European chemical producers face a bleak 2024 due to reduced domestic operating rates and a destocking cycle, leading to capacity rationalization.
Bleak Outlook
Soaring energy costs drove Europe into increased imports, accelerating a trend toward a larger net import position over the last decade.
Specialized product imports into Europe rose by 6% overall, notably with significant increases in ethanol, caustic, UAN, and other inorganic chemicals.
Import Dynamics
- US chemical imports grew by 22% in 2023, driven by glycols, ethane derivatives, and a doubling of methanol volumes.
- Expected steady chemical imports in 2023 due to slumping demand amid inflation and cost-of-living pressures, rather than a European output recovery.
Navigating Challenges
The chemical shipping sector sees opportunities but faces fleet efficiency challenges amid declining European production. Limited backhaul prospects to East of Suez or the US Gulf emerge with stagnant Europe to Far East trade.
Environmental regulations from EU and IMO in 2024 will elevate fleet efficiency concerns, raising shipping costs universally. Despite this, cost-advantaged production hubs in the US and the Middle East gain scope amid challenging arbitrage economics.
Uncertain Impact
The influence of environmental regulations on European import profiles remains uncertain. Middle East proximity to EU offers potential cost advantages due to ETS, but full cost realization will take time.
Meanwhile, Asia anticipates significant liquid bulk chemical growth, with nearly 40 million tonnes of new capacity by 2026, predominantly in China. Economic concerns might lead to increased global market integration for this surplus amid fears of deflation and stagnancy.
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Source: Clarksons
