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INSIGHT: Trump’s 25% tariff would trigger broad recession in Canada – Oxford Economics
TORONTO (ICIS)–A 25% US blanket tariff on all imports from Canada would push Canada into a recession and raise inflation and unemployment, according to analysis from at Oxford Economics. Broad recession, big job losses Trump unpredictable, uses tariffs to pursue non-trade agenda High household debt, low productivity keep weighing on Canada While President Donald Trump did not go through with his threat of an immediate 25% tariff on Canada and Mexico after taking office on 20 January, he said that a tariff announcement would follow on 1 February, and on Tuesday a White House spokesperson confirmed this. Speaking on a webinar, Tony Stillo, Oxford Economics’ director for Canada, and economist Michael Davenport outlined the impacts of a worst-case 25% tariff scenario, as well as a more optimistic baseline scenario with a 10% tariff on selected imports. 25% TARIFF WOULD TRIGGER RECESSION Oxford Economics’ analysis shows that 25% US tariffs across the board on imports from Canada, along with proportional retaliatory tariffs, would cause Canada’s GDP to fall 2.5% peak-to-trough by early 2026. The tariffs could cost Canada more than 150,000 jobs, according to Oxford’s estimates, but the premiers (governors) of Ontario and Quebec have warned of much higher job losses. Ontario alone, which is the center of Canada’s auto industry, could lose up to 500,000 jobs, the province’s premier has said. About 1.8 million people, or about 8.8% of Canada’s total workforce, work in sectors that directly depend on exports to the US, according to federal agency Statistics Canada. Oxford’s Stillo said that a 25% blanket tariff would not only hit the industrial sectors that trade directly with the US but trigger a much larger hit to output via weaker aggregate demand. Demand would weaken on the back of higher inflation, tighter monetary policy, elevated global uncertainty, and lower business and consumer confidence, he said. Services sectors such as arts, entertainment and recreation, as well as accommodation and food would see large negative impacts as household budgets would be squeezed and consumer confidence would deteriorate, Stillo said. In addition, there would be impacts on the construction and homebuilding sector, he said. The “stagflationary tariff shock” meant that Canada’s central bank, the Bank of Canada, would need to balance concerns over an immediate spike in inflation with a downturn in the economy, Stillo said. If the bank raises interest rates to address the price shock it would deepen the downturn, he noted. He added that the uncertainties caused by Trump’s tariff threat were already affecting business confidence and investment plans. A permanent hike in tariffs would trigger re-shoring from Canada to the US, which was much easier to do than re-shoring from Asia, he said. According to ICIS analysis, with a 25% tariff Canada’s GDP would see a -1.1 percentage point impact in year one, a -4.3 point impact in year two, and a -3.5 point impact in year three. TARIFFS AS A TOOL FOR NON-TRADE PURPOSES Trump’s trade argument for tariffs was weak, Stillo said. In fact, after excluding Canada’s exports of oil and gas, which the US needs, Canada’s merchandise trade surplus with the US was small, he said. Furthermore, after factoring in the surplus the US has with Canada in services trade, Trump was making a “very self-serving” trade argument against Canada, he said. For Canada’s chemical and plastics industry, the US is by far the most important market. The chemicals and plastics sector accounts for more than Canadian dollar (C$) $100 billion (US$69 billion) in annual shipments, with nearly two-thirds of those shipments being exported to the US, according to Ottawa-based trade group Chemistry Industry Association of Canada (CIAC). Stillo said that Trump’s actions were unpredictable, and his immediate objective may be to force an early renegotiation of the US-Mexico-Canada (USMCA) trade deal. The three countries are due to review the deal in 2026. Stillo stressed that Trump was using his “favorite toy”, tariffs, to pursue non-trade related objectives. He went on to note as a recent example Trump’s tariff threat against Colombia in a dispute over the deportation of Colombian migrants. He also reminded of Trump’s recent threats to use economic force to annex Canada as the 51st US state. Trump would continue to use the tariff threat to keep Canada “off-balance”, although the full 25% tariff was unlikely to kick in on 1 February, Stillo predicted. Like Stillo, Canada’s finance minister, Dominic LeBlanc, said on Tuesday that Trump’s policies remained unpredictable, and it was difficult to determine what he wants from Canada. Trump initially linked his tariff threat to an alleged flow of illegal drugs and migrants from Canada to the US; later he cited the US trade deficit, which he called a US “subsidy” to Canada; and he called on Canada to boost its military spending. To top it off, he started to belittle Canadian Prime Minister Justin Trudeau as “governor” of the 51st US state. LeBlanc, speaking to public broadcaster CBC/RDI, said the government had little option but to wait for the expected 1 February announcement and then react accordingly. Meanwhile, Ottawa was preparing to provide relief for workers and industries that may be affected, he said without disclosing details. According to media reports, the government is preparing pandemic-level relief programs. Ian Lee, associate professor at the school of business at Ottawa’s Carleton University, said in webcast remarks that it would be “beyond nonsensical” for Canada to take retaliatory measures against the world’s largest economy. “The idea that we can take on and actually win or hold the US to a stand-still is truly beyond delusional”, he said, adding that only a politician could think this was doable. Instead of engaging in a tit-for-tat trade dispute with the US, Canada should agree to an immediate renegotiation of USMCA, with the objective of getting a new trade deal that eliminates all tariffs, Lee said. Philippe Couillard, who was premier of Quebec from 2014 to 2018 and is now an advisor at a consultancy, told CBC/RDI said that given the size of the US economy and Canada’s dependence on the US, Canada could not engage in dollar-for-dollar retaliatory measures. BASELINE:10% TARIFF Oxford’s more optimistic baseline assumption is for a 10% tariff, on about 11% of Canadian exports to the US – mainly steel, aluminium, base metals, and dairy products. Oxford expects those tariffs to be phased in, with marginal negative impacts on employment in Canada. The tariffs will likely be temporary, lasting until the USMCA renegotiations, Stillo said. Also, Trump was not likely to put a tariff on the more than 4 million barrels per day of Canadian oil going to US Midwest refineries as this would have “a material impact on the US”, Stillo said. “We think that in the end, Trump will realize that across-the-board tariffs on Canada and Mexico would harm the US” as well, he said. Oxford’s current baseline assumptions about the tariffs do “not materially” affect Canada’s economy, Stillo added. However, Oxford will adjust its assumptions, depending on what Trump may announce on 1 February, he said. Stillo also noted that most of the legislative tools Trump could use to hike tariffs require up to six months before they can be implemented. On the other hand, Trump could invoke the International Emergency Economic Powers Act (IEEPA) on 1 February, which allows immediate action, although using IEEPA against Canada may be a “stretch”, Stillo said. There are also indications that Trump may delay tariff action until after the US Secretary of Commerce delivers a report on trade policies on 1 April, Stillo said. MANUFACTURING EXPANDS Surprisingly, Canada’s manufacturing sector continued to grow for a fourth consecutive month in December, according to the latest S&P purchasing managers’ index survey. Companies reported better export sales to the US last month, driven by inventory accumulation ahead of the expected Trump tariffs. At the same time, however, the outlook for Canadian manufacturers remains uncertain as long as the shape and extent of the tariffs is unknown, S&P said. MORE CHALLENGES Aside from the tariffs, the main challenges Canada’s economy faces include high household debt, weak business investment and low productivity growth, as well as a shrinking population because of a more restrictive immigration policy, Oxford’s Michael Davenport said. Household debt was much higher than in comparable countries, largely due to Canada’s overvalued housing prices, he said. Over the past decade, Canada’s economy relied heavily on debt-fueled consumer spending and housing to drive economic growth, which has become “a high-level imbalance”, Davenport said. At the same time, business investment has been weak since the 2014 oil price slump and has contributed to the sluggish productivity growth and weak per capita GDP growth, he said. “We think Canada’s lackluster productivity will remain a major theme in 2025 and into the latter half of this decade”, he said. Furthermore, Canada faces policy uncertainties ahead of a likely change in government, from Trudeau’s Liberals to the Conservatives, he noted. The opposition Conservatives continue to lead in opinion polls about the election, which must be held before October but will likely be called earlier. The Conservatives have promised to abolish Canada’s consumer carbon tax. They have also said they would pursue balanced budgets, cut government spending, and reduce the nation’s debt. Trudeau announced his resignation earlier this month, but he plans to stay on as prime minister until his Liberal party selects a successor, expected by 9 March. Trudeau also suspended parliament until 24 March, meaning that any legislation to address Trump’s tariffs or other threats cannot be passed immediately. (US$1=C$1.44) Please also visit Trump presidency – impact on chemicals and energy Insight by Stefan Baumgarten. Thumbnail photo source: Government of Canada
EU proposes import tariffs on Russian and Belarusian nitrogen-based fertilizers
LONDON (ICIS)–The European Commission has adopted a proposal to impose tariffs on a number of agricultural products from Russia and Belarus, as well as on certain nitrogen-based fertilizers. In the proposal, the first round of tariffs will come into place on 1 July 2025. For fertilizers, on top of the existing duty of 6.5%, the tariff would be subject to an additional specific duty that would gradually increase, starting at €40/tonne or €45/tonne, depending on the type of fertilizer (corresponding to around 13% in ad valorem equivalent). The duty would increase to a prohibitive level of €315/tonne or €430/tonne respectively, three years after the start of the proposed regulation’s application (a level of about 100% in ad valorem equivalent). In the three-year transitional period, the prohibitive tariffs would also be introduced if imports from Russia and Belarus are above certain specified volumes. The increase in tariffs will not affect the transit of goods to countries outside the EU. The agricultural products affected by the new tariffs constitute 15% of agricultural imports from Russia in 2023 that had not yet been subject to increased tariffs. Once adopted by the European Parliament and the Council, all agricultural imports from Russia would be the subject of EU tariffs. The EU said the tariffs will support the growth of domestic production and the EU’s fertilizer sector, which has suffered during the energy crisis. They will also ensure a steady fertilizer supply and, most importantly, for fertilizers to remain affordable for farmers. The proposal includes mitigating measures, should EU farmers see a substantial increase in fertilizer prices. In the press release, the EU expected the tariffs to negatively impact Russian export revenues, thus impacting Russia’s ability to wage its war of aggression against Ukraine. Major fertilizer producers in Europe have been lobbying the EU to take immediate action against Russian fertilizer imports. The producers have called on the European Commission to act against the high volume of imports from Russia, in what is described as “unfair trade’ due to the impact of Russian and Belarusian imports. They have expressed their frustration that the threat of Russian imports was not being taken seriously and not enough was being done to protect them ahead of the spring campaign which is now underway. A week ago, German fertilizer company SKW Piesteritz said it had been forced to shut one of its two ammonia plants for an indefinite period because of cheap fertilizers from Russia, coupled with high costs in Germany and an unfavorable political climate. Top Five European urea importers 2023 Importing country  Imports 2023 (tonnes)  Russian imports (%) France Customs                         1,671,913 15 Poland Customs                         1,160,717 30 Spain Customs                            997,551 10 United Kingdom HMRC                            977,229 13 Germany Customs                            921,321 37 Calls for a 30% tariff on Russian and Belarusian imports on all fertilizers no later than February was described by one supplier to Europe as “a bold move ahead of the season”. The new season for buying and application is underway in some parts of Europe. In areas where temperatures are higher than normal, urea will be applied in the next 7-10 days. Aside from the impact of cheap Russian fertilizer on the EU, participants are also worried about Europe’s growing reliance on Russia imports, the potential threat to EU food supply and a derailing of the region’s plan to decarbonize. It is widely discussed that Russia will push European fertilizer producers out of the market, and replace gas with fertilizer imports. Urea is produced from ammonia and carbon dioxide. It has a 46% nitrogen content, which is the highest nitrogen content of any solid nitrogen fertilizer.  Urea can be applied by itself to the soil or mixed with phosphate and potash. Thumbnail photo source: Shutterstock
SHIPPING: Maersk will continue diversions away from Suez Canal
HOUSTON (ICIS)–Global container shipping major Maersk said it will continue to avoid the Suez Canal and Red Sea until safe passage through the area is ensured for the longer term to optimize stability and certainty across supply chains. In an advisory to customers, Maersk said the ceasefire agreement between Hamas and Israel and the announcement from Houthi rebels that they will only attack Israel-linked vessels is a “welcome step in the right direction towards stability and eventual normality for the global shipping industry.” “The process to bring the current conflict between Israel and Hamas to an end is dependent on a multi-phased roadmap continuing to be met, and as such the predictability of the situation remains a complex challenge,” Maersk said. “Furthermore, due to the continued tensions in the region, the security risk of commercial vessels transiting the Red Sea and Bab-el-Mandeb strait remains high.” Global shipping capacity tightened at the onset of the attacks as commercial vessels had to reroute around the Cape of Good Hope, which pushed shipping costs higher. The reopening of the Suez Canal would have the greatest impact on normalizing the Asia-to-Europe container shipping route but would also affect Asia-US rates, as shipping capacity would surge once carriers were able to access the shorter route. One reason shipping companies are hesitant to alter routes is because it typically takes three to four months to create new schedules, including all complementary services. Maersk also said its Gemini Cooperation with Hapag-Lloyd will be phasing in routes via the Cape of Good Hope on 1 February, as previously planned. 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), are shipped in pellets. They also transport liquid chemicals in isotanks.

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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 will impose a 5% general tariff on them – although he lamented “the world is becoming more closed” and protectionist. Activas employs 150 workers at eight Brazilian sites. In 2024, it posted sales of Brazilian reais (R) 700 million ($118 million), flat year on year. 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. Front page picture source: Activas’ facilities around Brazil Picture source: Activas Interview article by Jonathan Lopez
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.
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