HOUSTON (ICIS)–The tentative agreement between US Gulf and East Coast ports and dockworkers has taken some of the pressure off rates for shipping containers from Asia to the US, but the threat of tariffs proposed by President-elect Donald Trump is likely to support higher prices moving forward. Supply chain advisors Drewry expect importers to continue front-loading volumes ahead of anticipated tariff hikes. Global average rates from Drewry rose by 2% this week, as shown in the following chart. Rates from Shanghai to Los Angeles surged by more than 13%, and rates from Shanghai to New York jumped by almost 10%, as shown in the following chart from Drewry. Rates from online freight shipping marketplace and platform provider Freightos showed a similar surge, with rates to the West Coast soaring by 23% and rates to the East Coast jumping by 13%. Upward pressure on rates persists as imports are expected to continue to surge because of potential increases in tariffs, according to the National Retail Federation (NRF). “The new [ILA] contract brings certainty and avoids disruptions, and we hope to see it ratified as soon as possible,” NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said. But Gold said because the agreement came at the last minute, retailers were already bringing in spring merchandise early to ensure that they would be well-stocked to serve their customers in case of another disruption, resulting in higher imports. “The surge in imports has also been driven by President-elect Trump’s plan to increase tariffs because retailers want to avoid higher costs that will eventually be paid by consumers,” Gold said. “The long-term impact on imports remains to be seen.” The Global Port Tracker from the NRF and Hackett Associates, shows in the following chart that US ports handled 2.17 million TEUs (20-foot equivalent units) in November, although the ports of New York and New Jersey have yet to report final data. That was down 3.2% from October but up 14.7% year over year. Ports have yet to report December data, but Global Port Tracker projected the month at 2.24 million TEU, up 19.2% year over year. That would bring 2024 to 25.6 million TEU, up 15.2% from 2023. January is forecast at 2.16 million TEU, up 10% year over year; February at 1.87 million TEU, down 4.5% because of Lunar New Year factory shutdowns in China. Thumbnail image shows a container ship. Photo by Shutterstock

BARCELONA (ICIS)–Chemicals leaders must plan for a year in which powerful trends will alter the markets they serve, promising another period of rapid change across the industry landscape. Global overcapacity will get worse this year, ICIS Supply & Demand data show Depressed demand set to continue Donald Trump tariffs may change trade flows, fuel inflation China economy will continue to struggle Disinformation will make it difficult to navigate trends Look for pockets of growth from low carbon agenda In this Think Tank podcast, Will Beacham interviews Nigel Davis and John Richardson from the ICIS market development team and Paul Hodges, chairman of New Normal Consulting. 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.

SINGAPORE (ICIS)–Global economic growth is projected to remain at 2.8% in 2025, unchanged from 2024, weighed by trade tensions spurred by the incoming Donald Trump administration in the US as well as geopolitical risks, according to a United Nations (UN) report. The US and China – the world’s biggest economies – are projected to grow at a slower pace but will be offset by modest recoveries in the EU, Japan, the UK, as well as robust performance in India and Indonesia, the UN World Economic Situation and Prospects 2025 report stated. The UN estimates China’s economic growth at 4.9% in 2024 and 4.8% in 2025; while the US’ 2024 GDP growth is expected at 2.8%, which will slow down to 1.9% this year amid “weaker labor market performance, modest income growth, and looming cuts in public spending”. “Despite continued expansion, the global economy is projected to grow at a slower pace than the 2010–2019 (pre-pandemic) average of 3.2%,” according to the report released on 9 January. Challenges such as weak investment, slow productivity growth, high debt levels, and demographic pressures continue to weigh on economic growth. Various uncertainties and downside risks continue to cloud the near-term economic outlook as well, notably geopolitical tensions and rising trade and technological tensions, the report said. Global trade volume is projected to grow by 3.2% in 2025, subject to these growing uncertainties, the UN added. The incoming Trump administration and his ‘America First’ policies, which include tariffs levied on all foreign goods, will be a major source of uncertainty in the near-term. Global inflation has continued its downward trend, with headline inflation projected to continue easing to 3.4% in 2025 from 4.0% last year and 5.6% in 2023, according to the UN report.

SAO PAULO (ICIS)–Brazilian senator Sergio Moro this week rallied plastic manufacturers against the October increase in import tariffs arguing it primarily benefits petrochemicals major Braskem by protecting its sales in the domestic market. In a public hearing in Brazil’s parliament second chamber, former judge Moro criticized the import tariffs increase – most of them from 12.6% to 20.0% – highlighting that they are to benefit mostly Braskem due to its near-monopoly in Brazil’s resins production. The company holds predominant positions in the production of polyethylene (PE) and polypropylene (PP), among others. The company is controlled by Novonor (formerly Odebrecht) but state-owned energy major Petrobras also holds a significant stake. This week, the trade group representing chemicals producers in Brazil, Abiquim, in which Braskem has a commanding voice, said the higher import tariffs were not to benefit only Braskem or the chemicals industry itself, but the whole manufacturing sectors which have been pressured by cheaper material produced overseas. Braskem had not responded to a request for comment at the time of publication. PUBLIC ENQUIRYSome manufacturers, including the trade group representing plastic transformers Abiplast, are pushing for a parliamentary inquiry (CPI in Brazill’s parliamentary jargon) to pressure for a return to previous rates. In their view, more expensive imports will ultimately be passed onto consumers, and therefore feed inflation. Senate leaders, however, concede that success in setting up a CPI is unlikely. “It is clear that it is necessary to defend the national industry, especially against unfair competition,” said Moro in a public hearing. “There is a very significant detail, however, since the production of these plastic resins in Brazil is almost a monopoly of a single company, Braskem.” Braskem’s CEO, Roberto Ramos, skipped the hearing despite being summoned. UTILIZATION RATES HIT LOWSAbiquim, which for months lobbied the government to increase import tariffs, said this week the Senator’s moves and those by companies and trade groups to lower import tariffs were missing the key point that Brazilian industry needed protection from some imports “predatory prices.” The trade group argued the government’s decision to hike tariffs in dozens of chemicals was accompanied by other tariff increases as well as non-tariff measures to protect the competitiveness of industrial sectors such steel, glass, tires and paper. According to figures by Abiquim, imported chemical products’ share of the Brazilian market reached 49% between 2000 and 2024, leading to record 36% idle capacity in the domestic chemical industry. “Abiquim believes that the Brazilian government correctly acted with an emergency and high-impact measure to correct the surge in imports, which unfortunately led to the halt of production in the chemical sector,” said the trade group. “Therefore, Abiquim reaffirms that the measure that defends the chemical sector as a whole is part of the same correct technical process of defending sectors of the Brazilian industry attacked by unfair and predatory imports.” It conceded, however, that Brazil has an “structural challenge” with the competitiveness of its industry while admitting higher import tariffs – set to be in place for 12 months – were just a temporary measure to “stimulate production” domestically.

HOUSTON (ICIS)–A surge in new methyl methacrylate (MMA) capacity in China will keep utilization rates depressed during the next few years, even with the recent decision by Mitsubishi Chemical to cancel its proposed project in the US. Mitsubishi said it cancelled its proposed MMA plant because it could not secure enough long-term commitments from customers. The US plant would have been the third featuring Mitsubishi’s Alpha process technology, which uses ethylene, methanol and carbon monoxide (CO) as feedstock. Even after Roehm starts up its own ethylene-based MMA plant in the US, the country will have less MMA capacity than at the start of the decade. FLOOD OF MMA IN CHINASince 2020, Chinese MMA capacity has expanded rapidly. By 2028, ICIS expects it will grow by 67% from 2020, adding an extra 1.77 million tonnes/year of capacity. That added capacity exceeds that of North American and Europe combined. Most of the new capacity in China relies on the acetone cyanohydrin route, although some of the other new plants use the isobutylene path. There is even a sprinkling of ethylene-based plants. The following chart shows the growth of MMA capacity in China. Figures are in thousands of tonnes/year. Source: ICIS MMA capacity has grown faster than demand, and the excess is showing up in depressed operating rates. Global MMA utilization rates fell to 61% in 2023, and they will remain in the low 60s through 2028, according to the ICIS Supply and Demand Database. From 2010-2019, global MMA utilization rates never fell below 75%. ROEHM GETS EARLY START ON US MMA PLANTRoehm is also developing a US MMA plant that will be based on its ethylene technology. The plans from Roehm and Mitsubishi were revealed by ICIS in 2019, and their new plants were intended to replace older ones that relied on acetone. The following table compares the capacities of the new plants with the ones that would be shut down. Figures are in tonnes/year. NEW PLANT OLD PLANT Roehm 250,000 160,000 Mitsubishi 350,000 155,000 Source: ICIS While Mitsubishi continued evaluating its project, Roehm proceeded with construction and broke ground in October 2022. Roehm should start up its new plant this quarter. Had Mitsubishi and Roehm both proceeded with their plants, the US would have a surplus of MMA, an unappealing prospect in a market with such a large glut of material. Mitsubishi has closed three plants globally since 2020, and all used the acetone cyanohydrin route. Their 155,000 tonne Beaumont, Texas plant shut in 2021, followed by the 200,000 tonne site in Billingham, UK at the end of 2022 and 110,000 tonnes of capacity in Otake, Japan in 2024. EXPORTING IN AN OVERSUPPLIED MARKETThe outlook for MMA demand will make it more difficult for the market to grow out of its glut. MMA is used in paints, coatings, adhesives and durable goods like displays and automobiles. These applications are sensitive to higher interest and mortgage rates. Consumers tend to buy new appliances when they move. Because mortgage rates are high, fewer people are buying homes and purchasing durable goods made of MMA. Until rates decline and US housing markets recover, many of the major end markets for MMA will remain depressed. Mitsubishi described future demand growth as stable, which is hardly justification for investing in a world-scale plant. Mitsubishi expects to meet immediate MMA demand with its existing plants. ELEVATED CONSTRUCTION COSTSThe Mitsubishi project did have one thing going for it. The plant would have relied on ethylene and methanol as feedstock, and the US holds cost advantages for both feedstocks. The plant’s feedstock advantage could give it an edge in an oversupplied market that predominantly relies on acetone as a feedstock. The problem is that the US feedstock advantage is becoming offset by rising costs for material and labor. Chemical plants are competing for parts, labor and materials with a growing number of other industrial and infrastructure projects. In 2023, several US projects faced large cost overruns. Companies building a polyester plant and a sulfuric acid plant put their projects on hold. Insight article by Al Greenwood Thumbnail shows objects made out of polymethyl methacrylate (PMMA), which is made from MMA. Image by Shutterstock.

The heavier base oils grade Brightstock may hold onto its large premium over low-viscosity grades until the end of this quarter on the back of tight supply and high energy costs. Widening premium partly driven by high energy costs Limited availability for Brightstock Upcoming expanded capacity in H2 2025 could shift market direction Participants with specific requirements for the heavier grade may need to look at either paying up for the premium or taking a wait-and-see approach. Later in the year, weather-driven seasonal drops in energy prices may make producing and storing Brightstock slightly cheaper, while expectations of additional base oils capacity due to come on stream may ease the supply tightness. As opposed to other low viscosity grades, Brightstock needs to be stored at higher temperatures of 50-55°C, according to market participants. The heating requirements result in higher storage, production and shipping costs than for other grades. But the heavier material may be preferred by some buyers in the market because of its higher viscosity. The spread between Brightstock and other grades such as SN150 or SN500, also part of Group I base oils, may increase in cold winter months especially in northern Europe where heating needs are greater. WIDENING SPREADRecent high energy prices in most of Europe combined with a tight supply have contributed to a further widening of the spread. When an oversupply and reduced demand weighed on SN150 and SN500 in the past few weeks, the heavier grade remained steady, widening the spread to the other grades. In fact, the Brighstock-SN150 spread has stayed at a two-year high since 17 December. The situation is likely to persist in the next few months, said ICIS senior analyst Michael Conolly, pointing to “the lack of availability due to closure of lots of Group I plants globally and the lack of substitutes for heavier grades like Brightstock”. Lighter grades in Group I may be substituted with light Group II grades in various applications. A market player agreed: “The biggest problem is the volume is just not enough.” The return from maintenance in late December of Cepsa’s plant at Algeciras may help inject some Brightstock supply, but not this may not displace the existing spread. One active trader said southern Europe was observing lower production costs for Brightstock. This was most likely driven by lower energy prices in countries such as France or Spain, a second trader explained. High French nuclear capacity has capped electricity prices. ICIS gas and cross-commodity expert Aura Sabadus said: “Spain has a lot of LNG [capacity] but cross-border interconnectors to Europe are limited, meaning that the majority of its gas stays in the country.” This also helped keep gas prices more subdued than in other northern European countries such as the Netherlands or Germany. Base oils make up the key component of finished lubes and greases in automotive and manufacturing industries. Infographic by Yashas Mudumbai

East Asian spot LNG and European gas strengthen pricing relationship in 2024 Shift towards LNG as a form of baseload supply has consolidated the correlation between Europe and Asia In the absence of regional supply shocks, correlation should at least sustain in 2025 LONDON (ICIS)–Throughout 2024 the daily price correlation between European TTF and Asian spot LNG markets held above 90%, with the close connection likely to continue in 2025. The correlation between both markets remained steady at 94% from the first to the third quarters, then falling a little to 91% in the fourth quarter. This is based on the simultaneous ICIS TTF Early Day and ICIS East Asian Index assessments that close at 16:30 Singapore time. The correlation reflects ongoing competition for volumes between the two regions, in addition to a number of Asian market participants using early-day swings in the TTF to provide guidance for outright Asian spot LNG prices. The correlation is also obvious in daily market feedback where traders frequently cite fundamentals in the other region as influencing sentiment in their home market. The recent near-perfect correlation between the two markets confirms the globalized nature of the gas market, and how each basin can at times influence sentiment in the other amid Europe’s greater dependency on LNG. The correlation is expected to remain strong as Europe’s reliance on LNG will continue, and with market prices key in directing destination-free US LNG cargoes that can move to the highest-priced market, in turn flatting price differences between markets. There are times when regional fundamentals lead to a disconnect between prices between the regions but these were short lived in 2024. Without previous baseload Russian pipeline gas in Europe, the TTF is increasingly influenced by wider gas fundamentals, and can react quickly to issues outside Europe. US LNG volumes continue to grow, now firmly over a fifth of the total global LNG market, with more new supply to come from Venture Global’s Plaquemines LNG and Cheniere’s Corpus Christi expansion in 2025. Record low charter rates has also helped to narrow the price differential between the two markets, once again, strengthening the relationship between Europe and Asia.

HOUSTON (ICIS)–Union dockworkers and US Gulf and East Coast port operators tentatively agreed to a new six-year contract Wednesday, averting a strike that was about a week away. The International Longshoremen’s Association (ILA) and United States Maritime Alliance (USMX) will work under the existing agreement until the union can meet with its full wage scale committee and schedule a ratification vote, and USMX members can ratify the terms of the final contract. The two sides agreed on the financial portion of the contract in October, ending a three-day strike and postponing the work stoppage until 15 January. A stalemate developed over automation at the ports, which port operators said was needed to remain competitive globally and which the union said would threaten human jobs. “This agreement protects current ILA jobs and establishes a framework for implementing technologies that will create more jobs while modernizing East and Gulf coast ports – making them safer and more efficient and creating the capacity they need to keep our supply chains strong,” the parties said in a joint statement. Details of the new tentative agreement will not be released to allow ILA rank-and-file-members and USMX members to review and approve the final document. The October strike and the threat of next week’s work stoppage had some impact on market participants. Many importers pulled forward volumes because of the possibility of a strike, pushing rates for shipping containers higher. To mitigate risks, some buyers and suppliers took a wait-and-see approach, while others scheduled shipments with maximum deadline until the first week of January to ensure supply chain continuity and safeguard against potential disruptions that could affect pricing and availability. Container and vessel availability was a challenge for exports following the impacts in ocean logistics from the three-day strike in October, with lead times to secure available space on a vessel being cited at four to six weeks. 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. (adds details in paragraphs 7-12)

HOUSTON (ICIS)–Union dockworkers and US Gulf and East Coast port operators tentatively agreed to a new six-year contract Wednesday, averting a strike that was about a week away. The International Longshoremen’s Association (ILA) and United States Maritime Alliance (USMX) will work under the existing agreement until the union can meet with its full wage scale committee and schedule a ratification vote, and USMX members can ratify the terms of the final contract. The two sides agreed on the financial portion of the contract in October, ending a three-day strike and postponing the work stoppage until 15 January. A stalemate developed over automation at the ports, which port operators said was needed to remain competitive globally and which the union said would threaten human jobs. “This agreement protects current ILA jobs and establishes a framework for implementing technologies that will create more jobs while modernizing East and Gulf coast ports – making them safer and more efficient and creating the capacity they need to keep our supply chains strong,” the parties said in a joint statement. Details of the new tentative agreement will not be released to allow ILA rank-and-file-members and USMX members to review and approve the final document.