HOUSTON (ICIS)–Oil and gas production, the main source of the feedstock and energy used by the petrochemical industry, should benefit from policies proposed by President-Elect Donald Trump, while hydrogen and renewable fuels could lose some of the support they receive from the federal government. Trump expressed enthusiastic and consistent support for oil and gas production during his campaign. He pledged to remove what he called the electric vehicle (EV) mandate of his predecessor, President Joe Biden. Trump may attempt to eliminate green energy subsidies in Biden’s Inflation Reduction Act (IRA) BRIGHTER SENTIMENT ON ENERGYRegardless of who holds the presidency, US oil and gas production has grown because much of it has taken place on the private lands of the Permian basin. Private land is free from federal restrictions and moratoria on leases. That said, the federal government could indirectly restrict energy production, and statements from the president could sour the sentiment in the industry. During his term, US President Joe Biden antagonized the industry by accusing it of price gouging, halting new permits for LNG permits and revoking the permit for the Keystone XL oil pipeline on his first day in office. By contrast, Trump has pledged to remove federal impediments to the industry, such as permits, taxes, leases and restrictions on drilling. WHY ENERGY POLICY MATTERSPrices for plastics and chemicals tend to rise and fall with those for oil. For US producers, feedstock costs for ethylene tend to rise and fall with those for natural gas. Also, most of the feedstock used by chemical producers comes from oil and gas production. Policies that encourage energy production should lower costs for chemical plants. RETREAT FROM RENEWABLES, EVsTrump has pledged to reverse many of the sustainability policies made by Biden. Just as Trump did in his first term, he would withdraw from the Paris Agreement. For electric vehicles (EVs), Trump said he would “cancel the electric vehicle mandate and cut costly and burdensome regulations”. He said he would end the following policies: The Environmental Protection Agency’s (EPA) recent tailpipe rule, which gradually restricts emissions of carbon dioxide (CO2) from light vehicles. The Department of Transportation’s (DoT) Corporate Average Fuel Economy (CAFE) program, which mandates fuel-efficiency standards. These became stricter in 2024. The EPA was expected to decide if California can adopt its Advanced Clean Car II (ACC II) program, which would phase out the sale of combustion-based vehicles by 2035. If the EPA grants California’s request, that would trigger similar programs in several other states. Given Trump’s opposition to government restrictions on combustion-based automobiles, the EPA would likely reject California’s proposal under his presidency or attempt to reverse it if approved before Biden leaves office. According to the Tax Foundation, Trump would try to eliminate the green energy subsidies in the Inflation Reduction Act (IRA). These included tax credits for renewable diesel, sustainable aviation fuel (SAF), blue hydrogen, green hydrogen and carbon capture and storage. In regards to the UN plastic treaty, it is unclear if the US would ratify it, regardless of Trump’s position. The treaty could include a cap on plastic production, and such a provision would sink the treaty’s chances of passing the US Senate. For renewable plastics, much of the support from the government involves research and development (R&D), so it did little to foster industrial scale production. WHY EVs AND RENEWABLES MATTERPolicies that promote the adoption of EVs would increase demand for materials used to build the vehicles and their batteries. Companies are developing polymers that can meet the heat and electrical challenges of EVs while reducing their weight. Heat management fluids made from base oils could help control the temperature of EV batteries and other components. If such EV policies reduce demand for combustion-based vehicles, then that could threaten margins for refineries. These produce benzene, toluene and xylenes (BTX) in catalytic reformers and propylene in fluid catalytic crackers (FCCs). Lower demand for combustion-based vehicles would also reduce the need for lubricating oil for engines, which would decrease demand for some groups of base oils. Polices that promote renewable power could help companies meet internal sustainability goals and increase demand for epoxy resins used in wind turbines and materials used in solar panels, such as ethylene vinyl acetate (EVA) and polyvinyl butyral (PVB). Insight article by Al Greenwood

SAO PAULO (ICIS)–Brazil’s central bank monetary policy committee (Copom) voted unanimously late on Wednesday to hike the main interest rate benchmark, the Selic, by 50 basis points to 11.25%, to fend off rising inflation and a depreciating Brazilian real. Central bank urges government to put fiscal house in order H1 October inflation data reveals that upward trend continues Despite high borrowing costs, car sales at decade-high in October The 50 basis point increase is a double-down on the first 25 basis point increase in September which put an end to the monetary policy easing which started in August 2023 after a post-inflation crisis. Copom did not mention the market fallout which followed US Republican candidate Donald Trump’s victory in the presidential election, as global investors are wary about radical changes in US trade policy via higher import tariffs, among others. Instead, Copom focused on the healthy domestic economy and strong labor market which has put upward pressure on prices. After a small fall in August, the annual rate of inflation ticked higher in September – an upward trend that started May – to stand at 4.4%. Indicators for H1 October showed inflation ticking up further to 4.5%. The Banco Central do Brasil’s (BCB) own inflation expectations reflect this trend, with inflation expected to end this year at 4.6% before falling to 4.0% in 2025. The BCB’s mandate is to keep inflation at around 3%. “The scenario remains marked by resilient economic activity, labor market pressures, positive output gap, an increase in the inflation projections, and deanchored expectations, which requires a more contractionary monetary policy,” said Copom. “[Copom] judges that this decision [increase in the Selic] is consistent with the strategy for inflation convergence to a level around its target throughout the relevant horizon for monetary policy. Without compromising its fundamental objective of ensuring price stability, this decision also implies smoothing economic fluctuations and fostering full employment.” Petrochemical-intensive industrial companies have repeatedly said high interest rates have harmed sales as consumers think twice before purchasing durable goods on credit due to high borrowing costs. One vocal opponent to high rates is automotive trade group Anfavea, although its own figures this week showed sales riding at a high not seen since 2014, regardless of high borrowing costs. The automotive industry is a major global consumer of petrochemicals, which make up more than one-third of the raw material costs of an average vehicle, driving demand for chemicals such polypropylene (PP), nylon, polystyrene (PS), styrene butadiene rubber (SBR), polyurethane (PU), methyl methacrylate (MMA) and polymethyl methacrylate (PMMA), among others. Meanwhile, Brazilian president Lula’s cabinet is looking to strengthen the country’s industrial sectors to fulfil his Workers Party (PT) electoral promise to create more and better paid industrial jobs. As a result, Lula and several of his  officials have repeatedly and publicly criticized the BCB for its interest rates policy. Meanwhile, central bank governor Roberto Campos Neto, appointed by the previous center-right Jair Bolsonaro administration, will end his term in December, when Lula appointed Gabriel Galipolo will succeed him. It is a move that has put some investors on alert due to his closeness to Lula, as he may prioritize the cabinet’s demands instead of the bank’s inflation target, its main mandate. But as global markets increasingly look at Brazil, Galipolo has fallen in line and also voted to increase rates in the last two Copom meetings. CABINET URGED TO END DEFICITThe Brazilian cabinet, presided over by Luiz Inacio Lula da Silva, was expected to run a fiscal deficit this year in an attempt to expand public services without increasing taxes. Investors and analysts have been piling pressure on the government by punishing the Brazilian real (R), which has depreciated sharply in the past few months against the US dollar, making dollar-denominated imports into Brazil more expensive and ultimately filtering down in the form of higher inflation. At the start of 2024, the real was trading at $1:4.85. But the exchange rate stood at $1:5.69 on Wednesday, a depreciation of nearly 15%. On Wednesday, Copom joined the chorus of voices asking for stricter fiscal policy, arguing that to stop the real losing ground it is necessary a “credible fiscal policy committed to debt sustainability, with the presentation and execution of structural measures” in the public accounts. The Brazilian cabinet is reportedly working against the clock this week on those measures, and Finance Minister Fernando Haddad even cancelled an official trip to Europe this week to focus on this. “The perception of agents [in the market] about the fiscal scenario has significantly impacted asset prices and expectations, especially the risk premium and the exchange rate. [A credible fiscal policy] will contribute to the anchoring of inflation expectations and to the reduction in the risk premia of financial assets, therefore impacting monetary policy.” Analysts at Capital Economics on Wednesday also highlighted the diplomatic but very clear request from the central bank to the government – without stricter fiscal policies aiming to reduce the deficit, investors will continue making the central bank’s work on inflation harder as they bet against Brazilian assets, including its currency. “[The hike] has more to do with the domestic macro backdrop and shoring up monetary policy credibility than a response to the market fallout following Trump’s victory … [Copom’s] Concerns will have only been amplified by recent data and developments, with the accompanying statement reiterating that ‘economic activity and labor market continues to exhibit strength’,” the analysts said. “Alongside all of this, Copom members are probably also feeling compelled to tighten policy in order to shore up their credibility amid investor concerns about politicization of monetary policy. This strikes at an important point – the central bank is responding to Brazil-specific factors rather than the financial market fallout from Trump’s victory, especially given that the real is up by around 1% against the dollar today [6 November].” Capital Economics said Copom’s intention to raise rates further if necessary is likely to become a reality in coming months, expecting the Selic to rise further by 75bps more to reach 12% in early 2025. “That said, the risks are skewed to the upside, particularly if the government fails to soothe investors’ concerns about the fiscal position.” they concluded. Focus article by Jonathan Lopez 

LONDON (ICIS)–The Bank of England (BoE) on Thursday cut its key interest rate for the second time this year, instituting a 25 basis point fall as inflation continues below target. The bank cut its core interest rate to 4.75% in the wake of a steeper-than-expected decline in inflation in September, from 2.2% to 1.7%. Eurozone inflation also declined that month, dropping to 1.7%, but is expected to have increased last month, bouncing back to 2% according to preliminary Eurostat data, driven by higher food and services pricing and weaker energy cost declines. Both the BoE and the European Central Bank have inflation targets of levels close to but not exceeding 2%. The BoE move also follows the announcement of the UK’s autumn budget, which pledged higher borrowing, taxes and spending to generate funds for areas such as the country’s health service. The UK Office for Budget Responsibility (OBR) projects that the budget will drive inflation higher in the short term, to a quarterly peak of 2.7% in mid-2025.

SINGAPORE (ICIS)–China’s oxo-alcohols market will face a supply glut in the face of intensive new plant start-ups and tepid downstream demand. Net import volumes may plunge in the short term because of overseas plant turnarounds and rising domestic supply, whether this can sustain depends on overseas plant operations and import arbitrage opportunities. New oxo-alcohols capacities hit 1.3 million tonnes/year in July-Oct 2024 Oxo-alcohols supply to rise steadily in short term on few maintenance outages Oxo-alcohols net imports to decline on overseas plant turnarounds, rising domestic output

Biden’s permit pause likely cut short by US election result Trump’s victory may lead to quicker Department of Energy permits Expected FID on Port Arthur expansion moves ahead of Cameron HOUSTON(ICIS)–Just hours after the US re-elected former US President Donald Trump on 5 November, US LNG export plant developer Sempra Infrastructure updated expectations around the timing of its next federal LNG permit. The second phase of Sempra’s Texas project Port Arthur LNG should receive authorization to export to countries outside the US Free Trade Agreement (FTA) from the Department of Energy (DOE) in the first half of 2025, Sempra executives said 6 November. “LNG is a very, very important tool of American foreign policy,” said Jeffrey Martin, CEO of Sempra Infrastructure’s parent company, during its third-quarter earnings call. “I think we have growing confidence in getting the permits we need for Port Arthur, phase two in the first half of next year.” No US LNG export projects have received a non-FTA permit from the DOE since 2023. In January, current President Joe Biden’s administration paused issuance of the permits. While campaigning, Trump said that if elected, he would immediately lift the pause on federal LNG permitting. France’s Technip Energies previewed the electoral result during its third-quarter earnings call on 31 October with CEO Arnaud Pieton’s statement that a Trump victory could faster lift the moratorium on DOE permits than if opponent Kamala Harris had won. COMMERCIAL TALKS Of the two expansion projects under development – the 13mtpa second phase of Port Arthur LNG, and a fourth production train at Cameron LNG that would add 6.75mtpa – CFO Karen Sedgwick said the company expects to make an FID on Port Arthur’s phase two first. “The timing of an FID decision on the Cameron expansion is uncertain at this point,” Sedgwick said. “We continue to work with our partners on the optimal timing for expansion.” Previously, the Cameron expansion FID was delayed in November 2022 and November 2023 . Port Arthur’s 13mtpa second phase requires the non-FTA permit to reach a final investment decision, in addition to lining up more long-term customers and securing financing. The expansion project has been under consideration since at least November 2022. Saudi Arabia’s state-backed Aramco agreed in June to purchase 5mtpa from Port Arthur’s second phase over 20 years, and that it would consider taking a 25% stake in the project. In August, Sempra Infrastructure CEO Justin Bird said the company hoped to have additional heads of agreements to discuss on Sempra’s Q3 call. “As noted in our Q2 call, we saw an increased interest in Port Arthur 2, and I’m happy to say that interest has further increased since the call and momentum continues to build,” Bird said. “Commercial discussions for offtake and project equity are ongoing, and I think we’re seeing better terms.” CONSTRUCTION UPDATES Construction at Sempra’s Energia Costa Azul LNG export project faced delays due to local workforce shortages in Sonora, Mexico, executives said in August. In the latest call, Sempra stuck with its most recent estimate that ECA would start commissioning in spring 2026. Sempra hired engineering company TechnipFMC in 2020 to handle engineering, procurement and construction for ECA with a lump-sum contract. Technip Energies split off from TechnipFMC in 2021. Rival EPC contractor Bechtel leads construction on Port Arthur LNG’s first phase – also 13mtpa – which remains on budget and on schedule, executives said 6 November.

SINGAPORE (ICIS)–Donald Trump’s return to the White House could intensify trade frictions with China, fostering decoupling of the world’s two biggest economies, with Chinese exporters looking at making advance shipments to the US before new tariffs are imposed. Hefty US tariffs to drag down China exports, GDP growth China may accelerate relocation of manufacturers Heavy flow of Chinese exports to US likely in H1 2025 In his election campaign, Trump has vowed to take four major actions against China upon winning, namely, revoke China’s Permanent Normal Trade Relations (PNTR) or most favoured nation status; impose tariffs of 60% or more on all Chinese goods; stop importing Chinese necessities within the four years of his second term as US president; and crack down on Chinese goods imported through third countries. In Trump’s first term as US government head in 2016-2020, Washington had launched five rounds of tariffs on around $550 billion worth of Chinese imports, raising the average duties on Chinese goods by more than fivefold to 15.4% from 2.7%. Based on calculations by investment bank China International Capital Corp (CICC), those tariffs had reduced China’s exports to the US by around 5.5% and dragged down China’s overall GDP by one percentage point. If a 60% tariff is imposed on Chinese goods in Trump’s second term, China’s overall export growth would be shaved by 2.1-2.6 percentage points and its GDP growth by 0.2-0.3 percentage points, CICC said in a research note. Most Chinese exporters, especially those which rely heavily on the US market, will face the fallout in terms of significant drop in export volumes and profits, CICC said. “Only those in high value-added and very competitive sectors can sustain that high tariff. This will accelerate the trend of Chinese companies moving manufacturing sites to third countries like Vietnam and Mexico to finally get into US markets,” it added. China has been actively expanding trade relations with partner countries in its belt-and-road project within Asia as well as Africa, as buffer against growing US import curbs on its goods. In 2023, ASEAN replaced the US as China’s biggest export destination. “That demonstrated resilience and competitiveness of Chinese products in global markets,” said Li Xunlei, chief economist at Hong Kong-based brokerage China Zhongtai International. China, however, is currently faces huge challenges, including slowing domestic demand, high debt, a property slump, and decoupling from western countries, he said. “One major headache now is that currency depreciation is difficult to implement this time, because [a] weakening yuan could trigger capital outflow,” Li said. In 2018-2019, China was able to offset the US tariffs by allowing the Chinese yuan (CNY) to depreciate by around 10%. This time, mitigating the ill-effects of a 60% US tariff would need the yuan to fall by 18% against the US dollar, which meant exchange rate of CNY8.5 to $1.0, which was not seen since the 1997 Asian financial crisis, Li pointed out. Some Chinese exporters have been looking to pre-ship goods to the US ahead of the potential imposition of new tariffs. A Guangdong-based shipping broker has received increasing inquiries for Q1 2025 container spaces from China to North America, because traders are trying to move cargoes as early as possible to avoid the tariff issue. These could mean a strong flow of Chinese exports – including consumer electronics, plastics, home appliances, among others – to the US in the first two quarters of next year. Insight article by Fanny Zhang ($1 = CNY7.16)

SINGAPORE (ICIS)–Donald Trump’s re-election as US president sets the stage for economic turbulence in Asia as regional businesses brace for significant increases in US tariffs. Trump set to impose levies of 60% or more on Chinese goods US tariffs on China to accelerate economic decoupling China must counteract fallout from potential US trade protectionism Asian financial markets opened mixed on Thursday as investors assessed Trump’s return to the White House after winning the 5 November US presidential election, with focus turning to the potential long-term impact of his economic and foreign policies. The other prominent victory for the Republican Party was re-taking of the US Senate, with the possibility of retaining control of the House of Representatives as well, which would give Trump unified control of the government. At 02:40 GMT, Japan’s Nikkei 225 slipped 0.39% to 39,335.52, South Korean benchmark KOSPI composite was 0.21% lower at 2,558.25 and Hong Kong’s Hang Seng Index edged 0.48% higher to 20,635.64. China’s mainland CSI 300 index was up 0.38% at 4,038.85. Chinese energy major PetroChina was up 0.52% in Hong Kong, LG Chem was down 3.11% in Seoul and Mitsui Chemicals rose 1.78% in Tokyo. POTENTIAL TARIFFS Trump has pledged to impose blanket tariffs of up to 20% on imports from all countries, with even steeper levies of 60% or more on Chinese goods, citing unfair trade practices that have contributed to US economic decline. China is expected to remain the primary target of additional US tariff measures due to its significant trade surplus with the US. The US has also become the top target of China’s anti-dumping cases for chemical imports, underscoring growing trade barriers between the world’s two biggest economies. While China will likely retaliate against new trade policies, its response will likely be measured to avoid escalating tensions. “Trump has the legal authority to implement tariffs without Congressional approval, and we expect trade restrictions will be imposed quickly,” Japan’s Nomura Global Markets Research said in a note on Thursday. According to Nomura’s forecasts, 60% tariffs on Chinese imports are likely to take effect by mid-2025. Additionally, a blanket 10% tariff may be imposed on all countries next year, although Canada and Mexico are expected to be exempt due to existing free-trade agreements. “The most pronounced impact on Asia will likely be through Trump’s policy on trade,” UOB Global Economics & Markets Research economists said in a note on Thursday. “It remains to be seen when and whether Trump will be able to carry through his tariff threats in their entirety.” Higher US tariffs on Chinese imports would likely speed up the economic separation of the world’s two largest economies and significantly disrupt supply chains across Asia, according to analysts. Imposing new tariffs also increases the risk of China taking retaliatory measures, potentially jeopardizing crucial collaborations on pressing global issues like climate change and artificial intelligence (AI). “US-China relations are already frosty, and trade tariffs (if implemented) may exacerbate the situation,” Singapore-based bank OCBC said in a note. “However, Trump is also a negotiator and may be inclined to cut a deal if he gets what he wants. Hence, the question is whether there will be a deal. The strategic industries most at risk remain advanced manufacturing, especially semiconductors, EVs [electric vehicles], solar panels etc.” In 2023, US imports from China hit a 14-year low of $427 billion, equivalent to 2.4% of China’s nominal GDP. Since 2021, trade tariffs on China have been ratified and extended under US President Joe Biden. As a result, China lost its status as the US’ main trade partner for goods. The proportion of Chinese imports to the US fell significantly in the past two years from almost 19% at the start of 2022 to only 13.5% at the end of 2023, according to ratings firm Moody’s. The proposed 60% tariffs on Chinese goods would substantially impact China’s growth, effectively cutting off US demand for a large portion of Chinese imports. “Given the structural slowdown in its economy, China needs to offset the negative impact from any potential new trade protectionist measures with stronger domestic policy responses in order to stabilize growth,” UOB said. SPOTLIGHT ON CHINA’S NEXT MOVES The ongoing National People’s Congress Standing Committee meeting on 4-8 November is under intense scrutiny as market observers await announcements on China’s fiscal policy support. Key decisions expected include an additional yuan (CNY) 6 trillion ($836 billion) bond issuance to address hidden local government debts and CNY1 trillion for bank recapitalization. The upcoming Politburo meeting in early December and the Central Economic Work Conference (CEWC) will outline China’s economic agenda for 2025. These gatherings will set the stage for the National People’s Congress (NPC) in March 2025, where pivotal economic targets will be unveiled, including GDP growth, fiscal deficit, and local government special bonds issuance quota. These announcements will provide crucial guidance on China’s economic direction for the year ahead. While China is a primary focus, other regions including ASEAN are also exposed to potential policy risks due to their significantly increased trade surpluses with the US since 2018. This surge is largely attributed to supply chain diversification aimed at evading tariffs and trade restrictions implemented during Trump’s first term. “In ASEAN, there continues to be positive spillovers from the supply chain shifts leading to a brighter trade outlook this year while import demand strengthened across key Asian countries amid improving job market and domestic policy support,” UOB said. Asian exports will face more scrutiny, there will more regulatory headaches, but the region’s scale, excellence in manufacturing and logistics, strong corporate and public sector balance sheets will hold them in good stead during Trump 2.0, Singapore-based bank DBS said in note. With more Chinese companies offshoring export-focused production to southeast Asia, a second Trump administration may start to target these countries for trade-related violations, risk and strategic consulting firm Control Risks said. “One area to watch would be southeast Asia’s automotive sector, where Chinese players are flooding and dominating the original equipment manufacturer industry as the region gears up to fulfil ambitions of being a hub for the production, assembly and export of electric vehicles in the coming decade.” “Tariffs are an unambiguous negative for the region, but Asia’s strong ties with the US and China would survive Trump,” DBS said. “The region’s openness to trade and commerce makes it more attractive to investors, especially as the contrast with an inward-looking West becomes stark. This election marks a firm rightward shift of the US; Asia has to learn to live with it.” Insight article by Nurluqman Suratman ($1 = CNY7.18) Thumbnail image: At Lianyungang port in China on 25 October 2024.(Costfoto/NurPhoto/Shutterstock)

HOUSTON (ICIS)–Nutrien said demand in North America for the fall fertilizer application has been supported by a relatively early harvest along with the need to replenish soil nutrients following a period of lower field activity in the third quarter. In its latest market outlook, the Canadian fertilizer major said favorable growing conditions in the US have supported expectations for record corn and soybean yields and significant soil nutrient removal in 2024. The company did note that prospective crop margins have declined compared to the historically high levels in recent years, however Nutrien’s view is most growers in the key region of the US Midwest remain in a healthy financial position. One positive factor that the producer sees is that global grain stocks remain below historical average levels which support export demand for North American crops and firm prices for key agriculture commodities such as rice, sugar and palm oil. Looking at crop nutrient, Nutrien said it has raised 2024 global potash shipment forecast to 70 million – 72 million tonnes primarily driven by stronger expected demand in Brazil and Southeast Asia. The company said it believes the increase in global shipments this year has been driven by an underlying increase in consumption in key markets. The forecast for global potash shipments in 2025 is between 71 million – 74 million tonnes, which Nutrien said supported by the need to replenish soil nutrient levels and the relative affordability of potash. It does anticipate limited new capacity next year and the potential for incremental supply tightness with demand growth. Regarding global ammonia the producer said prices have been supported by supply outages, project delays and higher European natural gas values. For urea Nutrien said that Chinese export restrictions, production challenges from major exporters and strong demand from India and Brazil have tightened the global urea market. It noted that US nitrogen inventory was estimated to be well below average levels at the end of the third quarter, and the company is expecting it will support demand in the fourth quarter of 2024 and early 2025. For global phosphates, the situation remains tight which is furthered by Chinese export restrictions and production outages in the US. Nutrien said it anticipates some impact on global demand due to tight supply and weaker affordability relative to potash and nitrogen.

HOUSTON (ICIS)–Several ICIS market experts share insightful facts related to their respective plastics markets, amid conversations with industry professionals at PackExpo ’24. Though each market comes with a host of uncertainties, the broader US plastic packaging industry continues to navigate mixed demand and various supply challenges in 2024 and beyond. Bottled beverage sector made up 15% of all US packaging revenue in 2023. US polyethylene terephthalate (PET) production to remain 3 billion lb short of domestic demand in 2025. US polystyrene (PS) production has been impacted by outages since July 2024. US polypropylene (PP) prices have been volatile, with price movements 11 out of the last 12 months. US polyethylene (PE) inventories are the highest they have been since May 2023. US recycled PET (R-PET) market facing onslaught of imports. 2Q2024 PET scrap import volumes were above 125 million lb. PackExpo runs through 7 November and is hosted in Chicago, Illinois.