BARCELONA (ICIS)–European polyethylene (PE) markets face growing pressure from cheaper imports, highlighting the impact of rising overcapacity driven by China and the US. Plants in Europe operating at technical minimum levels Minimal stocks held amid plentiful supply Demand poor across most end uses, packaging stronger Europe will see more PE imports as global overcapacity grows More polymer plant closures are likely in Europe and other high-cost regions US has more to lose from trade war as it is a major exporter of PE to China Trade flows could change dramatically if tariff walls go up Supply/demand imbalance may take up to nine years to correct In this Think Tank podcast, Will Beacham interviews ICIS markets editors Vicky Ellis and Ben Monroe-Lake plus ICIS market development executives Nigel Davis and John Richardson. Editor’s note: This podcast is an opinion piece. The views expressed are those of the presenter and interviewees, and do not necessarily represent those of ICIS. ICIS is organising regular updates to help the industry understand current market trends. Register here . Read the latest issue of ICIS Chemical Business. Read Paul Hodges and John Richardson’s ICIS blogs.

LONDON (ICIS)–Global crude oil markets are likely to be comfortably supplied next year despite moves by OPEC+ to hold back on easing production cuts and anticipated firmer demand, the International Energy Agency (IEA) said on Thursday. Oil demand in 2025 is expected to pick up from 840,000 barrels/day this year to 1.1 million barrels/day next year, bringing total daily consumption to 103.9 million barrels, according to the agency. The petrochemicals sector is expected to be the key driver for that uptick, with transport fuels consumption growth still constrained, and China demand still substantially slower than might have been predicted a few years earlier. Total oil supply growth is expected to increase by 1.9 million barrels/day next year, compared to a 630,000 barrels/day increase in 2024, driven by non-OPEC+ nations, which are expected to comprise 1.5 million barrels/day of the growth. The OPEC+ coalition of nations announced plans last week to hold back on easing voluntary production cuts and slow the rates at which some of the measures are phased out, in the face of continued slow demand growth. OPEC+ member states agreed to extend voluntary cuts amounting to approximately 2.2 million barrels/day through to the end of March next year, and slow the pace of the reintroduction of those volumes so that the process will run through to September 2026. Additional voluntary cuts amounting to 1.65 million barrels/day are to be held in place until the end of December 2026, OPEC added. The moves have substantially reduced the projected supply overhang for 2025, the IEA said, but demand trends still point to an ample buffer of available product. “Persistent overproduction from some OPEC+ members, robust supply growth from non-OPEC+ countries and relatively modest global oil demand growth leaves the market looking comfortably supplied in 2025,” the agency said in its monthly oil report. The US, Brazil, Canada and Guyana are expected to drive production growth next year, while OPEC+ crude output may still stand to increase if Libya, Sudan and South Sudan sustain volumes and additional capacity comes onstream in Kazakhstan, the IEA said. Crude price moves have been relatively subdued in recent months despite geopolitical tensions, with Brent crude futures averaging around $73/barrel, the IEA said, a trend that has continued into December, with midday trading prices of around $73.47 on Thursday. Despite the latest measures announced by OPEC+ and political uncertainty across parts of the globe, demand remains the big question for next year, the agency said. “The abrupt halt to Chinese oil demand growth this year – along with sharply lower increases in other notable emerging and developing economies such as Nigeria, Pakistan, Indonesia, South Africa and Argentina – has tilted consensus towards a softer outlook,” the IEA said. Thumbnail photo: An oil platform off the coast of California (Source: Shutterstock)

SINGAPORE (ICIS)–The UAE will impose a minimum top-up tax (DMTT) on large multinational companies, to align its tax system to global standards. The DMTT, which will take effect for financial years beginning on or after 1 January 2025, is a component of the OECD’s global minimum corporate tax agreement signed by 136 countries, including the UAE, the country’s Ministry of Finance said on 9 December. OECD is a group of industrialized economies with 38 members. (Note: ICIS doesn’t spell out OECD) The new tax will apply to multinational enterprises operating in the UAE with consolidated global revenues of at least €750 million in the past two years, the ministry said. Small petrochemical converters and traders in the UAE are not expected to be affected by the new tax. These tax amendments follow a 9% business tax implemented in 2023, with exemptions for special free zones that operate under different laws. Alongside the DMTT, tax incentives for research and development (R&D) as well as a refundable tax credit for “high-value employment activities” will also be introduced, the ministry said. The R&D tax incentive, beginning 1 January 2026, will offer a potential 30-50% tax credit, while the high-value employment tax incentive will, from 1 January 2025, be “granted as a percentage of eligible salary costs” for eligible employees, including C (chief)-suite executives. The initiatives aim to “enhance the UAE’s global competitiveness” as well as spur innovation and growth, the ministry said. Additional reporting by Nadim Salamoun

HOUSTON (ICIS)–The US Department of Agriculture (USDA) is expecting increases in corn utilized for ethanol, larger exports, and lower ending stocks, while soybean supply and use projections are unchanged, according to the December World Agricultural Supply and Demand Estimate (WASDE) report. In the monthly update, the USDA said corn used to produce ethanol is raised by 50 million bushels to 5.5 billion bushels. This lift is based on the most recent data from the Grain Crushings and Co-Products Production report and weekly ethanol production data for the month of November. The agency said this data implies that corn used for ethanol during the September to November quarter was the highest since 2017. The December WASDE shows corn exports raised by 150 million bushels to 2.5 billion bushels, which the USDA said reflects the pace of sales and shipments to date. With no other use changes, corn ending stocks are reduced 200 million bushels to 1.7 billion. The season-average corn price received by producers continues to be unchanged at $4.10 per bushel. For soybeans, the supply and use projections are unchanged but the monthly update has lifted soybean oil production to 131.2 million tons, with the USDA saying it is up slightly due to an increase for cottonseed. With higher soybean oil supplies and strong export commitments to date, exports are raised 500 million pounds to 1.1 billion pounds. The December WASDE said the season-average soybean price is being forecasted at $10.20 per bushel, down $0.60 from last month. The first WASDE report of 2025 will be released on 10 January.

HOUSTON (ICIS)–A new gas pipeline set to be built by Energy Transfer should provide support for natural gas and ethane prices in the Permian producing basin, lowering the likelihood that US chemical producers see another period of ultra-low costs for the main feedstock used to make ethylene. Energy Transfer’s new Hugh Brinson pipeline, previously known as Warrior, will ship natural gas from the Waha Hub in West Texas, to Maypearl, Texas, which is south of Dallas. The first phase of the project will ship 1.5 billion cubic feet/day of natural gas. Operations should start by the end of 2026. Depending on demand, Energy Transfer could concurrently start construction on a second phase that will increase the pipeline’s capacity to 2.2 billion cubic feet/day. Energy Transfer’s pipeline is the second major one announced in the past six months. Earlier, a new joint venture announced Blackcomb, a pipeline that can ship up 2.5 billion cubic feet/day of natural gas from the Permian basin to the Agua Dulce area in south Texas. Blackcomb will be developed by joint venture made up of Targa and WPC, itself a joint venture made up of WhiteWater, MPLX and Enbridge. NEW PIPELINES TO SUPPORT ETHANE BY REDUCING LIKELIHOOD OF NEGATIVE WAHA PRICESThe two new pipelines should provide West Texas with sufficient capacity to take away natural gas from the Waha Hub and prevent regional prices from falling below zero. The Waha Hub is the main pricing point for the natural gas produced by the oil wells in the Permian basin. Prices at the hub spent much of 2024 below zero because existing pipeline capacity was insufficient to take away excess supplies, which were growing because of rising oil production and gas-to-oil ratios across the basin. When gas prices at Waha fall below zero, it creates a powerful incentive for processing plants to recover as much ethane as possible from the gas stream. Any ethane that remains in the gas stream is sold for its fuel value. When gas prices are negative, producers are unable to capture any value for the ethane left behind. By maximizing ethane recovery, processing plants also free up existing pipeline space, allowing more natural gas to be taken out of West Texas. The surge in ethane recovery increased the amount of the feedstock available to the market. At one point in 2024, ethane prices fell below 12 cents/gal, a low not seen since the COVID pandemic. Since that low, the start up of the Matterhorn Express pipeline has increased takeaway capacity in the Permian, which caused Waha gas prices to rise above zero. Colder temperatures also supported prices for natural gas by increasing demand. Ethane prices are now trading above 20 cents/gal. LNG, ETHANE TERMINALS ALSO INFLUENCE COST FOR CHEM FEEDSPricing at the Waha Hub is one of the many factors that can influence the cost of ethane for chemical producers. Maintenance on one or more of the pipelines that takes away gas from the Permian basin can also depress Waha prices and, potentially, those for ethane. The proliferation of liquefied natural gas (LNG) terminals on the Gulf Coast is playing an increasing role in natural gas and ethane prices. These terminals are vulnerable to disruptions caused by hurricanes and tropical storms that pass through the Gulf of Mexico. These storms can disrupt LNG operations and temporarily shut down a large source of gas demand in the US. If the outage lasts long enough, it can cause a meaningful increase in US supplies of natural gas. That can lower prices for gas as well as the recovery cost for ethane. Midstream companies are increasing their capacity to export ethane overseas, which should support prices for the feedstock. Enterprise is adding 120,000 bbl/day of capacity via the first phase of the Neches River Terminal project, scheduled to come online in mid-2025. A second phase, due online in the first half of 2026, will add up to another 180,000 bbl/day of ethane export capacity. Enterprise and Navigator are adding ethane export capabilities as part of the expansion projects at their existing ethylene terminal in Morgan’s Point. Energy Transfer is also adding 250,000 barrels/day of flexible export capacity, which is scheduled to start up during the second half of next year. Similarly, new crackers will increase demand for ethane. The only confirmed new US cracker is a joint-venture cracker that Chevron Phillips Chemical and QatarEnergy should start up in late 2026 in Texas. Shintech could build a cracker in Louisiana, but the company has yet to announce a final investment decision (FID). Insight article by Al Greenwood Thumbnail shows natural gas. Image by Hollandse Hoogte/Shutterstock

SINGAPORE (ICIS)–South Korea will invest won (W) 14 trillion ($9.78 billion) to build a new port in the southern city of Changwon, as part of its plans to upgrade Busan Port. It will be unified with Busan Port to become a new “mega port”, raising its vessel capacity to 66 when it is completed in 2045 from 40 currently, the Ministry of Oceans and Fisheries said on Wednesday. Busan Port is South Korea’s largest and the second-largest transshipment port globally. Its total berth length will be extended to 25.5 kilometers (km) compared with 18.8km currently, according to the ministry. South Korea needed to increase its global competitiveness amid port expansions in China and Singapore; as well as increased supply chain uncertainties due to “escalating trade disputes between countries” and conflicts in the Middle East, the ministry said. ($1 = W1431.8)

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson: It is that time of the year again when analysts need to put their reputations on the line and make forecasts for the following year. So, see below five forecasts for 2025 with detailed descriptions as follows: There will be enough new capacity coming onstream next year to push China closer to self-sufficiency in some chemicals and polymers such as polypropylene (PP). The boat has already sailed on products such as purified terephthalic acid (PTA) and styrene where China has, in recent years, swung into net export positions. What will further bolster China’s self-sufficiency will be China’s long-term decline in demand growth. China’s operating rates will be higher than sometimes assumed, as it will prioritize self-sufficiency, and potentially more exports (see point 3) over individual plant economics. We are seeing a long-term shift in global growth momentum to the much more populous and much more youthful mega region of the Developing World ex-China. Part of this process involves relocation of manufacturing capacity from China to countries such as Turkey, Mexico, Vietnam and India for cost and geopolitical reasons, and this will continue in 2025. Deals will be done by the Trump administration on tariffs as competitively priced imports will have to come from somewhere – and because of the intricate and complex integration of manufacturing supply chains. Since 2021 and the Evergrande Turning Point, China had doubled down on exports up and down manufacturing chains, reducing the room for competitors in low, medium and high-value industries. This includes its switch to net export positions in products such as PTA and styrene, and the potential for this to happen in products such as PP,  acrylonitrile butadiene styrene (ABS) and polycarbonate (PC). I, therefore, believe that antidumping, tariff and other protectionist measures against China will accelerate in 2025. China will respond in kind. First came the pandemic-related disruptions to global container shipping and, since February of this year, we’ve had to contend with the Houthi attacks on shipping that have disrupted access to the Suez Canal via the Red Sea. Access to cost-efficient and prompt logistics will remain a key competitive advantage in 2025 for chemicals companies as global trade flows will remain disrupted for whatever reasons. The ICIS numbers tell us that because of disappointing Chinese demand, and the scale of global capacity closures required to bring markets back into balance, a new upcycle in 2025 is a very remote possibility. Expect no upswing for at least the next three years because of the scale of the shutdowns necessary. I could be wrong, of course. I’ve been advised not to keep saying this, but I disagree as nobody likes somebody who never concedes when they are wrong, moves on from the history of where and when they have been wrong, and assumes that they will always be right in the future. 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.

SINGAPORE (ICIS)–China is expected to implement a “more proactive fiscal policy” and a “moderately loose” monetary policy for next year, according to the country’s top officials, amid economic headwinds and looming heavy tariffs from the US. Central bank likely to cut key interest rates, banks’ reserve requirements China 2025 GDP growth forecast to slow to 4.3% in 2025 – UOB New US-China trade war in the offing The policy shift was announced following a meeting by the Political Bureau of the Communist Party of China (Politburo) and was meant to boost overall consumption in the world’s second-biggest economy. The change in monetary policy stance was the first since 2011 amid flagging economic growth and the prospect of high tariffs that will be imposed on Chinese goods by the US next year, with Donald Trump coming back to assume control of the White House for the next four years from 20 January 2025. The policy shift was announced ahead of the annual Central Economic Work Conference (CEWC), which kicked off on Wednesday. China’s growth targets and stimulus plans for 2025 will be hammered out at the meeting which will then be released at the National People’s Congress (NPC) in March 2025. “The Politburo signalled that China’s growth target of ‘around 5%’ this year will be met and the ‘main objectives and tasks for the year’s economic and social development will be successfully accomplished’,” UOB Global Economics & Markets Research economists said in a note on 10 December. “We think the focus will be on releasing long-term liquidity via reserve requirement ratio (RRR) reductions,” said the economists. MORE STIMULUS REQUIRED China had set a target of 5.0% GDP growth for 2024 but has struggled to hit that benchmark all year as high youth unemployment and weaker demand hit production levels. Fiscal stimulus measures were introduced around end-September, but were deemed insufficient for China to achieve its GDP growth target of around 5% in 2024. “Stimulus directed at promoting consumption would likely have a larger impact than investments or big infrastructure projects,” the UOB note added. November economic data suggest a slow recovery in demand, but it appears unlikely that it will recover sufficiently to achieve the growth target next year if additional US tariffs were imposed in 2025. Official data showed that China’s consumer price index (CPI) increased by 0.2% year on year, a five-month low. Meanwhile, China’s exports in November grew at a slower year-on-year rate of 6.7% to $312.3 billion, while imports fell 3.9% year on year on weaker domestic demand. Amid flagging Chinese demand, Saudi Arabia, the world’s largest crude exporter, cut its January Official Selling Price (OSP) for its benchmark Arab Light crude to the lowest level in four years. The January OSP for Arab Light was cut by 80 cents/barrel to Oman/Dubai average plus 90 cents/barrel, the lowest level for buyers in Asia since January 2021. US-CHINA TRADE WAR 2.0 LOOMS As China struggles to turn its economic fortunes around, it faces a difficult 2025 and a hostile US administration under Trump. Trump’s first term as US president in 2017-2021 was characterized by a trade war launched against China. UOB Global Economics & Markets Research economists are projecting China’s GDP growth to slow to 4.3% in 2025 from 4.9% this year, “with potentially more punitive US tariffs posing downside risks next year”. A consequential weakness of the Chinese yuan from a looser monetary policy, meanwhile, makes the country’s exports more competitive. Like most Asian economies, China is export-oriented and counts the US as a major market. For the first 11 months of 2024, China’s total exports increased by 5.4% year on year to $3.2 trillion amid a global economic slowdown, while imports rose at a slower pace of 1.2% over the same period to $2.4 trillion. China remains a major importer of petrochemicals, but heavy capacity expansions accompanied with weak domestic demand in recent years has turned it into a net exporter of selected products, including purified terephthalic acid (PTA). Focus article by Jonathan Yee

SAO PAULO (ICIS)–Brazil’s central bank is likely to increase interest rates this week as the annual inflation rate continued ticking up in November to nearly 5%, analysts said on Tuesday. Some analysts think rising prices and a healthy economy lay the ground for Brazil’s central bank to hike rates this week by as much as three quarters of a point to 12.0%. Brazil’s annual rate in the price consumer index (IPCA in its Portuguese acronym) stood November at 4.87%, up from 4.76% in October, according to the country’s statistics office IBGE on Tuesday. Monthly inflation, however, eased with the IPCA up 0.39% in November, month on month. In October, monthly price rises stood at 0.56%. Prices continued reeling in November from the severe drought that affected much of Brazil in August-October. In November, the drought’s lingering effects showed in food prices, with a monthly price increase of 1.55%. In October, the drought effects had showed in the electricity bills due to lower hydroelectric energy production during that month. UP AND UPNovember’s uptick in inflation is likely to prompt the Banco Central do Brasil (BCB) monetary policy committee, called Copom, to hike the main interest rate benchmark, the Selic, for the third time since August as they meet for the last time in 2024 on Wednesday (13 December). Far from continuing the monetary policy easing being implemented in most major economies, Copom members went the other way in August as inflation started increasing, bucking the trend in the rest of Latin America. The Selic was hiked to 11.25% at Copom’s November meeting. A depreciating real – making dollar-denominated imports more expensive, and a healthy economy – pushing up consumption – are propping up inflation. Investors’ concerns about the government’s fiscal policy have further depreciated the real, in turns feeding back into inflation. “The further rise in Brazil’s inflation rate in November alongside the weakness in the real and strong economic growth mean that Copom is nailed on to step up the pace of monetary tightening, probably with a 75bps [basis points] hike to 12.00% tomorrow,” said Capital Economics. “Further tightening is on the cards in early 2025 and the risks to our Selic forecast are skewed to the upside, particularly if the government fails to better address investors’ fears about the state of the public finances … Our current forecast is for a peak in the Selic of 13.00% [in 2025] but the risks are firmly skewed towards rates being raised even higher.” BRAZIL ANNUAL RATE OF INFLATION Change in % Grey columns: forecast Source: IBGE via Trading Economics BRAZIL INTEREST RATES Change in % Source: BCB via Trading Economics