hydrogen, take on a specific position in Europe’s energy markets because their use has been mandated by the European Commission through its latest Renewable Energy Directive package, or ‘RED III’. RED III stipulates that of all hydrogen in industry, 42% should be RFNBO by 2030, rising to 60% by 2035. Further, at least 1% of energy consumption in the transport sector should be RFNBO. REGULATED DEMAND Earlier in August, ICIS examined the status of EU member states’ transposition of RED III hydrogen targets. The Netherlands and Germany have demonstrated support for RFNBO hydrogen with draft transpositions of RED III. The Netherlands has announced a transport obligation of 1.07%, while Germany has announced 1.5%. As well as this, the Netherlands has set a 4% industry target, while Germany has not set an obligation for industry, opting instead to achieve the targets via support mechanisms. Using Eurostat data for both countries’ current energy demand for transport, ICIS has forecast the potential RFNBO demand transposed targets could create in 2030. ICIS data for potential industry demand in 2030 has been used to forecast the potential RFNBO demand created in industry by current or full RED III transposition. Based on its transposed RED III commitments, overall RFNBO demand for the Netherlands would be 74.5 kiloton (kt). This is a combination of 49.3kt of transport demand and 25.2kt of industrial demand. Meanwhile, Germany’s total transposed demand would be 234kt from transport obligations alone. Comparatively, if each member state transposed RED III fully, total Dutch RFNBO demand would reach 313.8kt with German demand at 520.8kt. MARKET SUPPLY ICIS data indicates that projects in the Netherlands aiming to be online by 2030 which are currently at either Front-End Engineering Design (FEED) study, under construction, at final investment decision (FID) or already operational currently amounts to approximately 2,800MW of capacity. For the purposes of this analysis, this figure will be considered the “ICIS Base Case”. ICIS has calculated two base case figures. The first accounts for 50% annual load hours (4,380 hours total) and the second accounts for 80% annual load hours (7,008 hours total. The 50% case represents electrolyzer production in the early years of operation. Market participants speaking to ICIS have indicated that 50% is the likely figure at this stage due to intermittent renewable power, unexpected outages and a lack of storage infrastructure. The 80% case represents more mature electrolyzer use and represents the percentage that developers have indicated is necessary to cover capital costs. This could be achievable long term with stable renewable power source integration alongside optimised storage and pipeline access. Both base case figures also incorporate a 65% electrolyzer efficiency, which sits in the middle of the achievable range as seen by ICIS. From a volume perspective, the 50% load hours base case would result in annual domestic production of 239.5kt in the Netherlands, more than three times the forecast regulated demand figure of 74.5kt. This figure does not account for the Zeevonk project, which recently had its capacity halved to 500MW and was delayed to 2032. To give an indication of the increased level of capacity that could come online in the early 2030s, ICIS has included a projection inclusive of Zeevonk and capacity supported by the first two rounds of the government’s development of the hydrogen economy scheme (OWE). In July the second round of OWE awarded over €700 million for large-scale renewable hydrogen projects with a minimum electrolysis capacity of 0.5MW. Projects must be operational within five years of the subsidy decision, though the Dutch government has indicated flexibility on timelines. Using the same methodology as was applied to Dutch projects, approximately 1,230MW of German renewable hydrogen capacity is expected to be online by 2030. Accounting for an electrolysis efficiency of 65%, this converts to 105.5kt of domestic production annually at 50% load hours. Germany’s expected regulated transport demand alone already exceeds supply potential. This remains the case even when upping supply load hours to 80%. Using this supply and demand data, ICIS has forecast a number of scenarios for the net balance of both countries in 2030. In all scenarios modelled by ICIS, the German market is expected to be short by at least 65.7kt RFNBO annually come 2030, with the deficit as high as 415.6kt in the case of 50% load hours. In only one scenario – 50% load hours with potential demand – is the Netherlands short, with the surplus rising to a potential 308.6kt in the case of 80% load hours. INFRASTRUCTURE Both countries have begun construction of their national pipeline networks, with the Dutch Hynetwork and the German Hydrogen Core Network both aiming for completion of initial phases by the early 2030s. The German Hydrogen Core Network is expected to be complete by 2032. Last year, transmission system operator Gasunie delayed the completion of Hynetwork by three years to 2033, citing permitting issues. The two countries’ networks will be linked by the Delta Rhine Corridor, which has also been delayed to 2032 or later from an original completion date of 2030. This means that hydrogen hubs in both countries could be fully connected by 2033, with exports from the Netherlands to Germany expected. TARIFFS Alongside Denmark, the Netherlands and Germany have provided important early indications for the cost of transport utilising these networks. Germany has set a €25/kWh/h/year tariff for both entry and exit to the network, which at 50% utilisation amounts to €0.38/kg of hydrogen for complete transport. Tariffs have been kept lower than cost by a €24 billion amortisation account, which allows revenue shortfall to be recouped when the use of the grid has increased. Dutch regulator, the Authority for Consumers and Markets, has cited the amortisation account as a model that could be adopted for the Dutch network. At 50% utilisation, fees amount to €0.32/kg of hydrogen for complete transport in the Netherlands. This means sellers would pay a total of €0.70/kg to transport from the Netherlands to Germany. This figure falls to €0.35/kg at 100% utilisation, although this is unlikely to be the case at this early stage of the market. Capacity utilisation will differ depending on each producer’s production profile, storage availability and offtake agreements, but these figures provide an indication of tariff costs. EXPORT OPPORTUNITY Pipeline availability is a clear concern. Vattenfall has cited the delay to the Delta Rhine Corridor as the reason for the Zeevonk project’s delay and subsequent withdrawal from European Hydrogen Bank funding. However, a 1.5% RFNBO share for the transport sector in Germany is only the 2030 target. The German government has indicated that RFNBO transport targets will progressively rise to 12% by 2040, which would equate to roughly 1.9 megatons. In July, the German government reaffirmed its commitment to hydrogen’s role in the energy transition in the form of the draft hydrogen acceleration act, which aims to significantly accelerate market ramp-up by decreasing bureaucratic sticking points. Further, the German government has presented a penalty of €8.40/kg for fuel suppliers that fail to meet their RFNBO obligation, providing a very clear motivation for renewable hydrogen uptake. Looking at the latest ICIS Hydrogen Insight price assessments for renewable hydrogen shows that German volumes are more expensive than Dutch in both the short and the long term. Although the price gap narrows when looking at long-term procurement, this could further encourage exports from the Netherlands to Germany in the 2030s. Looking at the €0.32/kg figure for 100% utilisation of pipeline access and the long-term price gap of €0.50/kg, it would be cheaper to procure renewable hydrogen from the Netherlands and import to Germany. While this is not the case at lower utilization rates, as one party speaking to ICIS said, if you consider the penalty and multipliers, it makes a good case for RFNBO purchase. Due to the supply-demand imbalance in Germany and the Netherlands, there is a clear export venture that aligns with portfolio-player ambitions of transiting excess volumes from the Dutch market to Germany.

LONDON (ICIS)–INEOS Oxide may have permanently shuttered propylene oxide (PO) and propylene glycols (PG) capacity at its site in Cologne. A letter seen by ICIS dated 8 September states that INEOS stopped producing PO and PG “with immediate effect”. According to the ICIS Supply and Demand database, the site at Dormagen, Germany has capacity to produce 120,000 tonnes/year of PG and 210,000 tonnes/year of PO. “The high costs of raw materials, gas, energy, combined with the oversupply in the propylene oxide market and low local demand for derivatives have place Europe at a significant disadvantage compared to other regions,” the letter said. “Additionally, the competitive disadvantage of the chlorohydrin process for manufacturing propylene oxide, compared to more efficient processes, has further contributed to our inability to justify the continuity of production.” This comes on the heels of INEOS Group having its credit rating downgraded by financial services firms Moody’s and Fitch to BB-, maintaining a negative outlook, driven by weak market sentiment in the chemicals industry. INEOS Inovyn recently announced it is mothballing its chloromethane facility in Tavaux, France, which began from 1 September. The chemicals major is still investing in the industry, with the start-up of its Project ONE cracker in Antwerp, Belgium scheduled to come online in early 2027. INEOS has been contacted for comment but had not replied at the time of publication. Thumbnail image shows INEOS site in Dormagen, Germany (image credit: Shutterstock)

LONDON (ICIS)–The Bank of England (BoE) on Thursday left its key interest rate unchanged amid elevated levels of inflation and weak UK economic growth. The UK central bank held rates at 4% after cutting levels by 25 basis points at its previous monetary policy committee meeting last month. The move to hold comes amid levels of inflation that remain at the highest levels in over a year and a half at 3.8% on the back of higher restaurant and hotel costs. Sticking substantially above the bank’s target of inflation close to but not exceeding 2%, the current level of price increases comes amid non-existent GDP growth in July driven by a 0.9% decline in production. UK manufacturing is steadily losing steam despite a return to growth for producers in the eurozone. The purchasing managers’ index (PMI) for the sector fell to 47.0 in August, slipping further below the 50.1 watermark that signifies growth. The question is now whether the bank will cut at its next meeting in November, with inflation expected to stick in the 3.5-4% boundary for the rest of the year. “Certainly, we aren’t in the camp that thinks rate cuts are over. Services inflation should show more visible progress next spring, while wage growth should ease below 4% by year-end,” said analysts at banking group ING. “Add in the fact that the late-November autumn Budget is likely to be dominated by tax rises, and we think there’s still a decent case for UK interest rates to fall two or three more times by next summer.”

LONDON (ICIS)–Construction output in the eurozone and EU rebounded in July following two consecutive months of decline, statistics agency Eurostat said on Thursday. Seasonally adjusted production in construction in July rose by 0.5% in the eurozone compared to June and was higher by 0.6% in the wider EU. In May and June, construction output fell in both blocs following strong growth in April. 2025 February March April May June July Eurozone -1.1 0.0 4.5 -2.1 -0.7 0.5 EU -1.1 -0.1 3.8 -1.8 -0.3 0.6 In the eurozone for July, building construction decreased by 1.4%; civil engineering increased by 0.5%; and specialized construction activities increased by 1.2%. For the EU, building construction decreased by 1.3%; civil engineering increased by 0.7%; and specialized construction activities increased by 0.8%. On a year-on-year basis, overall July construction output was up by 3.2% in the eurozone and by 3.6% in the EU. The construction sector is a key consumer of chemicals, driving demand for a wide variety of chemicals, resins and derivative products, such as plastic pipe, insulation, paints and coatings, adhesives and synthetic fibers, among many others.

SINGAPORE (ICIS)–Bank Indonesia (BI) lowered its key interest rate – the seven-day reverse repurchase rate – by 25 basis points (bps) to 4.75% on 17 September, the third consecutive cut in recent months. GDP growth forecast above midpoint of 4.6-5.4% range Rate cut signals “policy synergy” between central bank, government Downside risk from volatile currency – Nomura The deposit facility rate was reduced by 50 bps to 3.75%, while the lending facility rate was set at 5.5%, BI said in a statement. “The decision is consistent with joint efforts to stimulate economic growth by maintaining low inflation … while maintaining rupiah (Rp) exchange rate stability in line with economic fundamentals,” said BI. The central bank will continue monitoring economic growth and inflation to consider further room for interest rate reductions based on exchange rate stability, BI added. BI expects GDP growth for 2025 to remain above the midpoint of its 4.6-5.4% range. POLICY SYNERGY The latest rate cut – seen as “pro-growth” by BI – came as a surprise to economists; just two out of 38 surveyed had expected the rate cut, said Japan-based bank MUFG. Economic growth has been a key focus for President Prabowo Subianto’s government amid the imposition of US tariffs of 19% on Indonesia, as well as large-scale protests that led to the sacking of former Finance Minister. On 15 September, a nearly-$1 billion stimulus package was unveiled by the government, in a bid to meet its GDP growth target of 5.2% in 2025. BI’s rate cut is hence a sign of “policy synergy” between the central bank and government, which BI flagged in its statement. “[BI] will continue strengthening policy coordination and synergy with the Government to accelerate economic growth, while maintaining economic stability,” said the central bank. However, an all-out pro-growth stance could complicate BI’s FX stability objective, said Japan-based financial services firm Nomura in a note on 17 September. The rupiah has experienced volatility recently owing to Indonesia’s protests and Cabinet reshuffle, spiking to Rp16,527.6 against the US dollar on 8 September, when the reshuffle took place, while lowering to Rp16,225 on 22 August. “External risks remain elevated, which, in our view, warrants a more vigilant BI stance than just being primarily focused on supporting domestic demand,” Nomura said. Regardless, Nomura maintained its forecast that BI will cut its policy rate by an additional 50bps to 4.25% on the central bank’s “more dovish tone”. Focus article by Jonathan Yee

HOUSTON (ICIS)–The US Federal Reserve has decided that the nation’s weakening job market is a bigger threat to the economy than inflation, leading it to lower its benchmark interest while prices will continue to rise faster than its 2% goal. The concurrence of a weak job market and higher inflation is unusual and puts the Federal Reserve in a dilemma. “There’s no risk-free path,” Federal Reserve Chairman Jerome Powell said during a press conference. “It’s not incredibly obvious what to do.” The tools available to the Federal Reserve cannot address both problems at the same time, Powell said. Until now, the central bank has focused on inflation, and it adjusted monetary policy accordingly. “Now, we see that there’s downside risk clearly in the labor market,” Powell said, “And so we’re moving in.” On Wednesday, the Federal Reserve lowered its benchmark interest rate by a quarter point, to 4.00-4.25%. “It’s really the risks that we’re seeing to the labor market that were the focus of today’s decision,” Powell said. INFLATION MAY REMAIN HIGHER FOR LONGERUsually, inflation and employment rates move in tandem. Currently, that is not happening. The Federal Reserve expects inflation will remain above its 2% target at least through 2027. That will have ramifications for chemical markets – especially those exposed to housing markets. Higher inflation puts upward pressure on mortgage rates. If the forecasts from the Federal Reserve hold and inflation remains elevated, then mortgage rates could also remain higher for longer. Something similar happened in 2024 when the Federal Reserve last lowered its benchmark interest rates. Mortgage rates initially fell before rising again once inflation proved persistent. Higher rates for home loans will depress activity in the nation’s housing market and limit demand for chemicals and polymers used in the sector, such as paints and coatings, insulation, sealants and adhesives. TARIFFS ARE SHOWING UP IN INFLATIONThere are signs that tariffs are causing prices for goods to increase, Powell said. “We think it’s contributing 0.3 or 0.4 or something like that to the current core PCE inflation reading, which is 2.9%,” Powell said. Core personal consumption expenditures (PCE) is the Federal Reserve’s preferred measure of inflation. For goods in general, inflation has been running at 1.2% during the past year, he said. That is a break from the longer term trend. Prices for goods have actually been declining for the past 25 years, even after adjusting for quality, he added. The pandemic broke that trend, but goods inflation had returned to zero prior to the tariffs. “A reasonable base case is that the effects on inflation will be relatively short-lived in a one-time shift in the price level,” Powell said. “It is also possible that the inflationary effects could instead be more persistent, and that is a risk to be assessed.” So far, the tariffs are being absorbed by companies caught between exporters and consumers, but some passthrough is occurring, Powell said. SIGNS OF JOB MARKET WEAKNESSGrowth in payroll jobs has slowed significantly to just 29,000/month over the past three months, Powell said. A large part of that is due to a decline in immigration into the US. In addition, labor participation has fallen. “There’s very little growth, if any, in the supply of workers,” he said. At the same time, the rate of job creation has slowed significantly and dropped below the break-even point, Powell added. “Overall, the market slowing in both the supply of and demand for workers is unusual in this less-dynamic and somewhat-softer labor market,” he said. Companies are hiring less. The danger is that if people lose their jobs, they could remain unemployed for a long time. Wages continue to grow faster than inflation, but the rate of the increases has slowed – representing another sign of a weakening job market, Powell said. ECONOMY REMAINS HEALTHYDespite the challenges in the labor market, the unemployment rate is still relatively low and the economy is still growing. In fact, the Federal Reserve raised its forecasts for economic growth for 2025 and 2026. “It’s not a bad economy or anything like that,” Powell said. “We’ve seen much more challenging economic times.” The following table shows the current forecasts made by the members of the Federal Reserve Board and the presidents of the Federal Reserve Banks. 2025 2026 2027 Current GDP 1.6 1.8 1.9 June GDP 1.4 1.6 1.8 Current Unemployment 4.5 4.4 4.3 June Unemployment 4.5 4.5 4.4 Current Inflation 3.0 2.6 2.1 June Inflation 3.0 2.4 2.1 Current Core Inflation 3.1 2.6 2.1 June Core Inflation 3.1 2.4 2.1 Current rate 3.6 3.4 3.1 June rate 3.9 3.6 3.4 Source: Federal Reserve Insight article by Al Greenwood Thumbnail shows a sign that says “Now Hiring”. Image by Shutterstock

SAP PAULO (ICIS)–Petrobras aims to start up its Bahia and Sergipe nitrogen fertilizer factories formerly leased to beleaguered chemicals producer Unigel by year-end, the Brazilian state-owned energy major said this week. The company has now concluded the bidding process for operation and maintenance services at the plants, and signed a five-year contract with engineering services Engeman for the contract. The agreement covers the plants FAFEN-BA in Camaçari, Bahia, and FAFEN-SE in Laranjeiras, Sergipe. “The operation and maintenance contract [with Engeman] will last up to five years and represents another important milestone in Petrobras’ return to the fertilizer sector – this time in the Northeast region,” said the energy major. “Ownership by Petrobras is expected to be reestablished next month, during which time Unigel will demobilize its teams and carry out other processes to terminate the lease.” The operation and maintenance contract will generate approximately 800 direct and indirect jobs serving both plants, the company said. The plant in Laranjeiras, FAFEN-SE, has a capacity to produce 650,000 tonnes/year of urea, 450,000 tonnes/year of ammonia and 320,000 tonnes/year of ammonium sulphate (AS). The Camacari plant, FAFEN-BA, is able to produce 475,000 tonnes/year of ammonia and 475,000 tonnes/year of urea. This week, Petrobras said the contract with Engeman also included production Arla-32, an additive added to diesel engines to reduce polluting gas emissions. ARLA 32 is Brazil’s term for Automotive Liquid Reducing Agent, equivalent to Diesel Exhaust Fluid (DEF) or AdBlue used internationally. It is a solution containing 32.5% high-purity urea and 67.5% deionized water that works in Selective Catalytic Reduction (SCR) systems to reduce nitrogen oxide (NOx) emissions from diesel engines by converting them into harmless nitrogen and water vapor. Moreover, the contract with Engeman includes operating the Ammonia and Urea Maritime Terminals at Aratu Port in Candeias, Bahia. BACK TO FERTILIZERSPetrobras’ resumption of operations at its northern fertilizers plants represents the energy major’s return to the sector. This had been withdrawn under the previous center-right administration, which mandated the major to dispose of fertilizers assets to focus on crude production. As Brazil continues to heavily rely on imported fertilizers for its agricultural sector – which has become one of the largest globally – the current center-left administration of Luiz Inacio Lula da Silva wants Petrobras to play a bigger role in the economy, including producing fertilizers. Earlier in 2025, Petrobras said it would start up its ANSA fertilizers plant in Araucaria, state of Parana, in H2 2025. The facilities are officially called Araucaria Nitrogenados SA (ANSA) and are a wholly owned Petrobras subsidiary, located next to Petrobras’ Presidente Getulio Vargas Refinery (REPAR). At the time, the company said planned production capacities at the facility will stand at 720,000 tonnes/year of urea and 475,000 tonnes/year of ammonia. It would also have capacity to produce 450,000 cubic meters/year of Arla-32. Petrobras had not responded to a request for comment about the ANSA plant at the time of writing on Wednesday. Front page picture: Petrobras’ FAFEN-BA fertilizers facilities in the state of BahiaPicture source: Oil Workers’ Union (Sindipetro) Additional information by Sylvia Traganida

SINGAPORE (ICIS)–Singapore’s petrochemical exports fell by 23.2% year on year to S$944 million in August, amid a larger-than-expected contraction in overall non-oil domestic exports (NODX) as US tariffs took effect. Petrochemical exports to US, China, Indonesia decline further in August Growth to moderate in second half of 2025 amid US tariff impact Weakening economic performance of key trading partners weigh on Singapore as trading hub – AMRO Singapore’s NODX fell by 11.3% year on year in August, following the 4.7% decline in July, according to Enterprise Singapore data on Wednesday. Exports of non-electronic products such as pharmaceuticals and petrochemicals declined by 13.0% year on year as food preparations and petrochemicals fell by 51.4% and 23.2% respectively. In August, pharmaceutical exports grew by 15.7% year on year amid an exemption from US tariffs. NODX to the US, China and Indonesia all fell in August, with US NODX declining by 28.8% as a 97.1% drop in food preparations weighed. Singapore’s non-oil exports to China and Indonesia also contracted further in August, although NODX to the EU, South Korea and Taiwan grew. Petrochemical exports to Indonesia, notably, fell by 37.1% year on year in August amid large-scale protests around the country over rising inequality and a lack of secure jobs, with 59.4% of employees working in informal service jobs such as motorcycle taxi drivers as of February 2025, according to Kompas. Singapore is a leading petrochemical manufacturer and exporter in southeast Asia, with more than 100 international chemical companies, including ExxonMobil and Aster Chemicals & Energy, based at its Jurong Island hub. The country’s economic growth is expected to moderate in the second half of 2025 following a stronger first half as the impact of US tariffs begins to weigh. Growth is projected at 2.6% in 2025 and 2.0% in 2026, said the ASEAN+3 Macroeconomic Research Office (AMRO) on 11 September. Singapore’s GDP grew by 4.3% in the second quarter of 2025, and the government upgraded its 2025 GDP growth forecast on 12 August to 1.5-2.5% from 0-2% previously. “While Singapore faces a lower tariff rate from the US compared to other countries in the region, the global trade slowdown and associated uncertainties will weigh on the economy, given its high trade openness,” said AMRO Lead Economist Runchana Pongsaparn. Weakening economies in the US and China, key trading partners, also “poses further downside risk”. However, inflation is expected to moderate to 0.9% this year with support from “well-coordinated policy measures, softening domestic demand and lower import prices”, AMRO said. Thumbnail photo shows Singapore’s Tanjong Pagar Port with Sentosa Island (Joseph Nair/NurPhoto/Shutterstock) Focus article by Jonathan Yee