Chemicals

TORONTO (ICIS)–Canadian CEOs and business trade groups are warning about the state of Canada’s fiscal policies. Finance minister resigns Deficit larger than expected Canada struggles to respond to US tariff threat Chrystia Freeland on Monday resigned as finance minister and deputy prime minister, saying that she was "at odds" with Prime Minister Justin Trudeau over the best way forward for Canada amid the tariff threat by US President-elect Donald Trump. Trump said on 25 November that as one of his first actions after taking office on 20 January he would impose a 25% tariff on all imports from Canada and Mexico, which would remain in place until the two countries took action on drugs and immigrants entering the US. The tariffs would have a devastating impact on Canada’s economy, which relies on the US as its largest export market by far. In the chemicals and plastics industry, nearly two-thirds of Canadian shipments are exported to the US, according to trade group Chemistry Industry Association of Canada (CIAC). In her resignation letter, Freeland said that Canada needed to take Trump’s threat “extremely seriously” and needed to “keep its fiscal powder dry” to have reserves for a coming “tariff war” with the US. That meant that the government could not afford “costly political gimmicks”. Trudeau’s Liberal-led government recently implemented a two-month sales tax holiday for a number of goods, including beer, cider and restaurant meals, and it promised a Canadian dollar (C$) 250 (US$175) tax rebate for 18.7 million “working Canadians”. The measures, estimated to cost more than C$6 billion, have been criticized by economists. The Business Council of Canada (BCC) said that it was “deeply troubling” that Freeland believed the government was opting for “costly political gimmicks at a time when federal finances are severely strained.” The BCC represents CEOs of Canadian-based companies. Members include, among others, the heads of BASF Canada, Shell Canada, and of ExxonMobil’s Canadian affiliate, Imperial Oil. Canada needed stable and credible leadership that recognizes the seriousness of the significant economic headwinds over the coming weeks, including the looming US tariffs, the council said. The BCC also noted that despite assurances in the 2024 budget that the government would limit the federal deficit to C$40.1 billion, its latest fiscal update on Monday showed that that number ballooned to C$61.9 billion. “By not keeping its economic promises, the federal government is sending the message that it can’t be trusted to manage the public finances”, said BCC president and CEO Goldy Hyder. Another trade group, Canadian Manufacturers and Exporters (CME) said that Canada was facing a “significant economic threat that demands a decisive, coordinated federal response”. “Canadian manufacturers need political stability, and a government committed to implementing policies that foster resilience, attract investment, and drive growth”, said Dennis Darby, president and CEO of CME. POLITICAL CRISIS Trudeau has come under increasing pressure to step down, even from members of his Liberal party. However, he has said he would lead the Liberals into the next election, which needs to be held by October 2025 but will likely be called earlier. The minority Liberal government needs the support of at least one opposition party in parliament to hang on to power. Two parties, the Conservatives and the Bloc Quebecois, want to bring the government down as soon as possible, they have said. The left-leaning New Democrats have called on Trudeau to resign but have not said whether they would vote to bring the government down. The Conservatives are far ahead of the Liberals in opinion polls on elections. The elections and political uncertainties affect investment decisions in the chemical industry, chemical trade group CIAC has said. The bottom line is that Canada finds itself in political turmoil – at a time when is should be united in the face of the US tariff threat. Thumbnail of photo Trudeau (left) meeting Trump in Washington in 2019 during Trump’s first presidency; photo source: Government of Canada (US$1=C$1.43)

17-Dec-2024

SAO PAULO (ICIS)–US President-elect Donald Trump said late on Monday that his administration may impose higher tariffs on goods from Brazil. In a surprise press conference, Trump spoke at length about his proposed strategy to use import tariffs to make the US wealthier, before adding that many countries charge more tariffs on US goods than vice versa. Brazil was included, but the single mention – almost in passing – had the corporate and financial circles in Brazil talking on Tuesday. “We're going to be treating people very fairly. But the word reciprocal is important, because if somebody charges us… If India charges us a 100% [import tariffs on US goods], do we charge them nothing for the same?” said Trump. “India charges us a lot. Brazil charges us a lot. If they want to charge us, that's fine, but we're going to charge them the same thing. That's a big statement.” Asked by a reporter about concerns that higher import tariffs will prop up inflation, Trump replied, “Make our country rich. Tariffs will make our country rich.” According to figures from the Brazilian government, total trade in goods between Brazil and the US was around $75 billion in 2023. The US is Brazil’s second largest export market after China, and the third largest source of foreign products to Brazil, accounting for 15.8% of total Brazilian imports. Chemicals trade group Abiquim had not responded to a request for comment at the time of writing. In Latin America, Trump also said he will impose higher import tariffs on Mexican goods in his first day in office on 20 January. Mexican and Canadian goods are currently part of a free trade zone within the North American USMCA free trade agreement (FTA). Earlier this month, Mexican chemicals trade group ANIQ expressed its concern about import tariffs given the integration between the chemicals sectors in both countries after nearly 40 years of free trade. "The chemical industries of both countries are deeply integrated throughout their value chain: raw materials cross borders to be transformed into industrial chemical products, which return in both directions to become products with higher added value," ANIQ said. "The chemical industry once again expresses its support for collaboration and maintaining a solid commercial relationship that will boost economic growth and ensure North America's competitiveness and sustainability in global markets.”

17-Dec-2024

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. To paraphrase William Shakespeare, I see last week’s fuss about China’s new economic stimulus as being full of sound and fury, signifying hardly anything. The hard reality is that China is undergoing a period of a much lower GDP and therefore chemicals demand growth. Nothing can change this trajectory, for reasons I discuss in detail in today’s post. During 2025, the problem will remain far too much global capacity chasing much weaker-than-expected demand up and down all the chemicals value chains because the consensus on China was wrong. So, to add to my five forecasts for 2025 which I published last week, here is a sixth: There will be no significant improvements during next year in China’s CFR polyethylene (PE) and polypropylene (PP) price spreads over CFR Japan naphtha costs. The 2024 final numbers are almost in. We can see that the downturn in spreads that followed the Evergrande Turning Point continues. Let’s start with PE where 2022-2024 average spread for the three grades was just $300/tonne. This compares with a spread in 1993-2021 – during the Chemicals Supercycle – that averaged $532/tonne. The average 2022-2024 PP spread was $240/tonne as against $562/tonne during the Supercycle. Please don’t be distracted by unhelpful noise. Instead, place all your focus on retooling your tactics and strategies to deal with the post-Supercycle chemicals world. 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.

17-Dec-2024

HOUSTON (ICIS)–Two world-scale joint venture projects being developed by Chevron Phillips Chemical and QatarEnergy remain on track to start operations in 2026, Phillips 66 said on Monday. Phillips 66 and Chevron hold equal stakes in Chevron Phillips Chemical (CP Chem). The US project is Golden Triangle Polymers, an integrated polyethylene (PE) complex in Orange, Texas. Chevron Phillips holds a 51% stake, and construction started in 2023. The Qatari project in Ras Laffan is another integrated PE project. It is a 70:30 joint venture between QatarEnergy and CP Chem. Construction on this project started in 2024. PHILLIPS 66 CAPEX BUDGETPhillips 66 provided the updates on the two petrochemical projects when it revealed its 2025 capital budget, as shown in the following table. Figures are in millions of dollars. Sustaining Growth TOTAL Midstream 429 546 975 Refining 414 408 822 Marketing & Specialties 63 91 154 Renewable Fuels 18 56 74 Corporate and other 74 1 75 TOTAL 998 1,102 2,100 Source: Phillips 66 Phillips 66's proportionate share of capital spending in its CP Chem and WRB Refining joint ventures is $877 million, and its inclusion would bring Phillips 66's total 2025 capital spending to $3 billion. The joint ventures' spending will be self funded, Phillips 66 said. WRB Refining is a 50:50 joint venture made up of Phillips 66 and Cenovus Energy. The joint venture owns the Wood River refinery in Illinois and the Borger refinery in Texas. WRB's capital spending will direct its capital spending on sustaining projects, Phillips 66 said. PHILLIPS TO SELL STAKE IN OIL PIPELINEA subsidiary of Phillips 66 has agreed to sell its 25% non-operated stake in the Gulf Coast Express Pipeline to an affiliate of ArcLight Capital Partners. Pre-tax proceeds from the sale should total $865 million. The sale should close in January 2025. Thumbnail shows PE. Image by ICIS.

16-Dec-2024

HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 13 December. Dow’s $2.4-3.0 billion infrastructure deal larger than expected Dow signed a deal to sell a minority stake in its US Gulf Coast infrastructure assets to a fund managed by Macquarie Asset Management for up to $3.0 billion – larger than expected, according to UBS. PCC's proposed USG chlor-alkali unit to add caustic length in unique development US caustic soda supplies will continue to grow in the coming years following an announcement by PCC Group that it intends to invest in a new 340,000 tons/year chlor-alkali plant at DeLisle, Mississippi. The new capacity will be built on Chemours site at DeLisle Mississippi with the intent to provide Chemours with reliable access to chlorine. The company intends to sell its caustic soda to strategic partners and into the open market. Construction on the unit is expected to begin in early-2026 and conclude in 2028. INSIGHT: New gas pipeline to provide support for ethane prices for US chems A new gas pipeline set to be built by Energy Transfer should provide support for natural gas and ethane prices in the Permian producing basin, lowering the likelihood that US chemical producers see another period of ultra-low costs for the main feedstock used to make ethylene. Olin to shut diaphragm chloralkali capacity that serves Dow's Freeport PO unit Olin plans to shut down its diaphragm-grade chloralkali capacity in Freeport, Texas, that provides feedstock to Dow's propylene oxide (PO) unit, the US-based chloralkali producer said on Thursday. ACC expects modest US chemicals volume recovery in 2025 – economist The American Chemistry Council (ACC) expects a 1.9% rebound in chemical volumes in 2025 after two consecutive years of declines as the US economy undergoes a soft landing and the housing market improves in the second half of the year, its chief economist said.

16-Dec-2024

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

16-Dec-2024

LONDON (ICIS)–Here are some of the top stories from ICIS Europe for the week ended 13 December. Little improvement expected for German chems sector in 2025- VCI Germany’s chemicals and production is expected to have increased by 2% in 2024, while output growth is set to slow next year, sales could stagnate and prices fall, trade group VCI said on Friday. Ample supply for crude markets in 2025 despite stronger demand – IEA Global crude oil markets are likely to be comfortably supplied next year despite moves by OPEC+ to hold back on easing production cuts and anticipated firmer demand, the International Energy Agency (IEA) said on Thursday. INEOS pushes forward with Greensand carbon storage project INEOS and project partners Harbour Energy and Nordsofonden have made a final investment decision (FID) to move forward with the first commercial phase of the Greensand carbon storage project. Dow’s $2.4-3.0 billion infrastructure deal larger than expected Dow signed a deal to sell a minority stake in its US Gulf Coast infrastructure assets to a fund managed by Macquarie Asset Management for up to $3.0 billion – larger than expected, according to UBS. EU-Mercosur trade deal to support R&D in green chemicals – Brazil’s Abiquim EU and Mercosur chemicals will greatly benefit from trade without barriers as per their free trade agreement (FTA) which will also encourage much-needed research and development (R&D) in new technologies for greener chemicals, Brazil’s chemicals producers’ trade group Abiquim said.

16-Dec-2024

SINGAPORE (ICIS)–A feasibility study for a joint venture petrochemical complex in the Duqm Special Economic Zone (SEZ) in Oman will be completed in 2025, an official from Oman’s national oil and gas company OQ told ICIS. The proposed project is a joint venture between OQ, Saudi Arabia’s SABIC and Kuwait Petroleum International (KPI). “We are trying to maximize the value of hydrocarbons in Oman,” OQ’s vice president for business development Sultan Al Burtamani said in an interview with ICIS. “We are studying this project together with our other partners, and hopefully in the coming months we'll get clarity on how we will be moving the project to the next stage,” Al Burtamani said. The OQ8 Duqm refinery, which became operational in 2024 and cost $9 billion to build, has a capacity of 230,000 barrels per day. The Duqm Petrochemical Complex, when built, will be located close to the Duqm Refinery, which is operated by OQ8, which is an existing joint venture between OQ and KPI. The project will draw feedstock primarily from the refinery. Oman, as with other Gulf states such as Saudi Arabia and the UAE, is looking to diversify away from oil and gas production, which accounts for over half of the nation’s GDP. "We are studying what could make a commercial competitiveness for us in the petrochemical space, [perhaps] related to the cracker business, that we are thinking of expanding,” Al Burtamani said. “We are trying to develop Duqm as another industrial hub, which is what we did in (the port cities of) Sohar, Sur, and Salalah (in Dhofar).” Al Burtamani added that Duqm is an attractive location as it has direct access to the Indian Ocean. Duqm is in the southeast Al Wusta Governorate of Oman and is in the path of international shipping lines in the Indian Ocean and the Arabian Sea. At the recently concluded Gulf Petrochemicals and Chemicals Association (GPCA) Forum in Muscat, Oman, OQ chairman Mulham Basheer Al Jarf said that a privatization program for the state-run company, which includes the listing of its chemicals arm OQ Base Industries (OQBI), forms part of Oman’s 2040 Vision plan to diversify its economy. OQBI launched an initial public offering (IPO) on 24 November, with 49% of the total shared capital of the company offered at 111 baizas per share or a total of Omani rial (OR) 384 million ($1 billion). The company started trading on the Muscat Stock Exchange on 15 December. OQBI produces methanol, ammonia, propane, butane, condensate and liquefied petroleum gas (LPG) in a facility in Salalah. Interview article by Jonathan Yee ($1 = OR0.384829)

16-Dec-2024

NEW YORK (ICIS)–The American Chemistry Council (ACC) expects a 1.9% rebound in chemical volumes in 2025 after two consecutive years of declines as the US economy undergoes a soft landing and the housing market improves in the second half of the year, its chief economist said. “We do expect the Fed rate cuts to stimulate demand for durable goods and investment, and certainly loosen things up in the housing sector,” said Martha Moore, chief economist at the ACC, at a press briefing. “When the differential between the mortgage rates most people got during the pandemic years and what they are now starts to come closer together, that will hopefully increase some transactions in the housing market,” she added. The economist also sees an improvement in manufacturing and industrial production globally in 2025, which should help US exports, although trade policy is very much uncertain with the threat of tariffs by the incoming Trump administration, she noted. Yet she sees a recovery in demand for US chemicals, although a modest one, in 2025, and weighted to H2 2025 as the lag effects of the US Federal Reserve’s rate cuts take hold. Yet here there is also uncertainty on the trajectory of rate cuts, given sticky inflation. “Weakness persisted in 2024, led by specialties and basic chemicals… but next year we expect to see volume growth across all segments," Moore stated. “We’ve got good energy fundamentals here in the US and the ethane advantage persists. Capacity expansions in manufacturing from reshoring [in the US] and nearshoring [in Mexico] are expected to drive chemical sales in the years ahead,” she added, noting that Mexico is one of the US’ top trading partners. The economist sees 2024 US chemical volumes down 0.4% following a decline of 0.2% in 2023, capping off a dismal period for the industry. Volume declines in 2024 are expected to be led by specialty chemicals (-3.2%) and basic chemicals (-1.5%), offset partially by agricultural chemicals (+1.2%) and a strong gain in consumer products (+5.0%). Within US specialties, there is softness in architectural coatings and automotive chemicals, she noted. The global picture in chemicals is quite different, with a 3.8% gain in volumes expected for 2024, led by Asia Pacific (+4.8%). Europe volumes should rise 1.9% in 2024 off a very sharp decline in 2023. Looking to 2025, Moore expects world chemicals output to increase 3.1% with gains across all regions. For the overall US economy, the economist sees 2025 GDP growth to slow to 2.0% versus an expected 2.7% in 2024. She sees housing starts improving to 1.40 million in 2025 from 1.35 million in 2024, and light vehicle sales rising to 16.2 million in 2025 from 15.7 million in 2024. TRUMP ADMINISTRATION IMPACTWith the incoming Trump administration, the ACC will be closely tracking developments on regulations, transportation and tariffs. “We’ll be keeping an eye on any policy and regulatory changes, [especially] chemical management regulatory policies – things like TSCA (Toxic Substances and Control Act),” said Scott Jensen, director of Issue Communications at the ACC. “We’ve had some issues in the past few years when it comes to new and existing chemical reviews, and then of course we’ll be keeping an eye on trade and tariffs pretty closely, along with transportation issues,” he added. LOOMING DOCKWORKERS STRIKEMost immediate on the transportation and trade front is a potential US East Coast and Gulf Coast dockworkers strike on 15 January if the union and shipping companies do not reach a deal working out a dispute on the future of automation at the ports. “It’s a big deal. Those are some of the biggest ports for us to not only export chemistry but also import,” said Jensen. On 12 December, President-Elect Donald Trump backed the International Longshoremen’s Association (ILA) union and its members, saying the harm to workers far outweighs the benefit of money saved by automation. Focus article by Joseph Chang Thumbnail shows a flask used in chemistry. Image by Fotohunter.

13-Dec-2024

HOUSTON (ICIS)–In a late-Thursday post on social media, President-elect Donald Trump expressed his support for dockworkers in the labor dispute between US Gulf and East Coast ports and the International Longshoremen’s Association (ILA). The ILA and the ports, represented in the negotiations by the US Maritime Alliance (USMX), are facing a 15 January deadline to complete a new master agreement. The union has vowed to strike if its demands on limiting automation are not met. In a post on Truth Social after meeting with union president Harold Daggett, Trump said “the amount of money saved [by automation] is nowhere near the distress, hurt, and harm it causes for American workers”. Trump said he would rather see the ports spend money on labor instead of “machinery, which is expensive, and which will constantly have to be replaced”. “For the great privilege of accessing our markets, these foreign companies should hire our incredible American workers, instead of laying them off, and sending those profits back to foreign countries,” Trump said. The USMX responded in a post to its website. “We appreciate and value President-elect Trump’s statement on the importance of American ports,” the USMX said. “But this contract goes beyond our ports – it is about supporting American consumers and giving American businesses access to the global marketplace – from farmers, to manufacturers, to small businesses, and innovative start-ups looking for new markets to sell their products.” The USMX contends that to achieve this, there is a need for modern technology that is proven to improve worker safety, boost port efficiency, increase port capacity, and strengthen supply chains. “ILA members’ compensation increases with the more goods they move – the greater capacity the ports have and goods that are moved means more money in their pockets,” the USMX said. “We look forward to working with the President-elect and the incoming administration on how our members are working to support the strength and resilience of the US supply chain and making crucial investments that support ILA members and millions of workers and businesses across the entire domestic supply chain, improving efficiency and creating even more high-paying jobs for ILA members,” the USMX said. A strike would not have an impact on liquid chemical tankers, which transport most chems. But container ships and costs for shipping containers are relevant to the chemical industry because while most chemicals are liquids and are shipped in tankers, container ships transport polymers, such as polyethylene (PE) and polypropylene (PP), are shipped in pellets. They also transport liquid chemicals in isotanks. No negotiations are currently underway with slightly less than five weeks left before the deadline.

13-Dec-2024