The heavier base oils grade Brightstock may hold onto its large premium over low-viscosity grades until the end of this quarter on the back of tight supply and high energy costs. Widening premium partly driven by high energy costs Limited availability for Brightstock Upcoming expanded capacity in H2 2025 could shift market direction Participants with specific requirements for the heavier grade may need to look at either paying up for the premium or taking a wait-and-see approach. Later in the year, weather-driven seasonal drops in energy prices may make producing and storing Brightstock slightly cheaper, while expectations of additional base oils capacity due to come on stream may ease the supply tightness. As opposed to other low viscosity grades, Brightstock needs to be stored at higher temperatures of 50-55°C, according to market participants. The heating requirements result in higher storage, production and shipping costs than for other grades. But the heavier material may be preferred by some buyers in the market because of its higher viscosity. The spread between Brightstock and other grades such as SN150 or SN500, also part of Group I base oils, may increase in cold winter months especially in northern Europe where heating needs are greater. WIDENING SPREADRecent high energy prices in most of Europe combined with a tight supply have contributed to a further widening of the spread. When an oversupply and reduced demand weighed on SN150 and SN500 in the past few weeks, the heavier grade remained steady, widening the spread to the other grades. In fact, the Brighstock-SN150 spread has stayed at a two-year high since 17 December. The situation is likely to persist in the next few months, said ICIS senior analyst Michael Conolly, pointing to “the lack of availability due to closure of lots of Group I plants globally and the lack of substitutes for heavier grades like Brightstock”. Lighter grades in Group I may be substituted with light Group II grades in various applications. A market player agreed: “The biggest problem is the volume is just not enough.” The return from maintenance in late December of Cepsa’s plant at Algeciras may help inject some Brightstock supply, but not this may not displace the existing spread. One active trader said southern Europe was observing lower production costs for Brightstock. This was most likely driven by lower energy prices in countries such as France or Spain, a second trader explained. High French nuclear capacity has capped electricity prices. ICIS gas and cross-commodity expert Aura Sabadus said: “Spain has a lot of LNG [capacity] but cross-border interconnectors to Europe are limited, meaning that the majority of its gas stays in the country.” This also helped keep gas prices more subdued than in other northern European countries such as the Netherlands or Germany. Base oils make up the key component of finished lubes and greases in automotive and manufacturing industries. Infographic by Yashas Mudumbai

East Asian spot LNG and European gas strengthen pricing relationship in 2024 Shift towards LNG as a form of baseload supply has consolidated the correlation between Europe and Asia In the absence of regional supply shocks, correlation should at least sustain in 2025 LONDON (ICIS)–Throughout 2024 the daily price correlation between European TTF and Asian spot LNG markets held above 90%, with the close connection likely to continue in 2025. The correlation between both markets remained steady at 94% from the first to the third quarters, then falling a little to 91% in the fourth quarter. This is based on the simultaneous ICIS TTF Early Day and ICIS East Asian Index assessments that close at 16:30 Singapore time. The correlation reflects ongoing competition for volumes between the two regions, in addition to a number of Asian market participants using early-day swings in the TTF to provide guidance for outright Asian spot LNG prices. The correlation is also obvious in daily market feedback where traders frequently cite fundamentals in the other region as influencing sentiment in their home market. The recent near-perfect correlation between the two markets confirms the globalized nature of the gas market, and how each basin can at times influence sentiment in the other amid Europe’s greater dependency on LNG. The correlation is expected to remain strong as Europe’s reliance on LNG will continue, and with market prices key in directing destination-free US LNG cargoes that can move to the highest-priced market, in turn flatting price differences between markets. There are times when regional fundamentals lead to a disconnect between prices between the regions but these were short lived in 2024. Without previous baseload Russian pipeline gas in Europe, the TTF is increasingly influenced by wider gas fundamentals, and can react quickly to issues outside Europe. US LNG volumes continue to grow, now firmly over a fifth of the total global LNG market, with more new supply to come from Venture Global’s Plaquemines LNG and Cheniere’s Corpus Christi expansion in 2025. have also helped to narrow the price differential between the two markets.

HOUSTON (ICIS)–Union dockworkers and US Gulf and East Coast port operators tentatively agreed to a new six-year contract Wednesday, averting a strike that was about a week away. The International Longshoremen’s Association (ILA) and United States Maritime Alliance (USMX) will work under the existing agreement until the union can meet with its full wage scale committee and schedule a ratification vote, and USMX members can ratify the terms of the final contract. The two sides agreed on the financial portion of the contract in October, ending a three-day strike and postponing the work stoppage until 15 January. A stalemate developed over automation at the ports, which port operators said was needed to remain competitive globally and which the union said would threaten human jobs. “This agreement protects current ILA jobs and establishes a framework for implementing technologies that will create more jobs while modernizing East and Gulf coast ports – making them safer and more efficient and creating the capacity they need to keep our supply chains strong,” the parties said in a joint statement. Details of the new tentative agreement will not be released to allow ILA rank-and-file-members and USMX members to review and approve the final document. The October strike and the threat of next week’s work stoppage had some impact on market participants. Many importers pulled forward volumes because of the possibility of a strike, pushing rates for shipping containers higher. To mitigate risks, some buyers and suppliers took a wait-and-see approach, while others scheduled shipments with maximum deadline until the first week of January to ensure supply chain continuity and safeguard against potential disruptions that could affect pricing and availability. Container and vessel availability was a challenge for exports following the impacts in ocean logistics from the three-day strike in October, with lead times to secure available space on a vessel being cited at four to six weeks. 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), which are shipped in pellets. They also transport liquid chemicals in isotanks. (adds details in paragraphs 7-12)

HOUSTON (ICIS)–Union dockworkers and US Gulf and East Coast port operators tentatively agreed to a new six-year contract Wednesday, averting a strike that was about a week away. The International Longshoremen’s Association (ILA) and United States Maritime Alliance (USMX) will work under the existing agreement until the union can meet with its full wage scale committee and schedule a ratification vote, and USMX members can ratify the terms of the final contract. The two sides agreed on the financial portion of the contract in October, ending a three-day strike and postponing the work stoppage until 15 January. A stalemate developed over automation at the ports, which port operators said was needed to remain competitive globally and which the union said would threaten human jobs. “This agreement protects current ILA jobs and establishes a framework for implementing technologies that will create more jobs while modernizing East and Gulf coast ports – making them safer and more efficient and creating the capacity they need to keep our supply chains strong,” the parties said in a joint statement. Details of the new tentative agreement will not be released to allow ILA rank-and-file-members and USMX members to review and approve the final document.

NEW YORK (ICIS)–On Wall Street, hope springs eternal at the beginning of a new year, and especially for sectors that have underperformed in the past year. But for chemicals, analysts are kicking off the year with cuts to their 2025 profit forecasts as a recovery in housing, automotive and consumer durables appears to be further off in the horizon. At least the bar is set low. In terms of stock market performance, in a year when the benchmark S&P 500 returned 25%, the S&P Materials Index was one of the worst sector performers, falling around 2%. Chemicals certainly played their part, with most companies underperforming the Materials Index. H.B. Fuller’s 2 January preannouncement of disappointing fiscal Q4 (ended November) results citing weaker-than-expected conditions in consumer product goods, packaging-related end markets and durable goods sparked a series of earnings estimate cuts across the chemicals group. JEFFERIES CITES WEAKNESS IN KEY END MARKETS Jefferies slashed 2025 and 2026 profit forecasts for Huntsman on a likely delay in the durable goods upcycle until 2026-2027. Jefferies analyst Laurence Alexander lowered estimates on Celanese again (after its initial shock preannouncement on Q4 results on 4 November), cutting his 2025 earnings per share (EPS) forecast by 8% to $8.70 and 2026 EPS by 3% to $10.45, along with reducing his Q4 2024 EPS estimate by 4% to $1.20. “We are lowering estimates again to reflect, primarily, choppy order patterns flagged by peers for packaging and durable goods this winter, as well as a more muted recovery cycle in construction and automotive end-markets in H2 2025-2026,” said Alexander in a research note. The analyst also cut his 2025 EPS estimate on Eastman by 11% to $8.60 and his 2026 forecast by 5% to $10.50. “We are trimming estimates to better reflect likely incremental headwinds from cyclical end-markets over the next few quarters, as well as modest adverse foreign currency [impact],” said Alexander. “The cyclical recovery we had baked into 2025 and 2026 appears likely to be both delayed at least a couple of quarters and less robust, at least initially,” he added, citing chemical peer comments on weakness in durables, electronics and transportation markets, coupled with choppy trends in construction. MIZUHO CUTS ESTIMATES, AVOIDS BASIC CHEMICALS Mizuho analyst John Roberts modestly cut 2025 earnings estimates by 1-6% on a wide range of chemicals, coatings and packaging companies, including Sherwin-Williams, PPG, Axalta, FMC, Corteva, Entegris, Element Solutions and Berry Global. “The March 2025 quarter appears set to begin as weak as the December 2024 quarter ended for most stocks. We reduce estimates and price targets for several stocks (no increases), and see no catalyst yet to change our relatively defensive positioning,” said Roberts in a research note. Downstream customers may have modestly rebuilt inventories early in in Q4 2024 in advance of potential new or increased tariffs, which could slow demand in 2025, the analyst pointed out. “Unfavorable currencies are the latest headwinds to earnings, as most of our companies derive 50%+ of sales ex-US,” he added. A stronger US dollar makes exports less competitive, and sales and earnings abroad are translated back into fewer dollars. Roberts characterizes Mizuho’s top picks in the sector as “relatively defensive”. They are specialties producer DuPont in advance of splitting into three companies, industrial gases producer Linde, and coatings company PPG. He is not recommending any asset-heavy, upstream basic chemical stocks, with the exception of Westlake. “Global operating rates are low for almost all basic chemicals since the consumer-spending switch to services. Destocking appears over, but with demand remaining near trough, expansions in recent years in China and the US have left markets oversupplied,” said Roberts. “China continues to expand to improve self-sufficiency, and shift refinery output to chemicals as gasoline demand is expected to peak early from China’s accelerated adoption of EVs,” he added. While new China capacity additions slowed in 2024, a consequence of fewer projects starting construction early in the pandemic, they are poised to ramp back up in 2025-2027, he pointed out. UBS SEES MORE UNCERTAINTY FOR EUROPE CHEMICALS For European chemical companies, UBS Europe chemicals analyst Geoff Haire sees more uncertainty in 2025 versus 2024. “We expect the primary focus for 2025 in the chemicals sector will once again be on the prospects for volume recovery, but investors will also need to focus on geopolitics (US, Germany and France) and the outcome of several conflicts around the world,” said Haire in a research note. “With global GDP growth expected to be slower in 2025 and 2026 versus 2024, particularly in the US and China, we see limited prospect of a significant year on year volume recovery in 2025,” he added. With resulting continued pressure on prices and margins, companies will likely react with further cost savings initiatives or portfolio reshaping, the analyst pointed out. Even with the challenging backdrop, UBS sees 2025 gains in earnings before interest, tax, depreciation and amortization (EBITDA) to the tune of around 8% for European diversified chemical companies, and 9% for specialties. Insight article by Joseph Chang Thumbnail shows stock prices. Image by BIANCA DE MARCHI/EPA-EFE/Shutterstock

HOUSTON (ICIS)–Global container shipping major Mediterranean Shipping Co (MSC) will increase its emergency operation surcharge (EOS) by $1,000/FEU (40-foot equivalent unit) effective 27 January on the North Europe to the US, Puerto Rico, and the Bahamas route. In a customer advisory on 8 January, the company said it is taking the action considering significant changes in the alliances network. “We foresee general operational disruption during the first months of next year, the company said. Shipping alliances are agreements between carriers to collaborate globally on specific trade routes. Several major carriers are restructuring alliances in 2025, the most significant shift in alliances since 2017, according to analysts at freight forwarder Flexport. The previous EOS surcharge was $1,000/FEU, bringing the new surcharge to $2,000/FEO. The company will increase the EOS surcharge by $800/TEU (20-foot equivalent unit), bringing it to $1,300/TEU. GUIDANCE AHEAD OF POSSIBLE PORT STRIKE The company also offered operational guidance to US customers ahead of the possible ILA strike at US Gulf and East Coast ports should the work stoppage occur. For export booking from affected ports, the company will continue to accept bookings for dry cargo based on vessel availability and will reserve the right to not accept new refrigerated bookings via these ports where there is a risk to the refrigeration services due to the port strike for vessels departing on or after 16 January. MSC is urging customers to move equipment before 16 January as many terminals will likely offering extended gate hours. On demurrage and detention (port storage and container use inside the terminal), the company will follow terminal policy and only pass through at cost any demurrage charges imposed by terminals during the strike. MSC will stop the clock on detention charges during the strike and once the strike has ended will resume billing following its tariffs. MSC will align its policy to that of the rail ramp operators, the company said. If, the rail ramp operators cease to accept containers at origin ramps for US East and Gulf Coast bound ports, MSC will do the same. For North America import cargoes via US East and Gulf Coast ports, MSC will adjust bookings – including rolls to other vessels or cancellations – as needed. For new bookings, MSC will follow the same plan as for imports. The company will refuse any liability arising from the strike due to reefer containers left uncollected at terminals. MSC urges customers to pick up their import cargo before 16 January. 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), which are shipped in pellets. They also transport liquid chemicals in isotanks. Thumbnail image shows a container ship. Photo by Shutterstock

SINGAPORE (ICIS)–Asia ethylene editor Josh Quah and analyst Aliena Huang talk about the Asia outlook for ethylene arbitrage cargoes for 2025 with markets editor Damini Dabholkar. Ethylene loadings from US in December continue to favor southeast Asia destinations More intra-Asia tradeflows between northeast and southeast Asia expected for H1 2025 Increasing ethane competitivity and demand may curtail US ethylene exports to Asia

SINGAPORE (ICIS)–Malaysia has imposed provisional antidumping duties (ADDs) on polyethylene terephthalate (PET) imports from China and Indonesia, effective 7 January. The duties range from 6.33% to 37.44% “to prevent further injury to the domestic industry”, Malaysia’s Ministry of Investment, Trade and Industry (MITI) said. Chinese exporters affected include Jiangsu Hailun Petrochemical, Far Eastern Industries (Shanghai), and Jiangsu Xingye Plastic, with duties set at between 6.33% to 11.74%. All PET imports from Indonesia, meanwhile, will be levied a higher ADD rate of 37.44%. Country Exporter Rates China Far Eastern Industries (Shanghai) 6.33% Jiangsu Hailun Petrochemical Co 11.74% Jiangsu Xingye Plastic Co 11.74% Jiangyin Xingtai New Material Co 11.74% Others 11.74% Indonesia All producers or exporters 37.44% The duties are not likely to drastically affect China’s PET exports as Malaysia is not their major market, an industry source said. These duties will last “not more than 120 days” or four months, and a final determination will be made no later than 6 May, the MITI added. Malaysia’s investigations into PET imports from China and Indonesia were initiated on 9 August 2024. Additional reporting by Judith Wang Thumbnail image: PET goes into textitles. At a textile enterprise in Binzhou, China, on 24 September 2024. (Costfoto/NurPhoto/Shutterstock)

SINGAPORE (ICIS)–Malaysia has imposed provisional antidumping duties (ADDs) on polyethylene terephthalate (PET) imports from China and Indonesia, effective 7 January 2025. The duties range from 6.33% to 37.44% “to prevent further injury to the domestic industry”, Malaysia’s Ministry of Investment, Trade and Industry (MITI) said. These duties will last “not more than 120 days” or four months, and a final determination will be made no later than 6 May, the MITI added. Investigations into PET imports from China and Indonesia were initiated on 9 August 2024.