LONDON (ICIS)–A hoped-for recovery in Germany’s chemical industry has been pushed out to 2026, as shown by an industry survey presented at a webinar hosted by chemical producers’ trade group VCI. No recovery before 2026 Chemical production seen flat in 2025 Persistent lack of orders The VCI survey, conducted in November, found that 52% of German chemical companies expect a recovery to only take place in 2026 or later, whereas a previous survey conducted this summer showed that a majority had expected a recovery in 2025. Now, only 22% expect a recovery in the second half of 2025 while 8% expect it to occur in the first half, according to the latest survey As for sales and profits, 33% expect a sales decline in 2025 and 46% expect lower profits. Companies are particularly pessimistic about sales expectations for Germany and Europe, but are less pessimistic about business outside Europe. With nearly every second company expecting falling profits next year, business will remain difficult, said VCI economist Christiane Kellermann. LACK OF ORDERS The share of companies complaining about a lack of orders is around 40%, the same level as at the start of the coronavirus lockdowns in early 2020, she said. Producers have been complaining about a lack of orders since the end of 2022, and there was still no prospect of an improvement, she said. The share of companies stating that a lack of orders was no problem for them and that business was good was “vanishingly small”, she added. New orders were weak both domestically and internationally, she said. LOSS OF COMPETITIVENESS Germany as a place for industrial production is losing competitiveness because of its high bureaucratic costs, high labor costs, high taxes and levies, and high energy costs, she said. Adding to these challenges is rising geopolitical uncertainty, in particular in the wake of Donald Trump’s victory in the 5 November US presidential election, she said. Companies were trying to determine what Trump’s second term as president will mean for them in terms of trade conflicts and tariffs. They were not only worried about direct tariff impacts, but also about the impact on China where the tariffs are likely prompt producers to ship more product to Europe, she said. As for German politics, there are hopes that a new government next year will address at least some of the challenges the country faces, she said. The coalition government of Chancellor Olaf Scholz collapsed last month, and new elections are expected to be held in February. CHEMICAL PRODUCTION TO STAGNATE IN 2025 In 2024, total chemical-pharmaceutical production rose 2.0%, led by a 4.0% increase in chemicals, according to preliminary data, Kellermann said. 2024, percentage change in production, by major segments: Inorganic basic chemicals: +7.0% Petrochemicals: +8.5% Polymers: +4.0% Fine and specialty chemicals: -2.0% Consumer chemicals: +2.0% Pharmaceuticals: -1.5% While some segments saw a significant year-on-year increase in production, the increases did not offset the declines in 2023, she said. Demand for chemicals across industrial customers was weak, especially in Germany, she said. For 2025, VCI currently forecasts that chemical/pharmaceutical production will inch up 0.5%, with chemical production expected to stagnate: Production, year-on-year %-changes   2025 forecast 2024 (based on preliminary data) 2023 Chemicals & pharmaceuticals +0.5% +2.0% -7.9% Chemicals (ex pharma) flat +4.0% -10.4% COMPANIES REACT Companies are reacting to the challenges they face in Germany with a range of measures, Kellermann said. They include restructuring; improvements in productivity and energy efficiency; cost cutting programmess; shifting production abroad; divestments of businesses lines; and plant closures, she said. The country was seeing a permanent shutdown in production, and this trend may accelerate, she added. Only 25% of the chemical companies surveyed expect their investments in plants, equipment and machinery at German locations to increase next year, whereas 40% expect their investments to decline. On the other hand, 46% expect an increase in their investments abroad. Companies were investing, but not necessarily in Germany, Kellermann said. VCI chief economist Henrik Meincke, who also presented at the webinar, said following steady growth in the years after the 2008-2009 global financial crisis, “multiple shocks” have hit Germany’s economy and its energy-intensive industrial producers since 2018: 2018/19: US-China trade conflict 2020: Pandemic lockdowns 2020/21: Supply chain crisis 2022: Ukraine war and energy price shock 2023: Inflation, and high interest rates to contain it Germany was currently in a stagflation phase, with core-inflation above 2% – and this has come at a time of enormous political and economic risks as well as the challenge of transforming the economy to net zero-emissions, he said. Thumbnail photo of BASF’s Ludwigshafen site; source: BASF

HOUSTON (ICIS)–Dakota Gasification Company has confirmed that the company and fertilizer producer OCI decided earlier this month to dissolve their joint marketing venture N-7 and that it will begin its own fertilizer sales and marketing beginning 1 February. This move comes after a strategic review by both parties it was determined to dissolve the joint venture, which was focused on selling nitrogen fertilizers, industrial ammonia, urea liquor and diesel exhaust fluid (DEF). Since the partnership formed in July 2018, N-7 has shipped over 26.5 million short tons of product to more than 520 customers in 3,100 cities. The company said it will continue to offer the same products moving forward including ammonia and urea, and rather than reduce their workforce this change has lifted levels. “We have expanded our team with highly skilled professionals to enhance our ability to deliver exceptional products and service to our customers,” said a Dakota Gasification Company spokesperson. The parent company said in a statement the decision reflects a mutual recognition of the unique growth opportunities available to both companies independently. “This partnership allowed us to serve our customers with exceptional products while achieving significant milestones together,” said Daniel Gallagher, Basin Electric commodity sales & trading director. “Dakota Gas remains committed to producing and delivering high-quality products to our customers.” The companies will honor all agreements previously undertaken by N-7 with a spokesperson saying, “the market has responded favorably to our decision”. Netherlands-based OCI has not responded for comment but when the partnership was first announced it had stated N-7 would market and distribute product from Iowa Fertilizer Company, the OCI Partners operations in Texas and the Dakota Gas facility in North Dakota. In addition, it intended to market any imported product from their operations outside North America. Ending the N-7 venture follows the sale of Iowa Fertilizer Company and OCI Beaumont.

HOUSTON (ICIS)–With the 15 January target date for a new master agreement between union dock workers and US Gulf and East Coast ports rapidly approaching, the Alliance for Chemical Distribution (ACD) is urging both sides to push back the deadline. Negotiations between the dockworkers, represented by the International Longshoremen’s Association (ILA), and the ports, represented by the United States Maritime Alliance (USMX), have been stalled as each side is unwilling to budge on issues surrounding automation of ports. 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. ACD President and CEO Eric Byer outlined the challenges hindering negotiations and emphasized the significant economic and public consequences of a contract lapse in a letter to both parties. Byer also highlighted the economic impacts the previous three-day strike caused to various industries and the challenges the chemical distribution industry would face if another strike were to occur. Other challenges are the 29 January start of the Lunar New Year, and the upcoming inauguration and transition to the new presidential administration. “In early October, during the three-day lapse in the master contract between the ILA and USMX, there was a substantial economic impact, weeks of supply chain disruptions, and challenges in getting necessary supplies to communities in the wake of the Hurricane Helene disaster,” Byer said in the letter. “Additionally, had the lapse continued for just a few more days, it would have resulted in ACD members losing stock of chemicals used for critical processes, such as water treatment.” In a 12 December post on social media, President-elect Donald Trump expressed his support for the dockworkers in the labor dispute. A strike would not have an impact on liquid chemical tankers, which transport most chems. For most traders and brokers who export polyvinyl chloride (PVC), much of their warehouse space is full and they are unable to book vessels until after the 15 January deadline because of the uncertainty. “This could make for a very challenging first quarter,” ICIS Senior Analyst Kelly Coutu said.

HOUSTON (ICIS)–Chemical plants and refineries along the Gulf Coast of the US will likely face another winter that will be warmer than usual but punctuated with brief periods of freezing temperatures, which could disrupt operations. Meteorologists expect winter temperatures in the US will be colder than the previous year but still warmer than average. A meteorologist in Texas warned that the state could face another brief spell of freezing temperatures similar to past winters, such as the devastating Winter Storm Uri in 2021. Chemical plants in the Gulf Coast still have trouble operating in freezing temperatures despite improvements made since Uri. COLD SPELLS CONTINUE TO DISRUPT GULF COAST CHEM PLANTSBrief spells of freezing temperatures are becoming an annual feature of winters in the Gulf Coast, even as the overall season becomes warmer, according to a presentation made earlier this year by Chris Coleman, the supervisor of operational forecasting at Electric Reliability Council of Texas (ERCOT), which manages the flow of electricity in most of the state. This upcoming winter could continue the trend. Coleman warned that the state has a greater than average chance of suffering from freezing temperatures – even though the season as a whole will be warmer than usual. Meteorology firm AccuWeather also warned that the US will be vulnerable to a blast of cold temperatures despite the forecast for a warm winter. Such blasts are caused by polar vortexes, and February is the most probable month when one will move across the eastern US. AccuWeather did not say whether such a polar vortex could hit Texas. CHANCES OF CHEM OUTAGESFor chemical plants, freezing temperatures can cause outages by disrupting operations or by blackouts caused by excessive electricity demand. Such a demand spike caused the widespread plant outages during winter storm Uri in 2021. Since then, Texas has avoided state-wide outages despite continued cold spells and growing demand for electricity. The state’s power grid is more reliable, and it has conducted more weatherization inspections, ERCOT said. If the power grid in Texas holds up this winter, then chemical disruptions would be caused by freezing temperatures shutting down operations at specific plants. Even after Uri, steps taken by some companies still did not prevent cold temperatures from disrupting their operations. During the freeze of December 2022, TotalEnergies shut down its polypropylene (PP) units at La Porte, Texas, even though the company said it took all precautions possible through freeze protection and heat tracing. US WINTER COOLER THAN 2023-2024Meteorologists at the National Oceanic and Atmospheric Administration (NOAA) expect winter temperatures will be warmer than average for the southern and eastern US. That said, they will still be cooler than the previous year, according to the Energy Information Administration (EIA). Those cooler temperatures have led the EIA to expect average prices for natural gas to reach $3.00/million Btu in 2025, up from $2.20/million Btu in 2024. Natural gas is important to the chemical industry because they use it as fuel and because it influences prices for ethane, the predominant feedstock that US crackers use to make ethylene. MORE LNG TERMINALS WILL START UPA growing source of gas demand is made up of terminals that export liquefied natural gas (LNG). The following table lists the terminals that should start up in 2025 and later. Capacity figures are listed in millions of tonnes/year. Project Developer Capacity Estimates Start Up Corpus Christi Stage 3 Cheniere 10 2025 Plaquemines LNG Venture Global 20 2025 Golden Pass LNG ExxonMobil/QatarEnergy 15.6 2027 Port Arthur LNG Sempra 13 2027 Rio Grande LNG Phase 1 NextDecade 17.6 2027 Insight article by Al Greenwood Thumbnail shows ice. Image by David J Phillip/AP/Shutterstock

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. Lots of focus has been on the Trump effect on the US trading relationship with China. But we need to think more broadly than this. I see a significant risk that next year we will see trade tensions also increasing between other countries and China for the reasons described in today’s post. See today’s, main slide, showing China’s percentage shares of global capacities for some polymers in 2009 (the beginning of China’s giant economic stimulus programme) versus 2021 (the Evergrande Turning Point) and 2025. Producers elsewhere, seeing charts such as this one, could be anxious to protect market share and avoid commoditisation for polymers such as acrylonitrile butadiene styrene (ABS) and ethylene vinyl acetate (EVA) which can be higher value in some end-use applications. In polypropylene (PP), China’s share of global capacities was just 15% in 2009 and 26% in 2021. ICIS forecasts this will next year jump to 45%. We have already seen an uptick in protectionist measures against Chinese PP. More broadly, China’s investment in export-based manufacturing capacity has accelerated since late 2021 to compensate for the end of the property bubble. China has dominated exports of finished goods for 20-odd years. But ICIS data, such as today’s first chart, and other data show that this has gone to a different level since the end of 2021. International trade used to be a win/win game, but the data suggest that China has recently gained stronger positions in low, medium and high-value manufacturing. What form will any increase in protectionism take in 2025? To what extent could it be short-term our “knee jerk” versus further strategic initiatives to reshore manufacturing? To what degree is it too late for strategies in some countries and regions? I’ve been recently polling people on the German auto industry. It is too late to turn around the decline in the industry, was the majority view. If true, this would obviously have huge implications for Germany’s chemicals companies. If “protectionism” and “China” are the words of the year in 2025, expect chemicals trade flows and pricing patterns to be significantly reshaped by announcements of investigations into new duties and the imposition of duties. Keeping on top of news on trade protectionism, especially if you can get the news before your competitors, will be a significant competitive advantage. And every action can promote a reaction. We must consider how China might respond to more duties. Its responses will of course also affect chemicals trade flows, pricing patterns and demand in different regions. Good luck out there. Next year is going to be very, very challenging for reasons beyond just protectionism. 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.

HOUSTON (ICIS)–US listed shares of chemical companies fell sharply on Wednesday, with many falling by more than 4%, after the Federal Reserve lowered its expectations for rate cuts and raised them for inflation. The following table summarizes the major indices followed by ICIS. Index 18-Dec Change % Dow Jones Industrial Average 42,326.87 -1,123.03 -2.58% S&P 500 5,872.16 -178.45 -2.95% Dow Jones US Chemicals Index 829.38 -21.74 -2.55% S&P 500 Chemicals Industry Index 871.47 -23.78 -2.66% The Federal Reserve lowered its benchmark federal funds rate by a quarter point as expected. However, it now expects to lower rates by a half point in 2025, down from earlier expectations of cuts totaling 1 point. Meanwhile, inflation may not reach the Fed’s target until 2027. The prospect of fewer rate cuts contributed to a run-up in yields for longer term government debt. The yield on 10-year Treasury notes rose past 4.5%, a level it last reached at the end of May. Yield on these notes affects rates for other types of longer term debt, notably those for 30-year mortgages. Elevated mortgage rates have made housing unaffordable for a growing number of consumers. That has lowered demand for houses, appliances and furniture, all important end markets for many plastics and chemicals. If longer term rates remain elevated, it is unlikely that chemical markets will recover as expected in the second half of 2025. DEFICIT CONTRIBUTES TO ELEVATED MORTGAGE RATESAnother trend elevating rates on longer term debt is the growing size of the government deficit. To fund the expanding deficit, the US will issue larger amounts of government debt. An increase in the supply of debt will lower prices, and yields on debt are inversely related to price. PRICES FOR US-LISTED CHEMICAL SHARESThe following table lists the US-listed shares of chemical companies followed by ICIS. Symbol Name $ Current Price $ Change % Change ASIX AdvanSix 28.72 -1.38 -4.58% AVNT Avient 42.37 -3.55 -7.73% AXTA Axalta Coating Systems 35.01 -1.38 -3.79% BAK Braskem 3.98 -0.29 -6.79% CC Chemours 17.36 -0.85 -4.67% CE Celanese 67.94 -0.47 -0.69% DD DuPont 77.62 -2.51 -3.13% DOW Dow 40.15 -0.42 -1.04% EMN Eastman 90.95 -4.40 -4.61% FUL HB Fuller 69.81 -2.16 -3.00% HUN Huntsman 18.3 -0.26 -1.40% KRO Kronos Worldwide 9.77 -0.19 -1.91% LYB LyondellBasell 74.8 -0.64 -0.85% MEOH Methanex 45.75 -1.37 -2.91% NEU NewMarket 522.36 -16.76 -3.11% NGVT Ingevity 41.61 -1.79 -4.12% OLN Olin 34.1 -1.37 -3.86% PPG PPG 121.25 -0.81 -0.66% RPM RPM International 126.49 -4.93 -3.75% SCL Stepan 68.33 -3.17 -4.43% SHW Sherwin-Williams 348.66 -14.13 -3.89% TROX Tronox 10.53 0.39 3.85% TSE Trinseo 5.41 -1.17 -17.78% WLK Westlake 115.54 -2.00 -1.70%

HOUSTON (ICIS)–The US Department of Agriculture (USDA) announced it is making more than $116 million in investments for domestic fertilizer production to increase competition, lower fertilizer costs for farmers and lower food costs for consumers. USDA is awarding the funds through the Fertilizer Production Expansion Program to help eight facilities expand innovative fertilizer production in California, Colorado, Georgia, Indiana, Iowa, Kansas, Michigan, Oklahoma and Wisconsin. “When we invest in domestic supply chains, we drive down input costs and increase options for farmers. Through today’s investments to make more fertilizer, USDA is bringing jobs back to the United States, lowering costs for families, and supporting farmer income,” said Tom Vilsack, USDA Secretary. Through the Fertilizer Production Expansion Program, the USDA has invested $517 million in 76 fertilizer production facilities to expand access to domestic fertilizer options for growers in 34 states and Puerto Rico. It is expected these efforts will see US fertilizer production increase by 11.8 million short tons annually and create more than 1,300 jobs in rural communities. Projects receiving this round of funding include California company Biofiltro USA Inc. which will use a $2.3 million grant to construct a new facility to process manure from dairy cows and yield more than 33,000 cubic yards of composted fertilizer alternative annually. In Georgia, Reve Solutions Inc. will have $1.3 million to expand a biosolid fertilizer composter and increase capacity through additional equipment and working capital for two production locations. This undertaking is expected to generate more than 30,000 short tons of fertilizer nutrient and create five new jobs. There is also a $2.3 million grant going to Kansas-based Farmers Cooperative Association who will expand an existing dry fertilizer facility with additional storage and processing capacity. The project will improve the efficiency of order processing and will increase its dry fertilizer production to 24,500 short tons per year.

HOUSTON (ICIS)–The Federal Reserve lowered on Wednesday its benchmark interest rate by a quarter point while reducing the number of cuts it expects to make in 2025. The quarter point decline brings the benchmark federal funds rate to 4.25-4.50%. Fed members and presidents expect the rate will fall to 3.9% by the end of 2025. That represents two quarter-point cuts. Earlier in September, the group expected the rate would fall to 3.4%, which represented four quarter-point cuts. The group expects inflation will remain above the Fed’s target of 2%, according to projections they made in regards to the core personal consumption expenditures (PCE), which the central bank’s preferred measure of inflation. The 2025 forecast for core PCE is 2.5%, up from September’s forecast of 2.2%. The group does not expect inflation will reach its target until 2027. CHEMS STILL STRUGGLING WITH ELEVATED LONG-TERM RATESSo far, the current reductions in the federal funds rate have not translated into reductions in longer term rates, such as 10-year treasury notes and 30-year mortgages for home loans. Both remain elevated, and that has limited demand for housing as well as appliances, furniture and other durable goods. These are all large end markets for several plastics and chemicals. Weak demand in these core markets have depressed several plastic and chemical markets. Rates for longer term debt remain elevated, in part, because of the growing size of the US deficit. The US funds the deficit by issuing larger amounts of debt. Those larger debt issuances have raised rates for longer term government debt and private debt with similar maturities. ECONOMIC GROWTH REMAINS SOLIDIn comments identical to its November statement, the Fed said the US economy continues to grow at a solid pace, and unemployment remains low. Inflation remains elevated despite making progress towards the Fed’s 2% target. The following table summarizes the Fed’s economic projections and compares them to the ones it made in September. 2024 2025 2026 2027 GDP 2.5 2.1 2 1.9 Sept GDP 2 2 2 2 Unemployment 4.2 4.3 4.3 4.3 Sept Unemployment 4.4 4.4 4.3 4.2 PCE Inflation 2.4 2.5 2.1 2 Sept PCE Inflation 2.3 2.1 2 2 Core PCE 2.8 2.5 2.2 2 Sept Core PCE 2.6 2.2 2 2 Fed Funds Rate 4.4 3.9 3.4 3.1 Sept Fed Funds Rate 4.4 3.4 2.9 2.9 Source: Fed Thumbnail shows dollars. Image by ICIS.

SAO PAULO (ICIS)–Brazil’s chemicals producers are confident the sector would be mostly spared from potentially higher US import tariffs as the latter maintains a clear trade surplus in bilateral commerce, the country’s trade group Abiquim said to ICIS. In fact, given the clear advantage in bilateral trade, Abiquim said that instead of tariffs they may need to prepare for the US to “facilitate” chemicals trade with Brazil, a net importer of chemicals. Earlier this week, US President-elect Donald Trump mentioned Brazil for the first time as a potential target for higher tariffs because, he argued, Brazil’s import tariffs on US goods are much higher than the other way around. In a written response to ICIS, Abiquim said it “understands” that countries may impose “legitimate emergency tariffs” as a short-term remedy to trade distortions caused by “unfair” imports. It could not be otherwise, after the trade group lobbied hard during 2024 – and successfully achieved – for the Brazilian government to hike import tariffs for a wide of chemicals, as domestic continued losing market share to imports. “We will monitor the eventual developments of this recent [Trump] announcement, especially given the fact that Brazilian chemical products do not have predatory potential in the US market,” said Abiquim. “In other words, we do not expect the imposition of barriers on Brazilian chemicals, but rather more facilitation. Since the chemical balance is clearly favorable to the US, we do not foresee significant restrictions on US imports of chemicals [from Brazil].” The US-Brazil bilateral trade in chemicals has clearly been favoring the US in the past few years, after the country’s shale gas boom made it a net exporter of petrochemicals. According to figures by Brazil’s foreign trade chamber Comex and compiled by Abiquim, Brazil’s trade deficit in chemicals with the US stood at $7.4 billion in 2023. The figure was lower than in 2022 as imports from Asia, mostly from China, increased during the year, but Brazil’s deficit with the US still represented a big chunk of Brazil’s chemicals imports deficit during that year, which stood at $47 billion. Brazil trade with US Imports   Exports   Surplus/deficit     2023 2022 2023 2022 2023 2022 ChemicalsIn ‘000 dollars 9,873,319 11,946,685 2,472,086 2,907,413 -7,401,233 -9,039,272 In tonnage 7,016,919 7,809,290 2,193,470 2,483,008 -4,823,449 -5,326,282 According to figures from the US government, US exports of goods and services to Brazil stood at $37.9 billion in 2023, down more than 25% from 2022, although still an overall trade surplus as Brazil exported to the US goods and services worth $36.9 billion, down 2% percent from 2022. In total, the bilateral trade value stood at $74.8 billion in 2023. “The US purchased a record $29.9 billion in manufactured products from Brazil in 2023, accounting for 81% of total US imports from Brazil, reaffirming the US as the top destination for Brazilian value-added goods,” said the US government. Key industrial Brazilian exports to the US included semi-finished iron and steel products, aircrafts and aircraft parts, and civil engineering equipment, it added. POTENTIAL RETURN OF GSP PROGRAMMoreover, Abiquim said it is expectant to see if the US Congress renews the Generalized System of Preferences (GSP), a program which provided duty-free treatment for thousands of products from designated beneficiary countries and territories (BDCs), mostly developing countries. At the height of the Cold War in the 1970s, the GSP was designed to increase trade with developing countries. The duty-free trade applied both ways, with US companies who purchased under the program exempt from import tariffs. The GSP was authorized by the Trade Act of 1974 and implemented in 1976 but expired in 2020 and is currently pending US Congressional action for renewal. “It is essential to bear in mind that Brazil does not apply discriminatory tariff barriers against the US in the chemical sector and, on the other hand, with regard to access to the US market, Abiquim awaits with great expectation the reactivation of the US tariff benefits program [US-GSP],” it said. “[Its reactivation] will reinvigorate the entry with lower import taxes into the US of several chemical products originating in Brazil which would benefit from the regime.” The US’ chemicals trade group the American Chemistry Council (ACC) and Brazil’s industrial trade group CNI said to ICIS they would not comment at this stage on Trump’s Brazil remarks. The US’ trade groups the American Fuel & Petrochemical Manufacturers (AFPM) and the Society of Chemical Manufacturers & Affiliates (SOCMA) had not responded to a request for comment at the time publishing. Front page picture: Chemicals facilities in Brazil Source: Abiquim Focus article by Jonathan Lopez