Trade war

With higher tariff barriers going up between the US and China, the European market is likely to experience an influx of polymers and other chemicals from exporters looking for a new home for their production,  Displaced product which can’t go from the US any more to China and therefore will likely come to Europe.

There is also an indirect effect as domestic demand in China is also falling, leaving other Asian producers which usually export there to seek new markets and targeting Europe.

The US isn’t buying so many consumer goods from China any more, and container ships going from China to the US for Thanksgiving and Christmas aren’t full. So NE and SE Asian chemical producers haven’t got the business they expect in China and are exporting to Europe instead.  We don’t know how disruptive this will be but it has quite a lot of potential.

US polymer start-ups

It is clear that the new US polymer capacities will go ahead even if the demand is not there for the product. This is because the ethane feedstocks they use need to be extracted by the producers and sellers of natural gas who must remove ethane from the gas stream to make it safe.

For these producers some of the cost advantages have already disappeared because of rising ethane prices. The exports of US ethane are adding one or two more crackers to the total. And without sufficient capacity, ethane prices have become higher and more volatile.

In turn this means that pricing power is being lost as poor demand means producers cannot pass on the effect of rising oil prices. Margins are being hit with some already falling by 50-60%.

Circular economy
EU targets mean that all plastic packaging must be capable of being recycled, reused or composted by 2025. For the industry this could be a huge opportunity, but only if it acts fast. We have to develop the technology that allows that to happen. We will need the regulatory approvals and if we don’t get moving in the next 12-18 months we are in trouble.

Brexit beckons
We are now in the end game for Brexit. We talk to senior politicians from both sides who don’t think there is a parliamentary majority for any Brexit option. In turn this raises the clear risk that if no deal can be agreed, there is a chance the UK will refuse to pay its £39bn divorce bill.

This will have major consequences for chemical regulation and transport. Although the bigger companies have made preparations, only one in seven in the supply chains are getting prepared.