Brazil starts US, Canada PE-dumping probe

Spanish Market: Petrochemicals
14/11/24

Brazil's government has started an anti-dumping investigation into polyethylene (PE) produced in the US and Canada.

The country's foreign trade committee Gecex launched the investigation on 13 November following allegations from the sole Brazilian PE producer, major petrochemical company Braskem, that these countries are exporting PE to Brazil at prices below what is considered fair market value.

Overall imported PE prices into Brazil have been in a downward trend since July, pushing down Braskem prices in the domestic market.

Gecex said it will analyze export prices and compare them with those in the domestic markets of both countries. If dumping is confirmed, corrective measures may be applied to protect the Brazilian industry.

A preliminary analysis has identified significant evidence of dumping, justifying the continuation of the investigation, Gecex said. It added that there was a considerable increase in PE imports from these countries — especially from the US — during the period being investigated, which may have contributed to the decline in domestic prices and harmed the domestic producer.

The preliminary analysis of dumping evidence covered 1 April 2023 to 31 March 2024. The damage analysis period extended from 1 April 2019 to 31 March 2024.

The anti-dumping investigation into PE imports from the US and Canada was preceded by an increase in import taxes on a number of polymers and chemicals to 20pc from 12.6pc, including PE, polypropylene (PP) and polyvinyl chloride (PVC), effective since 15 October.

Repercussions

An international trader specializing in polymer imports into Brazil told Argus that if anti-dumping duties are applied, his company's PE imports from the US to Brazil could drop by 20-30pc.

"The decision has a 10-month deadline to be presented, but I believe it will be implemented and possibly announced earlier," he said, adding that this is another Braskem maneuver to regain its traditional 70pc market share in the Brazilian market.

If confirmed, the measure is expected to have a significant impact on the Brazilian economy, especially on the plastic products manufacturing industry, as imports of finished plastic products could rise substantially, the trader said.

One US-based trader selling US and Canada PE into Brazil sees the possible application of anti-dumping measures on the products as a structural development.

"We will need to source PE in different production regions such as Asia and the Middle East, developing new ways of logistics, cash flows, ways of payment, to make it work flawlessly as it currently works with North American PE," the trader told Argus. "Prices should go up and we will increase our margins on PE sales."

Brazil's January-September PE production increased by 1pc to 1.7mn t from the same period in 2023, while domestic sales fell bu 2pc to 1.24mn t. In contrast, PE imports jumped by 45pc to 1.54mn t, resulting in an apparent consumption of around 2.8mn t, up by 20pc higher year-on-year and a record high.

By Fred Fernandes

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

24/12/24

Viewpoint: US BD demand awaits 1Q rebound as risks loom

Houston, 24 December (Argus) — US demand for butadiene (BD) is expected to increase in January, but buyer sentiment for the remainder of the first quarter remains uncertain. Inventory restocking in January is expected to draw down excess supply and provide near-term price support, according to market participants. Derivative manufacturers aim to rebuild inventories following earlier-than-normal destocking initiatives this year. Many buyers employ standard inventory control management strategies to avoid paying higher end-of-year inventory taxes, particularly in Texas. Others cut costs to improve year-end financial statements. Domestic demand in February and March is less clear, as market participants question whether the market will rebound from persistently low demand at the end of 2024. US BD prices on a contract basis fell by 12pc during the fourth quarter , owing to weak demand and oversupply. Demand was depressed by BD consumer turnarounds in October, seasonal slowdowns between November-December and trade pressures tied to derivative imports. US tire shipments this year are expected to rise by 2.1pc to 338.9mn units, surpassing the record set in 2021, according to the US Tire Manufacturers Association. However, market participants along with US trade data reference a jump in tire imports from Asia-Pacific. Both Bridgestone and Goodyear have said low-cost tire imports and structural changes in segment profitability across the Americas are eroding their market share, fueling capacity rationalization, asset sell-offs and plant closures in the region. Acrylonitrile butadiene styrene (ABS) is another segment at risk of stronger competition from low-cost, Asia-origin imports. Ineos Styrolution plans to permanently shut down its ABS plant in Addyston, Ohio, in 2025 because the facility cannot compete with imported material. "Over the past few years, we have seen the ABS market become increasingly competitive, particularly with growing competition from overseas imports," Ineos Styrolution chief executive Steve Harrington said in late October. Protectionist trade policies are likely to be a feature of president-elect Donald Trump's second administration, potentially altering business investment decisions and durable goods trade flows. Even if demand does not improve, planned maintenance in the first half of 2025 is expected to tighten BD supplies. A heavy turnaround cycle for steam crackers will concentrate in the first and second quarters, constraining availability of feedstock crude C4. One integrated US Gulf coast producer plans to enforce BD allocations while its assets are offline for planned maintenance. A separate, non-integrated producer has not announced BD sales controls, based on feedback from its customers. This same BD supplier was short on feedstock supplies for parts of this year, with the crude C4 merchant market illiquid in North America. A third producer has scheduled a cracker turnaround starting in January, but no indications emerged that would limit term volumes from its BD unit. Reduced BD supply during cracker maintenance is likely to pull volumes away from the export market until the second half of 2025. Export spot cargoes in the fourth quarter more than doubled from the third quarter, serving as a critical outlet to clear the domestic market of surplus BD supplies, even as lower export prices pressured US margins. By Joshua Himelfarb Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US LPG cargo premiums poised to fall

23/12/24

Viewpoint: US LPG cargo premiums poised to fall

Houston, 23 December (Argus) — The booming US LPG export market has fueled record spot fees this year for terminal operators that send those cargoes abroad, but those fees are poised to fall next year as additional export capacity comes online. US propane exports surged over the past two years, hitting an all-time high of 1.85mn b/d in the first quarter of this year, according to data from the US Energy Information Administration (EIA). Terminal fees for spot propane cargoes out of the US Gulf coast hit an all-time high of Mont Belvieu +32.5¢/USG (+$169.325/t) in mid-September. US propane production is expected to grow by another 80,000 b/d in 2025 to 2.22mn b/d while the outlook for domestic consumption is fairly steady, at 820,000 b/d next year — meaning even more propane will be pushed into the waterborne market. But that is dependent on US infrastructure keeping up with the pace of production. US export terminals in Houston, Nederland and Freeport, Texas, have run at or above capacity for the last two years given the thirst for cheaper US feedstock, largely from propane dehydrogenation (PDH) plant operators in China. This demand has created bottlenecks at US docks, and midstream operators like Enterprise, Energy Transfer, and Targa have rushed to ramp up spending on both pipelines and additional refrigeration to stay ahead of the wave of additional production. US gas output spurs LPG exports As upstream producers have ramped up natural gas production ahead of new LNG projects, most producers are counting on LPG demand from international outlets in Asia to offload the ethane and propane the US cannot consume. For the past four years, Asian buyers have been more than happy to oblige. US propane exports to China rose from zero in 2019, when China imposed tariffs on US imports, to an average of 1.36mn metric tonnes (t) per month in January-November 2024, according to data from analytics firm Kpler, making China the largest offtaker of US shipments. US exports to Japan averaged 480,000t per month throughout most of 2024, and exports to Korea averaged 460,000t per month in the first 11 months of 2024. China, Korea, and Japan received 52pc of US propane exports in 2024, up from 49pc in 2020, according to data from Vortexa. Strong demand in Asia has kept delivered prices in Japan high enough to sustain an open arbitrage between the US and the Argus Far East Index (AFEI). Forward-month in-well propane prices at Mont Belvieu, Texas, have remained well below delivered propane on the AFEI. In 2020, Mont Belvieu Enterprise (EPC) propane averaged a $143/t discount to delivered AFEI — a spread that has only widened as additional PDH units in Asia have come online. During the first 11 months of 2024, the Mont Belvieu to AFEI spread averaged a hefty $219/t, leaving plenty of room for wider netbacks in the form of higher terminal fees for US sellers, especially as a wave of new VLGCs entering the global market has left shipowners with less leverage to take advantage of the wider arbitrage. The resulting wider arbitrage to Asia has kept US export terminals running full for the last two years. So when a series of weather-related events and maintenance in May-September limited the number of spot cargoes operators could sell and delayed scheduled shipments, term buyers willing to resell any of their loadings could effectively name their price. This spurred the record-high premiums for spot propane cargoes in September. New projects may narrow premium An increase in US midstream firm investments in additional dock capacity and added refrigeration in the years ahead could narrow those terminal fees, however. Announced projects from Enterprise and Energy Transfer, in particular, will add a combined 550,000 b/d of LPG export capacity out of Houston and Nederland, Texas by the end of 2026. Enterprise's new Neches River terminal project near Beaumont, Texas, will add another 360,000 b/d of either ethane or propane export capacity in the same timeframe. These additions are poised to limit premiums for spot cargoes by the end of 2025. Already, it appears the spike in spot cargo premiums to Mont Belvieu has abated for the rest of 2024. Spot terminal fees for propane sank to Mont Belvieu +14¢/USG by the end of November. The lower premiums come not only as terminals resume a more normal loading schedule, but at the same time a surplus of tons into Asia ahead of winter heating demand has narrowed the arbitrage. The spread between in-well EPC propane at Mont Belvieu fell from $214.66/t to $194.45/t during November. A backwardated market for AFEI paper into the second quarter of 2025 means US prices are poised to fall more in order to keep the spread from narrowing further. By Amy Strahan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Protectionist policies muddy US PE outlook

23/12/24

Viewpoint: Protectionist policies muddy US PE outlook

Houston, 23 December (Argus) — Potential new tariffs combined with protectionist policies from other importing countries are clouding the outlook for growth in the US polyethylene (PE) market heading into 2025. US president-elect Donald Trump threatened a 25pc tariff on all imports from Canada and Mexico, and at times has threatened as much as a 60pc tariff on all goods imported from China. Any new tariffs open the US up to retaliatory tariffs from the three countries, which have historically been among the top destinations for US PE exports. Brazil, another major trading partner with the US, recently raised import tariffs on PE to 20pc. On top of that, Brazil is in the midst of an anti-dumping investigation into US PE, which if successful would raise the tariff on US PE by an additional 21.4pc, bringing the total tariff for US PE in Brazil to 41.4pc. US PE exports in the first 10 months of 2024 totalled roughly 11.6mn t, with 16.4pc sold to China, 13.3pc sold to Mexico, 10.8pc sold to Brazil and 7pc sold to Canada , according to data from Global Trade Tracker (GTT). US PE producers are increasingly relying on exports, particularly with new capacity still set to come online in the next two years. This includes a new 600,000 t/yr linear low density polyethylene (LLDPE)/high density polyethylene (HDPE) swing plant from Dow set to start in the second half of 2025, as well as 2mn t/yr of HDPE capacity from Chevron Phillips Chemical's joint venture with Qatar-based QE in 2026. Exports as a percentage of total US and Canadian PE sales has been growing since 2016, when it was less than 25pc to crossing the 50pc threshold for the first time in November of this year, according to data from the American Chemistry Council (ACC). ACC data combines the US and Canada and considers trade between them as domestic rather than exports. With the US and Canadian PE markets largely functioning as one, the potential tariffs on product from Canada could cause problems for US buyers as well as Canadian suppliers, whose competitiveness in the region could be limited by new tariffs. "It would be a huge problem," said one US PE buyer who purchases resin from suppliers in both countries. For one particular grade of PE, the buyer said there are only two suppliers, including one producer in Canada and one in the US. If tariffs were imposed on Canadian material, it would suddenly make that particular grade more expensive because it would mean the US producer would no longer need to match competitive offers from Canada. Retaliatory concerns While US buyers are concerned about having to pay new duties on imports from Canada, US producers are also worried about potential retaliatory tariffs from other countries, such as China, and new duties and potential tariffs in Brazil. US PE exports to China totaled roughly 1.9mn t in the first 10 months of 2024, an amount that could not be easily absorbed by many other countries if new tariffs limit sales into that country. And in Brazil, US PE exports totaled roughly 1.26mn t in 2024 through October, another huge chunk that is at risk if the new anti-dumping duties against US PE are implemented. "Brazil is a huge market for the US. It's a big deal," said one US trader. "Producers can ship to countries around Brazil, but that will not cover everything we are losing. Where will it all go?" New outlets are opening up for US product in places such as Europe, where some global capacity has shut down. ExxonMobil, for instance, announced in April it was permanently shutting down its Gravenchon cracker and associated derivative plants in France, including a 420,000 t/yr HDPE-LLDPE swing unit. With the closure of that plant, sources have said ExxonMobil is exporting more volume from its cost-advantaged US assets to the region. But there is a limit to how much US export volume can be absorbed because of shutdowns in other regions. While many market participants are hopeful that proposed tariffs will not materialize, the uncertainty is making it difficult to plan for 2025, sources said. "Speculating on it is a waste. You don't know what is going to happen first, you don't know what the reaction is going to be," said one buyer. "All you can do is try to get the lowest prices you can and work a little bit of flexibility into your contracts." By Michelle Klump Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: rHDPE packaging grade demand solid into 2025

18/12/24

Viewpoint: rHDPE packaging grade demand solid into 2025

London, 18 December (Argus) — A number of European recyclers report stronger demand for premium rHDPE BM grades heading into 2025, but prices and margins are likely to remain under pressure. European recyclers have endured well-publicised struggles in the past two years, but demand for rHDPE BM natural and, particularly, white grades has been the brightest spot for those operating in the polyolefin market in 2024. Prices have risen by 7-8pc over the year and — while some recyclers are keen to emphasise that contracting out their 2025 volumes has not been without its difficulties — many report that they have more orders for the coming year than they are able to supply. The closure of UK-based recycler Viridor's Avonmouth recycling plant , an rHDPE natural supplier, pushed some orders to other suppliers at the end of the year. But underlying demand also appears to be rising, and large packaging companies told Argus that they expect — based on forecasts from their customers, and with the caveat that these do not always translate into physical volumes — to be using more rHDPE in 2025 than in 2024. This shows brands are keen to further increase the recycled content of their packaging, and that many see rHDPE as a good category to focus on. But challenges remain, even for recyclers that are seeing a stronger demand outlook. Packaging manufacturers and brand owners have no legal obligation to use rHDPE in 2025, and there will be a limit to what they will pay for sustainable packaging materials. Fast-moving consumer goods (FMCG) brands' sales were hit by inflation in 2022 and 2023, and they remain cognisant of the need to find the right price point with their customers as volumes recover. As a result, decreases in the virgin HDPE market and the consequent widening of the rHDPE BM-virgin HDPE BM premium to its highest since August 2023 may become an obstacle to demand. Barring a sharp rise in crude and naphtha costs that underpin the European petrochemicals chain, Argus does not expects any major increases in HDPE prices in 2025. The potential for virgin prices to cap recyclate prices will remain for the foreseeable future. Some European recyclers are also concerned about import pressure, which is resurfacing after a lull linked to two periods of unusually-higher Asia-Europe freight rates in 2024. Asian rHDPE natural pellets have been offered up to €400-500/t ($419-$524/t) cheaper than the highest-priced European supply in recent weeks. And, although some buyers prefer the optics of supporting their regional recycling industry, or the opportunity to resolve quality issues more easily and avoid traceability concerns by working with local suppliers, this price advantage may encourage more to find import sources they are comfortable with. Recyclers also still need to find an outlet for their lower-value grades, from darker/coloured packaging grades down to grades that mainly sell into "cost-saving" markets such as pipe. A typical colour-sorting recycling process produces a range of grades, reflecting the combined natural, white and mixed-colour composition of standard HDPE packaging bales in northwest Europe. But finding a home for darker pellets can be difficult in the packaging industry, where buyers like to process white or natural grades with masterbatch colourants — concentrated pigments — to preserve the appearance of their products. And construction and industrial markets are depressed by the current economic environment and unlikely to buy large volumes unless recyclers can offer a discount to virgin material. Recyclers making premium HDPE grades may therefore feel more confident than those in other polyolefin markets heading into 2025. But until buyers are more accepting of a wide range of grades, or recently-confirmed legislation mandating the use of recyclates in polyolefin packaging kicks in, they will be under no illusion that the past few years' challenges can be consigned to the rear view mirror just yet. By Will Collins Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: EU PVC margins to hold below average in 2025

18/12/24

Viewpoint: EU PVC margins to hold below average in 2025

London, 18 December (Argus) — European polyvinyl chloride (PVC) margins are likely to remain subdued in 2025, with a repeat of the sluggish demand and rising ethylene costs seen in 2024. Weakening European PVC consumption throughout 2024 was mainly underpinned by lower construction activity, a key demand driver. Construction purchasing managers index (PMI) data, compiled by S&P Global and Hamburg Commercial Bank (HCOB), show the eurozone construction PMI for 2024 peaked in October at 43.0, still way below the 50 mark that separates contraction and expansion. PVC market participants are cautiously optimistic that recent declines in interest rates from the European Central Bank (ECB) may help stimulate demand for home-builds in 2025, and improved PVC demand will follow. The ECB reduced rates three times in 2024, to 3.25pc. Rates may continue to ease in the short term, but as witnessed in 2024 this would take time to filter through to European PVC demand. Because of this, buyers are contemplating either maintaining or reducing contractual PVC volume commitments for 2025, noting struggles with passing raw material costs to customers. Anti-dumping duties (ADDs) on s-PVC imports from the US and Egypt helped to reduce excess supply in 2024, and while this is likely to continue into 2025 there is limited interest from buyers to source additional supply because of lower demand. Asian s-PVC imports remained minimal, with volatility in freight costs and longer lead times likely to suppress buying interest into 2025. Re-balancing act Domestic PVC producers focused on reducing inventories and operating rates for much of 2024 to keep the market balanced, with average operating rates between 60-70pc for s-PVC production and at the higher end of the range for specialty grades. But re-balancing proved to be a slow process in light of weakening demand, forcing European producers to keep operating rates and margins low for much of the year. Argus calculated s-PVC net production margins, based on feedstock ethylene costs in northwest Europe, averaged around €287.04/t between January-November 2024, lower by €109.04/t than during the same period in 2023 and around €73.40/t lower than the Argus 2015-23 average. Easing electricity costs in 2024 helped to suppress further PVC margin loss, but demand weakness throughout the year remained in favour of buyers as contract prices settled predominantly below the implied ethylene cost. With European ethylene prices likely to increase and PVC demand expectations suppressed throughout 2025, there could be another year of below-average margins for PVC producers. Argus assessed the December suspension PVC (s-PVC) preliminary contract marker for northwest Europe at €1,120/t on 20 December, reflective of a preliminary contract delta for December at minus €5/t. This is comparable to an ethylene monthly contract price (MCP) movement of minus €7.50/t for December. This raises the possibility of further supply consolidation in Europe to re-balance the market in the medium term, with smaller producers announcing potential closure of PVC production units in central and eastern Europe in 2025. Others plan to mothball some specialty PVC production lines, while others are seeking import licenses to supply PVC into emerging markets such as India. This is difficult to achieve because of cost-competitiveness. A rise in regional construction activity, and therefore PVC demand, will remain the quickest way to re-balance the market, helping to raise operating rates and margins back to above-average levels as buyers commit to more contractual volumes. By George Barsted and Michael Vitiello Integrated s-PVC NWE net margins €/t Eurozone construction PMI Index Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more