LONDON (ICIS)–On November 15, OMV Gas Marketing and Trading said Russia’s Gazprom Export would cut supplies following a decision by the Austrian company to stop payments.  Despite the announcement, gas continues to flow, sparking questions over what lies behind the supply cut announcement and new arrangement.  In this brief Q&A, ICIS responds to questions based on information cross-checked with multiple sources in Ukraine, Slovakia and Austria. 1. Why did Gazprom Export cut contractual gas supplies to Austria’s OMV? Under Russian legislation, exports of natural gas are subject to a 30% duty, in fact shouldered by European off-takers. Sources familiar with Gazprom’s long-term EU contracts say the producer is prohibited from paying the levy itself. This means that if an importer halts payments, Gazprom Export is obliged to stop supplies. OMV Gas Marketing and Trading announced on 13 November that it would stop payments for Russian gas exports to recover €230m in compensation awarded by an arbitral tribunal. The award is to cover non-delivered gas in 2022. That resulted in Russia stopping delivering gas under the long-term contract with OMV. 2. Russian gas is still flowing to Austria. How come? Although OMV said on November 15 that Gazprom Export would reduce gas deliveries to zero from the following day, flows transiting Ukraine and Slovakia and delivered into Austria have continued as normal. Data published by regional grid operators indicate that gas is also exported on to neighboring Italy and the Czech Republic, although it is unclear whether the volumes are of Russian origin. Data verified by ICIS with multiple Ukrainian, Slovak and Austrian sources show that Gazprom Export continues to transit the gas via Slovakia up to the Austrian border. From there it is reportedly transferred to a western European counterparty which has a transport contract with transmission operator Gas Connect Austria. This explains why there have only been minor changes in nominations on the Ukrainian-Slovak and Slovak-Austrian borders. Considering the minor impact on flows and even price spreads, many market sources interviewed by ICIS have raised questions over whether this transfer had been pre-arranged. Neither OMV nor Gazprom responded to questions from ICIS. 3. How long is this arrangement going to last? Possibly until January 1, 2025 when Ukraine’s current transit agreement with Russia expires. 4. Are there other companies involved in this arrangement? This is unlikely. Slovak-importer SPP also has an import contract for Russian gas. Sources in the country say most of the volumes are transited by Gazprom and offtaken by the buyer on the local virtual trading point, however. 5. Has anything changed in relation to the transit agreement in Ukraine and Slovakia? No. Ukrainian sources confirm there were no changes in the transit and transfer arrangement. Slovak sources close to grid-operator Eustream say Gazprom continues to hold long-term transmission capacity at the Velke Kapusany border point with Ukraine. Gazprom’s booked entry capacity at Velke Kapusany amounts to 141,500,000 cubic meters (at 20°C). Exit capacity at Baumgarten on the Slovak-Austrian border stands at 138,500,000. Gazprom has booked transit capacity via Slovakia until 2028. 6. Following this latest transfer, has anything changed in OMV’s long-term import agreement with Gazprom? Based on public statements, all we know for now is that OMV is no longer off-taking gas under its long-term agreement with Russia. It is possible that following the arbitration award and OMV’s subsequent refusal to pay for supplies, Gazprom would not resume contractual deliveries under the terms of the agreement. This is due to expire in 2040. Events could also lead to the renegotiation of the contract, with OMV likely looking to shorten the duration of the deal and reduce imports. OMV is under pressure by the Austrian government as well as the EU to reduce its dependence on Russian gas and has taken steps to secure Norwegian pipeline gas and LNG.

BARCELONA (ICIS)–European chemical producers may have to keep paying high energy prices as geopolitical instability impacts sentiment more than the fundamentals of supply and demand. Europe spot electricity prices up 76% this year, ICIS TTF gas price up 40% Fear drives markets more than fundamentals which remain bearish Demand is reduced compared to five-year average, supply plentiful Above average temperatures forecast into December in Europe Gas storage around 90%, well above 5-year average New sources of US, Qatari liquefied natural gas (LNG) due onstream in 2025 Renewable energy will ramp up quickly in Europe Donald Trump may increase LNG supply by unfreezing projects In this Think Tank podcast, Will Beacham interviews ICIS gas and cross-commodity expert, Aura Sabadus, 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.

HOUSTON (ICIS)–Although some locations still have some final acreage remaining, the latest US Department of Agriculture (USDA) weekly crop progress report is reflecting a completion of corn and soybean harvesting for 2024. While a final yield tally will not be immediately available, it has been discussed within agriculture and fertilizer segments as having been a more productive year – especially for corn – than was anticipated given the extremely hot and very dry conditions present this summer. For fertilizers, there is optimism remaining that over the next few weeks, winter will not quickly settle in and that weather conditions will be beneficial enough to see post-harvest applications gain more momentum. One product that is expected to see an uptick as long as there is no further rainfall is ammonia, with wet fields having been an issue for undertaking these end-of-the-year inputs through the first half of November in some states. The USDA did report there is now 77% of the cotton crop complete with the sorghum harvest having reached 95%. The next significant crop will be winter wheat, which the weekly update showed is now 94% planted with 84% having emerged. There is 49% of the crop rated as being in good to excellent condition.

CARTAGENA, Colombia (ICIS)–Latin American chemicals producers should be prepared to face a prolonged downturn which could extend to 2030 as newer capacities globally keep coming online, according to the director general at the Latin American Petrochemical and Chemical Association (APLA). Manuel Diaz said global manufacturing is not recovering at the speed the chemicals industry would need for supply and demand to rebalance anytime soon, and Latin America – the quintessential ‘price taker’ region as its trade deficit makes it dependent on imports from other regions – must prepare for the most prolonged downturn in chemicals in living memory. Diaz spoke to ICIS ahead of the APLA annual meeting which kicked off on Monday. “This is pretty much what we are going to be talking about in the 2024 annual meeting: oversupply of products and raw materials, of ethylene. There are still many plants being announced, so it seems that at least until 2027, I would say 2030, the pressure on profitability is going to be very strong,” said Diaz. “Companies in Latin America should be prepared because, while new plants are still being started up, there is no sign of a world recovery strong enough to get there. A silver lining could be found in the fact that there is still considerable population growth: from now until 2050, we will have a growth in the world population like what would be, so to speak, adding a new India [the most populous country with 1.45 billion people].” Diaz, an Argentinian national, said he expects more plants will shut down in his home country as the national chemicals industry adapts to a more liberalized market under Javier Milei’s administration. In October, US chemicals major Dow said it would stop producing polyether polyols at its site in San Lorenzo, in Argentina’s province of Santa Fe, on the back of poor economics caused by global oversupply, while Argentina’s Petroquimica Rio Tercero shut its toluene diisocyanate (TDI) plant in Cordoba arguing the same reason. “I think we will see a reorganization in the sector, especially in Argentina. There will be some plants that are no longer sufficiently attractive from a profitable or product point of view – there will be a trend to concentrate on more profitable products,” said Diaz. “In the case of Dow, for instance, the plant they shut in Argentina was not the only plant of that type that it shuts down globally, that is why I think this is not a problem only in Argentina or Brazil – it is a global problem, a problem of competitiveness.” Diaz said we must think about China’s “differently” in order to understand the current downcycle, much of it related to that country’s overcapacities as its economy is not growing at the expected, pre-pandemic-like rates. “From our place in the world, we see everything as an economic curve and a capital curve, but the Chinese sees it from the point of view of a work curve. So, it is not a case that they are subsidizing the product itself for an easier sale,” said Diaz. “What they are doing, in my opinion, is subsidizing companies so job creation does not slow down – economic growth there is the priority.” He went on to reflect on how the globalization rates up to 2020 may have gone too far, adding the pandemic showed us how it was a mistake to focus on just a few countries – or just China, in many cases – as the main source for manufactured goods. – So, is the world coming back to a protectionist wave, like that of the 1930s? – “Now we see countries around the world thinking about how to protect their manufacturing sectors from China’s oversupplies, so maybe that globalizing cycle [up to 2020] has ended, the trend of setting up plants in the cheapest place and so on. I think the pandemic left us messages,” said Diaz. “Messages around the fact that we can’t have a dependency on a single place from where all the electronic chips come from, for instance. So, I think it’s not going to be just Brazil [where protectionist measures are enacted] but in many other Latin American countries – it is a contingency measure.” Finally, about the potential the new US administration under Donald Trump may impose import tariffs on Mexico, Diaz said “reality may end up surpassing” ideology, referring to the high dependance US manufacturers also have from Mexico’s manufacturers. The two countries’ economies became highly linked from the 1990s, when the first North American free trade deal, NAFTA, was signed. The situation did not change much after the first Donald Trump administration renegotiated NAFTA to give way to the current USMCA trade deal. “We have two new administrations in the US and Mexico. We will see what they end up doing, but what is clear is that there will be alternatives [to import tariffs being imposed]. Trump also knows that US companies buy a lot from Mexico, and in a protectionist spiral Mexico could also impose tariffs, so US companies would end up being affected as well,” said Diaz. “That is the reality that applies to everything, and that is why I say that reality normally surpasses your ideological vision: One thing is what I can say in the campaign, a different one may be what you implemented once you are in office.” Thumbnail shows money from Latin America. Image by ICIS. The 44th APLA annual meeting takes place 18-21 November in Cartagena, Colombia. Interview article by Jonathan Lopez

SAO PAULO (ICIS)–Here are some of the stories from ICIS Latin America for the week ended on 16 November. NEWS Brazil to investigate alleged US, Canada PE dumpingBrazil is to start an investigation into polyethylene (PE) arriving on its shores from the US and Canada and whether the material constituted dumping, the government said. Unipar sees light at tunnel end as prices rise, Argentina revivesManagement at Brazil’s chloralkali chain producer Unipar this week held onto improved financial results in Q3, quarter on quarter, to assert the industry may be finally going through the beginning of the end of the downturn. Mexico confident US will realize tariff-free trade benefits both – SheinbaumRenegotiation in 2026 will be key for Mexico to show the US how the United States–Mexico–Canada Agreement (USMCA) is equally beneficial for both countries, the Mexican president said this week. Pemex targets petrochemicals, fertilizers expansion, $2.4-billion savings in 2025Pemex is to overhaul its La Cangrejera and Morelos petrochemicals complex in Mexico’s southern state of Veracruz to sharply increase production, the state-owned energy major said this week. INSIGHT: Mexico’s manufacturers hopeful USMCA renegotiation could spare them from tariffsPolicymakers and companies in Mexico are coming to terms with a potential shift in trade policies in the US after Donald Trump’s decisive victory in the presidential election last week. Mexico in strong position to renegotiate USMCA, tariff panic premature – Braskem Idesa execA potential US import tariff of 10% on Mexican goods is looming large on the country’s export and petrochemicals-intensive manufacturing sectors, but it is early days and the worries are premature, according to the head of institutional relations at polyethylene (PE) producer Braskem Idesa. Brazil’s Petrobras begins commercial operations at gas processing unit in RioPetrobras has begun commercial operations at its Natural Gas Processing Unit (UPGN) at the Boaventura Energy Complex in Itaboraí, Rio de Janeiro state, the Brazilian state-owned energy major said on Monday. PRICING LatAm PP domestic, international prices stable on sufficient supply, soft demandDomestic and international polypropylene (PP) prices were assessed unchanged this week across Latin American countries. LatAm PE domestic prices steady to lower on weak demand, sufficient supplyDomestic polyethylene (PE) prices were assessed as steady to lower across Latin American (LatAm) countries while international prices were unchanged this week.

HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 15 November. Trump to bring limited tariffs; higher growth, rates – economists Under US President Donald Trump, US chemical companies will unlikely see the full-blown tariffs that he has proposed during his campaign, but they will operate under a faster growing economy with higher inflation and interest rates that will settle at an elevated rate, economists at Oxford Economics said on Monday. INSIGHT: Mexico’s manufacturers hopeful USMCA renegotiation could spare them from tariffs Policymakers and companies in Mexico are coming to terms with a potential shift in trade policies in the US after Donald Trump’s decisive victory in the presidential election last week. Canada ports prepare to resume operations, but timeline still unclear The Port of Vancouver and other Canadian West Coast ports as well as the Port of Montreal were preparing on Wednesday to resume operations, but the exact timeline remains unclear, officials said in updates. US exporters should book cargoes 4-6 weeks in advance; ILA-USMX talks break down US exporters are being urged to book outgoing shipments four to six weeks in advance as US and Canadian port labor issues are ongoing and could coincide with the pre-Lunar New Year peak season on the Asia-to-US trade route. Brazil to investigate alleged US, Canada PE dumping Brazil is to start an investigation into polyethylene (PE) arriving on its shores from the US and Canada and whether the material constituted dumping, the government said. Canada Port of Montreal to resume operations on Saturday The Port of Montreal will resume operations on Saturday, 16 November, at 07:00 local time, following labor disruptions that started on 31 October and a subsequent lockout of about 1,200 dock workers.

LONDON (ICIS)–Click here to see the latest blog post on Chemicals & The Economy by Paul Hodges, which looks at the likely impact of Trump’s tariffs on the smartphone market. Editor’s note: This blog post is an opinion piece. The views expressed are those of the author and do not necessarily represent those of ICIS. Paul Hodges is the chairman of consultants New Normal Consulting.

LONDON (ICIS)–Here are some of the top stories from ICIS Europe for the week ended 15 November. Europe PET hit by multiple factors pulling market in different directions Polyethylene terephthalate (PET) sources in Europe are faced with a plethora of circumstances trying to shape the market, which in the end may result in a degree of stability. Crude markets face substantial 2025 surplus as China demand falters – IEA Global crude supply growth is likely to outstrip demand by over a million barrels/day in 2025, the International Energy Agency (IEA) said on Thursday, with the “marked” slowdown in China consumption the main drag on consumption this year. INSIGHT: European cracker shutdowns could open market to US ethylene exports European ethylene producers could be planning more cracker shutdowns, with the lost capacity being replaced by imports from the US. Shell wins appeal in Dutch emissions caseThe Netherlands court ruling mandating that Shell cut its total carbon emissions by 45% by 2030 has been thrown out, the oil and gas major said on Tuesday. Europe PE, PP adapt value proposition in face of evolving market European polyethylene (PE) and polypropylene (PP) are evolving as the world they occupy steadily changes.

SINGAPORE (ICIS)–South Korean refiner S-Oil’s new petrochemical complex in Ulsan is now 42% complete as of end-October and is on track for completion in 2026. Shaheen accounts for about 87% of full-year 2024 capex Project progress slightly ahead of schedule S-Oil swung to Q3 net loss on poor refining, petrochemical margins Construction of the $7bn project called Shaheen – Arabic word for falcon – at the Onsan Industrial Complex of Ulsan City started in March 2023. Its mechanical completion is targeted by the first half of 2026. Total capital expenditure (capex) for the Shaheen project is projected at W2,716 billion ($1.95 billion) in 2024, up 85% year on year, and accounts for about 87% of S-Oil’s overall capex this year. The company’s full-year capex at W3,136 billion, which includes costs of upgrade and maintenance works as well as marketing-related expenses, represents a 54% increase from 2023 levels. The Shaheen project will have a 1.8m tonne/year mixed-feed cracking facility; an 880,000 tonne/year linear low density polyethylene (LLDPE) unit; and a 440,000 tonne/year high density polyethylene (HDPE) plant. The site will have a thermal crude-to-chemical (TC2C) facility, which will convert crude directly into petrochemical feedstocks such as liquefied petroleum gas (LPG) and naphtha, and the cracker is expected to recycle waste heat for power generation in the refinery. Saudi Aramco, the world’s biggest crude exporter, owns more than 63% of S-Oil. The project update was included in S-Oil’s presentation slides on its Q3 financial results released on 4 November. The company swung to a Q3 net loss of W206 billion amid a sharp decline in refining and petrochemical earnings. in South Korean won (W) billion Q3 2024 Q3 2023 % Change Jan-Sept 2024 Jan-Sept 2023 % Change Revenue 8,841 9,000 -1.8 27,720 25,897 7.0 Operating income -415 859 200 1,411 -85.8 Net income -206 545 -61 788 The petrochemicals unit of S-OIL posted an operating income of W5.0 billion in the third quarter, an 89% year-on-year drop. Paraxylene (PX) and benzene markets weakened in Q3 due to increased supply amid reduced gasoline blending demand and restarts of production facilities after turnarounds. The company’s PX spread to naphtha weakened to $271/tonne in Q3 from $425/tonne in the same period last year, while the benzene-naphtha spread rose to $315/tonne from $251/tonne in the same period a year earlier. In the downstream olefin market, polypropylene (PP) was bearish in the third quarter due to “abundant regional supply amid weak downstream demand”. The refining unit posted an operating loss of W573.7 billion in the third quarter, swinging from the W666.2 billion profit in the same period a year earlier. The loss in the refining segment was mostly due to the one-off impact from the decline in oil prices and foreign exchange rates. On market conditions, the company said that the supply-demand environment and margins for refiners in Asia is expected to “gradually improve due to reduced operating rate from low margin condition and heavier maintenances year over year, amid continued stockpiling if winter heating oil”. For Q4, the company expected the PX and benzene markets to be supported by fresh demand from new downstream capacities while gasoline demand stays slow. For downstream olefin markets, S-Oil said that PP and propylene oxide (PO) markets may show modest recovery “depending on the impact of China’s economic stimulus measures amid ongoing capacity additions”. Focus article by Nurluqman Suratman ($1 = W1,395)