TORONTO (ICIS)–Canadian CEOs and business trade groups are warning about the state of Canada’s fiscal policies. Finance minister resigns Deficit larger than expected Canada struggles to respond to US tariff threat Chrystia Freeland on Monday resigned as finance minister and deputy prime minister, saying that she was “at odds” with Prime Minister Justin Trudeau over the best way forward for Canada amid the tariff threat by US President-elect Donald Trump. Trump said on 25 November that as one of his first actions after taking office on 20 January he would impose a 25% tariff on all imports from Canada and Mexico, which would remain in place until the two countries took action on drugs and immigrants entering the US. The tariffs would have a devastating impact on Canada’s economy, which relies on the US as its largest export market by far. In the chemicals and plastics industry, nearly two-thirds of Canadian shipments are exported to the US, according to trade group Chemistry Industry Association of Canada (CIAC). In her resignation letter, Freeland said that Canada needed to take Trump’s threat “extremely seriously” and needed to “keep its fiscal powder dry” to have reserves for a coming “tariff war” with the US. That meant that the government could not afford “costly political gimmicks”. Trudeau’s Liberal-led government recently implemented a two-month sales tax holiday for a number of goods, including beer, cider and restaurant meals, and it promised a Canadian dollar (C$) 250 (US$175) tax rebate for 18.7 million “working Canadians”. The measures, estimated to cost more than C$6 billion, have been criticized by economists. The Business Council of Canada (BCC) said that it was “deeply troubling” that Freeland believed the government was opting for “costly political gimmicks at a time when federal finances are severely strained.” The BCC represents CEOs of Canadian-based companies. Members include, among others, the heads of BASF Canada, Shell Canada, and of ExxonMobil’s Canadian affiliate, Imperial Oil. Canada needed stable and credible leadership that recognizes the seriousness of the significant economic headwinds over the coming weeks, including the looming US tariffs, the council said. The BCC also noted that despite assurances in the 2024 budget that the government would limit the federal deficit to C$40.1 billion, its latest fiscal update on Monday showed that that number ballooned to C$61.9 billion. “By not keeping its economic promises, the federal government is sending the message that it can’t be trusted to manage the public finances”, said BCC president and CEO Goldy Hyder. Another trade group, Canadian Manufacturers and Exporters (CME) said that Canada was facing a “significant economic threat that demands a decisive, coordinated federal response”. “Canadian manufacturers need political stability, and a government committed to implementing policies that foster resilience, attract investment, and drive growth”, said Dennis Darby, president and CEO of CME. POLITICAL CRISIS Trudeau has come under increasing pressure to step down, even from members of his Liberal party. However, he has said he would lead the Liberals into the next election, which needs to be held by October 2025 but will likely be called earlier. The minority Liberal government needs the support of at least one opposition party in parliament to hang on to power. Two parties, the Conservatives and the Bloc Quebecois, want to bring the government down as soon as possible, they have said. The left-leaning New Democrats have called on Trudeau to resign but have not said whether they would vote to bring the government down. The Conservatives are far ahead of the Liberals in opinion polls on elections. The elections and political uncertainties affect investment decisions in the chemical industry, chemical trade group CIAC has said. The bottom line is that Canada finds itself in political turmoil – at a time when is should be united in the face of the US tariff threat. Thumbnail of photo Trudeau (left) meeting Trump in Washington in 2019 during Trump’s first presidency; photo source: Government of Canada (US$1=C$1.43)

SAO PAULO (ICIS)–US President-elect Donald Trump said late on Monday that his administration may impose higher tariffs on goods from Brazil. In a surprise press conference, Trump spoke at length about his proposed strategy to use import tariffs to make the US wealthier, before adding that many countries charge more tariffs on US goods than vice versa. Brazil was included, but the single mention – almost in passing – had the corporate and financial circles in Brazil talking on Tuesday. “We’re going to be treating people very fairly. But the word reciprocal is important, because if somebody charges us… If India charges us a 100% [import tariffs on US goods], do we charge them nothing for the same?” said Trump. “India charges us a lot. Brazil charges us a lot. If they want to charge us, that’s fine, but we’re going to charge them the same thing. That’s a big statement.” Asked by a reporter about concerns that higher import tariffs will prop up inflation, Trump replied, “Make our country rich. Tariffs will make our country rich.” According to figures from the Brazilian government, total trade in goods between Brazil and the US was around $75 billion in 2023. The US is Brazil’s second largest export market after China, and the third largest source of foreign products to Brazil, accounting for 15.8% of total Brazilian imports. Chemicals trade group Abiquim had not responded to a request for comment at the time of writing. In Latin America, Trump also said he will impose higher import tariffs on Mexican goods in his first day in office on 20 January. Mexican and Canadian goods are currently part of a free trade zone within the North American USMCA free trade agreement (FTA). Earlier this month, Mexican chemicals trade group ANIQ expressed its concern about import tariffs given the integration between the chemicals sectors in both countries after nearly 40 years of free trade. “The chemical industries of both countries are deeply integrated throughout their value chain: raw materials cross borders to be transformed into industrial chemical products, which return in both directions to become products with higher added value,” ANIQ said. “The chemical industry once again expresses its support for collaboration and maintaining a solid commercial relationship that will boost economic growth and ensure North America’s competitiveness and sustainability in global markets.”

LONDON (ICIS)–German business sentiment dropped to its lowest point since May 2020 in December, according to the latest data from the Ifo Institute on Tuesday. The Ifo Business Climate Index fell to 84.7 points, down from  85.6 points in November, with the decline driven by pessimistic expectations. Although companies viewed the current situation as better, the Ifo stated that ‘the weakness of the German economy has become chronic.’ The manufacturing sector bucked the trend of improved current business conditions. Poor sentiment was compounded by deteriorating orders and the announcement of production cutbacks. Meanwhile, the index for the construction sector rose, driven by an improved assessment of current business conditions, mitigating the impact of deteriorating expectations. The outlook for wholesalers weighed down sentiment for the trade sector, compounded by dissatisfaction from retailers. Weaker expectations weighed on sentiment in the services sector despite an uptick in the current situation. Seasonal strength from the catering sector was not enough to offset concerns the transport and logistics sector have about business in the coming months. This supports the outlook that conditions will remain challenging in 2025 for German businesses. According to an Ifo Institute survey, only 12.6% of German companies surveyed expect an improvement in the coming year. In contrast 31.3% anticipate further deterioration and 56.1% predict no change to their economic situation in 2025. “Companies are currently seeing no signs of an economic upturn. In view of the fact that the economy has already performed poorly in 2024, these figures are worrying,” said Ifo head of surveys Klaus Wohlrabe. Thumbnail photo: Berlin (Source: Shutterstock)

SINGAPORE (ICIS)–Asia’s oxo-alcohols market continues to face challenges amid capacity expansions in China. Weak demand from downstream plasticizers sector Upstream support from propylene unlikely Demand recovery to take some time In this latest podcast, ICIS senior editor Julia Tan speaks with ICIS analyst Lina Xu on the latest developments and expectations for what lies ahead in 2025.

MUMBAI (ICIS)–India’s state-owned Hindustan Petroleum Corp Ltd (HPCL) plans to invest rupees (Rs) 46.79 billion ($551 million) to expand the lube oil base stocks (LOBS) production at its Mumbai refinery by 289,000 tonnes/year or by about 61%. “The company board has approved the ‘Lube Modernization and Bottoms Upgradation Project’ at the Mumbai Refinery,” it said in a statement to the Bombay Stock Exchange on 16 December. This project will increase the company’s LOBS production to 764,000 tonnes/year from current 475,000 tonnes/year with production of superior grade Group II+ and Group III LOBS, it added. HPCL expects to start producing the additional premium base oils via a new integrated hydrocracker and catalytic dewaxing unit by 2027-2028. ($1= Rs84.91)

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. To paraphrase William Shakespeare, I see last week’s fuss about China’s new economic stimulus as being full of sound and fury, signifying hardly anything. The hard reality is that China is undergoing a period of a much lower GDP and therefore chemicals demand growth. Nothing can change this trajectory, for reasons I discuss in detail in today’s post. During 2025, the problem will remain far too much global capacity chasing much weaker-than-expected demand up and down all the chemicals value chains because the consensus on China was wrong. So, to add to my five forecasts for 2025 which I published last week, here is a sixth: There will be no significant improvements during next year in China’s CFR polyethylene (PE) and polypropylene (PP) price spreads over CFR Japan naphtha costs. The 2024 final numbers are almost in. We can see that the downturn in spreads that followed the Evergrande Turning Point continues. Let’s start with PE where 2022-2024 average spread for the three grades was just $300/tonne. This compares with a spread in 1993-2021 – during the Chemicals Supercycle – that averaged $532/tonne. The average 2022-2024 PP spread was $240/tonne as against $562/tonne during the Supercycle. Please don’t be distracted by unhelpful noise. Instead, place all your focus on retooling your tactics and strategies to deal with the post-Supercycle chemicals world. 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)–Two world-scale joint venture projects being developed by Chevron Phillips Chemical and QatarEnergy remain on track to start operations in 2026, Phillips 66 said on Monday. Phillips 66 and Chevron hold equal stakes in Chevron Phillips Chemical (CP Chem). The US project is Golden Triangle Polymers, an integrated polyethylene (PE) complex in Orange, Texas. Chevron Phillips holds a 51% stake, and construction started in 2023. The Qatari project in Ras Laffan is another integrated PE project. It is a 70:30 joint venture between QatarEnergy and CP Chem. Construction on this project started in 2024. PHILLIPS 66 CAPEX BUDGETPhillips 66 provided the updates on the two petrochemical projects when it revealed its 2025 capital budget, as shown in the following table. Figures are in millions of dollars. Sustaining Growth TOTAL Midstream 429 546 975 Refining 414 408 822 Marketing & Specialties 63 91 154 Renewable Fuels 18 56 74 Corporate and other 74 1 75 TOTAL 998 1,102 2,100 Source: Phillips 66 Phillips 66’s proportionate share of capital spending in its CP Chem and WRB Refining joint ventures is $877 million, and its inclusion would bring Phillips 66’s total 2025 capital spending to $3 billion. The joint ventures’ spending will be self funded, Phillips 66 said. WRB Refining is a 50:50 joint venture made up of Phillips 66 and Cenovus Energy. The joint venture owns the Wood River refinery in Illinois and the Borger refinery in Texas. WRB’s capital spending will direct its capital spending on sustaining projects, Phillips 66 said. PHILLIPS TO SELL STAKE IN OIL PIPELINEA subsidiary of Phillips 66 has agreed to sell its 25% non-operated stake in the Gulf Coast Express Pipeline to an affiliate of ArcLight Capital Partners. Pre-tax proceeds from the sale should total $865 million. The sale should close in January 2025. Thumbnail shows PE. Image by ICIS.

HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 13 December. Dow’s $2.4-3.0 billion infrastructure deal larger than expected Dow signed a deal to sell a minority stake in its US Gulf Coast infrastructure assets to a fund managed by Macquarie Asset Management for up to $3.0 billion – larger than expected, according to UBS. PCC’s proposed USG chlor-alkali unit to add caustic length in unique development US caustic soda supplies will continue to grow in the coming years following an announcement by PCC Group that it intends to invest in a new 340,000 tons/year chlor-alkali plant at DeLisle, Mississippi. The new capacity will be built on Chemours site at DeLisle Mississippi with the intent to provide Chemours with reliable access to chlorine. The company intends to sell its caustic soda to strategic partners and into the open market. Construction on the unit is expected to begin in early-2026 and conclude in 2028. INSIGHT: New gas pipeline to provide support for ethane prices for US chems 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. Olin to shut diaphragm chloralkali capacity that serves Dow’s Freeport PO unit Olin plans to shut down its diaphragm-grade chloralkali capacity in Freeport, Texas, that provides feedstock to Dow’s propylene oxide (PO) unit, the US-based chloralkali producer said on Thursday. ACC expects modest US chemicals volume recovery in 2025 – economist The American Chemistry Council (ACC) expects a 1.9% rebound in chemical volumes in 2025 after two consecutive years of declines as the US economy undergoes a soft landing and the housing market improves in the second half of the year, its chief economist said.

LONDON (ICIS)–Click here to see the latest blog post on Chemicals & The Economy by Paul Hodges, which looks at the likely colder weather ahead. 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.