The Great Unwinding of policymaker stimulus has led global oil prices to drop back to $50/bbl. Meanwhile China, the major source of demand growth since 2009, is now seeing a major slowdown.
And, of course, this is still only the beginning of the great transformation that is now underway as we enter the New Normal world.
How low will oil prices go? I will look at this in more detail next week. But yesterday saw them reach my long-standing forecast level of $50/bbl. And given the supply build-up since that forecast was made, we will probably now see them fall another $20/bbl and return to historical levels around $30/bbl.
Already, of course, they are now low enough to effectively eliminate the ethane cost advantage that has driven major US ethylene expansion plans. Where will this planned 40% increase in production be sold? This is now a critical question for companies and investors – clearly project cancellations are now becoming inevitable.
Equally important is that China’s economy is already in its New Normal world, as President Xi has recently reminded us. Not only is its demand growth slowing, but it is also on track to become self-sufficient in many major products – and a net exporter of PVC, as well as PTA for the polyester industry, and many others.
COMPANIES NEED TO LOOK IN NEW DIRECTIONS FOR FUTURE GROWTH
But there is another, much more positive side to this story. Yes, we are getting back to reality, and that is set to be a very painful exercise after all the wishful thinking from policymakers.
But it also creates tremendous opportunities for companies and investors who are prepared to ‘think outside of the box’ and develop new ways of working and new business models.
My annual New Year Outlook for ICIS Chemical Business sets out the detail of these opportunities in more detail.
It explains how to become a Winner, and avoid becoming a Loser, in this New Normal world. Please click here to download a free copy.
And please click here to view my interview with Will Beacham, Deputy Editor of the magazine.