INSIGHT: ‘Bridge’ countries bring new opportunities as global trade flows fragment – Bertschi

BARCELONA (ICIS)–Changing trade flows driven by increasing friction between China, the US and their allies mean there will be demand for new chemical logistics routes and infrastructure, according to the executive chairman of chemical logistics group Bertschi.

As direct chemical exports from China to the US decline, and more trade barriers go up, countries in Eastern Europe, southeast Asia plus Mexico and Turkey are acting as a stopping off points for indirect exports, while new chemical manufacturing also springs up in these areas, said Hans-Jorg Bertschi.

He said: “The geopolitical situation also plays an important role – there are two blocs now – western countries and the BRICs (Brazil, Russia, India, China) led by China where we see a certain fragmentation of global trade. Chemical flows between China and the US are shrinking and we also now see a lot of triangulation trade where bridge countries in between take advantage of the situation.”

Speaking on the side lines of the European Petrochemical Association’s annual conference in Berlin, he explained that China now transports a lot more chemicals to Mexico, where local manufacturers add value and then export finished goods to the US.

Chemical producers – some from China – are building plants and businesses in Hungary and Turkey. There is also a flurry of activity in Morocco, India and Vietnam, which are all changing trade patterns around the globe, the executive believes.

He said: “The reality is that new countries are emerging, which I call bridge countries between the blocs – some do not yet have the right chemicals infrastructure so here I would expect to see more investment in chemical logistics and supply chain infrastructure where there is growing local demand in addition to demand from regional fragmentation.”

OTHER CHEMICAL TRADE FLOWS ALTER
Bertschi pointed out that there is a clear increase of imports from the US to Europe based on the US feedstock advantage and growth of new-build facilities which are very efficient.

“This has been going on for 3-4 years and will develop further. If you look at the average cracker size in Europe it’s about 350,000 tonnes/year whereas new world scale crackers are around 1 million tonnes/year. Also the average age of Europe’s crackers is 40-50… so I expect to see more closure announcements here, and more imports from the US, the Middle East and eventually from China.”

CHEMICAL RECYCLING WILL DRIVE NEW LOGISTICS
The chemical recycling sector is growing, with 83 projects in Europe alone recorded in the ICIS Recycling Supply Tracker – Chemical.  Globally the database records 173 sites and this nascent part of the chemical industry will create some completely new logistics requirements and trade flows according to Bertschi.

He pointed out that the current linear model for chemical production just requires oil and gas to move mainly by pipeline to refinery and cracker sites. The finished products –  chemicals and polymers – are then distributed to downstream customers.

The circular economy creates new flows of material which will require logistics support: “But now, with renewables, we have new flows of product which will require inbound logistics to deliver feedstocks into these plants. Pyrolysis oil will then be produced across regions which will require complex inbound logistics to refineries.”

Bertschi has started placing storage centers near to crackers, plus heating and testing facilities for pyrolysis oil, which is a product of chemical recycling which can be used as a circular feedstock for chemical production.

“This is not homogenous – it needs to be analysed before it is put into a cracker.  Previously just a pipe was needed but now complex inbound logistics will be required. We will import pyrolysis oil from across Europe and the US and some of this is already happening – this is at the beginning but it is becoming one of our growth drivers.”

Interview by Will Beacham

Image credit: Georgios Tsichlis/Shutterstock