SAO PAULO (ICIS)–Argentina’s petrochemicals players are in a wait-and-see mode about the effects a cut to import tariffs announced this week could have in the market and whether it will lower prices which, for many materials, remain higher than global prices. Earlier this week, the Argentinian cabinet said it would cut the so-called PAIS tax from 17.5% to 7.5% from 2 September. Introduced in 2012, the PAIS acronym responds to the name Tax for an Inclusive and Solidary Argentina (Impuesto Para una Argentina Inclusiva y Solidaria) and was presented by the at the time left-leaning administration as a tax on purchases of foreign currency. In practice, given that most imports are priced in dollars, the tax ended being practically an import tariff and contributed to Argentina becoming one of the most closed economies to trade in the world. President Javier Milei, in office since December 2023, has promised to turn the system upside down and make the Argentinian economy a bastion of liberalism. The cabinet’s intention is to end import tariffs altogether. The minister for the economy, Luis Caputo, has been quoted in the Argentinian press as saying the country should be “moving forward in the elimination of all export duties, a perverse tax that we do not like and hinders” Argentina’s economic progress. PETROCHEMICALS MUST WAITThis week, sources in Argentina, who have been reporting higher prices for several materials compared to the rest of the world for months, were sceptical of any quick effect from the cut to the PAIS tax. Some estimated, however, that the lower rates could slash petrochemicals import prices, on average, by $200/tonne. Most sources also mentioned the example of Dow, which is the sole polyethylene (PE) producer in Argentina and has greatly benefited from the closed economy up to now. Petrochemicals and the wider industrial sectors, including construction, remain the hardest hit industries amid the country’s recession, which is trying to digest the ‘shock therapy’ being implemented by the government. Consumers are squeezed and few can afford the luxury of even thinking about purchasing the higher-priced, petrochemicals-intensive durable goods, which are the ones which could revive the beleaguered chemicals industry. Moreover, those with stocks of materials purchased in imports under the previous PAIS rates are unlikely to lower their prices until they sell them – that period could be a few weeks or a few months. “Plastic sales remain weak because people think prices will go down with the tax reduction. But I am not convinced the reduction will be immediate and all at once. Prices could only come down once the new imports under the new regime come into force,” said one source at a large distributor. “It will be slow process, over one or two months – we will have to see how petrochemicals producers react and whether they start lowering prices straight away or do it in phases.” This source and others said Dow announced to its customers in Latin America prices increases of around $100/tonne for most materials, although that increase was not applied in Argentina, said the distribution source. Dow is Argentina’s sole producer of polyethylene. It operates facilities at the Bahia Blanca petrochemicals hub, south of Buenos Aires. According to ICIS Supply & Demand, it has the capacity to produce 730,000 tonnes/year of ethylene, 307,000 tonnes/year of high density polyethylene (HDPE), 329,000 tonnes/year of linear low density polyethylene (LLDPE), and 40,000 tonnes/year propylene. As the sole PE producer in a country locked up to external trade, Dow has greatly benefited in the past two months. Sources reported earlier in the year the company was selling PE at $2,400/tonne, when global prices stood at around $1,200/tonne. The price increase announced earlier in the year added more doubts to the company pricing strategy. Dow had not responded to a request for comment at the time of writing. The source at the large distributor added, “Dow’s $100/tonne increase was not implemented it in Argentina as prices remain higher than global prices. “If the reduction in the PAIS tax brings a reduction of $200/tonne, for example, perhaps Dow first decides to raise prices by $100/tonne and then take the $200/tonne hit and see what the market’s reaction is. Right now, we do not know how it will play out.” STAYING PUTAnother source at a petrochemicals distributor, with decades of experience behind him, described the largest recession it has seen in its career. In such an environment, he went on to say, prices should go down to prop up demand, at least, according to economy theory. But Argentina, it added, has escaped economy theory often in past decades so nothing can be taken for granted. The source even added that it was mulling whether to attend an industry event next week in Buenos Aires, just in case a business opportunity is lost while it attends the conference. On 4 September, the Latin American Petrochemical and Chemical Association (APLA) is holding its annual conference on sustainability, which together with its logistics event and the annual event are the three highlights in the Latin American petrochemicals markets. “There is a strong, very strong recession, and we have to be very attentive to each business that emerges in order to be on the edge of not losing the opportunity or do a bad sale,” said the source. Font page picture source: Shutterstock Focus article by Jonathan Lopez

HOUSTON (ICIS)–Fertilizer producer OCI Global announced it has successfully completed the sale of its equity interests in Iowa Fertilizer Company (IFCO) for $3.6 billion to Koch Ag & Energy Solutions. The producer said the closing of the deal involving the large-scale US greenfield nitrogen fertilizer facility marks a significant milestone in OCI’s strategy to unlock value for shareholders Located in Wever, Iowa the plant was the first greenfield nitrogen fertilizer plant built in the US in over 25 years, and the largest private construction project in Iowa’s history, adding more than 3,500 jobs during the construction period. The facility opened in 2017 and has the capacity to produce 3.5 million tonnes of nitrogen fertilizers and diesel exhaust fluid annually. “This acquisition marks another significant investment in the growth of our fertilizer business,” said Mark Luetters, Koch Ag & Energy Solutions president. “In the past 15 years, we have invested $2 billion in our North American production facilities to enhance reliability, expand production and improve logistics for our customers. This investment enhances our ability to serve customers long-term by providing additional flexibility to adapt to their nitrogen preferences.” The Wever facility adds to the Koch Fertilizer holdings, which includes four nitrogen production facilities in the US and one in Canada plus an extensive terminal network. The company and its affiliates also have partial ownership of three nitrogen facilities in Trinidad and Tobago, as well as a phosphate production facility in Morocco. The sale was first announced last December and OCI said it is confident that under Koch’s stewardship, IFCO will be well positioned for its next phase of growth. “This milestone further reinforces OCI’s standing and record as a successful developer, operator and investor. Looking ahead, we will continue to deploy our distinctive knowledge, management expertise and entrepreneurial spirt into further value accretive ventures,” said Nassef Sawiris, OCI executive chairman.

LONDON (ICIS)–BASF is to end production of adipic acid and several downstream units at Ludwigshafen, Germany, as part of structural changes underway at the site, the company said on Thursday. Production of adipic acid will conclude at the site over the course of 2025, while units to manufacture cyclododecanone (CDon) and cyclopentanone (CPon), which utilize adipic acid as a raw material, will cease in the first half of the year. The company is planning to cut around €1 billion in costs from the site, with new CEO Markus Kamieth expected to fully set out what steps will be taken at the company’s capital markets day in September this year. The company had already cut back adipic acid production capacity at the site in 2023, but had kept a some capacity onstream to feed into those downstream units. BASF expects to cease deliveries of CDon and CPon, which are used in nylon 12 and pharmaceuticals production respectively, and is in talks with customers, the company added. It will continue to produce adipic acid in Onsan, South Korea, and Chalampe, France, BASF added. The decision was taken as part of the ongoing strategic review of site operations to “ensure competitiveness under changing market conditions”, the company said in a statement. Around 180 workers will be affected by the closures, with BASF planning to explore the possibility of employment positions elsewhere within the group. “These closures are part of the development of a long-term target picture for the transformation of the Ludwigshafen site,” said BASF industrial relations director Katja Schwarpwinkel. Thumbnail photo: BASF’s Ludwigshafen, Germany production complex. Picture source: BASF Updates throughout

LONDON (ICIS)–BASF is to end production of adipic acid and several downstream units at Ludwigshafen, Germany, as part of structural changes underway at the site, the company said on Thursday. Production of adipic acid will conclude at the site over the course of 2025, while units to manufacture cyclododecanone (CDon) and cyclopentanone (CPon), which utilize adipic acid as a raw material, will cease in the first half of the year.

LONDON (ICIS)–A “worrying” future lies ahead for the UK chemicals industry because there is no concrete roadmap in place to eliminate fossil fuels, the think tank Green Alliance said on Thursday. Researchers at the organization warned that up to 140,000 jobs in the industry are at risk in the long term if policymakers fail to plan for its decarbonization. The figure is far greater than the 33,700 workers currently employed by the steel industry,  the most recent subject of talk about job losses and decarbonization. The UK chemicals industry accounts for 19% of the UK’s industrial emissions and is heavily dependent on fossil fuels for energy and feedstocks. It will also, however, play an important role in providing vital components for net-zero technologies, including batteries and wind turbines, the Green Alliance noted. Despite the chemical industry’s strategic value, government support has been minimal so far because of its focus on carbon capture and storage (CCS) and hydrogen fuel. As a result, more important areas such as electrification and the substitution of fossil fuel feedstocks are in danger of being left behind, Green Alliance said. It pointed out that a new industrial strategy will provide an opportunity to secure the future of the industry and safeguard the resilience of the UK economy. “The government needs to develop a coherent vision for what a successful green chemical industry looks like,” said Liam Hardy, senior policy analyst at Green Alliance.

LONDON (ICIS)–The economic outlook in the EU and eurozone improved in August on stronger industry confidence and brighter employment expectations. The European Commission’s Economic Sentiment Indicator (ESI) rose in both the EU (+0.4 points to 96.9) and eurozone (+0.6 points to 96.6), according to official data on Thursday. This reflected improved confidence in industry, services and retail trade, while confidence among consumers and in construction remained broadly stable. Employment prospects rose more significantly in both blocs following several months of decline, with the Employment Expectations Indicator (EEI) up 0.9 points to 99.6 in the EU and higher by 1.3 points to 99.2 in the eurozone. For the largest EU economies, the ESI improved in France (+4.3); Spain (+1.3); the Netherlands (+0.9); and Poland (+0.3). It declined in Germany (-1.7); and Italy (-1.2). The sharp uptick in France was likely due to the Olympics being hosted in Paris, analysis from Oxford Economics suggested.

HOUSTON (ICIS)–The US Department of Agriculture (USDA) announced it is partnering with business owners to expand innovative fertilizer production, create more rural jobs and strengthen local economies by awarding $35 million through the Fertilizer Production Expansion Program (FPEP). Appearing at the annual Farm Progress Show in Boone, Iowa, USDA Secretary Tom Vilsack revealed the agency is granting funds for seven projects in seven states through the FPEP, which is funded by the Commodity Credit Corporation. This program provides grants to independent business owners to help them undertake such efforts as modernize equipment, adopt new technologies and build production plants. “The investments announced today will increase domestic fertilizer production and strengthen our supply chain, while creating good-paying jobs to benefit all Americans,” said Vilsack. USDA has invested $286.6 million in 64 projects across 32 states through FPEP. These projects have created 768 new jobs and will help increase domestic fertilizer production by over 5.6 million short tons. The FPEP was created with a commitment of up to $900 million in funding to address issues facing farmers due to rising fertilizer prices due to a variety of factors including the Ukraine conflict and a lack of industry competition. Citing examples of the investments, the agency highlighted that in Virginia ammonium sulfate producer AdvanSix will expand a facility utilizing an almost $12 million grant. The company currently provides 31,400 agricultural producers with ammonium sulfate on the East Coast and in the Midwest. Through this project, AdvanSix will expand their operational capacity by 195,000 short tons/year and increase their total output to more than 36,000 agricultural producers.

LONDON (ICIS)–Germany’s chemical industry trade group, VCI, has nominated Covestro CEO Markus Steilemann for a second term as its president. Steilemann has been VCI president since September 2022, succeeding Evonik chief Christian Kullmann. He originally took on the role during what he described at the time as a “serious and challenging” period for Germany’s chemical industry, which has been struggling with energy costs. The election is scheduled for the Chemistry & Pharma Summit in Berlin on 12 September 2024. Steilemann has worked in the industry for many years, starting his career at Bayer in 1999.

SAO PAULO (ICIS)–Brazil’s analysts and economists are increasingly thinking inflation will continue to rise in 2024 but remain upbeat about GDP growth this year, the Banco Central do Brasil (BCB) said in its weekly Focus Survey. Rates to stay higher for longer on inflation uptick Currency to remain weak to year end GDP growth robust this year, mixed opinions on 2025 The survey, on the prospects for the largest Latin American economy, revised upward projections for inflation, GDP growth, and the exchange rate of the real in 2024. Meanwhile, the recent uptick in inflation may not be enough for the central bank to raise interest rates, but the consensus among analysts is now that the main interest rate benchmark, the Selic, could rise in 2026. INFLATION According to the survey, economists now expect the 2024 IPCA consumer price index to end the year at 4.25%, up from the 4.22% projection in the previous week and the sixth consecutive weekly increase. The 2025 inflation outlook edged up to 3.93% from 3.91%, while projections for 2026 and 2027 remained steady at 3.60% and 3.50%, respectively. The latest inflation figures for July showed prices had risen for a fourth consecutive month, with the annual rate of inflation at 4.50%, well above the April low of 3.69%. However, official data this week for the so-called IPCA-15 – which measures the month’s first fortnight’s price rises – showed a small decrease from 4.50% to 4.35%. Analysts at Capital Economics, who have been suggesting the central bank could hike the Selic as soon as this year to contain the latest rise in inflation, said the IPCA-15 data published this week was likely to make the central bank pause for now when it meets again to set monetary policy in September. “The breakdown of the data showed that the fall in inflation was pretty broad based. Housing and health inflation fell particularly sharply to 3.6% year on year [in the first fortnight of August] and 5.8% year on year, respectively, although this was partly offset by a rise in transport inflation,” said Capital Economics. “Developments in underlying inflation were a bit more concerning. Our estimate of underlying core services inflation – which strips out volatile items – edged up in the first half of August.” SELIC The monetary easing cycle that started a year ago as inflation was coming down is now considered well and truly over. Most analysts expect the central bank to keep interest rates on hold for the rest of this year and potentially in 2025, with only a few forecasting a rise. Earlier in August, the bank left the Selic unchanged at 10.50%. During the inflation crisis, the Selic peaked in 2023 at 13.75%. This week, the Focus Survey showed Brazilian economists and analysts agree that the Selic will not be lowered this year – for the 10th consecutive week, despite the latest tribulations in the exchange rate and investors’ doubts about the government’s commitment to fiscal discipline. However, the average in this week’s survey showed they are still forecasting a half a percentage point fall for 2025 to 10.0%, also unchanged from the previous survey. The novelty this week was that, from an earlier projection for the Selic at 9.0% in 2026, economists have now upgraded that and expect interest rates to end that year at 9.5%, the first change in the forecast in 14 weeks. The 2027 rate expectation remained at 9.0%. “Many Copom [monetary policy committee at the BCB] members have sounded very hawkish in recent media comments, opening the door to a rate hike,” said Capital Economics this week after the IPCA-15 data was published. “The next meeting in September will be a close call, but we think that, on balance, the fall in inflation in the first half of August, alongside the Fed’s seeming confirmation that it will kick off its easing cycle in September, mean that it’s a bit more likely that Copom will leave rates unchanged at 10.50%.” GDP One bright spot in this week’s central bank survey was that Brazil’s economy is expected to continue on a strong recovery path, with analysts now forecasting GDP growth of 2.43% in 2024, up from 2.23% in earlier surveys. However, the forecast for 2025 was for a minor dip to 1.86% from 1.89%. Unlike Brazilian economists, the IMF said it expected Brazil’s economy to grow 2.4% in 2025 in July, in part as a result of the reconstruction efforts at Rio Grande do Sul. Brazil’s southernmost state, a key industrial and agriculture producer in the country, was hit by the severe floods in May and its economy came to a standstill for nearly a month. According to this week’s survey, GDP growth estimates for 2026 and 2027 remain steady at 2.0%. REAL EXCHANGE RATE The median projection for the exchange rate for the real to the US dollar in 2024 increased slightly to reais (R) 5.32, from R5.31. The real has sharply depreciated this year versus the dollar on the back of higher inflation and investors’ fears that the cabinet presided over by Luiz Inacio Lula da Silva wants to expand public services at the expense of a larger fiscal deficit. Lula’s direct attacks on the governor of the central bank have not helped either. As such, most economists no longer expect the exchange rate to hover around R5 to the dollar as it did at the beginning of the year. For 2024, they are now forecasting a dollar to be worth R5.32, while in 2025 it would be at R5.30 and in 2026 at R5.25. Focus article by Jonathan Lopez