Helping you navigate the new normal
“There are decades where nothing happens; and there are weeks where decades happen”. Lenin’s famous insight was highly relevant to 2020. It was full of such weeks as the coronavirus pandemic became a catalyst for major paradigm shifts in the economy. Of course, some sceptics still expect a quick V-shaped return to ‘business as usual’,
On Friday, the UK premier confirmed what many of us have expected for a long time. There is unlikely to be a trade deal with the EU27 when the UK leaves at the end of December: “We should get ready for 1 January with arrangements that are more like Australia’s – based on simple principles
The chemical industry has a critical role to play in enabling the world to “build back better” after the pandemic. That is the conclusion of the World Economic Forum’s Chemical and Advanced Materials Industry Action Group, for which I had the privilege of acting as an Expert Adviser. Its conclusions are as follows: “Where next?
NEW YORK (ICIS)–There will be a paradigm shift away from mega crackers producing massive volumes of plastics for export, and toward local recycling of plastic waste for local finished goods production. Joe Chang, editor of ICIS Chemical Business, summarises my presentation earlier this month to the Societe de Chimie Industrielle in New York. “The industry
Not many companies still operate in the same way as 500 years ago, or even 50 years ago. But in manufacturing, it’s quite common. As the pictures show, a visitor from Shakespeare’s time – or from after World War 2 – would feel at home if they visited many manufacturing sites today. The issue is
Polyethylene markets (PE) are moving into a crisis, with margins in NE Asia already negative, as I have been forecasting. Scenario planning is now a matter of potential life or death for companies likely to be impacted over the next 12-18 months. The collapse in margins is already quite dramatic as the chart based on
Planning for future demand in petrochemicals and polymers used to be relatively easy during the BabyBoomer SuperCycle. The team would consult the latest IMF forecast for global and regional growth, and then debate the right ratio to use to calculate product demand. For polyethylene (PE), the ratio was generally just above GDP at around 1.1x,
Four serious challenges are on the horizon for the global petrochemical industry as I describe in my latest analysis for ICIS Chemical Business and in a podcast interview with Will Beacham of ICIS. The first is the growing risk of recession, with key markets such as autos, electronics and housing all showing signs of major
Sadly, my July forecast that US-China tariffs could lead to a global polyethylene price war seems to be coming true. As I have argued since March 2014 (US boom is a dangerous game), it was always going to be difficult for US producers to sell their vastly increased output. The expansions were of course delayed […]
The post Ethane price hikes, China tariffs, hit US PE producers as global market weakens appeared first on Chemicals & The Economy.
US ethylene spot prices are tumbling as the major new shale gas expansions come on line, as the chart based on ICIS pricing data confirms: They began the year at $617/t, but have since more than halved to $270/t on Friday They are only around 10% higher than their all-time low of $240/t in September […]
The post US ethylene prices near all-time lows as over-capacity arrives appeared first on Chemicals & The Economy.
Our 16th World Aromatics and Derivatives conference takes place on Wednesday/Thursday in Amsterdam. Co-organised with ICIS, it provides an excellent opportunity for delegates to meet and exchange views in the critical end-of-year period. It features the usual strong line-up of speakers: Ronald Doesburg, GM for Shell’s Base Chemicals business, will describe how innovation is driving new […]
The post World Aromatics Conference focuses on key industry challenges appeared first on Chemicals & The Economy.
300,000 homes and half a million cars have been destroyed by Hurricane Harvey. And in terms of business, it is often forgotten that Houston is home to more Fortune 500 companies than any other metro area than New York. The damage will take years to repair, as families have to regroup and re-establish their lives […]
The Stone Age didn’t end because we ran out of stones. Similarly, coal is being left in the ground because we no longer need it any more. And the same is happening to oil, as Saudi Arabia recognised last year in its Vision 2030: “Within 20 years, we will be an economy that doesn’t depend mainly […]
China’s strategies for oil, refining and petrochemical production are very different from those in the West, as analysis of Sinopec’s Annual and 20-F Reports confirms. As the above chart shows, it doesn’t aim to maximise profit: □ Since 1998, it has spent $45bn on capex in the refining sector, and $38bn in the chemicals sector □ […]
Some years ago, when China was well on the way to becoming the world’s largest importer of chemicals, a reporter asked the chairman of Sinochem, China’s largest chemical company if China intended to keep increasing its imports? ”Not at all” was Su Shulin’s reply, “This is temporary. It is not our strategy. We will become […]
The financial crisis began a decade ago, yet production of the key “building block products” for the European petrochemical industry has still not recovered to its pre-Crisis peak, as the chart shows (based on new APPE data): Combined production of ethylene, propylene and butadiene (olefins) peaked at 39.7 million tonnes in 2007 A […]
“There isn’t anybody who knows what is going to happen in the next 12 months. We’ve never been here before. Things are out of control. I have never seen a situation like it.” This comment last month from former UK Finance Minister, Ken Clarke, aptly summarises the uncertainty facing the global economy. As I note in a new analysis, major policy changes are […]
Just when you think something really can’t get any worse, it does. Sadly, that’s the story on chemical industry force majeures since my last half-year review. As I noted then: “There is no such thing as an accident. The chemical industry, like others, has known this for over 30 years, since the adoption of Quality […]
The Financial Times kindly prints my letter this morning on pricing policies for polyethylene. Sir, Conspiracy theories are always good fun, and Robert Bateman’s views on the polyethylene market are no exception (Letters, December 29). But there is a much more prosaic explanation for the pricing structures he describes. The key issue is that until […]
The Brexit vote, and Donald Trump’s election, confirm that we are in a New Normal world. In the interview below with Will Beacham, Deputy editor of ICIS Chemical Business, I highlight some ideas about how industry needs to adapt. BARCELONA (ICIS)–The global chemical sector needs to stimulate demand for innovative products and services in mature […]
Looking down the table below of chemical company’s reports, its hard to be very optimistic about the outlook. The first half of the year disappointed, as I noted in August. Then Q3 saw major volatility as the hedge funds and high frequency traders played their games in the oil market – prices weakened as demand […]
The 15th World Aromatics & Derivatives Conference take place in Vienna in 2 weeks’ time on 22 – 23 November. Co-organised as always with ICIS, we will benefit from the insight of key executives from the global industry including: THE OUTLOOK FOR AROMATICS Shell’s Commercial Manager, Europe, on feedstock and product availability China’s CICCC on what […]
Its not been a great 6 months for the global chemical industry, and my usual quarterly survey of company results confirms the disappointment. The first half of the year is typically the strongest, for seasonal reasons, as companies come back to work after the Christmas holiday and prepare for the peak car-buying and construction periods […]
There is no such thing as an accident. The chemical industry, like others, has known this for over 30 years, since the adoption of Quality Management techniques. Yet it seems that over the past 18 months either this important fact has been forgotten or, more likely, I fear, has simply been ignored. The evidence for […]
Chemistry and the Economy: 2016 Mid-year review The UK’s decision to leave the European Union (Brexit) is causing major upheaval in financial markets as investors rush to supposedly “safe havens”. This is highlighting the underlying slowdown in demand growth caused by globally ageing populations. What does this mean for the chemical and pharma industry? Can […]
Difficult times lie ahead for global polymer markets, as I note in a new analysis for ICIS Chemical Business. In the short-term it is clear that downstream users have, once again, been busy building stock in recent weeks as the oil price rose. But now, finance directors are getting calls from their bankers asking about […]
Global demand is continuing to slow, yet chemical industry capacity is continuing to ramp up. As a result, supply gluts are likely to appear in many key areas as we move into the second half of the year. That is the key conclusion from the latest American Chemistry Council data for global chemical capacity and […]
Thank goodness for Janet Yellen, and China’s provincial governments. That was clearly investors’ thoughts, when they bid up chemical company share prices during Q1. For as the chart above shows, there was nothing in the fundamentals of supply and demand to suggest economic recovery was finally underway. Instead, the latest American Chemistry Council data shows […]
China used to be the manufacturing capital of the world. It would buy raw materials, and sell finished products to the West. But these volumes are now in decline. The West’s ageing populations already own most of what they need, and their incomes are reducing as they enter retirement. So China’s business model is changing. […]
4 years ago, Brazil’s polyethylene market flagged up the first warning signs that its GDP was hitting headwinds, as China’s stimulus programme begin to slow. Today, sadly, the economy is in major recesssion, with the impeachment process against President Rousseff adding further pressure: World Bank data shows GDP fell 3.7% last year: they forecast “only” […]
“The reality is the US from a chemical standpoint is a very mature market. We have some demand growth domestically in the US but it’s a % or two – it’s not strong demand growth,” Pryor said, adding that polyethylene hardly grew in the US in a decade. “That is not going to change. “The […]
The chemical industry remains the best leading indicator for the global economy. That much is clear from the warnings it has delivered over the past year: Q3 results in November highlighted the need for “new strategies and business models“ Q2 results in July suggested “continued uncertainty over outlook“ Q1 2015 results in May revealed “increased […]
All accidents are preventable. This simple fact, which used to be top-of-mind for every chemical industry manager, seems to have been increasingly either forgotten or ignored in recent years. The evidence is in the chart above: showing industry force majeures since 2008 (as reported on ICIS news): They were at a record level in 2015, […]
Capacity Utilisation (CU%) is the best measure we have for the current state of the global chemical industry. It doubles as an excellent proxy for the outlook for the global economy. And as the above chart based on latest American Chemistry Council data shows, recovery still seems a long way off: Global CU% was down […]
2015 was the year when companies and markets began to feel the impact of the Great Unwinding of stimulus policies. The blog’s readership has increased significantly as a result, as people began to abandon the consensus wisdom which had so clearly failed – once again – to provide a reliable guide to the outlook. The […]
The unseen costs of the proposed Dow-DuPont merger are certain to be much larger than those we can currently describe. Both companies will effectively be more reactive to external developments, rather than pro-active, due to the internal focus that will be required to develop and implement the merger and divestment processes. This cost could well […]
All the evidence suggests that most mergers fail to deliver the promised value. So those who propose them, especially when they involve such critical companies for the US and global economy as Dow Chemical and DuPont, must expect some hard questions to be asked. Here are my 5 top questions in logical order – Why?, […]
Major change is underway in manufacturing and supply chains. China’s slowdown has exposed the myth that its demand would support ever-increasing production of commodities such as metals and oil. As the Financial Times reported yesterday: “Back in the summer, Glencore’s combative chief executive Ivan Glasenberg led a chorus of mining executives in blaming speculative funds for driving […]
Global chemical production growth continues to slow from the peak of 3.7% seen in April 2014. September’s reading from the American Chemistry Council was down to 3%, with most major regions showing a decline: Asia has halved from 6.4% to 3.2%; ME/Africa has fallen from 6.1% to 3.5%; Latin America is negative at -3.2% W […]
Today’s uncertain economic and oil price environment has created chaos in petrochemical feedstock and product markets. This creates major risks for producers, consumers and investors. ICIS and International eChem have therefore decided to combine our resources to launch a new Study, that will analyse the potential impact of these developments on the olefins, aromatics and […]
Major change is underway in world markets for all petrochemicals. It is no exaggeration to say that we now face chaos on the supply and demand side – affecting both feedstocks and products. Producers and consumers cannot afford to ignore the risks that this development creates for their business. Nor can investors afford to indulge […]
The chemical industry continues to be the best leading indicator we have for the global economy. Whilst stock markets were continuing to move higher during H1, its depressed level of capacity utilisation was signalling that the economy was far more fragile than generally realised. Company results for Q2 reflect this concern. Of course some, tied […]
I spent most of last week in New York and Boston, meeting with major investors. One key topic on all their agendas was the major downturn underway in the global mining industry. The connection with my visit was that some have already begun to worry that the planned US ethylene expansions may lead to a […]
The first half of 2015 was the worst half-year for force majeures in the chemical industry since reliable data became available via ICIS news in 2005. As the chart shows, there were 479 reports of outages, more than double H1 2014 and well above the previous peak of 375 in H1 2011. This is absolutely […]
Innovation is the life-blood of the chemical industry. It is also a critical success factor as we transition to the New Normal. Many of today’s plants and processes are simply too old and inefficient to remain competitive in a world of slow and volatile economic growth. Equally important is that changing demand patterns will demand […]
China is the world’s largest polyethylene market. One-third of the way through the year, it is therefore interesting to analyse the ratio of its own production versus imports, and look at relative import market shares. The chart shows annual data since 2005, with 2015 data to April, based on trade data from Global Trade Information […]
Volatility creates uncertainty. And uncertainty can easily lead to paralysis, if a company hasn’t planned ahead for the range of potential scenarios that might develop. This is the risk highlighted in my usual analysis of quarterly results. A key warning sign is the divide that has developed recently in performance in different regions and industry sectors, […]
China no longer wants to be the ‘manufacturing capital of the world’. Its ‘New Normal’ policies are instead taking it in a new direction, where growth will be based on income levels, not property wealth effects. So this seems a good moment to step back, and focus on the changes this is likely to bring. […]
Who would have believed, a few years ago, that European cracker operators would see an operating rate of 84% as something to celebrate? It would have been thought a disaster prior to 2008, when rates typically ranged around 90%. But whilst nobody is flying flags, last year was the best year since 2007. And as […]
The above chart is a major wake-up call for anyone who still believes that China will continue to import ever-increasing volumes of major commodities such as polyethylene (PE). It suggests demand and import growth are now at much lower levels than in the past, and may even have begun to peak. The chart shows cumulative volumes in […]
Sinopec, China’s largest chemical company, has just published its operating results for 2014. We don’t yet have all the details, but the chart above highlights the key points of its cumulative performance since it first filed public accounts in 1998: It has invested Rmb 288bn ($41bn) in capital expenditure for refining, and Rmb 239bn ($33bn) for chemicals (blue columns) […]
Today’s market conditions are some of the most dangerous that I can ever remember. Of course, markets are always unpredictable. As UK prime minister Harold MacMillan noted in the 1960s, when asked what kept him awake at nights. “Events, dear boy, events”. But today’s markets have a 3-dimensional unpredictability: They have the normal issue of trying to understand fundamental levels […]
Chemical production is a time-proven leading indicator for the global economy. And as the chart above shows, it has been signalling that a downturn is underway since April. Based on American Chemistry Council data, it highlights: Global growth peaked at 5% in April and was down to 3.3% in January (black line) Only the N American […]
European chloralkali producers ended up having a relatively good year in 2014, despite having been over-optimistic about likely demand levels in Q3. They held operating rates at 78% in Q3, in line with H1 levels. But realism soon prevailed, and producers quickly cut rates to average 75% in Q4 to compensate. The chart shows the detail of developments since 2009 (based […]
2013 wasn’t a good year for chemical plant reliability. As I noted a year ago, force majeures (when plants go offline unexpectedly) were close to a record level. Very worryingly, 2014 turns out to have been far worse as the chart above shows, based on the reports in ICIS news: 2014 saw a total of […]
It feels like the end of an era, as we survey the usual quarterly update of chemical company results. For several years, there have been 3 or 4 key dimensions: US companies have been very profitable due to shale gas Asian companies have done well with volume, due to Chinese demand Middle Eastern companies have done well due to […]
15 years ago, it was fashionable to dismiss eBusiness as a fairy story. I remember those days well, as I had just raised $25m from major companies to fund its development in the chemical industry. Today, of course, eBusiness is everywhere. Nobody would dream of shaking their heads and dismissing the whole concept, as many did pre-2000. Which takes […]
Exactly a year ago this week, the INEOS petrochemical business at Grangemouth in Scotland was facing closure. This would have been a disaster for the thousands of people employed directly and indirectly, as well as for Scotland. The blog was very closely involved in helping to achieve a successful outcome alongside the Scottish and UK governments, INEOS and the UNITE […]
We all know that the European economy is in a bad way. Sales and incomes are under pressure, and political risk is rising, whilst unemployment remains at high levels. Its very easy to get depressed about the outlook. We are also unlikely to get much help from policymakers. They remain in their world of mathematical models. These […]
The European petrochemicals industry is in crisis. Operating rates dropped below 85% in H2 2008, and have never recovered. Now there is a danger that it faces death by a thousand cuts. This would be a tragedy for the European economy, as it would imply the loss of tens of thousands of well-paid jobs along […]
The global economy really isn’t getting any better. That’s the key conclusion from the blog’s quarterly survey of company results for Q2. Of course, some companies are doing well – either because of shale gas economics, or their own market positioning. But consumer giant Unilever summarised the general picture very well: “Market growth continued to slow in emerging […]
Last May’s China Transformation webinar with John Richardson attracted great interest. We are therefore arranging a free follow-up webinar on Tuesday 9 September. As before, it will be run twice, to allow blog readers in different regions to attend. This ‘China Economic Transformation II’ webinar will cover these key areas: The likely impact on global markets of the […]
Chlorine and caustic soda are the bedrock of modern industry. They are used in everything from laundry products to pharmaceuticals. So changes in their business performance are a most valuable guide to what is happening in the real world in which we all live. The chart shows the detail of developments in the European industry, […]
The chemical industry is the best leading indicator for the global economy. The slide in operating rates (OR%) around the world during the seasonally strong Q2 period. is a clear warning that global economic growth may be stalling. This should be a major wake-up call for anyone still hoping that growth may recover to the Boomer-led SuperCycle level. The latest update from […]
An ageing population and record annual levels of oil prices create massive headwinds for Europe’s petrochemical producers. One means demand growth is much reduced from the SuperCycle. The other means these lower volumes cost more to produce. What a pity, you might say, that the industry is not part of the financial sector. Then it […]
Nothing has really changed over the past year. That seems to be the key conclusion from the blog’s quarterly summary of company results for Q1. A year ago, BASF noted that “achieving our earnings target is significantly more challenging today than we had expected”. This month, chairman Kurt Bock “warned the markets will remain volatile and […]
Companies are about to review their Q1 performance, and re-forecast profit and revenue for the rest of the year. Most will be disappointed with results so far, as the long-promised economic recovery has again failed to appear. This will be no surprise to blog readers. But there is another and connected issue for Management Teams to worry […]
China’s growth has been the main support for the global economy since the Crisis began in Q4 2008. The slide above captures the extent of this in polyethylene (PE), one of the world’s largest chemical markets, based on data from China’s chemical association and Global Trade Information Services: The total market grew 11% in the 3 […]
We all live in hope. That seems to be the underlying message from the blog’s quarterly survey of company results. Nothing has changed since last quarter or indeed Q2, when BASF noted that “achieving our earnings target is significantly more challenging today than we had expected”. Yet this latest quarter was, of course, supposed to be […]
2013 wasn’t a good year for plant reliability. The blog’s 6-monthly survey of force majeure reports in ICIS news shows: There were 386 reports of force majeures in 2013 This was very similar to the 391 level seen in 2010 It also reverses the decline seen in 2012 after the record 495 reports in 2011 This is a worrying […]
Trade data for net US PVC exports seems to be trying to tell us something very important about the current state of the global economy. As the chart shows, based on data from Global Trade Information Services: Net exports failed to grow in 2013 (red column) versus 2012 (black) and were only up 2% versus 2011 […]
A prominent “activist” fund in New York has told Dow Chemical to spin off its performance plastics, performance materials and feedstocks-and-energy units. The news led the blog to imagine a fictional scene in the offices of Activists-R-Us fund last Tuesday morning, as the news came through. Any resemblance to actual events is purely coincidental, as they say in movies. […]
The blog’s audience has continued to set new records in 2013. It is now well on the way to its 200,000th visit, and is read in 159 countries and 6110 cities as shown in the chart above. Readers also remain incredibly loyal, with around one in two readers visiting every week, and one in four readers visiting every day. […]
Will the US be able to sell all its planned new petchem volumes? That is the 3rd topic in the blog’s series about critical areas where we all think we know what’s happening, but may end up being surprised. We all know that the US now has a major feedstock advantage versus Europe, Asia and Latin America due […]
The Financial Times has carried an excellent analysis this week of the key shale gas issues facing the European chemical industry. It includes comments from a number of CEOs, as well as from the blog. Its key points are as follows: THE STRATEGIC DILEMMA “European petrochemical makers risk being squeezed between low-cost producers in the Middle East […]
Will 2014 finally be the year of economic recovery? There are signs of a stronger economy in the US and Europe. Pharma is shifting and downsizing as it works. How will all of this affect you in 2014? The blog will discuss these and other key issues with American Chemical Society chairman Bill Carroll, in its regular Chemistry […]
2013 has seen 3 types of markets develop for the blog’s IeC Downturn Monitor portfolio as the chart above shows: Financial assets such as the S&P 500 (purple) have soared, as did the US$ against the yen (orange) Crude oil (blue) and naphtha (black) tried to follow, but found it difficult to pass though the higher prices Benzene (green) and […]
Chlorine and caustic soda are some of the most widely used chemicals. Thus their performance is always a valuable leading indicator for the wider chemical industry and the economy itself. So the chart above, based on Eurochlor data, is a worrying sign: Chlorine production is down by 1.9% in 2013, after a 2.9% fall in 2012 Caustic […]
Q3 was supposed to be the turning point for the global economy. Back in April, the IMF had announced: “Global prospects have improved again but the road to recovery in the advanced economies will remain bumpy. World output growth is forecast to reach 3¼% in 2013 and 4% in 2014. In the major advanced economies, […]
Volatility is one of the blog’s key themes for the next few years, as the world transitions to slower growth and a more regional economy. And the chart above from the latest ICIS pricing Asian ethylene margin report highlights this new trend very well: Margins jumped 42% last week to reach $290/t, based on naphtha […]
The latest American Chemistry Council report on global production shows output was up 3% versus September 2012, and just 18% above average 2007 levels. There was a mixed picture in the main Regions: Asia-Pacific was strongest, up 5.9%, with Japan accelerating as the weak yen helped its exports The Middle East continued to slow, and was up […]
Sometimes a crisis can concentrate minds on one key issue. This was certainly the case last week, when the blog was part of the tense debate over the future of the INEOS petrochemical plant at Grangemouth, Scotland involving the UK and Scottish governments, INEOS and the UNITE union. The experience highlighted some critical learnings for the future of […]
Something very important seems to be happening in China’s polyester’s markets. The blog was brought up on these markets in its early days with ICI, when it was part of the team that launched PTA into Asian markets for the first time in the mid-1980s. It has always seen them as a source of steady growth, with […]
One never wants to see a major petchem plant shutdown, especially one with the history of Grangemouth in Scotland. It is the UK’s largest cracker site, with ethylene capacity of 1 million tonnes. Its production has a sale value of $1bn ($1.6bn), and a final value in food packaging, consumer packaging and automotive parts of […]
Global chemical operating rates have shown little improvement over the summer months. As the chart from the American Chemistry Council (ACC) shows: Rates in July were at 86.4%. compared to 87% in May This compares with the average of 91% between 1987 – 2012, and 86.7% in July 2012 Total production was up 2.8% versus 2012, […]
Over the past 4 years, major European companies and research organisations have been working to define and demonstrate the factory of the future. Based on the Bayer Technology Services (BTS) site in Leverkusen, Germany, and with €30m ($40m) of European Union and other funding, they have now developed radically new ‘plug and play’ modular technology capable of being implemented widely […]
The above chart paints a depressing picture for anyone thinking it should be easy to make money via a major US ethylene investment based on cheap ethane from shale gas. It shows 2012 ethylene production (red column) was still below …
Most of today’s executives and policymakers grew up during the SuperCycle. Many therefore continue to believe that a return to constant growth is somehow inevitable. Sadly, of course, they are doomed to disappointment. And disappointment is the predominant message from the blog’s usual quarterly review of company results. Thus BASF note that “achieving our earnings target […]
Markets have moved into summer holiday mode in recent weeks whilst they wait for a new direction, as the chart shows. It is therefore timely to look back over developments since the start of the year:
The S&P 500 (purple) …
Companies have clearly been cutting capital budgets, in response to the slowing global economy. That’s the only conclusion to be drawn from the blog’s 6-monthly review of force majeures, as reported by ICIS news. They have been climbing steadily for months, and June saw them at twice the June 2012 level, as the chart shows. […]
Innovation is the life-blood of the chemical industry. It is also a critical success factor as we transition to the New Normal. Many of today’s plants and processes are simply too old and too inefficient to remain competitive in a …
Q1 was another miserable quarter for EU olefin producers. As the chart shows, based on APPE data, ethylene production at 4.7MT was at the lowest level in the past 10 years, with the exception of 2009. In fact, one has to go back to 1997 to find a low…
A year ago, the blog’s quarterly review of company results revealed mixed views on the outlook. Dow were expecting “global growth will gain momentum”, whilst Unilever warned the “external environment remains difficult”. But today, much of the optimis…
Economic recovery is already underway, according to the optimists who have bid up financial markets in recent weeks. But the blog’s quarterly review of company results shows little evidence of it on the ground.
Phrases such as ‘challenging’, ‘economi…
The blog’s annual review of the Russian market showed production growth stalled in 2012. Output had picked up sharply in 2010-11 following the 2009 crisis. But as the chart shows, based on latest data from statistics agency Rosstat, today’s outlook h…
The blog is constantly astonished by the lack of interest in many companies in the vital field of trade data. No business today, no matter how large and well-connected, can possibly hope to understand market developments without constant analysis of t…
As the major regional economies continue to slow, more companies are starting to reduce capital budgets. Maintenance spending is always an easy target for a cutback. The cost of poor performance may not be seen for some time, whilst the bottom line s…
2012 was another difficult year for the European olefin industry. As the chart above shows, based on official APPE data, total ethylene volume was just 18.9MT. This was only just above 2009’s 18.8MT. Before that, we have to go back to 1997 to find a…
The blog is now close to celebrating its 150,000th visit. Its readership also continues to grow and it is now read in 146 countries. Readers remain very loyal, with 50% visiting every week and 28% visiting on a daily basis.
The main event of the yea…
The blog’s regular Chemistry & the Economy webinar with the American Chemical Society takes place today at 14.00 hours Eastern Time. As always, it will be moderated by friend and colleague Bill Carroll – chair of the ACS and Vice President of Occident…
China’s important polyethylene market (PE) showed little sign of any major upturn in October. Trade data from Global Trade Information Services shows:
• Demand was up just 4% versus 2010 levels
• Production was up 3%, as China’s refinery operatin…
Capacity utilisation continues to be on a downward path, according to the latest data from the American Chemistry Council. As their chart above shows, there has been no improvement since the summer:
• October should see peak rates, as companies cat…
Europe’s political leaders were deadlocked last weekend over plans for the EU’s new Budget. A new north-south gap opened up, where the major contributors to the Budget (Germany, UK, Netherlands) demanded €30bn ($39bn) in cuts. This was, of course,…
Our World Aromatics Conference in Berlin, now in its 11th year, provided valuable insight into changing market developments, thanks to our array of top-level speakers:
Ted Randall, Global Business Manager for Saudi Aramco, highlighted how their drive …
The blog’s quarterly survey of chemical industry results shows the downward trend continued in Q3. Some companies remain untouched by the mainstream problems, but they are now clearly in the minority:
• Bayer remain optimistic, and DuPont hopeful …
Next week’s World Aromatics conference is a must-attend event for anyone involved with the industry.
It features speakers from leading companies including Dow, Saudi Aramco and Shell, as well as from the International Energy Agency. In addition, ther…
As companies finalise Budgets for 2013-15, many will be thinking long and hard about the implications of the IMF’s new economic forecast:
“The recovery continues, but it has weakened. In advanced countries, growth is now too low to make a substantial …
Next month’s World Aromatics conference is a must-attend event for anyone involved with the industry.
It features an impressive line-up of major players, including Saudi Aramco, the world’s largest oil company, as well as Dow, Shell and the Internatio…
This year’s European Petrochemical Association in Berlin was notable for its realism. The blog gave an interview to ICIS news which was headlined ‘Major recession ahead, warns leading consultant’. This overview seemed to capture the overall mood of t…
There are many ways to lead a company to disaster. But one of the most reliable is to follow conventional wisdom. The reason is that this is almost always backward-looking, and tells us little about likely future developments.
The blog instead aim…
In the SuperCycle, polyethylene (PE) demand growth was closely linked to economic growth. Our research for the 2008 Feedstocks for Profit study showed, for example, a 1: 1 ratio between global growth in GDP and PE demand between 2002-7. But since the…
European olefin markets had a miserable time in Q2. As the chart shows, based on APPE data, ethylene production (red square) was just 4.7MT. This was the lowest Q2 volume since 1998.
Of course, crackers had switched severity to produce more propyl…
The chemical industry has a long track record as a leading indicator for the global economy. Its position in the value chain means that it sees what is happening upstream in energy markets, and downstream in consumer markets.
Anyone studying Q2 resul…
Almost unnoticed, an important shift is underway in propylene markets.
Propylene (C3) is the second largest olefin after ethylene, with production around 75 million tonnes in recent years. Its main sources are steam crackers and refineries – neither …
Sinopec is China’s main company in refining and chemical markets. Although it is listed on world stock markets, the government remains its largest shareholder with a 76% stake. As such, it follows government priorities rather than western commercial …
Chloralkali production is an excellent indicator of market direction in the short-term. Unlike petrochemicals, cellrooms can quickly reduce or increase operating rates. This is essential for efficient operation, as the price for electricity can chang…
The good news is that the blog’s 6 monthly review of force majeures shows considerable improvement from H1 2011’s performance. As the chart indicates, the number of ICIS news reports of force majeures halved from 375 in 2011 to 179.
Some of the decli…
Over Christmas, the blog spent some time considering whether its IeC Downturn Alert had served its purpose. By luck, or possibly judgement, it had been launched at the exact market peak on 29 April. And hopefully it had helped to alert companies to t…
The blog today celebrates its fifth birthday. Its 1400 posts since the June 2007 launch have covered a wide range of subjects. And one thing is certainly true. There has never been a shortage of topics to cover.
Readership has also continued to gro…
We are about to set out on a great journey as the world transitions to the New Normal.
The reason for the journey is that the world economy has changed irrevocably as a result of the financial crisis and the demand changes created by the aging of the…
BASF opened its first China plant 20 years ago. Its Asian strategy focuses on China, Japan, S Korea and India.
Thus yesterday’s comments by vice chairman Martin Brudermüller deserve careful study by any company or investor who is interested in t…
The blog’s quarterly look at company results raises more questions than answers about the outlook. This is very typical of turning points.
Back in May 2010, for example, companies also expressed mixed feelings, as the blog noted:
“Q1 has seen the fo…
The blog fears the storm discussed last month is getting closer.
Oil prices have weakened, with Brent falling $7/bbl last week to $113/bbl as Iran worries reduced. Attention is thus refocusing on the fundamentals, where US oil inventories are now at …
The new chapter of our free ‘Boom, Gloom and the New Normal’ ebook sets out a road map to success for companies in the New Normal. It also identifies 5 key areas where major change is already underway.
Demand-driven. Markets have essentially bee…
The above chart reflects the weekly changes in the 4 benchmark petchem products that launched the IeC Downturn Alert exactly a year ago. PTA (red line) was the only product to ever rise above its price on 29 April 2011 – and then only by $10/t, and fo…
It is almost a year since the blog launched its IeC Downturn Monitor. The aim was to try and avoid the problems seen in H2 2008, when operating rates remained high down the value chain whilst demand fell.
The above chart shows the weekly changes in…
It is hard to be very optimistic about the demand outlook for Q2.
Demand in Q1 was lacklustre, even though it should have been the strongest quarter of the year. H1 is seasonally strong, and Q1 also benefited from Easter being in Q2. Equally, the Ch…
Globalisation had a golden age between 1982-2007. Trade barriers fell almost everywhere. Companies focused on achieving a ‘lowest cost’ position, in order to maximise their competitive advantage.
Today, however, the world is starting to look quite d…
There are increasing signs that China’s economic growth is slowing. Local gasoline and diesel prices are now (as in Europe) at record levels. Gasoline is Rmb 8.2/litre, the equivalent of $1.20/l, or $4.40/US gal.
Unsurprisingly, this leaves people…
Politicians seem to be floundering as they seek to restore growth to the Western economy. Their prescriptions swing between austerity and economic stimulus as they argue over what has gone wrong.
But in chapter 10 of our Boom, Gloom & The New Normal…
Q1 should have been a strong quarter for global petchem demand:
• Buyers had to restock in the New Year, as CFOs had cut working capital for year-end reasons
• In the West, Easter is delayed until April, and the USA has benefited from the warmest …
Last May, the blog raised major questions about the sustainability of China’s petchem demand growth surge in 2009-10.
It suggested in an ICB article that “China’s 53% rise in PE demand is a warning sign in itself that its economy may be over-heating…
Q3 results showed chemical companies being cautious over the outlook. Q4’s results have now confirmed the external environment remains difficult. The reasons are not hard to find:
• Slow growth in the global economy – BASF expect 2.7% again in 201…
The New Normal involves three major transformations in the nature of consumer markets:
• The increasing size of the New Old 55+ age group in the West
• Too many young people struggling with higher unemployment
• Large number of people moving ou…
As promised, the blog looks today at the performance of US polyethylene (PE) exporters in Brazil.
It was the fastest-growing of the major markets in 2011, as the wider economy benefitted from China’s demand. Since 2008, Brazil’s PE net imports have…
US petchem producers are planning a major boost to ethylene capacity. They now have the 2nd cheapest feedstock in the world, due to ethane from shale gas. The only question is, where will they sell their product?
Ethylene, of course, is very expensi…
Russia has been the great exception in regional chemical markets.
Normally, production growth starts at a high level, often 15% a year or more, and then slows as markets become more mature. But in Russia, output collapsed with the Berlin Wall after…
Last April, China’s polyester market provided an early warning signal that the current downturn was about to start. Now, it is flagging an important change in relative positions within the value chain.
9 months ago, the divergence between crude oil …
The global economy is moving into a difficult period, as it transitions to the New Normal. Debt levels are high, and incomes are under pressure, particularly for the large numbers of people moving into retirement.
Cost must be the key criteria when…
Latest data from the IMF shows that the EU remains the world’s largest economic unit. Its GDP in 2010 was $16.2tn, 26% of the global economy. The USA was next with $14.5tn, and China 3rd with GDP of $5.9tn.
So what happens in Europe matters greatly…
The blog’s 6 monthly review of force majeures (FM) reveals worryingly little improvement in performance. As the chart shows, H2 was slightly better than H2 2010. But realism suggests it was flattered by Q4’s low operating rates, which probably reduce…
The above chart would have seemed unbelievable at any time in the past 30 years. It shows the performance of propylene and butadiene relative to ethylene.
Not because it shows butadiene prices racing ahead relative to ethylene (green line). This hap…
The chart above shows how the benchmark products in the IeC Downturn Monitor moved during 2011. The yellow shaded area covers performance since 29 April, when the Monitor launched.
It shows a year of two halves:
• The period to the end of April wa…
The blog celebrated its 100,000th visit during 2011. Its readership also continued to increase, and now covers 142 countries and 5992 cities. The map shows the major centres of readership, which include all the main petchem hubs.
Readers also remain…
Europe’s cracker operators are heading into a crisis, again, for the 2nd time in 3 years.
The chart above, based on official APPE data, compares quarterly ethylene volumes since 2000. It shows:
• 2011’s total Q1-Q3 volume of 15.2MT was one of the …
Petchem markets are telling us something very important about the state of the global economy. They are doing their usual job as leading indicators. Prices for all 4 of the blog’s benchmark products are now down over 20% since it launched the IeC Dow…
The downturn in the US housing market is turning out to have a silver lining, according to the Wall Street Journal.
It describes how farmers in some areas are now able to buy back land previously sold for housing development, and return it to agricult…
6 months ago, when reporting Q1 results, the blog strongly disagreed with the rosy outlook being offered by most analysts. It warned then that:
“The history of the past 40 years shows high oil prices have always led to:
• An initial boom in volume…
Europe’s polyethylene (PE) trade presents a fascinating patchwork, based on its geographic and historical trading position, overlaid with its multi-ownership structure.
This is highlighted in the above chart (based based on trade data for the January-…
Long-standing readers will remember that then-UK Finance Minister Alastair Darling was the first Western politician to recognise in August 2008 the disaster that was about to hit financial markets.
Now out of office, his warning today therefore deserv…
As promised, the blog looks today at the USA’s trade position in polyethylene (based on data for the January-August period from Global Trade Information Services, the leading global supplier).
The chart shows US net trade (exports less imports). This…
China has been the motor of the chemical industry’s recovery since the dark days of Q4 2008.
Polyethylene (PE), the largest of the polymer markets, saw volumes rise 53% between then and 2010. But the party has now come to an end, as the government ba…
3 years ago, many hoped the G20 group of the world’s wealthiest countries might work together to solve the global financial crisis.
Last week’s Cannes meeting ended that illusion.
Instead, its decision to abandon the Doha trade round, launched in 2…
It is 5 months since the blog launched its IeC Downturn Alert, using prices from 29 April. It wrote then that:
“They don’t ring bells at market turning points. Otherwise, we could all retire to the Bahamas.”
But its argument was that a peak was li…
Financial markets have become increasingly nervous in recent weeks, since the blog last reviewed developments in global bond markets.
Its conclusion then was that investors are worrying more about return of capital, than return on capital, as we trans…
Our 10th European Aromatics and derivatives conference will take place on 22-23 November.
Co-organised with ICIS, it provides an excellent opportunity for delegates to meet up and exchange views in the critical end-of-year period.
It features the …
Last week’s New Normal seminar in Houston continued the success of the Singapore and Frankfurt events. It sparked lively debate about the major opportunities for future growth in the New Normal. These include:
• The over-55 age group in the West …
Many chemical companies now believe it is inevitable that China and India will reach developed economy status. Some even believe that their strong growth will mean “the end of economic cycles”.
But as we discuss in chapter 6 of ‘Boom, Gloom and the …
The brave new world of modern finance continues to amaze the blog.
It still has problems with the idea that the answer to having too much debt is to borrow some more. But last week’s Eurozone summit not only did this (as noted by the German central b…
Stock markets soared after the eurozone meeting this week. But the head of the German central bank warned “The envisaged leverage instruments are similar to those which were among the origins of the crisis, because they temporarily masked the risks.” …
A year ago, Petromatrix highlighted the short-term ‘triangle’ that was being drawn by oil prices. This describes a period when sellers and buyers are evenly balanced, and neither side can gain momentum to take prices in their favoured direction.
It u…
The 2012-14 Budget period offers great opportunities, as well as great challenges.
Will companies continue to focus on short-term developments in financial markets? Michael Porter’s Shared Value concept instead offers us a powerful model for creat…
The 2012-14 Budget period offers great opportunities, as well as great challenges.
In the short-term, the challenges may well seem more important.
But they should not blind companies to the fact that the opportunities have probably never been gre…
Blog readers can choose their favourite leading indicator this week.
In financial markets, the US S&P 500 index continued its recent rally. If you believe the bullish analysts; a Greek default, lengthy arguments between Germany and France, and the ne…
SUMMARY
The global economy does not seem to be in good shape.
Policymakers seem to fail to grasp the importance of the demographic changes that are underway in both the Western and emerging economies.
Yet demographics drive demand.
The result of thi…
Its the ‘big picture’ issues that we need to watch these days, no longer detailed forecasts of individual product growth rates. They are driving chemical product sales in every major region.
The chart above from the Financial Times highlights Europ…
Auto sales in the key global markets of China, USA and Europe present a mixed picture as we look towards year-end (red square):
• China had a strong September, and sales are now up 6% versus 2010
• But the Auto Association claimed this was due to …
Wall Street analysts have their bonuses to consider at this time of year. So it is no surprise that they are talking up the prospects for the Christmas season – the peak shopping period of the year in the West.
But those involved in shipping goods do…
Financial markets continued their start of quarter rally last week. But their volatility amazes even seasoned observers. The US Dow Jones Index has moved at least 100 points in 57 of the last 58 days, for example, whilst crude oil jumped $3/bbl on Fr…
The blog will publish its fifth annual Budget Outlook next weekend. As usual, it is therefore time to review last year’s Outlook. Past performance may not be a perfect guide to future outcomes. But it is one of the best that we have.
The blog’s 2008 O…
Peggy Noonan is the blog’s favourite political correspondent. She used to be President Reagan’s speechwriter, so nobody can accuse her of being a ‘socialist’ or ‘doomsayer’.
Recently, she has been writing some very important columns in the Wall Stree…
The 10000 readers who downloaded the blog’s first Budget White Paper in December 2009, ‘Budgeting for a New Normal’, will remember the issues highlighted in the triangle above.
At the time, they were being widely ignored, as policymakers assumed that …
The world has suffered a recession every time the oil price has reached current levels. And as the blog has warned for months, this time is unlikely to be different.
The reason is captured in the above chart. This uses:
• Oil production since 19…
The good news about US auto sales last month was that they were the highest September sales since 2007. The bad news was that they were still below the 1.1 million level, which was the minimum monthly sale from 2005 – August 2008.
The reasons for the …
The great film comedy Groundhog Day saw Bill Murray doomed to repeat the same day in his life, until he learnt to become a better person. Sadly, financial markets have yet to learn from his example.
Every quarter, the investment banks produce new sto…
China was understandably a key item on most people’s minds at this week’s annual EPCA (European Petrochemical Association) meeting in Berlin. It has been the motor of global chemical demand growth over the past 3 years.
The blog’s discussions ident…
Yesterday’s Scenarios hopefully provided valuable insight into the challenges ahead for companies and individuals. They also suggest some Critical Success Factors for achieving a successful transition to the New Normal, as set out in the chart above:
…
The transition to the new Normal is likely to be painful and long-lasting.
Future demand growth will be slower as the ageing Boomers spend less and save more.
More regular and deeper recessions are likely to become a feature of the global economy o…
Today’s economic situation is getting worse, not better. The blog believes this is because most policymakers still refuse to accept the wisdom contained in the Beatles’ ‘When I’m Sixty-Four’ song on their iconic Sgt Pepper album.
The Western BabyBoo…
Petchem markets are continuing to act as leading indicators for the global economy. The IeC Downturn Alert shows there was no September rebound in orders after the holiday period.
October will have to bring a sudden, and powerful reversal of the do…
US subprime lending was the starting point for the economic crisis now spreading around the world. The blog believes a key cause was policymakers refusal to accept that the ageing of the BabyBoomers (those born between 1946-70) would cause a major cha…
The world’s leading retailers have been extremely reliable leading indicators for the chemical industry, since the Great Recession began.
They were the first, back in July 2007, to highlight the major changes underway in consumer markets. Tesco, the …
Auto sales in the world’s 3 main markets (China, USA, EU), saw much slower growth in the past 3 months.
The chart above shows how they have moved in 2011 (red square) versus previous years. It is clear that the stimulus-led boom seen since 2009 has c…
Will you still need me? Will you still feed me? The Beatles asked the right questions back in 1967, when singing ‘When I’m Sixty-Four’ on their iconic Sergeant Pepper album.
What would happen to the Western BabyBoomers when they became 64? Would …
The chemical industry has a turnover of $3.4trn, and is the world’s 3rd largest industry. It matters to the global economy.
Many of its leaders are about to meet next weekend in Berlin for the annual European Petrochemical Association (EPCA) meeting….
Next week, the blog publishes Chapter 5 of its ‘Boom, Gloom and the New Normal’ eBook, co-authored with John Richardson. This looks in detail at the major changes taking place in demand patterns as the BabyBoomers (those born between 1956-70) enter th…
Most of Europe goes on holiday in August, and so it is only now that auto sales for July and August have been reported.
As the chart above shows, the monthly sales figures continued the weak trend seen so far this year (red square):
• July’s sales …
An abrupt change of direction is never a pleasant experience in global financial markets. Yet unfortunately, the blog’s regular 6 monthly review suggests this has started to occur since March.
Investors are beginning to fear we may not be be entering…
There seems little doubt that the global economy is now entering a new downturn. Pessimists may worry that it has already begun in Q3. Optimists might hope it will be delayed till Q4, or even Q1.
But almost all major indicators are pointing in the …
Europe is at the eye of the storm when it comes to energy pricing. This is the last thing required by its struggling economy.
As the chart shows, Brent in euros (green line, RHS) is now back at the same level as June 2008, whereas WTI is 35% cheaper …
The blog’s Boom, Gloom and the New Normal eBook highlights the impact of the ageing Western babyboomers on future demand patterns.
Yet central banks such as the US Federal Reserve and the European Central Bank believe demographics have nothing to do…
Alchemists have always claimed to be able to perform the impossible. The most common claim was that they could turn lead into gold.
In Europe, the European Central Bank has been trying the same trick. It claimed to turn near-worthless Greek bonds …
The IeC Downturn Alert has hopefully done the job for which it was intended. It was launched at the end of April, when the blog became convinced that the global economy was highly likely to enter a new downturn. It …
Companies are now starting the Budget process for 2012-14.
As always, the blog will present its own view next month. It will also review last year’s Budget Outlook, presciently titled ‘Budgeting for Uncertainty’.
In the meantime, companies might l…
One characteristic of recessions is that recovery is always ‘just around the corner’. We can see this pattern in today’s US auto market. Since 2009, forecasters have been convinced that sales will quickly return to Supercycle levels of 15-17 million/…
The Financial Times kindly prints a letter from the blog today, under the headline “The golden age of the baby boomers is gone – for ever”.
It summarises the key ideas in its new eBook, Boom, Gloom and the New Normal, co-authored with John Richardson….
A recession is often defined as being when your neighbour loses their job. A depression is when you lose your job.
Latest industrial production data shows output is falling around the world. And US unemployment is rising again, with the wider measur…
Chemical markets are traditionally 6 months ahead of the wider economy, as they are so focused on consumer demand. September may therefore provide a ‘moment of truth’ for the IeC Downturn Alert, launched in April:
• The petchems downturn since Ap…
Sinopec is China’s leading petchem producer. Its H1 results, out this week, confirm the blog’s concern that China’s growth surge has stalled.
The chart shows Sinopec’s view of domestic demand growth for ethylene (blue line). After falling to zero in…
Many readers have been taking a well-earned break over the past few weeks. The blog also continues to gain large numbers of new readers, as the financial crisis intensifies. As usual, therefore, it is highlighting key posts during August, to help you…