Chemical markets struggle to assess impact of Trump tariffs

A month into Donald Trump’s second term as US president, chemicals market players are struggling to assess how his proposed tariffs will impact the price of feedstocks and downstream derivatives, as per Chemweek.

Some participants have been dismissing news and industry chatter about the tariffs and instead are waiting for concrete policy changes. “Nothing will really happen until it is clear if Trump will act or just use [these tariffs] for political leverage,” a source at a major North American polymer producer told Platts, part of S&P Global Commodity Insights.

At the center of the confusion is uncertainty around whether the tariffs will apply to raw materials or finished goods. For now, many are bracing for the worst. “We don’t know 100%,” Stephanie Brinley, associate director of auto intelligence at S&P Global Mobility, said Feb. 20. “The expectation is that it would apply to everything.”

While demand sentiment for some markets has shifted, spot price movements from Jan. 20 to Feb. 20 do not seem directly connected to Trump, according to source feedback.

Trump’s significant tariff announcement came on Feb. 1, in which he said the US would impose a 25% tariff on all imports from Mexico and Canada but a lower 10% tariff on energy imports from Canada. An additional 10% tariff on imports from China was also proposed.

Although the Canada and Mexico tariffs were delayed 30 days, the 10% tariff on China went into effect Feb. 4. Beijing responded with its own 10% tariff on US crude oil imports as well as a 15% tariff on US coal and LNG imports, effective Feb. 10.

Later in February, Trump announced there would be tariffs on US imports of steel and aluminum. Those tariffs raised alarms among chemicals market players with downstream connections to sectors such as automotive and construction, as well as major consumers of aluminum such as Coca-Cola.

Coca-Cola could shift its packaging strategy from aluminum to polyethylene terephthalate bottles if the price of aluminum rises, CEO James Quincey said during the company’s fourth-quarter earnings call Feb. 11. The 25% tariff on steel and aluminum is set to take effect March 12.

Eastman Chemical said during the company’s recent earnings call that it was paying close attention to new Trump administration policies, but that it expected higher production at its recycling plant in Kingsport, Tennessee.

Some chemicals market participants said they were entertaining the possibility of polymer imports from Asian countries to replace those from the countries subject to tariffs.

A Mexico-based exporter of synthetic rubber to the US said South Korean companies would be well-positioned to export larger volumes to the US to meet import demand and could raise their prices in the process. Some customers have rushed to order material in hopes of receiving it before any tariffs go into effect, the source added.

”Many customers are asking for material urgently,” the source told Platts. “They fear that these tariffs will be enacted.”

Tariff speculation in February caused a stir in the virgin PET markets, where the US is a net importer. Meanwhile, Canada-based suppliers of polypropylene and polyethylene were heard to have been moving material into US warehouses in February, aiming to sell from stocks in March and delay having to pay any potential increased duties.

Calgary-based Heartland Polymers outlined its approach for if and when tariffs are imposed in a Feb. 12 letter to customers, including that all its shipments into Mexico will now originate from Alberta instead of the US to avoid US tariffs and potential retaliatory tariffs from Mexico.

“Heartland Polymers is the importer of record and will be responsible for paying the tariff on US imports,” the letter also said.

Trump’s Jan. 10 executive order to return to plastic straws and halt the federal purchasing of paper straws is expected to boost demand for PP while raising concerns about a broader rollback of sustainability measures, market players said.

While the implementation of the tariffs remains clouded by uncertainty, sources overwhelmingly agreed that some sort of changes will come, even if for now the tariffs are being treated as a negotiating tool. Said a US Gulf Coast petrochemical trader, “You can only bluff so many times before people stop believing you.”

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Mitsui Chemicals, Inc., Kawasaki Heavy Industries, Ltd. and Osaka University’s Graduate School of Engineering Science have successfully conducted demonstration tests of methanol and para-xylene (p-xylene) synthesis using CO2 as a feedstock, as per Chemweek.

The tests were conducted as part of the Research of Selective Synthesis Technology of Chemical Products for Carbon Recycling project.

This project seeks to develop technology for the effective use of CO2 emitted by factories and the like. The project partners recently conducted a test in which they produced p-xylene using methanol synthesized from CO2 and hydrogen. This was carried out at the New Energy and Industrial Technology Development Organization’s research and development demonstration base for carbon recycling at Osaki-Kamijima, Japan.

According to the companies, compared with production methods that use petroleum-based resources as feedstocks, the p-xylene obtained in this project affords a substantial reduction in CO2 emissions.

“Methanol is now beginning to be used in ships and more as a fuel with a lower environmental impact.” P-xylene, meanwhile, is a raw material utilized in purified terephthalic acid and thus is also widely used in the manufacture of polyester resins for clothing and plastic bottles. Replacing conventional petroleum-based resources with CO2 gathered via direct air capture — as well as via factory emissions — and converting it into methanol and p-xylene will lead to both lower emissions and the fixation of CO2, they added.

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The EU Foreign Affairs Council approved the 16th package of economic and individual sanctions on Russia on Monday, the Council press service said, as per Interfax.

"This new round of sanctions not only targets the Russian shadow fleet but those who support the operation of unsafe oil tankers, videogame controllers used to pilot drones, banks used to circumvent our sanctions, and propaganda outlets," EU High Representative for Foreign Affairs and Security Policy Kaja Kallas said.

In June 2024, the 14th package of sanctions against Russia was adopted, it included restrictive measures against another 116 individuals and legal entities, introduced restrictions on the transit of Russian liquefied natural gas through European ports, prohibited investments, the provision of goods, technologies and services for the completion of LNG projects.

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Zeon Corp. (Tokyo) said its affiliate Zeon Chemicals LP (Louisville, Kentucky) has decided to freeze the investment plan for a new lithium-ion (Li-ion) battery binders unit at its Pasadena, Texas, site, which was to commence operations in 2026, as per Chemweek.

The company said it will suspend the plan for approximately two years in light of the changing business environment and market trends.

Zeon said it “will continue to closely monitor market trends as we determine the best investment strategy and strive to achieve sustainable growth.”

The company currently produces hydrogenated nitrile rubber at Pasadena.

Zeon’s Li-ion battery binders include anode, cathode, functional layer (for separator coating) and sealant binders, and materials utilized in the construction of Li-ion battery cells.

Zeon has been a leading supplier of binder materials to the Li-ion battery market since 1995.

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Lotte Chemical Corp. has sold its entire 75.01% stake in Lotte Chemical Pakistan Ltd. (LCPL) to AsiaPak Investments (Islamabad) and to Montage Oil (Dubai), a commodity trading and logistics firm. LCPL has 500,000 metric tons per year of purified terephthalic acid (PTA) capacity at Port Qasim, as per Chemweek.

The cost of the transaction is 97.9 billion South Korean won ($67.9 million). Lotte Chemical said that it plans to close the transaction within the first half of this year, “thereby avoiding risks such as Pakistan’s bailout and exchange rate volatility.”

Lotte Chemical said it has also secured 127.5 billion won by selling noncore assets and receiving unpaid shareholding gains from LCPL for the 2022–24 period.

In 2023, Lotte Chemical concluded a contract to sell LCPL to Lucky Core Industries Ltd. (Karachi, Pakistan), judging it did not fit with the mid- to long-term vision of expanding high-value-added specialties. However, the deal was terminated due to delays in approval of the business combination by local competition authorities.

With this contract, Lotte Chemical plans to focus more on lightening its noncore assets and strive to secure structural competitiveness and efficiency. “We will expedite the ongoing business structure transformation and continue to maintain a cash flow-centered management environment,” said Lee Young-joon, CEO of Lotte Chemical.

Lotte Chemical in 2009 acquired LCPL for approximately 14.7 billion won.

Lotte Chemical last October announced plans to raise funds amounting to 1.4 trillion won by selling shares in overseas subsidiaries to improve the company’s financial soundness.

It reported a fourth-quarter net loss of 1.1 trillion won, widening from a net loss of 416 billion won in the year-earlier quarter. The company’s operating loss reduced to 235 billion won, compared to an operating loss of 301 billion won in the year-earlier period. Sales were 4.8 trillion won, down slightly by 0.2% year over year.

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