International retaliation to the Trump administration’s steel and aluminum tariffs could pose a risk to US chemical manufacturers, especially exporters, according to a report by Moody’s Investors Service (New York).
However, announcements thus far have been mild and will have very minor impacts. If trade tensions escalate, the industry will be threatened, Moody’s says.
The only chemical product named as part of China’s retaliatory actions last week was ethanol. While this is negative news for ethanol makers, its impact on the overall chemical industry will be negligible, Moody’s says. The move could put some pressure on ethanol margins, as US exports of ethanol to China had crept up again earlier this year after falling in 2017.
Other risks loom beyond what has been announced. “Escalating protectionism around the world would hurt [industries] that produce specific commodities, including commodity chemicals,” Moody’s says. “The extent of protectionist trade measures around the world remains very uncertain.”
The credit ratings of producers of agchems, fertilizers, and petrochemicals will be hardest hit in a scenario of escalating protectionism, owing largely to export reliance and weak credit metrics, Moody’s adds. Petrochemical makers could face tighter margins as new capacity comes onstream in the coming years—a double whammy if protectionism becomes an issue.
The US chemicals sector is a net exporter, and much of the new capacity coming onstream on the Gulf Coast is intended for export, as domestic supply will outstrip demand.
Meanwhile, the steel and aluminum tariffs themselves are expected to modestly increase the cost of building new crackers and chemical projects. “Rapidly increasing labor costs over the past several years…placed a much bigger strain on project costs than the proposed steel project would,” Moody’s says. North America’s advantaged feedstock position remains the biggest driver for investment decisions, the ratings agency adds.
By Vincent Valk
Source: Chemical Week
CF Industries Holdings, Inc. (NYSE: CF) today announced that it has closed its acquisition of Incitec Pivot Limited’s (“IPL”) ammonia production complex located in Waggaman, Louisiana. Under the terms of the agreement, CF Industries purchased the Waggaman ammonia plant and related assets for $1.675 billion, subject to adjustments.
The Virgin Atlantic flight was powered entirely by SAF, that was a drop-in replacement for conventional jet fuel, but made solely from sustainable feedstocks. This was enabled through the inclusion of a new bio-based aromatic jet fuel blending component.
Cepsa SA (Madrid) has agreed a deal with C2X, an independent firm owned by AP Moller Holding with AP Moller-Maersk as minority owner, to develop a 300,000 metric tons per year renewable methanol plant at Huelva, Spain.