Xylenes

The following text is from a white paper published by ICIS called Trump peace talks bring further uncertainty over Russian oil and LNG sanctions. You can download the pdf version of this paper here. Written by: Aura Sabadus, Barney Gray, Andreas Schroeder, Rob Songer As US president Donald Trump pushes for Ukrainian-Russian peace negotiations, it is uncertain whether he might seek to strengthen or unwind some of the sanctions imposed on Russian oil and LNG over the last three years. Trump has also been pursuing a blend of tariffs and sanctions, complicating an already difficult landscape. This latest ICIS paper proposes to help companies navigate a complex environment, reviewing the impact of new tariffs and existing sanctions on markets, the likelihood that they may be scrapped and asks whether unilateral European sanctions on Russian oil and gas could be just as effective.  INTRODUCTION US President Donald Trump’s second term has ushered in a whirlwind of economic measures sparking volatility across markets and shaking the global economy. Since his return to power at the end of January, US trade policies have focused on a blend of tariffs and sanctions targeting import partners, Canada and Mexico but also political adversaries, Iran and Venezuela. From this vantage point, his wider economic measures have the potential to spur inflation and a global economic slowdown that could weaken energy demand at a time of surging global oil and gas supply, weighing heavily on prices. With events unfolding at rapid speed as policies are announced and rolled back within days or even hours, it is becoming increasingly difficult for companies to assess the direction that oil and gas markets will take in the longer-term. Perhaps the biggest wild card in this unpredictable environment is the US’ position on Russian oil and LNG sanctions. On 7 March, the US president said he was strongly considering an array of tariffs and sanctions on Russia but many observers do not exclude the possibility of a u-turn on restrictions as Washington has been doubling down on efforts to conclude a peace deal with Moscow over Ukraine. These sanctions could be eased either during peace negotiations or once the war ends. SANCTIONS AND LOOPHOLES Since Russia invaded Ukraine in February 2022, the US together with the EU and the UK imposed over 20,000 sanctions, targeting primarily its oil sector. Nevertheless, despite the sweeping sanctions, Russia still made close to €1tr in oil and gas sales since the start of the war, as the two account for up to half of Russia’s tax revenues, according to estimates from the Centre for Research on Energy and Clean Air (CREA). Although the US and the EU introduced limited restrictions on Russian LNG, the country lost most of its European pipeline gas market share after cutting close to 80% of its exports following the invasion of Ukraine. Following the expiry of the Russian-Ukrainian pipeline gas transit agreement at the beginning of 2025, the Russian share of LNG and gas in Europe is 11%. Since then, the shortfall has been plugged primarily by the US, which now accounts for nearly a quarter of European gas supplies. RECORD IMPORTS In January alone, a record 58% of LNG imported into Europe came from the US, while Russia’s market share including pipeline and LNG exports accounted for 11%, dropping from close to 40% in 2021. While Europe has become increasingly dependent on the US, the same could be said about the US, as 80% of its LNG exports have been heading to Europe in recent months, according to ICIS data. With US LNG production set to double in the second half of this decade, unwinding sanctions against Russia’s Arctic LNG2 project would create direct competition to US producers. In contrast, by removing some of the sanctions on the oil sector, the Trump administration might hope to offset the inflationary effect of tariffs through falling oil prices and greenlight the return of US companies to Russia. Meanwhile, with the EU and the UK pledging to weaken Russia economically as part of efforts to help Ukraine negotiate from a position of strength, the onus would be on Brussels and London to continue sanctions on their own but that raises questions about their effectiveness. An EU transshipment ban prohibiting the transfer of Russian LNG via European terminals could have the perverse impact of redirecting these LNG volumes into European markets when it comes in force at the end of this month. Last year, more than 50% of Russian LNG exports ended up in Europe, which means that with the trans-shipment ban even more volumes could enter the market just as the EU is preparing to announce a roadmap for the scheduled 2027 Russia fossil fuel import phaseout. TARIFFS Donald Trump’s administration has had a profound impact on the global crude market in only a few short weeks. His mix of tariffs on friendly countries and sanctions on adversaries have led to ramped-up volatility and uncertainty with a distinct bearish tinge. Tariffs against Canada and Mexico announced in February, paused for a month and reintroduced in March only to be suspended again, have sparked fears of a global trade war. Canada is the US’ largest source of imported crude, representing over 4 million barrels/day or 62% of total imports in 2024. US refiners rely on Canada’s heavier, sour grades for which many US Gulf Coast refiners are specifically adapted to process. The US has placed a tariff of 10% on Canadian imports, adding more than $5/barrel to the current cost of Canada’s Western Canadian Select export grade. This will adversely impact refiners’ margins and may encourage them to seek replacement barrels from overseas, boosting demand for non-tariffed Middle Eastern or Brazilian grades. While the majority of Canada’s export pipeline infrastructure is dedicated to serving US customers, Canada is likely to ramp up exports through its Trans Mountain pipeline on the Pacific coast targeting Asian customers. Such a move could compete with Middle Eastern exports to Asia as higher volumes of Canadian grades find their way to South Korea, China and Japan. US tariffs on Mexican imports are a more punitive 25%, impacting around 465,000 barrels/day. While Mexican imports could dip in the short term, most Mexican production is coastal and offshore, and the country has the option to reroute exports more readily than Canada. However, with Mexico’s OPEC+ partners starting to return 2.2 million barrels of production cuts to the market over the next 18 months from April, surplus Mexican oil on the global market is likely to pressure prices. Meanwhile, with OPEC+ seeking to increase monthly production by around 138,000 barrels per day, US sanctions will try to remove supply from Iran. Iranian production dipped sharply under Trump’s first term only to rally again during president Biden’s tenure to 3.26 million barrels/day in 2024. While US sanctions could pare this back by 1.0 million barrels/day, offsetting global supply gains elsewhere, it is likely that this number is optimistic as consumers in China and India continue to ignore US sanctions on Iran. The US is likely to be more successful sanctioning Venezuelan imports which currently average around 220,000 barrels/day. Since Trump cancelled Chevron’s license to operate in the country, imports of Venezuelan oil are now likely to cease completely with these barrels competing in the global heavy, sour market. RUSSIAN SANCTIONS US president Donald Trump's tariffs and sanctions policies so far this year have weakened oil prices. These policies, along with likely increased supply of competing grades from Canada, Mexico and the Middle East, mean medium and heavy-sour benchmark oil prices could weaken even further this year. One implication is that president Trump may sacrifice the growth of the US oil sector for lower oil prices as a net benefit to the US economy. Should he also relax sanctions on Russia, the prospect of up to 0.6 million barrels/day of spare capacity hitting the market comes closer to reality, which could tank prices. What decision the Trump administration takes regarding Russian oil and gas will be pivotal for global markets, determining not only immediate price movements but also the long-term direction of the industry. Recent diplomatic events suggest the US is sympathetic to Moscow’s cause, as it pushes for an immediate peace deal with Ukraine. Many observers say that lifting sanctions could be detrimental to US oil and LNG producers and could have major oil price downside. Since the start of Russia's full-scale invasion of Ukraine, western partners, including the US, UK and the EU have introduced over 20,000 sanctions against Russia, expecting to dissuade it from pursuing its aggression against Ukraine. Most of these sanctions target its oil and LNG sectors, which account for more than a third of Russia's annual revenue. They took the form of either sanctions on production and services, or a price cap designed to limit revenue while not creating global supply imbalances. These were bolstered by a comprehensive package introduced in the final days of the previous Biden administration, directed at 183 oil tankers, some of which overlap with the 90 vessels blacklisted by the UK and another 80 sanctioned by the EU. Since the G7 plus Australia introduced a $60/bbl cap on the price for seaborne Russian-origin crude oil, prohibiting service providers in their jurisdictions to enable maritime transportation above that level, Russia has built a shadow fleet of tankers stripped of ownership, management and flagship to help circumvent the restrictions. It spent over $10 billion in acquiring the vessels and is thought to have earned around $14 billion in sales, according to CREA. CREA also noted the comprehensive sanctions on oil production might cut up to $20 billion from Russia’s oil and gas revenue forecast of $110 billion this year. Following tougher US sanctions introduced earlier this year, India and China halted the purchase of Russian oil.  But the effectiveness of sanctions lies not only in their enforcement but also in the perception that they would be imposed. With Donald Trump driving the US increasingly towards Russia, that perception will be diluted, raising questions about the effectiveness of the sanctions in the longer-term. LNG SANCTIONS To date, the most wide-reaching sanctions to be imposed on Russian LNG ships and infrastructure have been through the US treasury. The most significant European sanctions, clamping down on LNG ship-to-ship (STS) transfers in European ports, come into effect at the end of March and are intended to reduce Russia’s ability to supply its Arctic LNG to markets outside Europe. However, they could result in increasing European imports of Russian LNG, since less will be able to be exported. To minimize disruption to the US’s European allies, US treasury sanctions did not target the established 17.4 million tonne per annum (mtpa) Yamal LNG and 10.9mtpa Sakhalin 2 liquefaction plants. Nor did they initially target much Russian shipping, although this soon followed. HITTING LNG PRODUCTION Instead, measures were aimed squarely at the 19.8mtpa Arctic LNG2 (ALNG2) liquefaction plant, which was sanctioned before it had loaded a commercial cargo, as were two giant brand-new floating storage units (FSUs), each with a storage capacity of 362,000cbm. These two FSUs, named Saam and Koryak, were intended to be installed as storage hubs at Murmansk in Europe, and Kamchatka in Asia, respectively, allowing laden Arc7 ice-class vessels to shuttle cargoes away from icy conditions, so they could be reloaded via STS transfers onto more lightly winterised vessels. In keeping with the theme of sanctions targeting new, rather than existing Russian infrastructure, four newbuilds built by South Korea’s Samsung Heavy Industries (SHI) called North Air, North Way, North Mountain and North Sky were all sanctioned, preventing them from being put to work at the neighbouring Yamal LNG facility. However, four more vessels also intended to perform this role but arriving slightly later from another South Korean shipyard – Hanwha Ocean – have only recently been delivered. As a result, these four vessels – called North Moon, North Light, North Ocean and North Valley –  managed to escape the last of the Biden-era sanctions and are being used for Yamal LNG STS operations. The operator of Arctic LNG2 turned to smaller, older vessels to try to circumvent the loading ban, and these vessels – which were characterized by regular changes to their names, flags and byzantine ownership structures – were also sanctioned. Finally, in January 2025, the outgoing Biden administration slapped sanctions on existing liquefaction plants for the first time, seemingly calculating that their small sizes would not greatly inconvenience buyers. These were the 1.5mtpa Portovaya midscale and 0.66mtpa Vysotsk small-scale liquefaction plants, along with two Russian-owned vessels, the Gazprom-chartered Pskov, since renamed Pearl, and Velikiy Novgorod, which Gazprom used to load Portovaya cargoes. As it stands, some 15 LNG vessels are the subject of US treasury sanctions, according to ICIS LNG Edge, including Saam and Koryak. It should also be noted that less specific sanctions targeting technology transfers have also meant that five Arc-7 carriers that were being completed in Russia’s Zvezda shipyards, their hulls having been built in South Korea by SHI, are yet to be commissioned, two years after they were supposed to be delivered. In addition, a further ten SHI hulls have since been cancelled, which will likely slow down future Arctic LNG projects planned by Russia. Given the Trump administration’s current cordiality to Russia and antagonism towards Ukraine, it seems unlikely at this stage that further sanctions on LNG vessels will be implemented. Instead, it is arguable that existing sanctions now stand more chance of being rolled back. The sanctioned vessels are as follows: UNWINDING SANCTIONS? With the US pivoting towards Russia, there are two questions that will dominate discussions in global oil and gas markets: Will the US unwind the sanctions imposed so far and, if so, can unilateral European sanctions be equally effective? Alexander Kolyandr, a sanctions specialist and non-resident senior fellow at the Washington-based Center for European Policy Analysis (CEPA) said several conditions must be taken into consideration. Firstly, with Trump’s tariff policies likely to lead to inflation that would hit both his blue-collar Rust Belt electorate and tech companies in California, lifting some sanctions on Russian oil production could pressure crude prices, offsetting the impact of tariffs, he said. As steep price falls could hit current and future oil output, such a measure would have to be weighed against the interests of US producers. Kolyandr said the blacklisting of Russian oil companies Gazprom Neft and Surgutneftegas has a relatively minor impact because their combined production is around one million barrels per day, or less than a tenth of Russian overall production. More critical are sanctions against the so-called shadow fleet that has been carrying 78% of Russian seaborne crude oil shipments in in 2024, according to a report by the Centre for Research on Energy and Clean Air (CREA). When EU and UK sanctions are added to those imposed by the US, the number of blacklisted oil tankers increases to 270, around a third of Russia’s shadow fleet. APPROVAL Kolyandr said another factor that will determine the unwinding of US sanctions is ease of removal. “Some sanctions derive from CAATSA (Countering America's Adversaries Through Sanctions Act), which need Congressional approval and are more difficult to remove and some were introduced through emergency acts, which are easier to unwind,” Kolyandr said. Although sanctions against Russian LNG are limited in scope, the likelihood of removing them, particularly against the Arctic LNG2 project , is lower as adding more LNG to a production glut that is expected to build up in coming months would hit US producers. However, it is unlikely the US Office of Foreign Assets Control (OFAC) will seek to expand the scope of sanctions beyond Arctic LNG2 and the smaller Portovaya and Vysotsk to the bigger Yamal LNG and Sakhalin II exports as these would create major disruptions in a global LNG market set to remain tight in the mid-term. EUROPEAN SANCTIONS If the US did unwind critical sanctions against Russia’s oil and LNG shadow fleets as well as against oil production, could European measures prove as effective? Some observers believe that a possible US exit from the G7 price cap would not pose a problem to Europe because most of the Russian oil dodging the cap is exported via EU-controlled chokepoints in the Baltic Sea, giving the bloc leverage to control and enforce the cap. Russian LNG exports are equally critically dependant on European insurance. In 2024, 95% of LNG volumes were transported on vessels insured in G7 + countries. More than half of these vessels belonged to UK and Greek companies, making them vulnerable to European leverage, according to CREA. Ongoing price volatility and tight market conditions expected for the rest of the year will likely leave the EU unable to join the UK in banning Russian LNG imports, at least for the time being. However, the EU could work with Ukraine to ban remaining land-based oil exports to Hungary, Slovakia and Czechia via the Druzhba pipeline. The expansion of the Transalpine Pipeline from Italy to the Czech Republic could help replace some of the volumes transiting Ukraine. FINANCIAL MARKETS To restart Russian oil and gas operations, western companies would need access to markets, where the major global financial centres of the EU and UK could also exert pressure. On March 13, there were reports that a waiver introduced by former president Joe Biden exempting 12 Russian banks used for oil payments may have lapsed on March 12 without being renewed. As the waiver lapsed, the May Brent future price fell below $70/bbl but regained some of the lost premium the following day to hover around that level. Kolyandr said that in the case of Gazprombank, which had received a separate exemption to allow payments from pipeline gas buyers from Turkey, the waiver may still be on for now. By: Barney Gray, Aura Sabadus, Andreas Schroeder, Rob Songer

14-Mar-2025

SINGAPORE (ICIS)–Sentiment in Asia’s petrochemical markets remains cautious with prices of some products – particularly in the southeastern region – were rising on tight supply, amid escalating trade tensions between the US and its major trading partners, including China. China’s oversupply-driven exports weigh on markets; post-Lunar New Year demand weaker than expected US tariff fears cause jitters across downstream industries Methanol supply constraints persist TRADES REMAIN SUBDUED Market activity in key chemical segments remains muted as buyers were staying on the sidelines, waiting for clarity on US trade policies and overall demand recovery. In the benzene market, South Korea’s January exports to the US slumped by 81% year on year to 15,000 tonnes, according to ICIS data. The decline was attributed to increased European supply to the US. “The market is cautious as everyone is waiting for more clarity on US tariff policies,” a trader said. South Korea faces potential hefty tariffs under the US’ plan to impose reciprocal tariffs from 2 April, even though the two countries have an existing free trade agreement. In the caprolactam (capro) market, producers are grappling with poor margins while supply within China continues to grow. “Capro margins have been bad for six months now, and demand didn’t pick up post-Lunar New Year,” said a Chinese producer. Chinese producers were exporting more to southeast Asia and Europe, in view of a general oversupply of petrochemicals and muted demand in the domestic market and following the US’ new 20% tariffs on all Chinese goods. For polypropylene (PP), China has ramped up exports to Vietnam and other southeast Asian nations which were exerting downward pressure on prices. With more Chinese capacity coming online, this trade flow is likely to continue. Chinese producers are increasingly willing to accept lower margins to capture market share in the polyolefin markets, creating ripple effects across Asia and beyond, forcing regional producers to adjust pricing strategies to remain competitive. However, these actions could be met with antidumping duties (ADD) as southeast Asian governments act to protect domestic producers. SHIPPING SECTOR WARY OF US POLICIES US protectionism is on the rise again under President Donald Trump’s administration, with an ongoing probe being conducted on China’s shipbuilding industry, which may be slapped with potential duties of up to $1.5 million per vessel. This move aims to deter reliance on Chinese-built ships and, instead, encourage investment in the US shipbuilding sector. China dominates the global shipbuilding industry, with over 81% of new tankers being built in the country, according to shipbroker Xclusiv in a November report. The fear is that if these tariffs come through, immediate cost impacts will be felt, especially on long-haul trades. Meanwhile, weaker freight demand post-Lunar New Year has also softened freight rates. Most downstream producers in China resumed operations in H2 February, after an extended holiday break. China was on official holiday from 28 January to 4 February. The northeast Asia winter was milder than expected, which reduced seasonal trade flows. DISRUPTIONS TIGHTEN SUPPLY While some chemical markets struggle with oversupply, others are experiencing tight supply due to plant outages. For methanol, supply is constrained in Malaysia, with Petronas’ unit experiencing operational issues, and Sarawak Petchem’s unit shut from late January. Iranian methanol plants have also been offline due to winter gas shortages, pushing Indian import prices up by $60/tonne within a week. Meanwhile, Russian supply disruptions due to drone attacks have tightened naphtha availability, strengthening prices. On the acetic acid front, plant turnarounds in China, Malaysia, and Japan initially tightened supply, but these units have since restarted, thereby improving availability of the material. OUTLOOK MIXED Market players remain wary of near-term price movements as supply and demand fundamentals shift across regions. March shipments for PE and PP in southeast Asia have largely been sold out, while Indonesian buyers are reluctant to commit to April purchases amid the Muslim fasting month of Ramadan, which started 1 March. Ramadan is observed in most parts of southeast Asia including Indonesia, southeast Asia’s biggest economy with a predominantly Muslim population. With uncertainties surrounding US’ trade policies, Chinese exports, and geopolitical risks, market sentiment remains mixed. Players are closely monitoring tariff developments and the potential impacts of further supply disruptions in key markets. Focus article by Jonathan Yee Additional reporting from Seng Li Peng, Isaac Tan, Tan Hwee Hwee, Angeline Soh, Jasmine Khoo, Julia Tan, Josh Quah, Damini Dabholkar, Doris He, Jackie Wong Thumbnail image: At Qingdao Port in Shandong province, China on 6 March 2025. (Costfoto/NurPhoto/Shutterstock)

10-Mar-2025

HOUSTON (ICIS)–Shipping container rates from Asia to both US coasts fell again this week as capacity has grown and as volumes have fallen after frontloading to beat tariffs, and liquid tanker rates rose on the transatlantic eastbound route and fell on the US Gulf to Asia trade lane. CONTAINER RATES Rates from Shanghai to Los Angeles fell by 9% this week, according to supply chain advisors Drewry, while rates from Shanghai to New York fell by 6%, as shown in the following chart. Rates to both US coasts are now at their lowest of the year, according to Drewry data. Global average rates in Drewry’s World Container Index fell by 3% and are also at their lowest over the past year, as shown in the following chart. Drewry expects rates to continue to decrease next week due to increased shipping capacity. Rates from online freight shipping marketplace and platform provider Freightos showed significant decreases this week, although their rates are slightly higher than Drewry’s. Judah Levine, head of research at Freightos, said that tariffs – or the threat of tariffs – led to many importers frontloading volumes to beat the announced levies. “The president’s proposed 60% tariffs on Chinese goods could go into effect as soon as April – as could a wider application of reciprocal tariffs on numerous countries – meaning the window to receive goods before then is about closed,” Levine said. Levine said that the combination of a seasonal slump in demand and the possible end of frontloading likely drove the sharp fall in transpacific ocean rates last week. “If frontloading of the past few months was significant enough, we could also expect to see subdued peak season demand and rates as a result,” Levine 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. LIQUID TANKER RATES MIXED US chemical tanker freight rates assessed by ICIS were mixed week on week. Trade routes from the US remain mixed with several trade lanes slightly higher and others lower. Cargo moving into Asia weakens following the recent tariff announcements and this route has recently seen a decrease of cargoes, as the tariffs have all but halted any spot activity for this trade lane. As a result, rates have dipped from the previous week. On the other hand, the rates from USG to Rotterdam experienced upward pressure. For this trade lane freight rates for March have strengthened, given the amount of space left. A shipowner said it is expecting the trend to continue throughout March, with higher contract of affreightment (COA) utilization leaving very little available space. From the USG to Brazil, this market has remained relatively unchanged but is experiencing some downward pressure. While the market continues to be active it is further influenced by freight availability and a swing in trade lane dynamics. Demand remains soft particularly for larger parcels further pressuring some downward movement. On the USG to India trade lane, the market remains extremely soft with plenty of space available as outsiders have entered the market. As a result, this has placed downward pressure, and rates could fall further on the route if this persists. Several inquiries were seen for monoethylene glycol (MEG), methanol, ethanol, and vinyl acetate monomer (VAM), but few fixtures were seen in the market. With additional reporting by Kevin Callahan

07-Mar-2025

LONDON (ICIS)–Senior Editor for Recycling, Matt Tudball, discusses the latest developments in the European recycled polyethylene terephthalate (R-PET) market, including: FD NWE colourless (C) bale prices rise for first time since May 2024 FD NWE C and mixed coloured flake prices rise at low end in March Food-grade pellet range widens, as UK C flake range narrows

07-Mar-2025

HOUSTON (ICIS)–US recycled polypropylene (R-PP) players are currently watching polypropylene (PP) bale price movement as recent increases have put pressure on finished recycled resin margins. As R-PP pellet prices are already established close to or over 2x virgin PP costs, recent increases in bale feedstock costs can be difficult to pass through, though recent increases in virgin PP prices have somewhat softened the blow. Bales East Coast PP bale prices have nearly doubled since last fall, on strong demand from several existing players who have increased processing capacity over the last year, PureCycle in particular. With the recent start-up of PureCycle's plastics recovery facility (PRF), bale markets have seen surprising upwards movement on tight supply as players are having to compete for the same pool of available bales. Bale supply could further tighten as the 25% tariffs on imports from Canada and Mexico take effect this week. Some recyclers who are located near border regions have historically purchased bale feedstock from neighboring countries. The proposed tariffs could render imported bales from Canada and Mexico uneconomic, thus further limiting supply, or lending support to higher domestic pricing. Post-consumer resin On the finished resin side, demand remains mixed, as recyclers and converters continue to field increased customer inquiries but have struggled to transition these to sales volumes. Target end markets include consumer goods/packaging, automotive and fiber applications, though most end markets are currently grappling with the challenging macroeconomic outlook. The latest quarterly earnings results suggest most global brands saw single digit volume growth at the end of last year, though it remains to be seen how consumers react as inflation remains persistent Moreover, as bottom line pressure grows, those considering higher cost sustainable materials may shift back to lower cost virgin resins. Prices for natural post-consumer R-PP material were heard as high as $1.30/lb. This was considered to be an outlier. Prices for PureCycle’s dissolution based material, PureFive, were quoted at $1.36/lb, according to company representatives during their latest earnings call. Moreover, it was noted PureCycle has inventoried 7.2 million lbs of resin, awaiting third party certification. This compares to the Q4 production volume of 3.6 million lbs and uptime of 67% in December. Despite the small initial supply from PureCycle and other PP mechanical recyclers, the ability to compound should increase potential volumes. PureCycle noted typical fiber applications of their resin are a 50/50 blend, where as film applications are centered around a 30/70 blend of recycled/virgin material. Pricing for a 50/50 blend of natural mechanically recycled R-PP and virgin PP material was heard in the range of $1.20-1.30/lb. Moreover, compounding is relatively popular with the PP space, as many PP applications require specific materials properties which can only be achieved through a blend of materials. Though as the recycled plastic space remains nascent, many worry initial failures will deter future interest. One producer noted customers might trial one source of R-PP, and if the resin does not perform as expected, they abandon plans for R-PP integration without trialing other types of R-PP from other providers which can vary significantly in quality and technical support. ICIS is currently developing US R-PP market coverage. Monthly, free prototyped reports target those involved in the processing and purchasing of PP bales as well as mechanically recycled post-consumer and post-industrial PP resin within the US. These reports have market discussion on pricing, supply, demand and current news, split by post-consumer vs post-industrial market categories. If you are interested in learning more about this coverage and or receiving these prototype reports, please reach out to Emily.Friedman@icis.com.

06-Mar-2025

LONDON (ICIS)–Fresh US tariffs posing a big risk for polyethylene (PE), a chemical industry under threat of “extinction”, more Q4 results to pore over from EU polyolefins. There’s yet again plenty to digest for Europe polyethylene (PE) and polypropylene (PP) senior editors. Vicky Ellis and Ben Lake are joined by senior analysts Lorenzo Meazza (PE) and Emiliano Basualto (PP) to consider February trends, what to expect in March and the rest of 2025. Last but not least, they look at different scenarios that US tariffs will affect PE and PP. They touch on articles including US PE exports most vulnerable to retaliatory tariffs, Saudi plans for a new Sipchem/LyondellBasell mixed feed cracker and Orlen’s Q4 petchem operating loss improving. Podcast edited by Nick Cleeve ICIS senior analysts, editors and managers will be at the Hyatt Regency Hotel in Cologne, Germany on the 8-9 April for the 11th ICIS World Polyolefins Conference. You’ll also get to hear from industry leaders like Borealis, LyondellBasell and Covestro, as they share their insights. Discover more:

06-Mar-2025

SINGAPORE (ICIS)–South Korea's headline inflation eased in February, giving the central bank flexibility to loosen monetary policy to boost economic activity amid a slowdown. 1.9% average inflation forecast kept for 2025-2026 Feb PMI reading in contraction mode at 49.9 Feb exports rebound weaker than expected Consumer price inflation in Asia’s fourth-largest economy eased last month to 2% on a year-on-year basis, slowing from the six-month high of 2.2% in January, data from Statistics Korea showed on Thursday. After staying below the central bank's 2% target in September-December 2024, inflation spiked in January due to rising global oil prices, compounded by weakness of the Korean won. "Going forward, consumer inflation is expected to fluctuate around the target level amid mixed factors of a weak local currency and low demand pressure," the Bank of Korea (BOK) said in a statement. The won (W) has strengthened 2% against the dollar this year, reaching around W1,440 against the US dollar on Thursday, after tumbling to its weakest level in almost 16 years in early January, with the downward pressure aggravated by a prolonged domestic political instability. Core inflation, which excludes volatile food and energy prices, also eased in February to 1.8%, from 1.9% in the previous month. South Korea's trade-reliant economy is facing numerous challenges, including the protectionist policies of the US’ Trump administration. In response to these headwinds and with inflation largely in line with expectations, the BOK has adopted a more accommodative monetary policy stance, cutting its benchmark interest rate three times since October 2024. On 25 February, the central bank cut its policy interest rates by 25 basis points to 2.75% as it revised down its GDP forecasts. GDP growth this year is projected at 1.5%, down from its previous estimate of 1.9% and lower than the 1.6% to 1.7% range indicated in January. For 2024, South Korea's final real GDP growth was confirmed at 2.0%, matching the preliminary estimate released in January, the BOK said on 5 March. Meanwhile, the central bank maintained its inflation average forecast of 1.9% for both this year and next. "Export growth has weakened amid a slump in consumption, driven by increased political uncertainties following the declaration of martial law and by a deterioration in weather conditions," the BOK said. "Trends in the domestic demand recovery and in export growth are forecast to be lower than previously expected due to deteriorating economic sentiment and due to U.S. tariff policies," it stated. South Korea is a major importer of raw materials like crude oil and naphtha, which it uses to produce a variety of petrochemicals, which are then exported. The country is a major exporter of aromatics such as benzene toluene and styrene. The country is experiencing a political crisis stemming from President Yoon Suk Yeol's controversial declaration of martial law in December, which has led to his impeachment and arrest. Its Constitutional Court is deciding President Yoon's fate, reviewing his impeachment after weeks of public trials, with his insurrection trial expected to take months and a verdict potentially reached by late 2025 or early 2026, according to media reports. ECONOMY LOSING STEAM South Korea’s industrial production shrank in January, with noted declines across output, consumption and investments. January’s overall industry output in January fell 2.7% year on year, reversing a 1.7% increase in December, official data showed on 4 March. Industrial output in South Korea's manufacturing and mining sector decreased by 2.3% in January compared with the same month last year. The services and construction sector output declined by 0.8% and 4.3%, respectively. Data released over the weekend showed that February exports rose 1.0% year on year, a sharp reversal of the 10.2% decline in January. Imports also increased, rising by 0.2% compared to a 6.4% drop in January, though this was below market expectations of a 2.6% rise. "While the timing of the Lunar New Year holiday adds volatility to the data, underlying momentum weakened in February,” Dutch banking and financial information services provider ING said in a note. The Lunar New Year, which is celebrated in most parts of northeast and southeast Asia, fell on 29 January. Conversely, car exports rebounded strongly by 17.7% year on year in February after falling in the previous three months. “Carmakers are likely to push their products out as early as possible before the reciprocal tariffs come into effect,” ING said. “We expect exports to remain a growth driver for the economy in the first quarter of 2025. Despite the moderation in exports, a sharper decline in imports should boost the positive contribution from net exports in Q1 2025.” MANUFACTURING PMI BACK IN CONTRACTION  S&P Global’s manufacturing PMI for South Korea dipped to 49.9 in February from 50.3 in January, even though output and new orders increased. This suggests that exports are likely to maintain their upward trajectory, while the domestic economy is acting as a drag on overall growth. “As suggested by the local business survey, business confidence remained weak amid political instability in Korea and uncertainty surrounding global trade,” ING said. “We expect the domestic political situation to become clearer in two weeks following the Constitutional Court ruling on the impeachment of President Yoon,” it added. “But US trade policy is likely to remain a headwind for businesses,” ING said. Focus article by Nurluqman Suratman Thumbnail image: At a container pier in South Korea's southeastern port city of Busan on 1 November 2023.(YONHAP/EPA-EFE/Shutterstock)

06-Mar-2025

LONDON (ICIS)–Driven by legislation, European packaging-suitable grades of recycled material are increasingly acting like specialty rather than commodity grades. Regulation has disconnected prices of packaging suitable grades of recycled material from: virgin values grades primarily serving other end-uses feedstock costs. This a pattern repeatedly shown through analysis of the yearly average price spreads against virgin and feedstocks across recycled polyethylene terephthalate (R-PET), recycled high density polyethylene (R-HDPE) and recycled polypropylene (R-PP) markets. These are the types of spreads featured in ICIS’ new Circular Plastics supply, demand and pricing beta (alongside long-term supply & demand data and forecasts). The beta is accessible via a short questionnaire here. There are two key events that show the impact most clearly: The 2019 entry into force of the EU’s Single Use Plastics Directive (SUPD) This included mandatory 25% recycled content targets for polyethylene terephthalate (PET) bottles by 2025, and 30% recycled content targets in all plastic bottles by 2030 Individual countries then had until 2021 to fully translate the SUPD into national law The 2022 publication of the draft Packaging and Packaging Waste Regulation (PPWR) This entered into force in January 2025 and included mandatory recycled content targets across most plastic packaging It replaced the previous Packaging and Packaging Waste Directive (PPWD) Recycled polyethylene terephthalate (R-PET) food-grade pellets (which predominantly serve the bottle-to-bottle market) have traded at a premium to virgin PET bottle grade spot prices on average yearly basis since 2011. The variation in the average yearly spread has intensified in recent years, suggesting increased decoupling between the two markets. Nevertheless, since the entry in to force of the SUPD in 2019 there has been a marked increase in the spread compared with all prior years, as shown in the below bar-chart. A similar – but less pronounced trend can be seen in the premium between R-PET food-grade pellets and feedstock colourless post-consumer PET bales, whereby the spread in each year from 2019 onwards remains higher than any year prior to 2019. Source: Circular Plastics Supply & Demand Beta Meanwhile, yearly average prices for R-PET food-grade pellets in each year since 2021 (the deadline for fully translating the SUPD into national law) have been consistently above any year prior to 2021. 2011 was the only prior year that saw higher average yearly prices than 2019 and 2020. 2011 saw what were record high prices at the time throughout the R-PET chain, in part attributable to a swathe of sustainability initiatives from brand owners. While 2023 and 2024 saw challenging macroeconomic conditions, yearly average R-PET prices remained consistent with their 2021 level (coming back from 2022 record highs driven by bale shortages and voluntary sustainability targets). Spreads with feedstock meanwhile in both 2023 and 2024 were above any year prior to 2022 (although production costs were also higher as a result of the energy cost crisis), and spreads with virgin higher than any year prior to 2020. Turning to recycled high density polyethylene (R-HDPE) and similar trends can be seen in the wake of the publishing of the first draft of the PPWR by the EU Commission in 2022. This was the first point where the general market became aware of the scope of the minimum recycled content targets. The average yearly spread between blow-moulding R-HDPE pellets (which predominantly serves packaging) and virgin blow-moulding spot prices has been at least €347/tonne higher than the years prior to 2022 in every year from 2022 onwards. Source: Circular Plastics Supply & Demand Beta For natural post-consumer R-PP pellets each year from 2022 onwards has seen the spread with virgin at least €567/tonne above 2021 levels. Source: Circular Plastics Supply & Demand Beta The average yearly spread between R-HDPE blow-moulding pellets and feedstock mixed-coloured bales, meanwhile, has been at least €263/tonne higher in each year from 2022 than the years preceding it. R-PP natural post-consumer pellets have seen a spread with feedstock mixed-coloured bales of at least €190/tonne higher than 2021 in each year from 2022 onwards. Taken together, the ‘break points’ that legislation creates in the market are clear. Comparing the trends in non-packaging grades makes this even starker. R-HDPE pipe-grade pellets provides the clearest example, but the trends are similar across other non-packaging grades in Europe. As the name suggests R-HDPE pipe-grade pellets serve the pipe industry rather than packaging. Players in this sector typically purchase based on cost-saving against virgin, and the pipe sector is heavily linked to construction demand where there are no current regulatory targets on recycled content that have been proposed in the EU. The yearly average spread between pipe-grade black and feedstock bale costs reached fresh record lows in both 2023 and 2024. Meanwhile, the yearly average spread with virgin shows that black pipe-grade pellets have become progressively cheaper compared with virgin injection moulding spot prices in both 2023 and 2024. The lack of regulation has meant that pipe-grade black pellets have been more exposed by the negative impact of the cost of living and energy cost crises on the construction sector, while regulation on packaging has acted as a bulwark, comparatively. The change in the spread with feedstock comes at a time when production costs have increased. For recycled polyolefins the conversion cost between bale to pellets is currently estimated at €400-500/tonne, up from an estimated €300/tonne before the current inflationary cycle. This has meant that in 2023 and 2024 many players have struggled with margins, and in some cases players have been selling at a loss. Technical limitations mean that the bulk of material across recycled polyolefins serves non-packaging rather than packaging markets – and the majority of producers serving packaging sectors also serve non-packaging sectors. So while on the face of it margins on packaging grades may seem high, it does not demonstrate the health of the overall industry. Consolidation risk in the market was high in both 2023 and 2024, and remains so in 2025. Squeezed margins on non-packaging grades are also limiting recyclers and waste managers’ ability to invest in additional sorting, infrastructure and production capacity necessary to meet EU recycled content target. The data clearly shows that regulation does have an impact. It also shows that when unevenly applied it can add market fragmentation, distortion and complexity that can harm the achievability of its goals. ICIS is developing a CIRCULAR PLASTICS product that enables you to compare Circular Plastics supply, demand and pricing. Please complete this questionnaire for early access. Access Data 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. On 1 October ICIS launched a recycled polyolefins agglomerate price range as part of the Mixed Plastic Waste and Pyrolysis Oil (Europe) pricing service. For more information on ICIS’ recycled plastic products, please contact the ICIS recycling team at recycling@icis.com

05-Mar-2025

Power mix changes amid regionalization plans Discussion expands on future power sources LNG trading a major economic activity in Singapore   SINGAPORE (ICIS)–Singapore plans to explore nuclear energy for power generation, Prime Minister Lawrence Wong announced on 18 February in his 2025 Budget speech to parliament, which could ease demand for gas and LNG widely used to as power fuels well past 2030. The advancement of small modular reactors (SMR) technologies has made it possible for Singapore to deploy nuclear power generation, Wong said in the speech. "We need domestic sources of clean power to ensure greater energy resilience… We do not have the natural resources nor the land to meet our needs using hydro, wind or solar power… We will therefore study the potential deployment of nuclear energy in Singapore", Wong said. Singapore vows to achieve net-zero emissions by 2050. Just a week before the Budget 2025 release, Singapore submitted its new climate target to the UNFCCC (United Nations Framework Convention on Climate Change), committed to reducing emissions to between 45 to 50 million tonnes of carbon dioxide equivalent by 2035. STEPS TAKEN The government will work with the US as well as other countries with the capacity on civil nuclear power, while stepping up efforts in electricity imports and hydrogen, Wong said. The course to nuclear power will be a decades-long one that Singapore has yet to make a decision on. Viability research preparation and international cooperation, nevertheless, are underway. In July 2024, Singapore and the US signed 123 Agreement on Nuclear Cooperation to facilitate knowledge and technology transfer. An SMR normally has maximum 300MW capacity – while a traditional reactor capacity is around 1000MW – requires less land and induces less safety risks. As a reference, Singapore's electricity generation in 2023 was 53GWh. LIMITED OPTIONS Due to resource constraints and limited renewables endowments, Singapore heavily relies on gas import to power the economy. At the same time, Singapore  aims to cement its role as Asia's LNG hub, hosting a long industry chain from bunkering, reloading, refining to trading. In 2023, US$150 billion worth of LNG trade – equivalent to a quarter of Singapore's GDP, was conducted through Singapore, which was primarily offshore trade. LNG and natural gas make up for 95% of Singapore's power structure presently, but is expected to drop to 50% by 2035. Solar, hydrogen, biofuels, nuclear and geothermal will consist of 20% in the energy mix by 2035.  Equatorial Singapore cannot count on solar to be its main renewable source due to land constraints. Domestic solar power capacity is targeted to reach at least 2 gigawatt-peak (GWp) by 2030, expected to supply only approximately 3% of Singapore's projected electricity demand in 2030. Likewise, "there are inherent challenges in the production, storage and transportation of hydrogen (low carbon hydrogen for power generation) which make it hard to scale up in a commercially viable manner", PM Wong said in his speech. (Source: EDB) A REGIONALIZATION APPROACH TO POWER SECURITY Singapore now imports 4-5% of its electricity but aims to boost the proportion to 30% by 2035. Mostly from its ASEAN neighbors, as well as Australia. According to Singapore's power authority EMA, Singapore plans to introduce green electricity from Vietnam (1.2GW), Cambodia (1GW), Indonesia (3.4GW) and Australia (1.75GW). Through an integral part of the ASEAN Power Grid (APG), Laos-Thailand-Malaysia-Singapore Power Integration Project (LTMS-PIP), Singapore imports 100MW hydropower from Laos starting 2022, and plans to double the volume to 200MW in Phase II, sourcing the additional supply from Malaysia. Besides direct power import, Singapore also buys fuels under the framework of Trans-ASEAN Gas Pipeline (TAGP), namely through a 470-kilometre cross-border pipeline from South Sumatera, Indonesia to Singapore. APG capacity scenarios under ASEAN Interconnection Masterplan Study (AIMS) (Source: ASEAN Center for Energy, UN ESCAP) CHELLENGES IN POWER CONNECTIVITY Much as Singapore strives to promote ASEAN (Association of Southeast Asian Nations) power connectivity and as the hub of regional power exchange, realistic hurdles stall the endeavor. The biggest risk in APAC power connectivity is regulatory and governments' political will, said Marc Ostwald, Chief economist at ADM ISI, at a panel during Commodity Trading Week APAC held in Singapore in February. In southeast Asia where the will for regionalization is generally adequate, ASEAN's flagship decision-making mechanism of consensus might prolong the coordination and negotiation. Another major concern is the cost and finance of power connectivity, as long-distance power transmission requires bulk investments in grid infrastructure. "Unless copper price plunge to zero, the prospect of physical grid connection remains skeptical", Achal Sondhi, chief investment officer at Aquila Clean Energy told the panel. Copper is widely used in underground and submarine power transmission cables, as well as wind turbine, PV transformers and inverters, EV and batteries. The same goes for aluminum, another major material in overhead high voltage direct current (HVDC) cables. "Interest rate and gas liquidity in the next two years, which Asian countries have little control over, are the headwinds to power connectivity in the region. Interest rates adds difficulties for new gas infrastructure, and gas imports, mainly from China and India, will affect the margin of the rest of the region", Sondhi added. Unlike its European counterpart EU that has a central bank, ASEAN countries are even more exposed to external volatility – the complex interplay in energy and financial markets as well as geopolitics. Beyond ASEAN, there is an even grander yet more distant vision of "Asian Super Grid". Two heavyweight economies in the region – China and India – "drive the transition but not integration", Lee Bradshaw, head of APAC power trading at AXPO told the panel. "Changes are happening but I don't see big landscape change in the near future", Bradshaw told ICIS.

03-Mar-2025

LONDON (ICIS)–Delays to granting of permits are negatively impacting pyrolysis-based chemical recycling supply chain growth and investment. Waste shipment approval delays diverting mixed polyolefin volumes from chemical recyclers Delays to pyrolysis oil start-ups raises questions on market scalability – with permits a key cause of delays RDF bale prices hit record low on burn-for-energy permit delays in Eastern Europe Permit delays have repeatedly been cited as one of the major factors behind start-up delays and long commissioning timeframes for new pyrolysis-based chemical recycling units. Another commonly cited factor is access to sufficiently high quality and consistent quality feedstock waste. Under the EU Waste Shipments rules, most forms of mixed waste require prior consent from all authorities in countries involved before the shipment is allowed to take place. This applies to both shipments outside of the EU and between EU countries. For materials on the EU’s ‘green-list’ there is a lesser requirement simply to provide general information on the shipped waste prior to transport. Common plastic-derived feedstock sources for pyrolysis-based chemical recyclers include high plastic content refuse derived fuel (RDF) bales, and mixed polyolefins bales and agglomerates. While mixtures of polyolefins are part of the green-list, in reality, the majority of volumes available on the market do not meet the requirements to avoid prior consent obligations. Permits for European mixed polyolefin waste shipments beyond national borders are now taking up to 12 months to be issued, reducing willingness among waste managers to supply chemical recyclers. At least one waste management major has sent volumes to the burn-for-energy market which had been intended to serve chemical recyclers, as a result of the delays. “The handling time for notification that used to be 3 months to 6 months are now 6 months to a year and we can see the same thing in other countries… we have mono fractions that could be green listed, but for anything that isn't the handling time is killing the recycling practice,” the waste manager said. There was also talk that pyrolysis plant start-up delays leading to inconsistent offtake and stricter technical requirements from pyrolysis oil plant – particularly on moisture content – has led some waste managers in the Nordics to stop actively pursuing sales to chemical recyclers. Pyrolysis oil can be – and often is – run through an upgrader or purifier to enhance its properties, but the initial quality of input waste has an impact both on yield and quality – and therefore profitability. Throughout the pyrolysis chain waste quality is often underdiscussed. Input waste quality impacts: Pyrolysis oil yield Level and type of impurities in finished pyrolysis oil Final boiling point of the pyrolysis oil Production equipment corrosion risk Blend ratios for downstream cracker production Aromatic and biogenic content Any additional sorting necessary at the pyrolysis oil unit adds cost and slows throughput. Many chemical recyclers have found on-site waste pre-treatment and sorting more difficult than anticipated, especially because it requires continuously adapting processes to account for  shifting feedstock mixes. Pre-treating and sorting at waste manager level creates economies of scale and prevents the slowdown in throughput sometimes associated with chemical recyclers sorting on site. While there is a large pool of mixed plastic waste globally, the available pool of sufficient quality mixed plastic waste to achieve cracker suitable pyrolysis oil is more limited,and will require significant infrastructure build for the pyrolysis oil sector to scale. Market players view the biggest barriers to market growth as: Access to high-enough quality waste Regulatory uncertainty The timeframe for the technology to scale A challenging financing and investment environment Permit delays impact both the short-term access to waste and willingness to invest in sorting capacity that will be necessary to serve the pyrolysis-based chemical recycling chain in the future. This in turn has a knock-on effect on scalability timeframes. Coupled with this, one of the additional current challenges for pyrolysis oil investment is the volatility of feedstock waste input costs. This is because investors typically seek feedstock cost projections for a minimum of five to 10 years.  90% mixed polyolefin bale prices, for example have traded as high as €600/tonne ex-works NWE (northwest Europe) and as low as €0/tonne ex-works NWE since July 2022, making long-term forecasts challenging. This is part of what has driven a push to cost-plus contracts in the market. The spike in volatility is also shown in the below statistical volatility chart. Statistical volatility shows the annualized standard deviation of prices on a rolling basis It is a useful indicator of whether the market is becoming more or less volatile and indicates periods of market stress when high. Because each market has a different level of "normal" volatility, it is the change in the graph line that is more key than the actual number. When the graph line rises, volatility is increasing, when it falls, volatility is falling. Last week high plastic content refuse derived fuel (RDF) bale prices reached record lows since ICIS began tracking mixed plastic waste values in November 2021. This was driven by prices in Eastern Europe – particularly Poland. This week, similar values have been seen in the Nordics. Difficulties in obtaining environmental permits for new burn-for-energy units were given as one of the primary causes of the price collapse – meaning permit delays are adding to the already high volatility of mixed plastic waste values. Focus article by Mark Victory ICIS is evaluating data for bio-naphtha and bio-LPG supply, demand and pricing. Please complete this questionnaire for early access. Access Data ICIS is developing a CIRCULAR PLASTICS product that enables you to compare Circular Plastics supply, demand and pricing. Please complete this questionnaire for early access. Access Data 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. On 1 October ICIS launched a recycled polyolefins agglomerate price range as part of the Mixed Plastic Waste and Pyrolysis Oil (Europe) pricing service. For more information on ICIS’ recycled plastic products, please contact the ICIS recycling team at recycling@icis.com

26-Feb-2025