LONDON (ICIS)–Click here to see the latest blog post on Chemicals & The Economy by Paul Hodges, which suggests companies need to refocus to avoid today’s overcapacity problems. 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. Paul Hodges is the chairman of consultants New Normal Consulting.

LONDON (ICIS)–Here are some of the top stories from ICIS Europe for the week ended 22 November. Eastern EU nations call for duties on imports of fertilizers from Russia and Belarus Countries such as Poland, Lithuania, Latvia and Estonia have submitted a letter to the European Commission calling for customs duty to be imposed on imports of fertilizers from Russia and Belarus, the Polish Ministry of Development and Technology has confirmed. Europe apathetic to PO asset reviews as oversupply plagues market Two propylene oxide (PO) plants have been added to the pile of European assets under review as the market grapples with chronic oversupply, low utilisation and persistent low demand. Chems firms struggle to gain traction in Q3 The chemicals sectors’ third-quarter earnings period has underlined how little momentum has built up in the last 12 months, and how tepid expectations are for the closing months of the year. Tightening Russia oil supply may support oil benchmarks as Russia-Ukraine conflict marks 1,000th day Global oil benchmarks could find support from tighter Russian oil supply in coming weeks amid calls for stricter EU sanctions and escalating geopolitical tensions. Europe, US chemicals have most to lose from a new trade war Donald Trump’s resounding victory in the US presidential election gives him a powerful mandate for a policy agenda which includes ramping up trade tariffs across the board as he pursues his re-shoring agenda.

SINGAPORE (ICIS)–The fifth and final round of United Nations (UN)-led negotiations for a global plastics treaty to combat plastic pollution kicked off in Busan, South Korea, on Monday. The fifth session of the UN Intergovernmental Negotiating Committee (INC-5) runs through 1 December and is aimed at finalizing an international legally binding instrument on plastic pollution by the end of this year. “Growth in plastic production is emitting more greenhouse gases, pushing us further into climate disaster,” Inger Andersen, executive director of the UN Environment Programme, said at the opening ceremony of the event. “At the international level there have also been clear signals that a deal is essential – including the G20 declaration last week, which said that G20 leaders were “determined” to land this treaty by the end of the year,” she said. The leaders of the G20 met in Rio de Janeiro, Brazil on 18-19 November. If an agreement is reached by the end of INC-5, the final draft of the treaty will be unveiled at the UN Diplomatic Conference of Plenipotentiaries in June 2025. Negotiations may be extended for two to six months if no deal is reached. The UN Environment Assembly (UNEA) in 2022 resolved to end plastic pollution by adopting resolution 5/14, which established an Intergovernmental Negotiating Committee (INC) to work towards a treaty. The INC has met four times since 2022, the latest being in Ottawa, Canada in April this year which ended with no clear path on capping plastic production. “Over the last two years, four negotiation rounds have yielded a wealth of options for the treaty, from plastic product design to waste management,” Swiss international advocacy non-governmental organization World Economic Forum said in a note on 18 November. “In Busan, negotiators face the challenge of refining these options into a coherent treaty that countries can ratify,” it said. Extended producer responsibility (EPR) – which holds producers accountable for their products’ lifecycle, especially after consumer use – has been a focal point in discussions on the international legally binding instrument, it added. Thumbnail image: Protesters call on government to recognize importance of the Global Plastics Treaty, in Seoul, Korea – 11 September 2024 (By JEON HEON-KYUN/EPA-EFE/Shutterstock)

SINGAPORE (ICIS)–Here are the top stories from ICIS News Asia and the Middle East for the week ended 22 November. Bearish sentiment in Asian naphtha market likely short-lived By Li Peng Seng 18-Nov-24 11:46 SINGAPORE (ICIS)–Asia’s naphtha market sentiment nosedived last week amid bearish pressures, but cracker expansion in South Korea and gasoline demand ahead of a festive season will likely buoy up demand. Thai PTTGC plans $840 million 5-year capex; focus on Allnex growth By Jonathan Yee 18-Nov-24 17:12 SINGAPORE (ICIS)–Thai chemicals producer PTT Global Chemical plans capital expenditure (capex) of $840 million in the next five years, more than 78% of which will be invested to grow its Germany-based specialty chemicals subsidiary Allnex. INSIGHT: Most Asia petrochemical markets to post Nov losses By Lina Xu 18-Nov-24 15:55 SINGAPORE (ICIS)–Most petrochemical markets in Asia are expected to register losses in November on slowing demand as the year draws to a close. China’s PC market faces ongoing supply pressure By Li Peng Seng 19-Nov-24 11:42 SINGAPORE (ICIS)–China’s polycarbonate (PC) import market is likely to remain under pressure due to persistent oversupply, trade conflicts and geopolitical uncertainties. Asia caustic soda unlikely to see immediate impact from China’s removal of aluminium export tax rebates By Jonathan Chou 20-Nov-24 12:30 SINGAPORE (ICIS)–China’s announcement to end export tax rebates on aluminium effective on 1 December may have limited long-term changes in caustic soda’s demand and supply conditions in Asia. SE Asia bottlenecks disrupt regional chemical tanker operations By Hwee Hwee Tan 21-Nov-24 11:57 SINGAPORE (ICIS)–Persistent delays in tanker operations in southeast Asia are snowballing into wider vessel schedule disruptions across intra-Asia trade lanes. More stringent regulations to hamper Asia’s rPET exports By Arianne Perez 22-Nov-24 14:20 SINGAPORE (ICIS)–Major producers of high-value recycled polyethylene terephthalate (rPET) flakes and pellets from Asia continue to aim for a growing market share in premium markets including the Americas and Europe.

HOUSTON (ICIS)–Rates for shipping containers from Asia to the US East Coast were largely flat and rates to the West Coast fell by 5%, and the Panama Canal will begin allowing swapping of slots on 1 January, highlighting shipping news this week. 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. Global average rates ticked lower by 1% this week, according to supply chain advisors Drewry and as shown in the following chart. Rates from Asia to New York were largely stable on the week while rates from Shanghai to Los Angeles fell by 5%, as shown in the following chart. Drewry expects spot rates to remain stable over the coming week. Drewry’s assessment has rates to the East Coast about $700/40-foot equivalent units (FEU) higher than to the West Coast. Online freight shipping marketplace and platform provider Freightos has rates to both coasts nearly at parity slightly higher than Drewry’s East Coast rate. Judah Levine, head of research at Freightos, said transpacific ocean rates are about 35%-45% below peak levels seen in July now that the peak season has ended. He said upward pressure remains from stronger than normal demand as some shippers are frontloading volumes ahead of expected tariff increases from the new administration as well as the possibility of another work stoppage at US East Coast ports as the 15 January deadline to finalize a new collective bargaining agreement nears. Levine noted that Lunar New Year starts at the end of January this year, which is earlier than usual. The unusual parity of transpacific rates to both coasts may point to some shift of demand to the West Coast due to January strike concerns, Levine said. LIQUID TANKER RATES – USG-BRAZIL TICKS HIGHER Overall, US chemical tanker freight rates was largely stable this week for several trade lanes, with the exception being the USG-to-Brazil trade lane as that market picked up this week following activity during the APLA conference in Columbia. Part space has limited availability as most owners are awaiting COA nominations. USG-Asia trade lane remains steady as spot tonnage remains readily available and multiple cargoes of glycol and styrene are interested in December and January loadings, supporting the market. Similarly, on the transatlantic front, the eastbound leg remains steady as there was limited space available which readily absorbed the few fresh inquiries for small specialty parcels stemming from the USG bound for Antwerp. Various glycol, ethanol, methyl tertiary butyl ether (MTBE) and methanol parcels were seen quoted to ARA and the Mediterranean as methanol prices in the region remain higher. Additionally, ethanol, glycols and caustic soda were seen in the market to various regions. However, it is also clear that space is becoming very tight until the end of the year, keeping rates firm. The CPP market firmed, limiting the number of tankers offering into the chemical market, thus keeping rates stable. Bunker prices rose, mainly due to the increase in energy prices following continued geopolitical concerns. PANAMA CANAL TO ALLOW SWAPPING OF SLOTS The Panama Canal will begin allowing swapping and substitutions of booking slots between container vessels with some conditions beginning 1 January, the Panama Canal Authority (PCA) said. The conditions are that both vessels must be the same type and must belong to the containership segment, both vessels must belong to the same vessel classification (Neopanamax, Super or Regular), and both vessels must be transiting in the same direction. Also, for swaps, vessels must have similar transit restrictions, and for substitutions, the new vessel must have similar or lesser transit restrictions, both vessel operators must belong to services under the same cooperative working agreement (Global Alliances or VSA), and the booking date of the vessels involved in the swap or substitution must be within the effective date of the services and of the Alliance or VSA. All other Long Term Slot Allocation method (LoTSA) and ordinary booking slots rules remain in effect. Additional reporting by Kevin Callahan

LONDON (ICIS)– European imports of Russian gas hinge on US or Russian decisions whether to allow payments for deliveries, a sanctions specialist told ICIS. Alexander Kolyandr, a non-resident senior fellow at the Center for European Policy Analysis (CEPA) and former strategist at Credit Suisse London, said there are two options for European buyers such as Hungary and Slovakia to pay for  gas after Russian state-owned Gazprombank was sanctioned by the US Treasury on November 21. One option would be for the US to include Gazprombank on a general license on energy transactions,  which is regularly updated by the US Treasury and currently includes 12 entities allowed to handle energy-related transactions. Gazprombank, which was sanctioned by the Treasury on November 21, is not on the list but could be included if the US is persuaded of the need to do so. The other option would be for European buyers who continue to offtake Russian gas such as Slovakia’s SPP or Hungary’s MVM CEEnergy Zrt. to pay for the gas to any of the other state banks included on the licence. Nevertheless, he said, Russian officials may refuse to accept this because under a scheme introduced by the Kremlin in 2022, European buyers can only pay for their Russian imports via Gazprombank Luxembourg. Under the arrangement, buyers of Russian gas are required to open accounts in foreign currency and in rubles with Gazprombank. Importers would pay in a foreign currency and Gazprombank would sell it on the Moscow Exchange and credit the buyers’ accounts with rubles. If the US fail to include Gazprombank on the general licence, Russian authorities would be forced to allow European buyers to pay via other banks, which would be “humiliating” for the Russian president Vladimir Putin, Kolyandr said. “Nevertheless, the remaining buyers are all Russian allies, which means Russia could grant some flexibility,” he said. The sanctions include a wind-down period for transactions involving Gazprombank until 20 December 2024 and for those related to the Sakhalin-2 oil and gas project in Russia’s Far East until 28 June 2025. Nevertheless, if Gazprombank is included on the general licence on energy transactions, transactions – including payments to or from Gazprombank – could continue as usual but only in relation to energy deals, Kolyandr said. A source close to Slovakia’s SPP said the company was monitoring the situation and confirmed that much will depend on “how Gazprom handles the situation.” Traders told ICIS on Friday that the news about US treasury sanctions on Gazprombank kept prices volatile on the final session of the week. One trader said, “it should be possible to pay Gazprom via other banks than Gazprombank” but that “the impact is not really clear yet”. Another trader said, “it is making people nervous.” TTF front-month prices tested €49.5/MWh in the early morning but retreated later in the afternoon, dropping below €47.5/MWh. Additional reporting by Amun Lie

TORONTO (ICIS)–Fallout from the policies and tariffs proposed by US President-elect Donald Trump will inevitably affect Canada’s economy, in particular the manufacturing sector, according to Oxford Economics. US tariffs and Canada’s retaliation Shrinking population Relaxation of mortgage lending rules TRUMP PRESIDENCY The President-elect has proposed increased fiscal stimulus, higher tariffs and curbs on immigration – all impacting Canada. The stimulus, including tax cuts and increased defense spending, will provide the US economy with an initial boost, Tony Stillo, Oxford Economics’ director for Canada, and economist Michael Davenport said in a webinar. Over the first half of Trump’s four-year term, the US stimulus could provide upside to the Canadian economy, “but not a whole lot”, Davenport said. As Trump’s presidency then progresses into its second half, the boost from the stimulus would fade and a drag from his tariffs would set in, slowing down GDP growth, he said. Trump has proposed to raise tariffs by 10-20% on all imports, and by 60% on imports from China. In the case of Canada, Oxford Economics assumes that Trump will impose a 10% tariff on about 10% of US imports from Canada, starting in 2026/2027, targeted at steel, aluminum and other base metals, and that Canada will respond with counter tariffs. US-Canada energy trade is not likely to be subjected to tariffs, they said. The impacts on Canada will be higher inflation. Canada’s central bank will recognize the higher inflation outlook and react by hiking rates in 2026, Davenport said. The Oxford experts think that Trump will likely use the tariff threat as a bargaining chip in the upcoming renegotiations of the US-Mexico-Canada (USMCA) trade pact. However, they would not rule out a more severe “full-blown” Trump presidency, with a 10% import tariff on all Canadian imports, leading to much more significant impacts – in terms of inflation and monetary policies – in Canada. “A full-blown Trump scenario”, and Canada’s retaliation, would be a negative for trade in heavy manufacturing sectors such as autos, base metals, chemicals and chemical products, rubber and plastics products, and autos, among others, Davenport said. While Canada’s manufacturing sector would be most directly exposed to rising import costs from the retaliatory tariffs, the much larger impact on Canada’s economy would come from weaker aggregate demand due to higher inflation, tighter monetary policy, elevated uncertainties and lower consumer confidence, Davenport said. As higher inflation and interest rates squeeze Canadian household budgets there would be big impacts on sectors such as construction and services, he said. Should Trump – contrary to Oxford’s expectations – decide not to go through with his tariffs, then his stimulus measures should be a positive for Canada’s economy, in line with the often-used phrase “What’s good for the US economy is good for Canada’s economy”, he said. However, “we think it’s most likely that Trump does impose substantial tariffs on countries, including Canada, and there is a risk there that tariffs could be more widespread”, he said. In addition to the Trump tariffs and policies, the course of Canada’s economy will also be influenced by a decline in the country’s population and by a recently announced relaxation in mortgage lending rules, the Oxford experts said. POPULATION Following years of soaring population growth, with nearly one million people per year added over the past two years alone, the Canadian government announced it would restrict immigration. Here is a link to a recent video in which Prime Minister Justin Trudeau explains the measures. The restrictions will lead to a decline in the country’s population, marking the first decline since the country was founded in its current form in 1867, Stillo said. The contraction in the population will reduce both supply and demand in the economy, meaning that the economy will shrink, he said. Over the mid-term, it will reduce the unemployment rate, lead to wage growth and to moderately higher inflation, he said. As the tighter jobs market and the Trump tariffs raise inflation, Canada’s central bank will react towards the end of 2026 by raising rates, he said. On the positive side, a tighter jobs market and a higher cost of labor should incentivize capital spending, he said. Also, lower population growth would ease Canada’s housing squeeze, he said. Oxford estimates that with a smaller population, Canada will need 3.7 million new homes to restore housing affordability by 2035, down from its previous estimate of 4.2 million homes. Stillo added that a likely change in government in Canada – with the opposition Conservatives ousting Trudeau’s Liberals – could lead to even tougher curbs on immigration. The Conservatives are well ahead of the Liberals in opinion polls on the elections, which will need to be held before November 2025. Contrary to the government’s plans, however, Canada could soon face an unwanted surge in its population due to a wave of undocumented immigrants from the US, where the President-elect has committed to mass deportations, he noted. MORTGAGE RULES Recently announced relaxations to Canadian mortgage rules will affect not only housing but also the broader economy. Effective 15 December, the government will allow 30-year fixed-rate mortgages for first-time home buyers and widen the eligibility for mortgage insurance. The government also removed a “stress test” for existing mortgage borrowers who switch lenders. Combined, the relaxations will boost household cashflows and “unlock” a new pool of home buyers, Davenport said. They will improve housing affordability, driving up housing sales but also raising prices, he said. Overall, Oxford Economics expects the mortgage measures to improve household finances “in a sustained way”, starting as soon as early 2025, and it expects them to “be key in underpinning a pickup in consumer spending and a pickup in housing”, he said. However, while the measures will support economic growth, they will “exacerbate Canada’s long-standing household debt issues” – meaning that households will remain vulnerable to interest rate shocks and losses of jobs or income, he said. Canada’s household debt is currently much higher than the US debt was just before the 2008/2009 global financial crisis, the Oxford experts noted. Shortly after the Oxford webinar ended on Thursday, the federal government announced new debt-financed short-term stimulus measures, valued at more than Canadian dollar (C$) 6 billion (US$4.3 billion), which, according to economists, could push up inflation. The stimulus includes a removal of the sales tax from a number of goods (including wine, beer and ciders) for two months, from mid-December to mid-February, and a C$250 tax rebate for 18.7 million “working Canadians”. (US$1=C$1.4) Thumbnail of photo Trudeau (left) meeting Trump in Washington in 2019 during Trump’s first presidency; photo source: Government of Canada

LONDON (ICIS)–Countries such as Poland, Lithuania, Latvia and Estonia have submitted a letter to the European Commission calling for customs duty to be imposed on imports of fertilizers from Russia and Belarus, the Polish Ministry of Development and Technology has confirmed. The duty being discussed is 30-40% for nitrogen, phosphate and potash fertilizers. Market participants believe a duty is unlikely to be imposed given Europe’s dependence on Russian fertilizer, especially when gas prices are rising, which could hit domestic production in Europe. European buyers have delayed imports, including of urea, to the first quarter of 2025. It is unlikely any government would want to antagonize the farming community further when there have been protests by farmers across many countries over the cost of inputs and taxes. Domestic producers, including in northwest Europe such as Germany, have been campaigning for duties on Russian fertilizers, but met with no success. Local producers say imports are available at competitive prices, partly due to the low cost of Russian natural gas. This puts pressure on European producers, particularly when it comes to remaining competitive while maintaining profitability. The concern is that the lower Russian prices could lead to an oversupply, creating unfair competition for European suppliers who may not be able to match those prices. There is also a broader concern about Europe, and Germany in particular, becoming too dependent on Russian resources – both in terms of urea and potentially other agricultural inputs. Data from the first eight months of the year shows an increase of more than 50% in fertilizer imports to the EU from Russia compared with the same period last year. In January-August, Russia was the biggest supplier of urea to Poland, at 426,342 tonnes, more than double the 207,981 tonnes in the same period of 2023, according to customs data. Additional reporting by Julia Meehan Thumbnail image source: Shutterstock

LONDON (ICIS)–Eurozone business activity fell in November with confidence in the year-ahead outlook also weakening. The decline in output came as business activity in the service sector decreased for the first time in 10 months to join manufacturing in contraction territory, S&P Global said in its flash Purchasing Managers’ Index (PMI) report. The Hamburg Commercial Bank (HCOB) composite and services business activity indexes both hit a 10-month low, with manufacturing and manufacturing output at two-month lows, according to survey data collected 12-20 November. HCOB PMI Indexes Nov Oct Composite Output 48.1 50.0 Services Business Activity 49.2 51.6 Manufacturing Output 45.1 45.8 Manufacturing 45.2 46.0 A figure above 50 in the index indicates expansion, and below 50 contraction. “For the first time since the opening month of the year, both monitored sectors saw output decrease in November as services joined manufacturing in contraction,” S&P said. Business sentiment for the year ahead fell sharply and was the lowest since September 2023, mainly driven by the service sector where optimism fell to a two-year low. Cyrus de la Rubia, chief economist at HCOB, said recent political events may have been a factor in the weaker business performance. “It is no surprise really, given the political mess in the biggest eurozone economies lately – France’s government is on shaky ground, and Germany’s heading for early elections,” the economist said. “Throw in the election of Donald Trump as US president, and it is no wonder the economy is facing challenges. Businesses are just navigating by sight.” In the UK, business activity also fell in November to end a 12-month period of sustained expansion. All  the PMI indicators were down from the previous month, with a sustained drop in private sector employment amid weaker business optimism and rising cost inflation.