LONDON (ICIS)–Covestro’s Q1 2025 earnings before interest, tax, depreciation and amortization (EBITDA) halved compared to last year, but were at the upper end of its forecast, the German producer announced on Tuesday. € million Q 1 2025 Q1 2024 % change EBITDA* 137 273 -49.8 Sales 3,477 3,510 -0.9 Net income -160 -35 357.1 Free Cash Flow (FCF) -253 -129 96.1 *EBITDA – earnings before interest, tax, depreciation and amortization Key points The key driver of EBITDA fall was the planned closure of the POSM site in Maasvlatke, Netherlands. The closure hit earnings in the Performance Materials segment. Although sales remained stable year, margins were eroded by high energy costs. The Solutions & Specialties segment marked a slight decrease in sales compared to last year (from €1.8 billion to €1.7 billion), as increased sales volumes and positive exchange rate effects were not enough to offset the decline in average selling prices. “The first quarter of this fiscal year has once again demonstrated the volatile and challenging nature of a market environment increasingly characterized by trade conflicts and growing protectionism,” said Covestro CFO Christian Baier. CEO Markus Steilemann said the Q1 figures showed that Covestro remains “on course… with stable sales but continued pressure on earnings.” Outlook In response to volatile changes in US tariff policy, Covestro narrowed its EBITDA guidance to €1.0-1.4 billion (previously €1.0-1.6 billion), with an FCF range forecast to stay €0-300 million. Covestro continues to implement its sustainable future strategy, focusing on sustainable growth, saving €400 million globally by 2028 from increased efficiency and digitalization, while pushing towards fully circular and climate-neutral production. “Whoever hesitates in these turbulent times loses. But whoever acts prudently now can shape the future. That is precisely what we are doing – with full conviction, high speed and a clear vision,” said Steilemann Thumbnail image credit: Covestro

LONDON (ICIS)–Click here to see the latest blog post on Chemicals & The Economy by Paul Hodges, which looks at the likely impact of President Trump’s tariff war on US stock markets. 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)–Economic growth in the eurozone grew more than initially thought in April but remained subdued as demand conditions weakened. The eurozone composite purchasing managers’ index (PMI) was revised up by S&P Global from its flash estimate but was still at a two-month low of 50.4, down from 50.9 in March. The group’s eurozone services business activity PMI for April was also revised up but only to a five-month low of 50.1, down from 51.0 in March. A PMI reading of below 50.0 signifies contraction. S&P said its April HCOB (Hamburg Commercial Bank) PMI data showed a sustained upturn in private sector business activity across the eurozone since the start of the year, but the trend was “subdued and well below its long-term average.” Soft demand conditions were limiting the speed of growth, the market intelligence firm said in a statement. “Eurozone economic growth slowed at the start of the second quarter, following a pick-up in the first three months of the year,” said Cyrus de la Rubia, chief economist at HCOB. “The services sector, which is a major player, practically stagnated in April. Even though manufacturing output saw a surprising uptick, it wasn’t enough to prevent the overall slowdown in growth.”

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. China is in the process of drafting its 15th Five-Year Plan (2026–2030) in a geopolitical and economic environment that suggests the need for greater self-reliance. It might be fair to assume this will include a continued push toward petrochemical self-sufficiency. But China is to cap refinery capacity from 2027 onwards due to the rise of electric vehicles. This reduced need for gasoline could mean not enough new naphtha, LPG or other refinery feedstocks to support further petrochemical plant construction. China might instead import more feedstocks from the Middle East or continue to repurpose existing refineries to make more petrochemical feedstock. This is already the direction of travel through Saudi Aramco investments in China. Add rumours of coal-to-chemicals rationalisation and closures of older plants, and the picture gets even murkier. Conflicting reports say either China is slowing petrochemical construction following the trade war —or pressing ahead and raising operating rates to the mid-80% range (up from high-70s post-Evergrande Turning Point). Demand is another major variable. Growth was already slowing before the trade war and could now turn negative in 2025. A document from China Customs (25 April) pointed to possible waivers for US polyethylene and ethane imports—but not for ethylene glycol or propane. Nearly 60% of China’s propane imports came from the US in 2024. With a 125% tariff still in place, China would be unable to replace those volumes quickly, putting PDH propylene production under pressure. This matters: 32% of China’s propylene capacity is now PDH-based, and 70% of propylene is used to make PP. ICIS expects PDH operating rates to fall to below 59% in 2025 (from 70% in 2024). Could this mean a propylene shortage? Not necessarily. Output from crackers, refineries and coal could increase—especially if, as one Middle East source suggests, China pursues greater PP self-sufficiency. Taking into account all these variables, and the extent to which China can export PP based on the level of trade tensions, consider these scenarios for China’s PP net imports in 2025–2028: The ICIS Base Case: They average 3m tonnes/year. Alternative 1: 600,000 tonnes/year with some years of net exports Alternative 2: 1.4m tonnes/year, with again some years of net exports My gut feel is that China will do its best to boost petrochemicals self-sufficiency. But you cannot take my always fallible words as the final words. You must extend and deepen your scenario planning in this ever-murkier environment. 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.

SINGAPORE (ICIS)–A free trade agreement between Singapore, Chile and Peru came into force on 3 May, according to Singapore’s Ministry of Trade and Industry (MTI). The Pacific Alliance – Singapore Free Trade Agreement (PASFTA) was signed in January 2022. The Pacific Alliance includes Colombia and Mexico alongside Chile and Peru, and combined, it represents the ninth largest economy in the world with a total population of 235 million people and a combined GDP of over $2.7 trillion, according to the World Bank. “The PASFTA will enter into force for Colombia and Mexico upon the completion of their respective ratification procedures”, MTI said. Notably, PASFTA allows businesses to use materials originating in any PASFTA party to contribute towards a good’s originating status, qualifying them for preferential tariff treatment. “Singapore and Colombia will establish new FTA links once Colombia ratifies the PASFTA,” the ministry said. Colombia does not have a trade deal with Singapore. About 100 Singapore companies are involved in the Pacific Alliance and bilateral trade with the alliance amounted to S$12.5 billion in 2024, MTI added.

SAO PAULO (ICIS)–Mexico remains the potential largest victim of the change in US trade policy, but practically no country in the world would be spared from an impact, analysts said this week. Mexico, Brazil GDP growth forecasts cut Mexico’s manufacturing impacted by US tariffs on automotive Latin American high interest rates to fall faster to prop up economy US high costs to still deter many manufacturers to relocate MEXICAN ISSUESIn a string of forecasts published by analysts at credit rating agencies and consultancies, Mexico was singled out as one of the countries most affected by US tariffs. Meanwhile, chemicals sources in Mexico have recently said demand has taken a turn for the better, especially after the US fell short of announcing any additional tariff on the country. However, other macroeconomic indicators have been mixed. On the negative side, the manufacturing purchasing managers’ index (PMI) fell further into contraction in April and added its 10th consecutive month in the red. On the other hand, Mexico’s GDP grew by 0.2% in the first quarter, compared with the first, a higher-than-expected figure which allows the country to avoid for the moment a technical recession – two consecutive quarters with negative growth. Mexico and Canada form, together with the US, the North American free trade zone under USMCA. Canada was also spared from any additional tariffs, but the two countries were already subject to some import tariffs implemented in February on sectors such as automotive or steel, among others. And it is the automotive tariffs, if prolonged in time in their current form, that could greatly dent Mexico’s economy, given the sector’s importance within manufacturing – it is a large global automotive producer, churning out nearly 3 million vehicles/year, of which around 80% are exported to the US. This week, London-headquartered consultancy Oxford Economics said it expects Mexico’s GDP growth to be flat in 2025, which is somewhere in the middle between the International Monetary Fund’s (IMF’s) forecast for a contraction of 0.3% and market consensus, which still sees some growth of a few tenths of a percentage point. “Mexico is the most open economy in the region with bilateral trade accounting for nearly 80% of GDP, out of which exports to the US account for over 25% of GDP. In fact, nearly 80% of all Mexican exports are directed to the US and currently face 25% tariffs on non-USMCA compliant goods on top of steel and aluminium,” said the analysts at Oxford Economics. The only Latin American country where investments are expected to grow in coming years is Argentina, the analysts added, while the rest of the region will post a slowdown, while Mexico will potentially see investments contracting. “Uncertainty around the future trade relationship with the US and the protection that the USMCA can bring is threatening billions in US investment,” said Oxford Economics. “The scale of this threat is substantial – last year alone, US investment in Mexico reached $16 billion, accounting for nearly half of the country’s total foreign direct investment. Even more concerning, over the last two decades, the US has invested over $300 billion in Mexico, creating a massive economic stake now under threat.” Analysts at BMI, a subsidiary of US credit rating agency Fitch, agreed that fixed investment is to fall sharply this year, a factor which could tip Mexico’s economy into recession in 2025. However, BMI’s report was published before Mexico’s statistical office Inegi said earlier this week that GDP growth in the first quarter stood at 0.2%, quarter on quarter, which is a weak figure but nonetheless allowed Mexico to avoid a ‘technical recession’ – two consecutive quarters with negative growth – for the time being. BMI cut its growth forecast for Mexico in 2025 and now expects a contraction in GDP of 0.5%, sharply lower than its prior forecast for modest growth of 0.2%. “The economy was already struggling prior to the latest shifts in US trade policy, with output having declined by a significant 0.6% quarter on quarter in Q4… Granted, it will only face an effective tariff rate of roughly 7.5% once all exemptions are accounted for (below the US’s weighted average rate of closer to 20%),” said the analysts. “But there is little incentive for firms expand their presence in Mexico when so much remains in flux. Combined with spillover effects from a more downbeat outlook for growth in the neighboring US (felt via reduced exports and softness in remittances), the likely trajectory for the Mexican economy is a challenging one.” S&P CUTS GDP GROWTH FORECAST – AGAINTrump’s second term seems to have brought even more uncertainty than the first, and analysts these days say their forecasts could be futile and valid only for a matter of hours. It is what US credit rating agency S&P said this week, as it downgraded GDP growth forecasts for Latin America’s two largest economies – Brazil and Mexico – as well as the world’s, including the US itself. “Our baseline forecasts carry a significant amount of uncertainty. As situations evolve, we will gauge the macro and credit materiality of potential and actual policy shifts and reassess our guidance accordingly,” it began. To make their point clear, they added a note after detailing what tariff scenario they consider likely to stay in the medium term which read: “A note of caution about our latest revisions: we are in uncharted territory.” S&P latest revisions assume the following: A 10% across-the-board tariff on imports from all US trading partners as announced on 2 April, but not the country-specific tariffs now on a 90-day pause. A 25% US import tariff on autos, steel, aluminium, pharmaceuticals and semiconductors. The revisions include the “fully escalated tariffs” between the US (145% on Chinese imports) and China (125% on US imports), net of the carve-out for electronics imports into the US. The results of this are likely to cause a more pronounced economic slowdown across the board. GDP forecasts by S&P (change in %) 2025 Change from March forecast 2026 Change from March forecast 2027 Change from March forecast 2028 Change from March forecast Brazil 1.8 -0.1 1.7 -0.3 2.1 0.0 2.2 0.0 Mexico -0.2 -0.4 1.5 -0.2 2.2 0.0 2.3 0.0 US 1.5 -0.5 1.7 -0.2 2.1 -0.1 1.9 0.1 Canada 1.4 -0.3 1.5 -0.4 2.1 0.0 2.1 0.3 World 2.7 -0.3 2.6 -0.4 3.3 -0.1 3.3 0.0 The rest of Latin America will fare slightly better, when compared with Mexico’s outlook, not least because most countries in the region are likely to face a 10% tariff if no deal with the US is reached. Brazil’s economy, in any case, was widely expected to slow down after three years of bumper growth which led to widely extended fears by the end of 2024 of economic overheating. Further afield, forecast revisions have been less severe for most countries than for the global economy at large. BMI said Peru, Chile and Colombia are expected to maintain “relatively healthy and stable growth rates” with three countries, as well as Brazil, having a significantly lower dependence than Mexico on exports to the US, which could insulate them somewhat from direct trade war impacts. Argentina will be the exception as the country makes an attempt at an economic spring after years in the doldrums and a deep recession in 2023-2024. Overall and for the region, the current crisis could have at least one silver lining: as growth slows down, central banks will be keener to lower still-high interest rates to prop consumption. Rates across the region remain above historical average, even if the inflation crisis has subsided in most economies. Brazil’s rates currently stand at 14.25%, Mexico’s at 9.0%, Colombia’s at 9.25%, while Chile’s have come down considerably and stand at 5.0%. Still a long way from economic normalization, Argentina’s interest rates stand at 29%, in response to an inflation which still stood at 56% in March. “Central banks in Latin America are likely to cut more aggressively given that their current policy rates are above neutral. The recent appreciation of EM currencies against the US dollar leaves central banks with more scope to cut rates across the countries we cover,” said S&P. The analysts added that the combination of stronger currencies in emerging markets – Latin American economies fall under that category – and lower oil prices will help decrease inflation, given most of those economies are net importers of energy. A FINAL REFLECTIONS&P concluded saying that no matter how much President Trump would like to bring as much manufacturing back to the US as possible, current global trade and industrial trends make that scenario very unlikely. This could stem from Trump’s fixation on manufactured goods, without taking into account the trade balance in services, which mostly and largely favors the US in most cases, or the difference between savings by US consumers and companies and investment. S&P said US tariffs – in full or in part – are unlikely to substantially narrow the US trade balance, because its current account deficit will only narrow to the extent that the savings-investment difference narrows, and that would require some combination of lower investment (and slower growth) and higher savings (and less consumption). “If the tariffs do not materially move the US savings rate, then they will simply shift the trade balance between partners as exports minus imports remain unchanged. It’s also hard to see the US tariffs causing a wholesale return or reshoring of US manufacturing. Decades of trade driven largely by comparative advantage means that production is currently located where it is most cost-effective.” Taking the case of Asian supply chains, the cost of production there is often only a fraction of the cost of producing the same product in the US, or Europe; the currently proposed tariff rates are unlikely to close that gap. “To put it another way, relocating a large swath of goods back to the US would likely involve a substantial increase in costs,” the analysts at S&P concluded. Front page picture source: Mexico’s automotive trade group the Asociacion Mexicana de la Industria Automotriz (AMIA) Insight by Jonathan Lopez

SAO PAULO (ICIS)–Here are some of the stories from ICIS Latin America for the fortnight ended on 2 May. NEWSBrazil chems production still impacted by imports despite protectionist measures – Abiquim Brazil’s chemicals production structural woes, such as high production costs, remain while imports continue making their way unabated, despite protectionist measures deployed by the government, according to the director general at producers’ trade group Abiquim. INSIGHT: Mexico’s chemicals revive as tariffs woes ease (part 1)When Donald Trump won the US election with a larger-than-expected majority, Mexican chemicals players started making plans for their businesses under what promised to be a disruptive second term for trade relations between the two countries. Argentina savoring economic spring but recovery for all biggest task still pending – Evonik execAfter years in the doldrums, Argentina’s economy is finally going through some sort of “spring” thanks to sectors such as agricultural, mining and energy – but the country, however, is yet to achieve a recovery which works for all Argentinians, an executive at Germany’s chemicals major Evonik said. Mexico’s improved fortunes on US tariffs propping up petchems demand – Entec execMexico’s chemicals fortunes seem to be turning for the better after the country was spared from the most punitive US’ import taxes, according to an executive at chemicals distributor major Ravago’s Mexican subsidiary. INSIGHT: Argentina faces up to rising inflation after currency controls liftedArgentina’s decision to end foreign currency restrictions is set to devalue the peso’s official exchange rate and increase inflation but it was a vital step to normalizing a dysfunctional exchange rate system. Mexico launches antidumping investigation into US PVC importsThe Mexican government officially launched an antidumping investigation into imports of suspension polyvinyl chloride (PVC) resin from the US, following allegations of unfair trade practices that have impacted domestic industry at the end of April. Brazil’s Braskem Q1 higher priced PE, PP sales in Q1 cannot offset lower PVC volumesBraskem resin sales in its domestic market dropped by 4% in Q1, year on year, due to lower polyethylene (PE) and polypropylene (PP) sales volumes as the producer prioritized sales with higher added value, the Brazilian polymers major said. Mexico’s Orbia earnings fall again while ‘trying’ to guess potential green shoots – CEOOrbia’s Q1 sales and earnings fell again, year on year, with the Mexican chemicals producer already writing off any significant recovery in 2025 and “trying to figure out” potential green shoots for 2026, its CEO said on Friday. PRICINGLatAm PE international prices steady to lower on competitive US export pricesInternational polyethylene (PE) prices were assessed as steady to lower as US export prices remain competitive. LatAm PP domestic, international prices fall in Colombia, Mexico on cheaper feedstocksDomestic and international polypropylene (PP) prices fell in Colombia and Mexico tracking lower US propylene costs. In other Latin American (LatAm) countries, prices were unchanged. LatAm – Argentina PP domestic price range narrows as distributors try to compete with cheaper imports Domestic polypropylene (PP) price range was assessed as narrower in Argentina. Distributors’ prices have fallen to compete with cheaper imports.

HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 2 May. China unofficial proposed tariff exemption list includes US PE, ethane but not EG China’s unofficial proposed tariff exemption list of 131 US products worth around $46 billion, or 28% of total imports, includes polyethylene (PE), along with other chemicals and key feedstock ethane, according to a document obtained by ICIS. US PPG’s order patterns remain steady despite tariffs US based paints and coatings producer PPG has so far seen no changes in order patterns from its customers, and it has maintained its full-year guidance despite the tariffs imposed by the US. INSIGHT: US suppliers maintain propane exports despite tariffs China’s tariffs on US shipments of liquefied petroleum gas (LPG) have yet to disrupt exports, and the companies that supply the material expect that will remain the case – even if prices fall. INSIGHT: CEOs face new problem as economy weakens, overcapacity worsens As the trade war puts a squeeze on already tepid economic growth, and deepens chromic global overcapacity in chemicals, CEOs may struggle to find fresh markets as they shift product flows to avoid the burden and uncertainty of tariffs. INSIGHT: Mexico renews nearshoring ambitions as tariffs woes ease As Mexico seems to have managed to navigate US President Donald Trump’s first 100 days in office relatively unscathed, compared with other emerging, manufacturing hub emerging economies, the country now looks again at its potential as a nearshoring hub. US tariffs may create COVID-like whiplash on chem markets – Huntsman The shock of US tariffs has caused customers to halt chemical purchases due to the uncertain trade policy, and that pause is reverberating throughout chemical chains in ways that resemble the COVID-19 pandemic in 2020, the CEO of US-based polyurethanes producer Huntsman said on Friday.

SINGAPORE (ICIS)–Saudi Arabia’s Basic Chemical Industries (BCI) has extended its Memorandum of Understanding (MoU) with Italmatch’s Middle East unit to supply chemicals to Italmatch’s facilities in the PlasChem Park in Jubail Industrial City. The MoU, first signed in May 2023, was extended to 31 Dec 2025, BCI said in a filing on the Saudi bourse Tadawul on 4 May. Italy-based Italmatch has extended the timeline on increased scope and additional technical work to modify product processes to match the local market, it added. The deal involves the supply of chlorine, caustic soda and hydrochloric acid to Italmatch’s facilities. Financial details of the deal were not disclosed. Saudi Arabia’s BCI manufactures chlorine gas, hydrochloric acid, caustic soda, and sodium hypochlorite at a site near Dammam, according to the company’s website.