Intro: Hello, and welcome to this Argus Chemicals Conversation Podcast, the fifth episode in our K-show Plastics Preview series.
Today we will be discussing the latest in the US-Europe polyolefins trade relationship and the impact of tariffs on the European market.
I am your host James Elliott, and I am joined by Sam Hashmi, Global Editor Polymers.
Sam pleased you can join us, hello.
Sam H: Hello
JE: Sam, we’re over half way through the year and in just a few week’s time the industry will be gathering in Dussedorf for the major K-Fair show. Before we get into the main discussion, please can you share what you’re hearing from the industry – what’s keeping our European polyolefins contacts up at night?
SH: Well everyone recognises it’s been another very challenging year for the European polymers industry. There were hopes coming into 2025 that we could see a modest improvement in demand. There were some signs of that in the first half of the year, but the disruption caused by the tariff and trade disputes, initiated by the incoming US administration, knocked demand and confidence across European industry – from polymer markets through to all major customers markets, particularly the automotive sector.
JE: There have been developments on US-EU tariffs last month. What are they and are there any signs yet of implications for the polymers market?
So the European Commission on 28 August proposed the removal of all import duties on US-origin plastics, categorised under HS code starting 39. These include imports of polyethylene from the US, which have been gaining market share in the EU this year, in part due to the increased trade tensions between US and its other partners. The US is a global cost leader on PE production, due to having abundant supply of low priced feedstock ethane for its crackers. So for context, polyethylene imports from the US in the first half of this year stood at around 1.2 million tons, which is up quite a bit from 870,000 tons in H1 2024. And the US had a 46% market share among all PE imports into the EU in the first half of this year,
Now import duties on US-origin polyethylene into EU currently stand at 6.5%, but even with these in place, PE imports have been pricing at substantially lower levels in the European market and play a role in setting the price floor. And in some cases, mainly for HDPE grades, the import arbitrages have been pretty wide recently and above €100/t on a ddp equivalent basis. So you can imaging the impact the removal of 6.5% import duties could potentially have going forward. To put it succinctly, there is quite some anxiety among European producers that have been faced with difficult market conditions in recent years and disadvantaged cost positions, and this development will just exacerbate their worries.
JE: Is it a given that these zero duties be implemented and when?
That is the big question James, as currently, the removal of trade duties on imports from the US is in a legal limbo. This is because the European Commission’s proposal will undergo a lengthy legal processes, it needs to be approved by majority voting in the European Parliament and EU member states. There were some reports that the approval process could be relatively fast tracked and concluded within the next 1-2 months. But that remains to be seen, especially given the political sensitivity of this matter, where the European Commission has offered zero tariffs on imports from the US whilst accepting 15% baseline tariffs being imposed by the US. So it would not be farfetched to imagine this uneven tariff field as part of a new proposed trade deal causing some dissent in the ranks of EU member states.
JE: You mentioned the impact on polyethylene from these developments, but what would your thoughts be on polypropylene? Could there be some impact seen there?
Well James, never say never, especially in this world where many things have been upended this year. For now and what is foreseeable, there wouldn’t be much effect on the PP market from a possible removal of tariffs on US-origin product. I say this because trade flows from the US to EU are relatively small on PP, and are a small fraction of the imports seen from the Middle East. This is mainly because the US does not quite have a cost leadership position on PP production, with the cost of feedstock propylene monomer being relatively high in the US.
But with trade tensions heating between the US and Brazil, and with Brazil putting punitive anti-dumping duties on US-origin polymers, some shakeup of trade flows could be seen there. A scenario of Zero tariffs and substantial oversupply could push more US-origin PP to Europe.
But the European market is already faced with ample supply, if not a lingering supply overhang. And then we have low demand next door in the Turkish market as well, which is a major outlet for Middle East-origin PP. So there is already some spillover effect of that being felt in Europe, as the Middle Eastern sellers look further west to place their product. And then spot prices for prompt delivery in the European market have been quite low, which is not helping import economics due to relatively narrow arbitrages. Then we have to account for particularly weak conditions in most downstream value chains with exposure to PP. Now when buyers have ample supply, cautious attitudes entrenched and low risk-reward equations, the focus is for prompt procurement. And this has already taken a risk-off approach on imports from Asia-Pacific despite lower freight rates, as the appetite to take delivery in three months’ time isn’t quite there in the market as it used to be a few years back.
JE: Sam, this has been extremely helpful for me – and I suspect our listeners. It can be challenging to follow the changes in tariffs and the US and EU policy – so thank you for providing clarity on the latest situation.
If you would like to meet with Sam and our polymers team at K-show – please get in touch.
Tune in next time for another episode of the K-show plastics preview by Argus Chemicals Conversations.
Many thanks Sam and blah blah blah
