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INSIGHT: Central bank credibility could erode in face of fresh inflation challenges
LONDON (ICIS)–The credibility that central banks have built up over the last few years has helped to contain the surge in inflation, but their capacity to calm markets could erode in the event of unexpected fresh challenges. Despite their importance, central banks traditionally have very few options to influence the economy, essentially boiling down to a lever that monetary policy committees can push up or down to move interest rates. The development of unconventional monetary policy, such as the European Central Bank’s campaign of buying up risky sovereign debt and company securities, expanded that toolkit to an extent. That asset-backed securities purchase scheme has been discontinued since July 2023 and in general the options available to central banks are far more limited than their prominence in global markets over the last few years would indicate. SURGE AND CONTAINMENT Through the post-pandemic inflation surge, central banks have had the task of bringing down levels, first through hiking interest rates, then attempting to bring those rates down without sparking a fresh surge in inflation. This task, of shifting from almost non-existent inflation for most of the post-financial crisis period to levels of over 10% in just over a year, was further complicated by the strange dynamics of that surge. Despite the ECB’s main refinancing rate rising from zero to 4.5%, and the US Federal Reserve’s key rate rising to over 5% in a highly compressed time period, wage and job growth continued to grow, in turn making inflation more stubborn. The disinflationary period that followed has also proven volatile, as rates tick up and down and raw material costs stay high despite weak industrial growth Despite this volatility, central banks have been successful so far at slowly bringing down rates. This progress may be slower than market players had hoped, with 2024 turning into 2025 potentially turning into 2026 without any substantial uptick in global economic growth or industrial demand. But the overall trajectory of bringing down inflation and cutting rates has been steady so far. The success so far has helped to maintain central bank credibility, as the sense that monetary policy committees have some degree of control over the situation helps to prevent market panics and any wider sell-offs. “One of the great achievements in that inflation episode we’re just coming out of is the fact that inflation expectations remained very well anchored in most countries in the world,” said IMF chief economist Pierre-Olivier Gourinchas at a press conference this month. “Central banks were able to rely on the credibility that they had accumulated over the years and convince households and businesses that they would not let inflation run away,” he added. PRESSURES GROWING AGAINDespite central bank success at bringing down interest rates without substantially reigniting inflation, rates have been slowly creeping up in some markets. Eurozone inflation firmed for the third consecutive month in December to 2.4%, driven in part by higher energy costs that have only increased into 2025. Input cost increases are also intensifying, with inflation intensifying at the highest rate in 21 months for the eurozone, despite only moderate service sector growth and continued recessionary conditions for manufacturing. The UK, similarly, is currently in danger of entering a phase of “stagflation”, where inflation remains high despite stagnating or falling growth. China is a different picture, with inflation low and input prices continuing weak. The US, which continues to outperform Europe economically and saw manufacturing sector output return to growth in January, has also experienced another month of firmer input costs and the highest rate of goods price inflation in 10 months. TARIFFSThere is also the question of the impact tariffs will have on global inflation trends. Governments are increasingly adopting protectionist measures such as anti-dumping duties to safeguard domestic industries. The new US administration has also promised fresh tariffs. These have failed to materialise at the rate initially expected, with levies on Canada and Mexico absent from inauguration day announcements, and little mention of Europe. US President Donald Trump has signalled willingness to deploy tariffs quickly as situations evolve, imposing then revoking emergency measures on Colombia late last weekend, and calling on Monday for 25-100% on Taiwan-made semiconductors. Trump has also called for the Federal Reserve to move faster in bringing down rates, although there is no indication at present that the bank’s monetary policy committee intends to comply. CREDIBILITY SHOCKS Central bank credibility through the gauntlet of market shocks seen in the last five years has been maintained through providing the impression of having a grasp of market movements and how to control them. There is a danger, Gourinchas noted, that the effort expended to keep a grip on the market so far, in the face of continuing volatility of inflation and a weak economic recovery, may have eroded central banks’ “credibility capital”. “If we were to have a new sequence of increase in price pressures… under some of the risks that would be associated with… expansionary policies in some parts of the world or some supply-constraining policies, then that capital may be eroded,” he added. If hotter pricing conditions and chilly growth rates continue to flow through the west, then there is a danger that inflation expectations could become de-anchored, Gourinchas said. This could result in businesses and households becoming more cautious in general, and quicker to take fright at negative market signals. “Households, people, businesses may be very, very cautious and very reactive in adjusting their prices and their inflation expectations going forward.  That would make the task of central banks much more difficult,” Gourinchas said. “In this environment, monetary policy may need to be more agile and proactive to prevent expectations from de-anchoring, while macro-financial policies will need to remain vigilant to avoid a build-up of financial risks,” he added. So far, central banks have more or less managed to plot a steady course through a narrow strait as they gradually unwind interest rate highs and inflation holds close to target. But, with growth continuing slow, inflation pressures intensifying dramatically and the potential for major policy shifts, the path to bringing down interest rates while maintaining market credibility only gets more treacherous. Insight by Tom Brown
PODCAST: Chemicals must do more to boost female leadership
BARCELONA (ICIS)–Women are under-represented in the chemical industry and companies are missing the benefits diversity brings to leadership teams. It could take 50 years for women to achieve gender equality Women under 30 have closed the gender pay gap But inequality increases at more senior levels Burn out is a major problem for female executives Companies with diverse workforces out-perform Women deterred from choosing roles which are male-dominated Chemical industry only has 30% female workforce globally More flexible working arrangements very important Women in Chemicals aims to help females achieve their ambitions In this Think Tank podcast, Will Beacham interviews Kylie Wittl and Amelia Greene, co-founders of Women in Chemicals and ICIS chief strategy officer, Alison Jones. 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 .
Brazil’s chemicals to slow in 2025 amid currency, fiscal deficit woes – Activas CEO
SAO PAULO (ICIS)–Brazil’s chemicals distribution sector posted healthy activity in 2024 as manufacturing finally gained traction, but conditions are set to worsen in 2025 amid high inflation, high borrowing costs, and a government too prone to spend, according to the CEO at Brazilian chemicals distributor Activas. Laercio Goncalves added that he was not too concerned about the prospect of US tariffs on Brazilian goods – credit ratings agency Moody’s forecasts by mid-2025 the US is will impose a 5% general tariff on them – although he lamented “the world is becoming more closed” and protectionist. Activas employes 150 workers at eight Brazilian sites. In 2024, it posted sales of Brazilian reais (R) 700 million ($118 million). Goncalves said the company is looking to expand by starting up a ninth distribution facility in Brazil’s south, where it already has a considerable presence with six out of its eight distribution facilities. Headquartered in Sao Paulo, Activas operates in that state its main facility in Maua and a smaller one in Sao Bernardo do Campo. Four more distribution facilities are in the country’s southern industrious states: Duque de Caxias (main petrochemicals hub in Rio de Janeiro state), Joinville (Santa Catarina), Caxias do Sul (Rio Grande do Sul), and Ibipora (Parana). In the country’s north, Activas operates two facilities in Cabo de Santo (Pernambuco) and Maceio (Alagoas). Activas sales 2024 2023 2022 2021 In million R 700 700 750 1,000 ‘REALISTIC TARGET’Goncalves remains committed to bringing Activas back to the R1.0 billion sales mark it posted in 2021, when chemicals prices shot up in the aftermath of the pandemic-induced lockdowns. He said he is confident the company can achieve that within a few year, but the CEO recognized that the 2021 sales figure was much about inflated prices and not much about actual larger volumes. “We already reached that level of sales [R1.0 billion] during the pandemic, so this is a realistic goal. For 2024, we had made a conservative business plan and indeed Q1 2024 was a very complicated quarter. At the time, a year ago or so, we were quite pessimistic: economic policy changes at home, wars abroad… everything was skewing the risks downside,” said the CEO. “So, after drawing up that rather conservative forecast for 2024, we started working internally on how to increase profitability. Sometimes it was reducing volumes of certain products while focusing on the most profitable lines, and by working operationally like that we managed to turn the year around – the second and third quarters were very good.” Activas, like other Brazilian distributors such as Quimica Anastacio, were able to ride on the manufacturing bonanza in Brazil in 2024, which together with booming agriculture and healthy services propelled GDP growth to around 3.5%. In 2023, GDP had grown by 3.2%. For 2025, Activas expects its sales could grow above the average growth of 2% expected by the Brazilian chemicals industry overall. BRAZIL: WRONG WAYWhile admitting that Activas and the industry’s performance in general sharply improved in the past two years, which coincided with the first two years of President Luiz Inacio Lula da Silva’s term, Goncalvez leaves no doubt he is not keen on a government he perceives as high spending and too interventionist. “A left-wing government… overtaxes. It puts the businessman against the wall all the time,” he said, adding that the cabinet should be more focused on propping up industrial investments, rather than tax them. However, Goncalves not only shows disappointment at Lula economic policy, he widens the criticism to the country’s industrial investment strategies over the past 50 years – or, rather, the lack of them. Activas’ CEO, despite all the criticism, also gave overriding support to the key measure affecting Brazilian chemicals in 2024, which came from a protectionist measure: the increase in import tariffs for dozens of chemicals, mostly of them from 12.6% to 20%, in October, which are expected to greatly prop up domestic producers’ earnings. “Import tariffs in Brazil were a highly relevant topic in 2024 and are expected to continue impacting the market in 2025, especially with the application of ADDs [anti-dumping duties] due to oversupply and dumping practices by China. These measures have a positive side, as they protect the national industry, benefiting both producers and local distributors,” said the CEO. “In the case of Activas, higher import tariffs strengthened our positioning in the domestic market. On the other hand, as we also import some product lines, such as ABS [acrylonitrile butadiene styrene] and PET [polyethylene terephthalate], some of these measures may bring specific challenges to our operation.” Goncalves said he had also good eyes to the possibility of Braskem’s Novonor controlling stake to be acquired by a consortium of Brazilian banks, with involvment of the country’s state-owned investment bank Bndes, as it would reinforce the Brazilian chemicals industry overall as well as its global footprint. “As direct partners [Activas is one of Braskem’s official distributors in Brazil], we view this change positively, as we believe that the government’s presence can bring stability and foster strategic investments in areas such as technology and sustainability, benefiting the entire production chain,” said Goncalves. “In addition, this perspective strengthens the competitiveness of the local industry, creating opportunities for innovation and the development of solutions aligned with the demands of the domestic and foreign markets. We are confident that, with solid governance and a long-term vision, Braskem will continue to play an essential role in the growth of the industry.” PROTECTIONISM ON THE RISEWhile on the one hand Goncalves admitted protectionism is back in the agenda like never before in the past 70 years, he was glad to see public opinion and policy makers delve into “Important discussions” about what industrial fabric countries are willing to have and willing to support in times of global oversupply for many industrial goods. And, once again, the Activas CEO leaves no doubt about his political preferences from the perspective of businesses and who, in his view, would contribute to a more thriving economy. “Current global trade policies reflect a changing scenario. The new wave of protectionism, driven by leaders like Trump, has brought to the fore important discussions about the search for a balance between protecting national interests and maintaining global trade flows,” said Goncalves. “We maintain a positive view of these changes. We are seeing a weakening of the left in many regions, which paves the way for economic policies that are more aligned with growth and competitiveness.” MANAUS: UNRESOLVEDSince ICIS last interviewed Goncalves in 2023, he said nothing has improved regarding Brazilian chemicals companies’ complaints about imports entering the country via the Free Economic Zone of Manaus, in the northern state of Amazonas. The concerns are shared by production and distribution sides alike. Manaus, the state’s capital, created a Free Zone in the 1960s to prop up development there, and taking advantage of the region’s waterways. However, many of the imports entering via Manaus are not directed to manufacturing in Amazonas itself but are just re-packaged and sold on. In theory, the tax incentives resulting from the Free Zone would only apply to imports which are later transformed in the region to produce Brazilian goods, creating employment and income for the state coffers. In practice, many of the imports are sent south to the industrial hubs of Sao Paulo, Rio Grande do Sul, or Rio de Janeiro, without paying the due taxes. “The Manaus free trade zone represents an entrenched economic anomaly in Brazil, where decades of improper product imports have become normalized despite repeated political attempts at reform,” said Goncalves. “Previous Federal governments’ attempts at reform were decisively blocked [the state of Amazonas has the exclusive right over the free zone], underscoring the zone’s significant political protection. “With tax gains approaching 30%, the economic incentives for maintaining the status quo remain overwhelmingly strong, rendering meaningful reform seemingly impossible despite clear systemic irregularities.” This interview took place at Activas’ offices in Sao Paulo last week. Interview article by Jonathan Lopez

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Baltic ENTSO-e synchronization unlikely to boost prices – expert
Baltic states to conduct preliminary island test before February synchronization Kaliningrad can operate in isolation after Baltic states unplug from Russian grid Exclave has abundant sources of Russian gas LONDON (ICIS)–EU electricity prices are unlikely to increase after the synchronization of the Baltic countries with the European continental area, scheduled for February 9. Estonia, Latvia and Lithuania are scheduled to unplug for good from the Belarussian and Russian integrated system, also known as BRELL, and connect to the ENTSO-e continental area after a short preliminary test in the first half of February. Speaking to ICIS, Susanne Nies, energy expert at Helmholtz Zentrum Berlin, a Germany-based think tank, said there will be very limited commercial exchanges between the three countries and Poland as the synchronization will be primarily technical in a first stage. Furthermore, the three countries are already connected with each other as well as Sweden and Finland via back-to-back lines. On 9 February, the 1GW LitPol  double circuit lines connecting Lithuania to Poland will switch from island direct current mode to an alternating current regime and the Baltic countries will synchronize with the rest of Europe via Lithuania. The LitPol high-voltage line will be backed up by a new interconnector operating in synchronous mode that is scheduled to be completed by 2030. For now, commercial exchanges will be very limited, which means prices will not increase on either side of the LitPol interconnector. RISKS Nies, however, warned of possible incidents in the run-up to the synchronization and said that recent attacks on subsea infrastructure including on EstLink-2 a power cable connecting Estonia to Finland by a vessel belonging to Russia’s shadow fleet may be linked to the upcoming European grid synchronization. Just like Ukraine, which unplugged from the Russian system hours before the start of the all-out war in February 2024, the Baltic countries fear disconnection from the former Soviet grid will bring reprisals from the Kremlin, she said. KALININGRAD SUPPLIES The countries will also disconnect from the Russian Kaliningrad exclave, which will be operating as an isolated system from now on, Nies told ICIS. She said the exclave relies on four thermal power plants including three operating on natural gas and one on coal. Nies also added that the exclave is supplied with a transit pipeline entering Kaliningrad via the Sakiai border point with Lithuania. According to ICIS compiled data, Russia delivered 2.3bcm via this route and can also deliver LNG to the Marshal Vasilevskiy FSRU berthed in the Baltic Sea, which has a total regasification capacity of 5bcm/year. The FSRU can be supplied from the Portovaya liquefaction plant, northwest of Saint Petersburg. The plant was recently included in a comprehensive sanctions package issued by the US Treasury. ICIS senior analyst Alex Froley said, “theoretically, now that Portovaya has been sanctioned, Russia could send the Portovaya cargoes across the Baltic into the FSRU, or the Vasilevskiy could make trips to Portovaya and back again. If they were to lose the pipe flows, they could use the FSRU”. Nies said Russia had also built storage capacity in Kaliningrad, which should give the exclave an extra layer of protection. “They had conducted  yearly successful island mode tests in recent years and have all the necessary electricity and gas capacity to operate in isolation once the Baltic synchronization is complete,” she said.
EU commercial vehicle sales up 5.5% in 2024
LONDON (ICIS)–New commercial vehicle registrations in the EU increased by 5.5% in 2024, with trucks the only segment posting a decline, according to the latest figures from the European Automobile Manufacturers’ Association (ACEA). New EU van sales increased 8.3%, at 1,586,688 units, led by positive growth in all four key markets. Spain led with a 13.7% rise, followed by Germany at 8.4%, France at 1.1% and Italy at 0.9%. In contrast, new truck registrations fell 6.3% in 2024, at 327,896 units. This included an 8.5% drop in heavy-truck sales which was partially offset by a 5.6% increase in medium-truck registrations. Of the four major markets, Germany (-6.9%), France (-2.9%), and Italy (-0.7%) saw declines, but Spain recorded a 12% increase. New bus sales rose by 9.2% in 2024 at 35,579 units. Italy recorded 26.7% growth, Spain saw a 10.3% increase and France grew by 2.2%. However, Germany saw a 2% decline. The latest data shows that sales of EU commercial vehicles in 2024 was stronger than that of passenger cars, which only increased by 0.8% for the full year. DIESEL STILL THE MAIN OPTIONDiesel remain the preferred choice for EU van buyers in 2024, with registrations rising by 10.5% to 1,340,003 units. This saw the market share for diesel vans increase by 1.7 percentage points to 84.5%. Petrol vans saw an increase of 3% to stabilize at a 6% market share. However, sales of electrically chargeable vans declined 9.1%, which saw the market share fall to 6.1% from 7.2% in 2023. Hybrid-electric van sales fell by 4.8%, accounting for just 2% of the market. Diesel trucks continued to dominate in 2024, making up 95.1% of new EU registrations, despite a 6.2% decline in sales. Electrically chargeable truck registrations fell by 4.6%, with market share stable at 2.3% compared with 2023. New electrically chargeable bus registrations rose by 26.8% in 2024, and market share increased from 15.9% to 18.5%. In contrast, hybrid-electric bus sales fell by 16.1%, with a 9.8% share. Diesel bus registrations grew by 11.1%, increasing market share to 63.1%, up 1 percentage point on 2023. thumbnail photp source: Shutterstock
India launches antidumping probe on EU, Japan PVC paste resins
MUMBAI (ICIS)–India has initiated an antidumping investigation into imports of polyvinyl chloride (PVC) paste resin from the EU and Japan. In a notification on 24 January, the country’s Directorate General of Trade Remedies (DGTR) said the probe was in response to a complaint from domestic producer Chemplast Sanmar Ltd. Chemplast and Finolex Industries are the only domestic producers of PVC paste resins. The ADD investigation will cover 18 months from 1 April 2023 to 30 September 2024, while the injury investigation period will be three fiscal years from April 2020 to March 2023. India’s fiscal year ends in March. It is expected to last one year, with preliminary findings usually made within 60 to 70 days from the start of the probe. In December 2024, the DGTR recommended imposition of ADDs of $89/tonne to $707/tonne on PVC paste resin imports from China, South Korea, Malaysia, Norway, Taiwan and Thailand for five years. PVC paste resin is usually mixed with plasticizers and additives and used to create various products including wallpapers, automotive sealant, industrial coatings, tarpaulins, adhesives, gloves and synthetic leather.
Latin America stories: weekly summary
SAO PAULO (ICIS)–Here are some of the stories from ICIS Latin America for the week ended on 27 January. NEWS Colombia accepts US terms for migrants’ deportations, fends off 25% tariff threat Colombia became over the weekend the first Latin American country to get a taste of President Donald Trump’s immigration policy mixed with unconventional diplomacy after the country refused landing to two flights with repatriated Colombian migrants. INSIGHT: Trump executive orders to revamp US energy and trade policyBuckle your seatbelts. US President Trump kicked off Day One with a slew of executive orders that will completely revamp energy and trade policy, with major implications for chemicals and plastics. INSIGHT: Argentina’s chemicals, manufacturing could be collateral victims of liberalization pushArgentina’s cabinet drive to shift the economy from staunch protectionism into liberal bastion is increasing fears among chemicals and wider manufacturing players that the country’s beleaguered industrial fabric is yet to suffer further losses in output in coming years. INSIGHT: Brazil’s GDP to be hit by potential US tariffs; COP30 loses significant emitter Brazil could be hit with US import tariffs of 5% by mid-2025, according to credit rating agency Moody’s, while the Brazilian leading role in climate negotiations in November will be diminished as one of the largest carbon emitters, the US, is absent from the talks. Argentina’s manufacturing output still falling but ‘expansionary phase’ starting overallArgentina’s petrochemicals-intensive manufacturing output continued falling in November, down 2.3% year on year, but overall economic output rose while consumer and business confidence is growing. Brazil’s grain harvest expected at record 322 million tonnes, up 8%Brazil’s fertilizers-intensive agricultural sector is expected to produce 322.3 million of grains, pulses, and oilseeds in the 2024-2025 harvest, up 8.2% year on year, according to the National Supply Company (Conab). Mexico’s cabinet wants Pemex to meet 80% of national fertilizers demandThe Mexican government continues putting high hopes on Pemex’s ability to sharply increase its fertilizers output and has suggested the state-owned energy major produce as much as 80% of the country’s demand. Brazil’s Petrobras to start up ANSA fertilizer plant in H2 2025Petrobras will start up its ANSA fertilizers plant in Araucaria, state of Parana, in the second half (H2) 2025, according to a spokesperson for the Brazilian state-owned energy major. German lubes maker Fuchs forms JV with distributor Remsac in PeruFuchs Group has established a joint venture in Peru with local distributor Remsac, the German lubricants producer said on Friday. Austria’s ALPLA to take majority stake in Brazilian recycler Clean BottleAustrian packaging firm ALPLA aims to enter Brazil’s recycling market by purchasing a majority stake acquisition in high density polyethylene (HDPE) recycler Clean Bottle, the company said on Wednesday. Brazil’s December lube demand risesBrazil’s lube demand rose in December for a ninth month on the back of a jump in consumption of everything from transformer oils to engine oils. PRICING Braskem-Idesa announces February price increase in MexicoBraskem Idesa is seeking a price increase of $110/tonne on high-density polyethylene (HDPE) and low-density polyethylene (LDPE) as of 1 February, according to a customer letter seen by ICIS. LatAm PP domestic, international prices increase in Mexico on higher spot propylene costsDomestic and international polypropylene (PP) prices increased in Mexico, tracking higher spot propylene costs. In other Latin American countries, domestic prices were unchanged. LatAm international LLDPE, HDPE prices steady to higher on back of expensive US export offersInternational linear low density polyethylene (LLDPE) and high density polyethylene (HDPE) prices were assessed as steady to higher across Latin American countries. Low density polyethylene (LDPE) prices were assessed unchanged.
CN Railway, union are getting closer to a labor contract – IBEW
HOUSTON (ICIS)–Canadian National Railway (CN) and a union representing signal and communication workers are still in talks, and they are getting closer to reaching a deal, the International Brotherhood of Electrical Workers (IBEW) said on Monday. The union members total 750. The union has issued a strike notice, allowing them to walk out as early as Tuesday. “The company and the union are getting closer to reaching a deal, and we are optimistic that a deal can be reached and strike action avoided,” according to a statement by Jason Sommer, senior general chair, IBEW System Council No 11. “We are currently still at the table with the company, and with the assistance of federal mediators, we are striving to reach a fair and equitable deal for our members.” Outstanding issues are wages, reimbursement for travel and striking a better work-life balance for union members, Sommer said. If the union does call a strike, CN expects no disruptions. “There will be no impact on our operations as a result of a work stoppage,” the railroad said in a statement. “CN’s contingency plans are in place, operations will continue, and our dedicated teams are prepared to ensure the seamless continuity of service.” The two sides have been negotiating a labor contract since September. That agreement ended on 31 December 2024. Canadian chemical producers rely on rail to ship more than 70% of their products, with some exclusively using rail.
CN Railway expects no disruptions from impending strike by signal workers
HOUSTON (ICIS)–Canadian National Railway (CN) expects no disruptions from a strike by signal and communication workers that could start on Tuesday, the Canadian railroad company said. The union members total 750, and they belong to the International Brotherhood of Electric Workers (IBEW). The union has issued a strike notice, allowing them to walk out as early as Tuesday. “There will be no impact on our operations as a result of a work stoppage,” the railroad said in a statement. “CN’s contingency plans are in place, operations will continue, and our dedicated teams are prepared to ensure the seamless continuity of service.” The IBEW did not immediately respond to a request for comment. The two sides have been negotiating a labor contract since September. That agreement ended on 31 December 2024. Canadian chemical producers rely on rail to ship more than 70% of their products, with some exclusively using rail. Thumbnail shows a railroad. Image by Shutterstock.
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