Global chemical slowdown highlights China impact

ACC Apr15

The global chemical downturn has now been underway for nearly a year.  And latest data on regional production volume from the American Chemistry Council for March shows no sign of improvements, as the chart highlights:

  • Global demand growth in March was just 2.9% (black line), versus the healthy 5% growth seen a year ago
  • Asia has seen a spectacular fall, with growth halving from 8.3% to just 3.4% (purple)
  • The Middle East/Africa has similarly collapsed from 8.6% to 2.9% (dark blue)
  • W Europe has seen a more modest fall from 4% to 2.9% (light blue)
  • Central/Eastern Europe saw a sharp fall, but is now back at the 2.3% level (yellow)
  • Latin America has fallen from +1.2% to -4% (brown)
  • Only N America has seen an improvement from 1% to 3.7%, as its operational problems reduced (green)

Thus overall, capacity utilisation levels have slipped to 83.2% – versus the long-term average of 91.4%.

The chemical industry is the best leading indicator that we have for the global economy.  And developments in key Asian and Latin American countries highlight the growing impact of the major slowdown now underway in China.

China’s own growth has slipped from an 11.1% peak last April to 7% today.  It is maintaining its volume via low-priced exports into the Asian region.  But Japan doesn’t have this option, and its growth has collapsed from +9.2% to -4.6% over the same period.  Clearly, Abenomics isn’t working, despite the yen’s devaluation.

S Korea is another weak spot, falling from 3.8% in Q1 last year to 1.2%.  And Singapore (more reliant on China), is even weaker, falling from +6.9 in Q2 to -1% today.  Taiwan (also dependent on China) has fallen from +6.6% to -4.2% over the same period.  India (less dependent on China) has fallen from 12.9% to 3.2%, but is on a recovering trend.

Latin America tells a similar story, with Brazil down from +2% to -3%, and other LatAm countries collectively falling from +1% to -5.3%.

Only Canada/USA have done well.  Canada has risen from -1.6% to +5.4%, and the USA from 0.3% to 4.1% under the influence of shale gas developments.  The question, of course, is whether this progress can be sustained, given that the new capacity will have to be exported into already over-supplied markets overseas.


My weekly round-up of Benchmark prices since the Great Unwinding began is below, with ICIS pricing comments: 
Benzene Europe, down 39%. “Availability has tightened due to better demand, ongoing exports across the Atlantic throughout April and limited feedstock supply”
Brent crude oil, down 39%
Naphtha Europe, down 37%. “Demand for naphtha is poor because of competition from alternative feedstock propane. Moreover, many downstream producers are said to be covered for now and are not keen to purchase additional product”
PTA China, down 28%. “Several PTA producers added that despite improvements in margins, they were still operating at below costs”
HDPE US export, down 21%. “Domestic export prices moved slightly higher during the week on improving demand and loosening supply”
¥:$, down 16%
S&P 500 stock market index, up 8%

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