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Ethylene18-Dec-2024
SAO PAULO (ICIS)–Brazil’s chemicals producers
are confident the sector would be mostly spared
from potentially higher US import tariffs as
the latter maintains a clear trade surplus in
bilateral commerce, the country’s trade group
Abiquim said to ICIS.
In fact, given the clear advantage in bilateral
trade, Abiquim said that instead of tariffs
they may need to prepare for the US to
“facilitate” chemicals trade with Brazil, a net
importer of chemicals.
Earlier this week, US President-elect Donald
Trump mentioned Brazil for the
first time as a potential target for higher
tariffs because, he argued, Brazil’s import
tariffs on US goods are much higher than the
other way around.
In a written response to ICIS, Abiquim said it
“understands” that countries may impose
“legitimate emergency tariffs” as a short-term
remedy to trade distortions caused by “unfair”
imports.
It could not be otherwise, after the trade
group lobbied hard during 2024 – and successfully achieved
– for the Brazilian government to hike import
tariffs for a wide of chemicals, as domestic
continued losing market share to imports.
“We will monitor the eventual developments of
this recent [Trump] announcement, especially
given the fact that Brazilian chemical products
do not have predatory potential in the US
market,” said Abiquim.
“In other words, we do not expect the
imposition of barriers on Brazilian chemicals,
but rather more facilitation. Since the
chemical balance is clearly favorable to the
US, we do not foresee significant restrictions
on US imports of chemicals [from Brazil].”
The US-Brazil bilateral trade in chemicals has
clearly been favoring the US in the past few
years, after the country’s shale gas boom made
it a net exporter of petrochemicals.
According to figures by Brazil’s foreign trade
chamber Comex and compiled by Abiquim, Brazil’s
trade deficit in chemicals with the US stood at
$7.4 billion in 2023.
The figure was lower than in 2022 as imports
from Asia, mostly from China, increased during
the year, but Brazil’s deficit with the US
still represented a big chunk of Brazil’s
chemicals imports deficit during that year,
which stood
at $47 billion.
Brazil trade with US
Imports
Exports
Surplus/deficit
2023
2022
2023
2022
2023
2022
ChemicalsIn
‘000 dollars
9,873,319
11,946,685
2,472,086
2,907,413
-7,401,233
-9,039,272
In tonnage
7,016,919
7,809,290
2,193,470
2,483,008
-4,823,449
-5,326,282
According to figures from the US
government, US exports of goods and services to
Brazil stood at $37.9 billion in 2023, down
more than 25% from 2022, although still an
overall trade surplus as Brazil exported to the
US goods and services worth $36.9 billion, down
2% percent from 2022.
In total, the bilateral trade value stood at
$74.8 billion in 2023.
“The US purchased a record $29.9 billion in
manufactured products from Brazil in 2023,
accounting for 81% of total US imports from
Brazil, reaffirming the US as the top
destination for Brazilian value-added goods,”
said the US government.
Key industrial Brazilian exports to the US
included semi-finished iron and steel products,
aircrafts and aircraft parts, and civil
engineering equipment, it added.
POTENTIAL RETURN OF GSP
PROGRAMMoreover, Abiquim said it
is expectant to see if the US Congress renews
the Generalized System of Preferences (GSP), a
program which provided duty-free treatment for
thousands of products from designated
beneficiary countries and territories (BDCs),
mostly developing countries.
At the height of the Cold War in the 1970s, the
GSP was designed to increase trade with
developing countries. The duty-free trade
applied both ways, with US companies who
purchased under the program exempt from import
tariffs.
The GSP was authorized by the Trade Act of 1974
and implemented in 1976 but expired in 2020 and
is currently pending US Congressional action
for renewal.
“It is essential to bear in mind that Brazil
does not apply discriminatory tariff barriers
against the US in the chemical sector and, on
the other hand, with regard to access to the US
market, Abiquim awaits with great expectation
the reactivation of the US tariff benefits
program [US-GSP],” it said.
“[Its reactivation] will reinvigorate the entry
with lower import taxes into the US of several
chemical products originating in Brazil which
would benefit from the regime.”
The US’ chemicals trade group the American
Chemistry Council (ACC) and Brazil’s industrial
trade group CNI said to ICIS they would not
comment at this stage on Trump’s Brazil
remarks.
The US’ trade groups the American Fuel &
Petrochemical Manufacturers (AFPM) and the
Society of Chemical Manufacturers &
Affiliates (SOCMA) had not responded to a
request for comment at the time publishing.
Front page picture: Chemicals facilities in
Brazil
Source: Abiquim
Focus article by Jonathan
Lopez
Crude Oil18-Dec-2024
SINGAPORE (ICIS)–China’s economic data in
November were mixed, with weaker retail sales
growth offset by some signs of stability in
property prices and a slightly quicker
industrial output growth, as policymakers brace
for more US trade tariffs once President-elect
Donald Trump takes office for a second time.
Policy support to ramp up in coming months
ahead
Retail sales unexpectedly slowed in
November
Trump 2.0 adds significant risk to trade
China’s November property market data showed
signs of stabilization, with rates of declines
for both new home and used home prices easing
from the previous month to 0.2% and 0.35%,
respectively.
These were the smallest rates of decline
recorded since June 2023 for new home prices
and in May 2023 for used home prices, data from
China’s National Bureau of Statistics (NBS)
showed on 16 December.
The numbers suggest the market may be bottoming
out, with 21 of 70 cities reporting steady or
rising new home prices, the highest proportion
this year.
Property investment in the country,
however, continued to contract at double-digit
rates in November, falling by 10.4% year on
year, with new residential starts and
completions contracting by 23.1% and 26.0%,
respectively.
“Real estate investment still likely faces some
hurdles before it is no longer a headwind on
growth – prices have not yet stabilized, but
property inventories are still relatively
elevated at this stage, and property developer
sentiment remains cautious,” Dutch banking and
financial services firm ING said in a note.
“A second consecutive month of improving price
data is a positive signal for the property
market bottoming out, and we expect a trough to
be established in 2025 and the start of an
L-shaped recovery to take effect.”
RETAIL SALES GROWTH
SLOWS
Meanwhile, China’s November retail sales growth
surprisingly slowed to 3.0% year on year, down
from October’s stronger-than-expected 4.8%.
Trade-in policies continued to boost specific
sectors in November, with household appliances
posting a robust 22.2% year-on-year growth,
albeit slower than previous months’ increase.
Meanwhile, November automobile sales on a
year-on-year basis surged to a nine-month high
of 6.6%, coming from a 3.7% expansion in
October.
In contrast, petroleum and related products
struggled, recording a 7.1% year-on-year
contraction, as the transition to electric
vehicles gains momentum.
Household confidence clearly remains soft and
it remains to be seen if the “vigorous support”
for consumption promised next year will be
effective in stimulating a recovery, according
to ING.
“We expect the rollout of supportive policies
could take some time, but overall retail sales
growth should recover in 2025.”
INDUSTRIAL PRODUCTION EDGES
HIGHER
China’s industrial output showed a modest
improvement in November, with the headline
growth edging up to 5.4% year on year from 5.3%
in October.
“Export demand has been a contributor to solid
industrial production growth in 2024, but this
factor is expected to weaken somewhat in 2025
as tariffs set in,” ING said.
The auto sector was a key driver, with output
growth accelerating to 15.2% year on year in
November, up from 4.8% in October.
This uptick was mirrored in November passenger
car output, which surged 14.1% year on year,
nearly double the 7.7% growth seen in October,
according to data from the China Passenger Car
Association (CPCA).
POLICY SUPPORT TO RAMP UP IN
2025
“Despite data coming in a little softer than
expectations, with only one month of data still
to come, China will likely manage to complete
its ‘around 5%’ growth objective for 2024,” ING
said.
At the
Central Economic Work Conference (CEWC)
held on 11-12 December, China’s top leadership
pledged to implement robust policy support
measures in 2025.
Heading into the conference, much of the
attention centered on the scale of stimulus
needed to bolster China’s growth.
While the CEWC affirmed the need for more
robust support measures, it remained
tight-lipped on specifics.
Detailed economic and social targets will be
unveiled at the National People’s Congress
(NPC) in March 2025, with concrete policy
measures likely to follow.
China’s fiscal deficit target and the special
government bond issuance targets were both
raised at the CEWC, which along with November’s
Chinese yuan (CNY) 10 trillion debt package
should create more room for fiscal stimulus in
2025, according to ING.
“The speed and scale of domestic stimulus will
likely play the biggest role in determining
whether or not China’s economy will be able to
maintain stable growth,” it said.
“The eventual growth target setting at next
year’s Two Sessions meetings in March will give
a better indication of how confident
policymakers are in terms of growth
stabilization.”
The Two Sessions are the annual gatherings of
China’s top legislative and advisory bodies,
the National People’s Congress (NPC) and the
Chinese People’s Political Consultative
Conference (CPPCC), during which key policies,
laws, and leadership appointments are discussed
and approved.
To achieve this, the government is likely to
expand its successful equipment upgrading and
consumer goods trade-in program beyond
automobiles and home appliances, Ho Woei Chen,
an economist at Singapore-based UOB Global
Economics & Markets Research, said in a
note on 13 December.
Future initiatives may encompass a broader
range of categories, including services such as
tourism and entertainment, as well as emerging
areas such as digital and green consumption, Ho
said.
Additionally, investments in technological
innovation, industrial upgrading, and domestic
infrastructure – including transportation,
energy, and urban renewal projects – are
expected to receive a significant boost, she
added.
“We do expect Beijing to ramp up fiscal deficit
and fiscal spending in 2025, but we believe how
to spend might be even more relevant than how
much will be spent, because this is not a
typical downcycle for China,” Japan’s Nomura
Global Markets Research said in a note.
“Due to the property meltdown, fiscal issues
and worsening tensions with the US, China’s
economy is not in a normal downcycle, so it may
take much more than the recent ‘bazooka’
stimulus package to truly reboot the economy.”
A meaningful recovery in China in 2025 will
likely require Beijing to tackle several key
challenges, including clearing the property
market backlog, reforming the fiscal system,
strengthening the social welfare system, and
easing geopolitical tensions, Nomura noted.
“We remain cautious on Beijing’s resolution in
clearing the property sector, which has been
contracting for almost four years, as the CEWC
mentioned little new measures to clear property
markets. The CEWC memo did mention reforming
the fiscal system, but no details were
provided.”
THE NEW CHALLENGE IN 2025: TRUMP
2.0
Trump’s victory, coupled with a Republican
sweep in the US sets the stage for significant
trade policy shifts in 2025 for the world’s
biggest economy, as concerns rise over the
potential imposition of 60% tariffs on Chinese
goods.
Nomura expects tariffs to be introduced in a
phased manner throughout 2025, mirroring the
gradual rollout seen during Trump’s first term.
“We assume the actual implementation that would
directly impact China’s exports to the US will
occur from around mid-2025 and will be mostly
concentrated in H2 2025, with some
front-loading in H1 2025,” it said.
“There is a possibility that the incoming Trump
administration may take action to tackle the
issue of Chinese export rerouting to the US via
third countries, and we believe such a threat
is a real risk to China’s export growth over
the next couple of years.”
Nomura predicts China’s export growth will
experience a temporary surge, rising to 8.5%
year over year in Q4 2024, up from 6.0% in Q3
2024.
This increase is attributed to frontloading, as
Chinese exporters rush to avoid the US tariffs
in 2025.
However, Nomura expects export growth to slow
significantly in 2025 due to the anticipated
trade headwinds and the frontloading that
occurred in Q4 2024.
Insight article by Nurluqman
Suratman
Thumbnail photo: A commercial housing
building under construction in Nanjing, China.
(Source: Costfoto/NurPhoto/Shutterstock)
Ethylene17-Dec-2024
TORONTO (ICIS)–Canadian CEOs and business
trade groups are warning about the state of
Canada’s fiscal policies.
Finance minister resigns
Deficit larger than expected
Canada struggles to respond to US tariff
threat
Chrystia Freeland on Monday resigned as finance
minister and deputy prime minister, saying that
she was “at odds” with Prime Minister Justin
Trudeau over the best way forward for Canada
amid the tariff threat by US President-elect
Donald Trump.
Trump said on 25 November that as one of his
first actions after taking office on 20 January
he would impose a 25% tariff on all imports
from Canada and Mexico, which would remain in
place until the two countries took action on
drugs and immigrants entering the US.
The tariffs would have a devastating impact on
Canada’s economy, which relies on the US as its
largest export market by far.
In the chemicals and plastics industry, nearly
two-thirds of Canadian shipments are exported
to the US, according to trade group
Chemistry Industry Association of Canada
(CIAC).
In her resignation letter, Freeland said that
Canada needed to take Trump’s threat “extremely
seriously” and needed to “keep its fiscal
powder dry” to have reserves for a coming
“tariff war” with the US.
That meant that the government could not afford
“costly political gimmicks”.
Trudeau’s Liberal-led government recently
implemented a two-month sales tax holiday for a
number of goods, including beer, cider and
restaurant meals, and it promised a Canadian
dollar (C$) 250 (US$175) tax rebate for 18.7
million “working Canadians”.
The measures, estimated to cost more than C$6
billion, have been criticized by economists.
The Business Council of Canada (BCC) said that
it was “deeply troubling” that Freeland
believed the government was opting for “costly
political gimmicks at a time when federal
finances are severely strained.”
The BCC represents CEOs of Canadian-based
companies. Members include, among others, the
heads of BASF Canada, Shell Canada, and of
ExxonMobil’s Canadian affiliate, Imperial Oil.
Canada needed stable and credible leadership
that recognizes the seriousness of the
significant economic headwinds over the coming
weeks, including the looming US tariffs, the
council said.
The BCC also noted that despite assurances in
the 2024 budget that the government would limit
the federal deficit to C$40.1 billion, its
latest fiscal update on Monday showed that that
number ballooned to C$61.9 billion.
“By not keeping its economic promises, the
federal government is sending the message that
it can’t be trusted to manage the public
finances”, said BCC president and CEO Goldy
Hyder.
Another trade group, Canadian Manufacturers and
Exporters (CME) said that Canada was facing a
“significant economic threat that demands a
decisive, coordinated federal response”.
“Canadian manufacturers need political
stability, and a government committed to
implementing policies that foster resilience,
attract investment, and drive growth”, said
Dennis Darby, president and CEO of CME.
POLITICAL CRISIS
Trudeau has come under increasing pressure to
step down, even from members of his Liberal
party.
However, he has said he would lead the Liberals
into the next election, which needs to be held
by October 2025 but will likely be called
earlier.
The minority Liberal government needs the
support of at least one opposition party in
parliament to hang on to power.
Two parties, the Conservatives and the Bloc
Quebecois, want to bring the government down as
soon as possible, they have said.
The left-leaning New Democrats have called on
Trudeau to resign but have not said whether
they would vote to bring the government down.
The Conservatives are far ahead of the Liberals
in opinion polls on elections.
The elections and political uncertainties
affect investment decisions
in the chemical industry, chemical trade group
CIAC has said.
The bottom line is that Canada finds itself in
political turmoil – at a time when is should be
united in the face of the US tariff threat.
Thumbnail of photo Trudeau (left) meeting
Trump in Washington in 2019 during Trump’s
first presidency; photo source: Government of
Canada
(US$1=C$1.43)
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Ethylene17-Dec-2024
SAO PAULO (ICIS)–US President-elect Donald
Trump said late on Monday that his
administration may impose higher tariffs on
goods from Brazil.
In a surprise press conference, Trump spoke at
length about his proposed strategy to use
import tariffs to make the US wealthier, before
adding that many countries charge more tariffs
on US goods than vice versa.
Brazil was included, but the single mention –
almost in passing – had the corporate and
financial circles in Brazil talking on Tuesday.
“We’re going to be treating people very fairly.
But the word reciprocal is important, because
if somebody charges us… If India charges us a
100% [import tariffs on US goods], do we charge
them nothing for the same?” said Trump.
“India charges us a lot. Brazil charges us a
lot. If they want to charge us, that’s fine,
but we’re going to charge them the same thing.
That’s a big statement.”
Asked by a reporter about concerns that higher
import tariffs will prop up inflation, Trump
replied, “Make our country rich. Tariffs will
make our country rich.”
According to figures from the Brazilian
government, total trade in goods between Brazil
and the US was around $75 billion in 2023.
The US is Brazil’s second largest export market
after China, and the third largest source of
foreign products to Brazil, accounting for
15.8% of total Brazilian imports.
Chemicals trade group Abiquim had not responded
to a request for comment at the time of
writing.
In Latin America, Trump also said he will
impose higher import tariffs on
Mexican goods in his first day in office on
20 January. Mexican and Canadian goods are
currently part of a free trade zone within the
North American USMCA free trade agreement
(FTA).
Earlier this month, Mexican chemicals trade
group ANIQ expressed its concern
about import tariffs given the integration
between the chemicals sectors in both countries
after nearly 40 years of free trade.
“The chemical industries of both countries are
deeply integrated throughout their value chain:
raw materials cross borders to be transformed
into industrial chemical products, which return
in both directions to become products with
higher added value,” ANIQ said.
“The chemical industry once again expresses its
support for collaboration and maintaining a
solid commercial relationship that will boost
economic growth and ensure North America’s
competitiveness and sustainability in global
markets.”
Crude Oil17-Dec-2024
LONDON (ICIS)–German business sentiment
dropped to its lowest point since May 2020 in
December, according to the latest data from the
Ifo Institute on Tuesday.
The Ifo Business Climate Index fell to 84.7
points, down from 85.6 points in
November, with the decline driven by
pessimistic expectations.
Although companies
viewed the current situation as better, the Ifo
stated that ‘the weakness of the German economy
has become chronic.’
The manufacturing sector bucked the trend of
improved current business conditions. Poor
sentiment was compounded by deteriorating
orders and the announcement of production
cutbacks.
Meanwhile, the index for the construction
sector rose, driven by an improved assessment
of current business conditions, mitigating the
impact of deteriorating expectations.
The outlook for wholesalers weighed down
sentiment for the trade sector, compounded by
dissatisfaction from retailers.
Weaker expectations weighed on sentiment in the
services sector despite an uptick in the
current situation.
Seasonal strength from the catering sector was
not enough to offset concerns the transport and
logistics sector have about business in the
coming months.
This supports the outlook that conditions will
remain challenging in 2025 for German
businesses.
According to an Ifo Institute survey, only
12.6% of German companies surveyed expect an
improvement in the coming year. In contrast
31.3% anticipate further deterioration and
56.1% predict no change to their economic
situation in 2025.
“Companies are currently seeing no signs of an
economic upturn. In view of the fact that the
economy has already performed poorly in 2024,
these figures are worrying,” said Ifo head of
surveys Klaus Wohlrabe.
Thumbnail photo: Berlin (Source:
Shutterstock)
Oxo-Alcohols17-Dec-2024
SINGAPORE (ICIS)–Asia’s oxo-alcohols market
continues to face challenges amid capacity
expansions in China.
Weak demand from downstream plasticizers
sector
Upstream support from propylene unlikely
Demand recovery to take some time
In this latest podcast, ICIS senior editor
Julia Tan speaks with ICIS analyst Lina Xu on
the latest developments and expectations for
what lies ahead in 2025.
Petrochemicals17-Dec-2024
MUMBAI (ICIS)–India’s state-owned Hindustan
Petroleum Corp Ltd (HPCL) plans to invest
rupees (Rs) 46.79 billion ($551 million) to
expand the lube oil base stocks (LOBS)
production at its Mumbai refinery by 289,000
tonnes/year or by about 61%.
“The company board has approved the ‘Lube
Modernization and Bottoms Upgradation Project’
at the Mumbai Refinery,” it said in a statement
to the Bombay Stock Exchange on 16 December.
This project will increase the company’s LOBS
production to 764,000 tonnes/year from current
475,000 tonnes/year with production of superior
grade Group II+ and Group III LOBS, it added.
HPCL expects to start producing the additional
premium base oils via a new integrated
hydrocracker and catalytic dewaxing unit
by
2027-2028.
($1= Rs84.91)
Polyethylene17-Dec-2024
SINGAPORE (ICIS)–Click
here to see the latest blog post on Asian
Chemical Connections by John Richardson.
To paraphrase William Shakespeare, I see last
week’s fuss about China’s new economic stimulus
as being full of sound and fury, signifying
hardly anything.
The hard reality is that China is undergoing a
period of a much lower GDP and therefore
chemicals demand growth. Nothing can change
this trajectory, for reasons I discuss in
detail in today’s post.
During 2025, the problem will remain far too
much global capacity chasing much
weaker-than-expected demand up and down all the
chemicals value chains because the consensus on
China was wrong.
So, to add to my five forecasts for 2025 which
I published last week, here is a sixth: There
will be no significant improvements during next
year in China’s CFR polyethylene (PE) and
polypropylene (PP) price spreads over CFR Japan
naphtha costs.
The 2024 final numbers are almost in. We can
see that the downturn in spreads that followed
the Evergrande Turning Point continues.
Let’s start with PE where 2022-2024 average
spread for the three grades was just
$300/tonne. This compares with a spread in
1993-2021 – during the Chemicals Supercycle –
that averaged $532/tonne.
The average 2022-2024 PP spread was $240/tonne
as against $562/tonne during the Supercycle.
Please don’t be distracted by unhelpful noise.
Instead, place all your focus on retooling your
tactics and strategies to deal with the
post-Supercycle chemicals world.
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.
Ethylene16-Dec-2024
HOUSTON (ICIS)–Two world-scale joint venture
projects being developed by Chevron Phillips
Chemical and QatarEnergy remain on track to
start operations in 2026, Phillips 66 said on
Monday.
Phillips 66 and Chevron hold equal stakes in
Chevron Phillips Chemical (CP Chem).
The US project is Golden Triangle Polymers,
an integrated polyethylene (PE) complex in
Orange, Texas. Chevron Phillips holds a 51%
stake, and construction started in 2023.
The Qatari project in Ras Laffan is another
integrated PE project. It is a 70:30 joint
venture between QatarEnergy and CP Chem.
Construction on this project started in 2024.
PHILLIPS 66 CAPEX
BUDGETPhillips 66 provided the
updates on the two petrochemical projects when
it revealed its 2025 capital budget, as shown
in the following table. Figures are in millions
of dollars.
Sustaining
Growth
TOTAL
Midstream
429
546
975
Refining
414
408
822
Marketing & Specialties
63
91
154
Renewable Fuels
18
56
74
Corporate and other
74
1
75
TOTAL
998
1,102
2,100
Source: Phillips 66
Phillips 66’s proportionate share of capital
spending in its CP Chem and WRB Refining joint
ventures is $877 million, and its inclusion
would bring Phillips 66’s total 2025 capital
spending to $3 billion.
The joint ventures’ spending will be self
funded, Phillips 66 said.
WRB Refining is a 50:50 joint venture made up
of Phillips 66 and Cenovus Energy. The joint
venture owns the Wood River refinery in
Illinois and the Borger refinery in Texas.
WRB’s capital spending will direct its capital
spending on sustaining projects, Phillips 66
said.
PHILLIPS TO SELL STAKE IN OIL
PIPELINEA subsidiary of Phillips
66 has agreed to sell its 25% non-operated
stake in the Gulf Coast Express Pipeline to an
affiliate of ArcLight Capital Partners. Pre-tax
proceeds from the sale should total $865
million.
The sale should close in January 2025.
Thumbnail shows PE. Image by ICIS.
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