China

Samsung stumbles in global smartphone market as Xiaomi overtakes Apple

Smartphone sales confirm that global markets are continuing to pivot to the New Normal world. Back in 2014, Samsung dominated with its middle market positioning. But since then, its position has been squeezed as the market polarises between low-cost Chinese suppliers and Apple’s focus on adding services. Every third smartphone used to be a Samsung.

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Europe’s Green Deal will transform its economy, as floods confirm urgency of tackling climate change

The floods raging in Germany and Benelux highlight the scale of the Climate Change challenge ahead.  Last week, Europe announced its roadmap towards a Net Zero economy.  It emphasised that achieving Net Zero, even by 2050, will be impossible if we don’t start now. As the Commission noted in presenting the strategy: “Climate change is

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Oil markets enter the endgame as car companies rush to electrify

Almost every day now sees a car company rushing to announce its plans to boost Electric Vehicle (EV) output. And key OPEC members – such as the UAE – are starting to recognise they have only a few years left to sell their oil, before the market disappears. Last May, the influential International Energy Agency

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Supply chains set to transform as companies start to reshore

Major new opportunities are starting to appear in today’s New Normal world, as I describe in a new analysis for the Institution of Chemical Engineers. Please click here to read the full article. We are set to enter a “New Normal” world as economies slowly reopen again with the arrival of Covid-19 vaccines. This will

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Pandemic leads to ‘baby bust’ as births decline in most countries

A year ago, many were suggesting the lockdowns might produce a “baby boom” as couples spent more time together. But early data suggests the world is instead seeing a “baby bust”. As Nikkei Asia reports: “Births (in December/January) have fallen between 10% and 20% in such countries as Japan, France and Spain — and even

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China’s dual circulation policy aims to reduce debt reliance

Every now and then, people wake up to the fact that debt is only good news when it adds to growth. Otherwise, it simply destroys value. China is usually the case study for this analysis, as the chart confirms. It shows the rise in debt from 2002, when official data begins, versus the rise in

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Weak demand – and the illusion of a return to “normal”

My new interview with Real Vision focuses on the major changes underway in the economy. Our analysis of the chemical industry, auto market, and technology sector, suggests a return to the “old normal” is highly unlikely. Instead, major changes are underway in Demand Patterns, Reshoring, Energy Abundance, the Circular Economy and in Advanced Manufacturing.  For

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Smartphone sales highlight new trends in consumer markets

Smartphone markets continue to provide early warning of the major changes taking place in consumer markets. And Q4 data confirms the old rules are becoming less and less relevant:  As the chart shows, market positioning is now all-important. Apple are stretching their lead in the ‘sweet spot’ of the value chain – design – and

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5 key questions for success in the New Normal

Sustainability rather than globalisation is becoming the key driver for business. And the paradigm shift this creates means that companies need to adopt new Critical Success Factors as shown above. Leadership skills will be essential at all levels of the organisation in order to stimulate the creativity and action orientation required for success. There are

OPEC set to lose out as Biden, EU and China focus on Climate Change opportunities

OPEC used to dominate global oil markets. In the early 1980s, there was even talk of another OPEC cartel to control gas prices. But those days are long gone.  Instead OPEC members such as the UAE are increasingly aware they have only a limited time left to monetise their vast reserves of fossil fuels. This is

Welcome to the New Normal – a look ahead to 2030

10 years ago, I took a look ahead at what we could expect in the next decade, as discussed last week. Unfortunately, we now face the major economic and social crises that the chart predicted, if policymakers continued with ‘business as usual’. This week, I want to look ahead at what we can expect to

Oil prices signal potential end to the V-shaped recovery myth

Oil prices have moved into another ‘flag shape’ – which previously provided critical warning of the March collapse, and of those in 2014 and 2008. The shape is important as it means the bulls and bears have been battling each other to exhaustion, making it likely one or the other will give up. This time,

China’s property sector is at the epicentre of the crisis

A branch of Centaline Property Agency in Hong Kong © Bloomberg Indebted Chinese property developers threaten a domino effect on western credit markets , as I describe in my latest post for the Financial Times, published on the BeyondBrics blog Second-order impacts are starting to appear as a result of China’s lockdowns. These are having

“They may ring their bells now, before long they will be wringing their hands”

The wisdom of Sir Robert Walpole, the UK’s first premier, seems the only possible response to this weekend’s headline from the Wall Street Journal. How can a National Emergency ever be the basis for a major rise in stock markets? Of course, we all know that stock markets have become addicted to stimulus. But the

Chain’s smartphone and auto sales tumble as coronavirus hits demand

China is the world’s largest market for smartphones and autos – responsible for c30% of global sales for both.  Yet as Reuters notes: “Most western policymakers and journalists view the world economy through a framework that is 10-15 years out of date, failing to account fully for the enormous shift in activity towards China and

China’s lockdown makes global debt crisis now almost certain

Beijing has a population of 21.5 million, but you wouldn’t know it from this BBC video from last Thursday.  Normally busy streets and transport systems are eerily empty, with food deliveries often the main traffic on the roads. It’s the same picture in industry, with the Baidu Migration Index reporting only 26% of migrant workers

Automakers face stiff headwinds in big emerging markets

Brazil, Russia, India and China disappoint as manufacturers face investment demands of EVs © Bloomberg  Less than a third of China’s 31,000 auto dealers were profitable in the first half of 2019, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog Auto markets in the Bric countries are

Will stock markets see a Minsky Moment in 2020?

Few investors now remember the days when price discovery was thought to be the key role of stock markets. Instead, we know that prices are really now set by central banks, on the model of the Politburo in the old Soviet Union. How else can one explain the above chart? It shows the US S&P

Polyethylene’s crisis will create Winners and Losers

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

$50bn hole appears in New York financial markets – Fed is “looking into it”

Most people would quickly notice if $50 went missing from their purse or wallet. They would certainly notice if $50k suddenly disappeared from their bank account. But a fortnight ago, it took the New York Federal Reserve more than a day to notice that $50bn was missing from the money markets it was supposed to

Auto markets set for major disruption as Electric Vehicle sales reach tipping point

Major disruption is starting to occur in the world’s largest manufacturing industry.  Hundreds of thousands of jobs will likely be lost in the next few years in auto manufacturing and its supply chains, as consumers move over to Electric Vehicles (EVs). As the chart from Idaho National Laboratory confirms, EVs have relatively few parts –

Oil market weakness suggests recession now more likely than Middle East war

Oil markets remain poised between fear of recession and fear of a US attack on Iran. But gradually it seems that fears about a war are reducing, whilst President Trump’s decision to ramp up the trade war with China makes recession far more likely. The chart of Brent prices captures the current uncertainties: It shows

Don’t get carried away by Beijing’s stimulus

Residential construction work in Qingdao, China. Government stimulus is unlikely to deliver the economic boost of previous years © Bloomberg China’s falling producer price index suggests it could soon be exporting deflation, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog On the surface, this year’s jump in China’s total

Stock markets risk Wile E. Coyote fall despite Powell’s rush to support the S&P 500

How can companies and investors avoid losing money as the global economy goes into a China-led recession?  That’s the key question as we enter 2019.  We have reached a fork in the road: Since 2008, Western central bankers have focused on supporting stock markets But the bursting of China’s shadow banking bubble means this cannot continue for

BASF’s second profit warning highlights scale of the downturn now underway

The chemical industry is easily the best leading indicator for the global economy.  And thanks to Kevin Swift and his team at the American Chemistry Council, we already have data showing developments up to October, as the chart shows. It confirms that consensus hopes for a “synchronised global recovery” at the beginning of the year

Asian downturn worsens, bringing global recession nearer

The chemical industry is the best leading indicator for the global economy.  And my visit to Singapore last week confirmed that the downturn underway in the Asian market creates major risks for developed and emerging economies alike. The problem is focused on China’s likely move into recession, now its stimulus policies are finally being unwound. 

Chemical output signals trouble for global economy

A petrochemical plant on the outskirts of Shanghai. Chinese chemical industry production has been negative on a year-to-date basis since February Falling output in China and slowing growth globally suggest difficult years ahead, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog Chemicals are the best leading indicator for the

“What could possibly go wrong?”

I well remember the questions a year ago, after I published my annual Budget Outlook, ‘Budgeting for the Great Unknown in 2018 – 2020‘.  Many readers found it difficult to believe that global interest rates could rise significantly, or that China’s economy would slow and that protectionism would rise under the influence of Populist politicians. […]

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Petrochemicals must face up to multiple challenges

Europe’s petrochemical sector must prepare now for the trade war, US start-ups, Brexit and the circular economy, as I discuss in this interview with Will Beacham of ICIS news  at the European Petrochemical Association Conference. With higher tariff barriers going up between the US and China, the market in Europe is likely to experience an influx of […]

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Political and economic risks rise as US mid-term elections near

This is the Labor Day weekend in the USA – the traditional start of the mid-term election campaign.  And just as in September 2016, the Real Clear Politics poll shows that most voters feel their country is going in the wrong direction.  The demographic influences that I highlighted then are also becoming ever-more important with time: […]

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US-China tariffs could lead to global Polyethylene price war

I was interviewed on Friday about the likely impact of President Trump’s trade wars on the global chemical industry by Will Beacham, deputy editor of ICIS Chemical Business. His interview is below. The introduction on Friday of trade tariffs by China and the US is the first step in a trade war that could turn into […]

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China’s lending bubble is history

As China’s shadow banking is reined in, the impact on the global economy is already clear, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog China’s shadow banking sector has been a major source of speculative lending to the global economy. But 2018 has seen it entering its […]

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Trump’s trade war should set warning bells ringing for every company and investor

There should be no surprise that President Trump has launched his trade war with China.  The real surprise is that financial markets, and business leaders, are so surprised it is happening.  He was, after all, elected on a platform that called for a trade war, as I noted originally back in November 2016 – and […]

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Goodbye to “business as usual” model for plastics

Polymer markets face two major challenges in coming months. The most immediate is the arrival of the major US shale gas-based ethylene and polyethylene expansions. The longer-term, but equally critical challenge, comes from growing public concern over plastic waste, particularly in the ocean. The EU has set out its vision for a new plastics economy, where: “All plastic packaging is reusable or […]

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US Treasury benchmark yield heads to 4% as 30-year downtrend ends

The US 10-year Treasury bond is the benchmark for global interest rates and stock markets.  And for the past 30 years it has been heading steadily downwards as the chart shows: US inflation rates finally peaked at 13.6% in 1980 (having been just 1.3% in 1960) as the BabyBoomers began to move en masse into the […]

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US PE exports on front line as Trump changes trade policies

It is almost a year since Donald Trump became President.  And whilst he has not followed through on many of his promises, he has indeed introduced the major policy changes that I began to discuss in September 2015, when I first suggested he could win the election and that the Republicans could control Congress: “In the […]

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The return of volatility is the key market risk for 2018

We are living in a strange world. As in 2007 – 2008, financial news continues to be euphoric, yet the general news is increasingly gloomy. As Nobel Prizewinner Richard Thaler, has warned, “We seem to be living in the riskiest moment of our lives, and yet the stock market seems to be napping.” Both views […]

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Anti-pollution drive hits China’s role as global growth engine

China is no longer seeking ‘growth at any cost’, with global implications, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog A pedestrian covers up against pollution in Beijing © Bloomberg China’s President Xi Jinping faced two existential threats to Communist party rule when he took office 5 […]

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Difficult times ahead for US polyethylene exports as business models change

This wasn’t the chart that companies and investors expected to see when they were busy finalising $bns of investment in new US ethylene and polyethylene (PE) capacity back in 2013-4.  They were working on 3 core assumptions, which they were sure would make these investments vastly profitable: Oil prices would always be above $100/bbl and […]

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Saudi Arabia’s ‘Vision 2030’ is looking a lot less clear

Saudi Arabia’s U-turn to revive oil output quotas is not working and fails to address the changing future of oil demand, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog Saudi Arabia’s move into recession comes at an unfortunate time for its new Crown Prince, Mohammed bin Salman […]

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Budgeting for the Great Unknown in 2018 – 2020

“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 from former UK Finance Minister, Ken Clarke, aptly summarises the uncertainty facing companies, investors and individuals as we look ahead […]

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President Xi focuses on pollution, not growth, as key Party Congress nears

Imagine living in the capital city of a major country, and suffering the level of pollution shown in the above photo on a regular basis.  We used the photo in chapter 6 of Boom, Gloom and the New Normal when we highlighted how pollution was inevitably going to move up the political agenda in China. Controversial at the […]

China’s used cars put a dent in global industry

China is now developing a used car market for the first time in its history.  This means the end of global auto sales growth, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog China’s car market has been key to the recovery in global auto sales growth since […]

Oil prices under pressure as US oil/product exports ramp up

On Monday, I discussed how OPEC abandoned Saudi Oil Minister Naimi’s market share strategy during H2 last year. Naimi’s strategy had stopped the necessary investment being made to properly exploit the new US shale discoveries. But this changed as the OPEC/non-OPEC countries began to talk prices up to $50/bbl. As CNN reported last week: “Cash is pouring […]

US Permian’s shale oil surge highlights OPEC’s failed strategy

OPEC and Russia made a massive mistake last November when when they decided to try and establish a $50/bbl floor for world oil prices.  And now they have doubled down on their mistake by extending the deal to March 2018. They have ignored 4 absolutely critical facts:   Major US shale oil producers were already […]

China’s lending bubble sees Beijing home prices jump 63%

Greed and fear are the primary emotions driving China’s housing and auto markets today, as China’s lending bubble hits new heights.  For ordinary citizens, greed is the key driver:    Average home prices in Beijing rose an eye-popping 63% between October 2015 – February 2017    In Shanghai, one enterprising estate agent (realtor) […]

China power struggle creates commodity snakes and ladders

The clash of priorities between President Xi and Premier Li over the role of stimulus in China’s economy is close to being decided, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog The stakes are rising in China’s power battle ahead of October’s 19th Party Congress. Normally, the […]

Smartphone profits under threat as market goes ex-growth

The outlook is becoming clearer for the global smartphone market, and it confirms my judgement in November, when reviewing Q3 sales: “It seems likely that a focus on price and affordability will come to dominate. In turn, pricing pressures on suppliers will intensify. The key challenge facing the market is that it has gone ex-growth.” […]

The global economy’s best leading indicator forecasts a downturn

If you want to know what is happening to the global economy, the chemical industry will provide the answers. It has an excellent correlation with IMF data, and also benefits from the fact it has no “political bias”.  It simply tells us what is happening in real-time in the world’s 3rd largest industry.  The chart […]

Recession the base case scenario for 2017

It is hard to be optimistic about the outlook for 2017. The good news is that policymakers are finally giving up on the idea that stimulus can somehow return us to the growth levels seen when the Baby Boomers were young.  As the Bank of England note in a new Report:   ”Economic theory suggests that a […]

Chart of the Year: US$, 10-year US interest rates begin to rise

Last year it was the oil price fall.  This year, there is no doubt that the US dollar has taken centre stage, alongside the major rise underway in benchmark 10-year interest rates.  As 2016′s Chart of the Year shows:   The US$ Index (black) has risen 12% since May against other major currencies (euro, yen, […]

2017 Global Outlook – ACS webinar on Thursday

This year has seen a paradigm shift in how major governments view trade.  We may well be seeing an end to globalisation:   In Europe, the United Kingdom voted to leave the E.U., and Italy may well have a referendum on leaving the euro   In the U.S., President-Elect Donald Trump’s 100-day Action Plan will see […]

Populism rises as global dynamics drive market shifts

We are living in a New Normal world.  Populists such as Nigel Farage, Donald Trump, Marine le Pen and Beppe Grillo are gaining support as economic growth slows and social/political unrest becomes common.  My presentation at our annual conference last week in Vienna highlighted some of the key issues, as Jessie Waldheim of ICIS news […]

Fault-lines open connecting the debt-fuelled ‘Ring of Fire’

Next week, I will publish my annual Budget Outlook, covering the 2017-2019 period. The aim, as always, is to challenge conventional wisdom when this seems to be heading in the wrong direction: The 2007 Outlook ‘Budgeting for a Downturn‘, and 2008′s ‘Budgeting for Survival’ meant I was one of the few to forecast the 2008 […]

President Xi tells China’s government to “control asset bubbles”

China’s housing bubble is not just about Shenzhen.  It is the most obvious sign of problems ahead, as I noted last month.  But as the chart above shows from the Wall Street Journal, total lending to the property sector has rocketed in recent months:    More than one-third of all loans went to the sector […]

Divorce, not marriage, now fueling China’s property bubble in Shenzhen

China’s housing market has always been about marriage since it began in 1998, until recently that is.  The reason, as I noted a while ago, is that: “70% of China’s women regard “housing, a stable income and some savings” as vital for any man wanting to get married.” Women have the upper hand when it […]

China’s PVC exports confirm its move to self-sufficiency

Many commentators were shocked by China’s weak trade data on Monday – with imports falling 12.5% versus July 2015, and January – July imports down 10.5%.  But they were no surprise to anyone focused on developments in the chemical industry, which has once again confirmed its status as the most reliable leading indicator for the […]

China’s G20 shutdowns will impact global economy

Imagine your government decided to shutdown most of the industry in two major cities for 2 weeks or more?  Say Detroit and Chicago in the US, or Milan and Turin in Italy, or Leeds and Manchester in the UK.  Now you will have some idea of the scale of the shutdowns being mandated in China […]

Clouds gather over global polymer markets as China imports drop

Difficult times lie ahead for global polymer markets.  It would be bad enough that downstream users have been busy building stock in recent weeks as the oil price rose, as Linda Naylor reports on polypropylene (PP) for ICIS: “PP demand is slow, slower than many expected, and the strong growth of recent months is now […]

Restocking boosts Q1 margins for chemical companies

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’s G20 Summit shutdown highlights risks to buying “frenzy” in commodities markets

China’s polyester industry, like many others, is already preparing to shut down ahead of September’s G20 Summit in Hangzhou, to reduce pollution levels.  The phenomenon even has its own Wikipedia page, APEC Blue, to describe the moment in November 2014 when Beijing suddenly saw blue sky for the whole of the Asia-Pacific Economic Co-operation (APEC) summit meeting.  It […]

Saudi plans to transform Aramco to energy /industrial company

“Within 20 years, we will be an economy that doesn’t depend mainly on oil“. With that one statement, deputy Crown Prince Mohammed bin Salman (pictured above), changed the outlook for oil and energy markets.  The world’s major oil producer, with the lowest cost, was signalling that the kingdom will no longer be supply-driven, focused on […]

China’s rising exports: less about growth, more about exporting deflation

China’s move towards self-sufficiency is radically changing global oil and petrochemical markets,as I describe in my latest post for the Financial Times, published on the BeyondBrics blog Markets used to cheer when China’s exports rose, believing this showed the global economy was in good shape. They are still hopeful today, despite the 25 per cent fall in February’s […]

China’s PTA market moves to self-sufficiency and exports

Credit conditions are tightening day by day in China.  Companies with good payment records over many years are seeing their borrowing limits cut back.  2016 is indeed proving to be the year that President Xi Jinping “takes the pain of restructuring”. At the same time, self-sufficiency has become a key strategy for many industries, in […]

Chemical companies see difficult times ahead in 2016

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 […]

China power demand surge ends as Old Normal economy slows

The decline in China’s electricity consumption growth highlights the remarkable slowdown underway in its Old Normal economy, as the chart shows: Consumption growth took off in 2009 under the influence of the stimulus programme It rose 6.5% in 2009, and then accelerated further in 2010 when it was up 14.7% 2011 growth stayed at double-digit […]

Smartphones head for price war as China sales fall 4% in Q4

We all now carry around a mini-computer in our pockets – one with more power than those which controlled Apollo 11 when Neil Amstrong first walked on the moon in 1969.  In certain parts of the world, there are now more smartphones than toilets, according to Time magazine. This is raising the spectre of market […]

China’s lending bubble is being deflated

The changes underway in China’s lending policies are far more significant that anything being planned by central banks in Tokyo, Frankfurt or Washington as I describe in my latest post for the Financial Times, published on the BeyondBrics blog Investors’ attention remains focused on the minutiae of central bank policies in the developed world. But they might spare a […]

China’s polyethylene market creates Winners and Losers

Tens of billions of dollars have been spent over the past 6 years to produce the above chart.  And thousands of people have argued and debated around the world about what will happen to China’s polyethylene (PE) market.  It has been a key focus of attention for everyone in the petchem and polymer industry since […]

Global car sales growth stalls without China

Where would the global auto industry be without the Chinese market?  Without China, sales in the Top 6 markets stalled last year, and were down 100k. And what will happen now China’s economy is slowing, and it is also starting to develop a large used car market for the first time?  Buyers will then have […]

Group think on oil prices puts company profits at risk

Shell Chemicals General Manager, Kate Johnson, asked a great question at our Conference last week, to which not a single hand went up in reply, as everyone had forecast an oil price around $100/bbl : “How many of your companies used $60/bbl as their oil price forecast in the 2015 Budget?” “Group think” is clearly […]

China’s auto slowdown to push spare capacity into export markets

Where would the world’s auto industry, and its suppliers, have been without China in recent years?  And how will they manage now China’s demand for new cars is slowing fast?  These are the question troubling companies and investors as Q3 sales are analysed. The chart above shows the recent history of sales in the Top […]

Budgeting for the Great Unwinding of policymaker stimulus

There have been 35 “flash crashes” in US oil markets so far this year, when prices swung up or down by 200 basis points (2%) – before reversing the move by > 0.75%.  That’s 35 occasions when the markets were out of control.   It is tempting to blame this on misfiring algorithms at the […]

Oil price rally disappears along with hopes of more stimulus

Many people in financial markets were hoping a new QE4 stimulus programme would be announced at the recent IMF meeting in Peru.  Unsurprisingly, markets rallied in anticipation: Brent oil was at $44/bbl on 24 August, and rallied to $56/bbl within a week The US S&P 500 Index rallied from 1823 to 1979 over the same period […]

The “China Chill” slows global economy and petrochemicals

There were record numbers at last week’s European Petrochemical Association annual meeting in Berlin.  But most of the 2900 attendees were in subdued mood.  Once again, it seems, the industry has chosen to sanction vast new investment at the top of the cycle, and will now suffer the consequences as it all comes online at […]

5 Critical Questions every Company and Investor Need to Answer

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 […]

Oil stocks at record levels as demand growth slows, supply rises

OECD oil inventories have never been higher.  They were 2.9mb at the end of July, and are expected to have risen further since then, according to energy watchdog the International Energy Agency: In terms of days of forward cover, they are now at 63 days in the OECD overall They are at 68 days in […]

China fooled the world, and now comes the Great Unwinding

The global commodity super-bubble is coming to an end, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog It is exactly a year since we forecast that a Great Unwinding of stimulus policies was underway, due to a major slowdown in China. As we warned on beyondbrics: Oil and commodity prices are […]

Stock market volatility surges as margin debt hits danger level

Global stock markets turned in a vintage experience last week for those who like horror movies. Continued sell-offs in China finally convinced some financial investors, and some senior Western policymakers, that its economy might not be quite as strong as they had assumed.  The ensuing panic led to record profits for the high frequency traders (HFTs), as the Dow Jones […]

Inflation turns to deflation as stimulus debt now has to be repaid

Its not what we know that causes the major problems.  Its what we think we know, but don’t. We know, for example, that markets balance supply and demand by shifting prices up and down.  Too much demand and/or too little supply, will mean higher prices and inflation.  This is what happened as the BabyBoom took place: Medical […]

“If the lips are gone, the teeth will be cold”: China’s New Normal policies require companies to undertake radical strategy reviews

Wishful thinking can be terribly dangerous for company profits.  Taken to extremes, it can lead them into bankruptcy. Recent developments in China thus make it essential for every company to immediately review its strategy for doing business in/with the country, against a realistic outlook for 2016-2018 GDP growth will likely be zero, and could well […]

Q2 results highlight continued uncertainty over outlook

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 […]

China’s collapsing stock market underlines need for New Normal reforms

My latest post for the Financial Times, published on the BeyondBrics blog is below  | Jul 27 15:08 | Red is a lucky colour in China, which is why share price displays go red when prices are rising. A green display means prices are falling, the opposite to stock markets elsewhere. There is a similar discontinuity between the short-term impact […]

BASF warns on outlook; Dow warns on China, ethylene cycle

BASF and Dow Chemical both warned on the outlook when presenting their H1 results last week: BASF CEO Kurt Bock warned, “We have for second quarter in the row in chemicals no growth worth mentioning . . . that is not a gratifying development.  We have the impression that there is little growth dynamic at the moment and our customers remain extremely cautious […]

China’s auto prices tumble as sales fall 3% in June

Its not a good time to be selling new cars in China.  As the chart shows: Sales fell 2% in Q2 (red line) versus 2014 (green), with June down 3.4% This is the first time sales have fallen in a quarter since Q1 2011 (pink) China’s auto dealer association said customer visits to dealers “dropped […]

H1 sees worst-ever number of chemical plant force majeures

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 […]

China’s new car market goes ex-growth as used car sales take off

My latest post for the Financial Times, published on the BeyondBrics blog is below |Jun 30 17:45 By Paul Hodges of International eChem Major structural change is under way in China’s passenger car market. New car sales grew just 1.2 per cent in May, as the country develops a used car market for the first time in its history. […]

New oil price fall is matter of “when”, not “if”, as inventory builds

Financial players have become convinced in recent months that the oil price will rise.  And so far, this has been a self-fulfilling prophecy.  Their buying has led to oil being stored all over the world – in tankers floating at sea and in shale oil wells, as well as in storage tanks. Unsurprisingly, prices have […]

China’s lending, electricity consumption continues to slow

‘Bad news’ seems to have become ‘good news’ as far as China’s economy is concerned.  In the past, most analysts simply ignored the possibility of a major slowdown.  Now that the slowdown is underway, they still ignore it  – this time, because they are sure further stimulus is just around the corner. But time passes, […]

China auto sales rise just 1% as New Normal slowdown bites

The above chart was my Chart of the Year last December, under the title “China’s auto sales bubble begins to burst‘.  So it seems only sensible to update developments 6 months later. The key question, of course, is whether my headline was right?  Could it be that China was not going to deliver endless growth […]

US producers face uphill battle to increase PE sales in China

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 […]

China’s economy continues to slow as lending curbs bite

Everyone seems sure that China’s government is about to undertake major new stimulus.  Thus Reuters reported: “Economists said it was a matter of when, not if, China eased policy again after economic growth in Q1 cooled to 7%, a level not seen since the depths of the 2008/09 global financial crisis.  Indeed, some analysts have […]

Stimulus proves no solution for today’s economic slowdown

“Central banks have to be mindful that too long a period of very low interest rates can have undesirable consequences in the context of ageing societies. For pensioners, and those saving ahead of retirement, low interest rates may not be an inducement to bring consumption forward. They may on the contrary be an inducement to […]

Polypropylene highlights impact of China’s new economic direction

Polypropylene (PP) is one of the world’s major plastics – used in areas as diverse as car bumpers and food packaging.  And in recent years, consumption has soared due to China’s seemingly insatiable demand, as it became the manufacturing capital of the world. But now, all that is changing.  As we warned in chapter 2 of ‘Boom, Gloom […]

China issues Top 100 list of most-wanted corruption fugitives

$2.83tn is estimated to have left China illegally as a result of corruption between 2005 – 2011.  This helps to explain the remarkable poster above, which shows China’s Interpol list of its 100 “most-wanted” corruption suspects.  It has just been published by China’s state media, with the following explanation: “The China National Central Bureau of […]

China lending curbs will hit global property bubbles

China’s interest bill this year is around $1.7tn, according to ratings agency Fitch.  And no, the “tn” isn’t a typo. China’s interest bill is indeed around the total size of India’s economy, and larger than the economies of S Korea ($1.3tn), Spain ($1.4tn) or Mexico ($1.3tn). Common sense tells us that no economy can afford […]

Q1 auto sales rise just 1.9% in world’s ‘Top 7′ markets

Its hard to be optimistic about the outlook for the global auto market.  The chart above of the Top 7 markets, which account for around 2/3rds of global sales, highlights the growing uncertainty.  It shows Q1 sales in 2015 (blue column) versus 2014 (blue).  Overall, these were up just 1.9% at 15.8m.  And although the […]

China Q1 electricity consumption up only 1% as economy slows

More and more evidence is emerging of the major slowdown now underway in China’s economy. China’s leadership have warned this would take place since they took office 2 years ago.  And they have reinforced the message in recent months with their focus on explaining the move into the New Normal and its consequences. A major interview […]

China’s used car market set to drive future auto sales growth

China’s auto market is going through major change.  Tier 1 cities have imposed limits on car ownership, and car use by government officials is being severely restricted.  In addition, the lending bubble that drove major growth in recent years is coming to an end. Perhaps even more importantly for the medium term, a used car market is now developing […]

President Xi says more to China’s economy than its growth rate

China’s economy has not had a good start to the year.  Central bank governor, Zhou Xiaochuan, admitted at the weekend that growth had “tumbled a bit too much“, adding: “China’s inflation is also declining, so we need to be vigilant to see if the disinflation trend will continue, and if deflation will happen or not” […]

Hedge funds moving away from ‘buy on the dips’ strategy

In recent years, financial markets have believed that “everything is for the best in this best of all possible worlds“.  Good news has taken markets higher.  So has bad news – as investors assume policymakers will apply more stimulus. As a result, a whole generation of managers and analysts has grown up without having to learn the fundamentals of supply/demand analysis.  And […]

China’s PE imports tumble as market slows, local output rises

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 confirms move into China’s New Normal economy

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) […]

China’s new policies cause West to scramble to catch up

Major change is underway in China under President Xi Jinping.  And this is not ’sound-bite’ policy change, created for the evening news bulletins.  Instead this is long-term strategy, intended to rebuild the economy for decades ahead. As a result, Western policymakers have largely missed its implications, and are having to scramble to catch up. One example is the sudden scramble to […]

Oil price, China Outlook – free pH Report webinar tomorrow

There have so far been 3 stages to the oil price collapse since I first forecast this development in mid-August: The first stage saw prices reach my initial forecast target of $70/bbl in November They then fell further to reach my second price target of $50/bbl in January Since then, prices have been trading in a wide range. Daily moves of $2/bbl, […]

Apple captures smartphone profits as market shifts to services

Consumers clearly love smartphones.  The global market is growing fast with 380m sold in Q4, up 31% versus 2013.  But manufacturers might be forgiven for not being so sure. As the chart above shows, major change is underway in the market.  The concept of ‘affordable luxury’ is disappearing as the market polarises between affordability and luxury. Samsung’s market share has dived from […]

Oil price, China Outlook – free pH Report webinar next Tuesday

There have so far been 3 stages to the oil price collapse since I first forecast this development in mid-August: The first stage saw prices reach my initial forecast target of $70/bbl in November They then fell further to reach my second price target of $50/bbl in January Since then, prices have been trading in a wide range. Daily moves of $2/bbl, […]

China becomes net exporter of PVC as property bubble bursts

China’s property bubble is collapsing, with average house prices now down 10% from their peak.  As agents Knight Frank note, “The developers have two to five years of stock to clear. So until that has been cleared, prices aren’t going up any time soon” We are also seeing more bankruptcies amongst property developers.  These began a […]

Oil prices have further to fall as US inventory hits new records

Another week, and another record high for US oil inventories.  Oil prices clearly have some way to go, before they return to being based on the fundamentals of supply and demand. Thankfully, the looking-glass world of $100/bbl prices has finally begun to shatter over the past 9 months.  And we can expect prices to return to historical […]

China exports deflation to the West

Unfortunately, the European Central Bank (ECB) does not read the blog, or yet subscribe to ‘The pH Report’.  If it did, it would have been forewarned back in August that a collapse in oil prices was potentially about to provide the catalyst for the arrival of deflation. Instead, as the Minutes of its critical January […]

Global shipping index hits all-time low

The world’s major shipping index, the Baltic Dry (BDI), has collapsed by 2/3rds since November, and by 80% since its earlier December 2013 peak, as the chart shows.  It is now at an all-time low of 509, almost half of its initial 1000 level when established in January 1985. Shipping is the major mode of transport for world trade, […]

Vast amounts of stimulus have not made China “middle class”

Debt can’t make a country middle-class overnight.  Even a massive amount of debt can’t achieve this.  Even the largest amount of debt in history can’t do this.  China’s experience since 2007, when it increased debt four-fold, proves this. As McKinsey have reported, China increased its debt from $7tn in 2007 to $28tn by the middle of […]

Deflation gains: China’s plastics market sees over-capacity

More and more commentators are beginning to recognise that deflation is becoming inevitable in many major economies: China’s producer prices fell -4.3% last month, and its consumer prices rose just 0.8% Eurozone consumer prices fell in December to -0.2%, and are likely to have fallen further in January US prices rose just 0.8% in December and are […]

Mckinsey says global debt now 3x global GDP, and rising

A major new report from consultants McKinsey confirms my concerns over the dramatic increase in global debt levels since stimulus policies began in 2008.   As their chart above highlights: Global debt has risen by $57tn to $199tn since 2007, nearly 3x global GDP Government debt is up by $25tn, with three-quarters of this in the developed […]

China’s slowdown hits PE imports from N America and NE Asia

A manufacturing slowdown is now well underway in China, as the latest official and unofficial Indices confirm. The government is mitigating this via its policy of self-sufficiency – which means a steady reduction in the need for imports – as well as by increasing exports of higher value-added products such as polyethylene (PE).  PE is the largest volume plastic, used in […]

BMW says China’s auto sales are heading into a New Normal

Its amazing what a lending bubble can do in the short-term, as the above chart shows.  It updates my August post for the Financial Times, and highlights the astonishing rise in China’s bank lending since 2008 on the x-axis, and the remarkable rise in auto sales on the y-axis. Official data shows average disposable income last […]

How to survive the Great Unwinding of policymaker stimulus

I was privileged to be interviewed by Merryn Somerset Webb, editor-in-chief of MoneyWeek (the UK’s best-selling financial magazine) in this week’s edition.  The interview covered a wide range of topics including the perilous state of UK house prices and some stock markets, and has prompted enormous interest amongst MoneyWeek readers. Merryn is one of the UK’s leading […]

Falling cotton/polyester prices create ‘deflation shock’ for consumers

Cotton prices appear to be collapsing again due to the surpluses created by central bank stimulus policies since 2009.  As the chart shows, these had initially caused prices to soar to levels not seen since the American Civil War: They reached 230c/lb in March 2011, nearly double the post-1982 peak of 117c/lb in May 1995 (blue […]

Halving of China’s electricity demand confirms major slowdown underway

China’s reported  7.4% GDP growth for 2014 was the lowest in 25 years.  But even so, it probably still overstates the true economic position.  How could China  possibly produce a final fiigure for GDP within just 20 days of 2015? Electricity consumption, as Premier Li has advised in the past, is a far more reliable guide to the actual […]

The great ‘Deflation Shock’ is coming closer

  The world is about to be hit by a demand shock equivalent to 1973′s supply shock.  Yet, astonishingly, most commentators remain so focused on central bank activity, that they have completely missed what is happening.  Here’s how it is playing out. You may remember the ‘The pH Report‘ forecast in early December that: “Oil prices […]

Oil prices at $50/bbl, China slowdown – the New Normal arrives

Welcome to the New Normal. 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 […]

Rocky road ahead for global economy as chemical industry remains downbeat

The chemical industry continues to be the best leading indicator that we have for the global economy.  This is because it is not only the 3rd largest industry (after agriculture and energy), but also because it is truly global and impacts virtually all areas of modern-day life. The chart above therefore presents a very downbeat […]

Chart of the Year – China’s auto sales bubble begins to burst

‘How China fooled the world’ was the subject of an excellent BBC documentary early in 2014 by senior editor, Robert Peston.  The BBC headline was as follows: “Now, Peston reveals what has actually happened inside China since the economic collapse in the west in 2008. It is a story of spending and investment on a scale never […]

The China middle class myth moves us closer to protectionism

Believing conventional wisdom can destroy your profits.  One example is playing out in the oil market before our eyes. Another example is the myth that China was about to become middle class.  Yet income levels always made this impossible: More than 9 out of 10 Chinese earn less than $20/day By comparison, the basic state pension in the UK is 25% higher, at over […]

Companies see confidence ebb away as China slows, US cost advantage weakens

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 […]

China’s “wasted $6.8tn” highlights its new economic direction

Can you imagine your government publishing a report that showed $6.8tn has been wasted in “ineffective investment” in the past 4 years?  That is $6.8tn, by the way, not a typo.   And it is more than Japan’s total annual GDP, or the combined annual GDP of Germany and France. No, I thought not.  I certainly cannot remember […]

China plans $90bn spend on new “Silk Roads”

I am just back from my first World Economic Forum meeting, having been invited to join its global chemicals council.  My first impression was astonishment – at the complete disconnect between the real knowledge of the experts at the Forum and today’s “consensus wisdom” . China is a great example.  The external consensus still thinks the new leadership is focused […]

Great Unwinding leads to major chemical market downturn

It is now almost 3 months since I suggested the Great Unwinding was about to hit oil and chemical markets.  As the chart above shows, there has since been a major collapse in most of the markets in our benchmark portfolio.  Given their role as leading indicators for the global economy, this major downturn is extremely worrying: […]

China becomes major PVC, PTA exporter for first time in history

Be very careful what you wish for.  That is the key message coming out of close analysis of China’s latest trade data. Recent media reports were upbeat at news that China’s exports had increased, as it appeared to suggest Western demand was returning.  But it seems nothing could be further from the truth. One major concern is that part […]

China’s $10bn trade deal fraud hits iron ore and copper markets

Iron ore prices on China’s futures market were at 5-year lows yesterday.  Copper prices also weakened in Australia.  This adds to the blog’s concern that China’s ‘collateral trade’ market is getting closer and closer to its ‘moment of truth’. This will come as an awful shock to most outside observers, who have been led to believe China’s vast imports […]

Chemical production continues to slow across most regions

Chemical production is currently the best leading indicator for the wider economy, as financial markets have lost their power of price discovery due to the impact of central bank stimulus. The above chart, based as always on the excellent American Chemistry Council (ACC) data, continues to flash the orange warning signal first seen last month.  The key […]

The real challenge is a lack of challenge

We all remember the Hans Christian Andersen story about the Emperor with no clothes.  His subjects were told that only those who were stupid or incompetent would be unable to see his wonderful new suit. Of course, nobody wanted to appear stupid or incompetent.  So when the Emperor paraded in his new clothes, nobody wanted to tell him the obvious.  It was left to a child […]

Shiller warning suggests S&P 500 bubble coming to an end

Nobel Prizewinner Prof Robert Shiller correctly forecast the dot-com collapse in 2000, and the 2008 financial Crisis, using the chart above.  Now he is warning we risk a 3rd collapse. The problem is that Western central banks have undertaken the largest financial experiment in history.  Their policy has been to boost financial markets, particularly the US S&P 500 – the world’s […]

Global stock markets still depend on low-cost money for support

The blog’s 6-monthly review of global stock markets highlights the narrow nature of the advance since September 2008, when the blog first began analysing developments.  It shows their performance since the pre-Crisis peak for each market, and the performance of the US 30-year Treasury bond. Remarkably, only the US, India, Germany and the UK stock markets […]

Great Unwinding of policymaker stimulus creates interest rate risk

Interest rate risk is rising in the developed economies as the Great Unwinding of policymaker stimulus continues.  Since the blog first highlighted this Unwinding last month: Oil prices have continued to tumble, with Brent now down over $15/bbl from its late-June peak The US$ has continued to rise from multi-year lows versus the yen, euro and pound And of course, […]

China Transformation webinar tomorrow

Today is Mid-Autumn Festival day in China, held to celebrate the harvest.  Traditionally it features the exchange of moon cakes filled with lotus paste and egg yolks, whilst children go to lantern parades. But in recent years, it has also become synonymous with corruption.   Silver moon cakes, as pictured above, became a common gift for […]

“Serious economic cooling-off” makes China’s GDP likely to go negative, again

We all know that China’s published GDP figures are meaningless.  China’s premier, Li Keqiang, has told us so.  And common sense tells us that no country, large or small, can possibly produce accurate GDP data within 2 weeks of the end of a quarter.  Nor is it possible to believe that this data never needs to […]

China’s waning stimulus spells trouble for the world’s biggest car market

The blog’s latest post for the Financial Times, published on the BeyondBrics blog is below. By Paul Hodges of International eChem China’s July lending level of just Rmb 385bn ($62.6bn) has surprised financial markets, which were expecting an increase in stimulus. But bigger surprises may lie ahead. The strong link between lending and passenger car sales […]

China’s housing market enters New Normal as prices slide

Markets appear to be continuing to move, slowly but surely, into their expected ‘scary phase’.  The reason is the massive distortions that have been created in financial markets, and in China’s housing market, by the $35tn+ of stimulus from governments and central banks since 2009. Unwinding these distortions will not be simple.  The stimulus has not returned us […]

China condom sales droop 1 million/day on anti-graft campaign

Condom sales have dropped by 1 million/day in China according to The Economist magazine.  It highlights how: Across China, luxury retailers and fancy restaurants are suffering from an edict against wasteful government spending. A chill has crept into karaoke parlours and brothels; mistresses also face a hard time. The reason is the new leadership’s anti-corruption […]

China auto market to focus on low-cost, not luxury

The key to forecasting China’s auto demand since 2008 has been the level of bank lending, as the chart above shows.  This was critical in making China the world’s largest auto market.  Official data shows average disposable income was just Rmb 10k ($1600) in H1 2014, making it impossible for most people to buy a car out of income: […]

Europe unprepared for hard winter without Ukraine gas

There is an alarming naivety about Western policymakers’ response to events in the Ukraine.  They have simply chosen not to recognise that Russia’s strategic objectives are no longer about building links with Europe, but are instead about creating a Eurasian Economic Union (EEU). Thus they assume that Russia will always put its economic interests ahead of its political objectives.  And […]

Cotton prices suffer worst crash in 55 years

Just as forecast in March, world cotton prices have crashed. Prices peaked at 97.35c/lb on 24 March, just 3 days after the post was published.  Since then, they have fallen by a third to 65c/lb.  They have now fallen for 11 straight weeks – the longest slump in 55 years, according to Bloomberg. There is no need to repeat […]

Global auto markets depend on China for growth

Global auto markets have started to move in new directions.  That much is clear from comment by the major national auto associations.  This will be a shock to manufacturers, who have over-expanded production.  Price wars and capacity cutbacks are inevitable if the industry forecasts are correct. The chart  starts from 2005, and shows the 7 major […]

Polyethylene, shadow banking and China’s ‘collateral trade’

The blog’s latest post for the Financial Times, published on the BeyondBrics blog is below. By Paul Hodges of International eChem Strange things are happening in China’s polyethylene (PE) market. Despite a slowdown in the economy, demand is surging. Our research suggests that PE, like copper and iron before it, is the latest instrument of China’s […]

Do you know where your polyethylene is in China?

In the late 1970s and early 1980s, New York Mayor Ed Koch fronted a series of public service TV commercials asking parents: “Its 10pm.  Do you know where your children are?” The blog was reminded of this when checking China’s polyethylene (PE) import data on Global Trade Information Services for the January – May period, as shown […]

$15bn gold loan scam revealed: Beijing property sales fall 50%

Almost every day brings new revelations about the growing evidence of major fraud in China’s ‘collateral trade’.  Yet the world’s financial markets remain very complacent.  They have forgotten the basic rule, that the first example is usually the tip of the iceberg – not a one-off mistake. They have also forgotten that the real problems only emerge when […]

China GDP reports remain “man-made and therefore unreliable”

The blog got 54.8m results from Google when it entered the phrase “China GDP” this week.  The only problem, seemingly unrecognised by most analysts, is that China’s GDP report is a completely fictitious number, invented by the leadership each quarter to suit its own narrative. This sounds a bold statement, but it isn’t: China is the only country to […]

‘Bubble, bubble, toil and trouble’ as China, West’s policy diverge

Sometimes its good to take a step back from the day-to-day markets, and focus on the bigger picture.  Thus the chart looks at how markets have moved since the start of 2008 when the sub-prime bubble came to an end: Prices peaked in June/July 2008 as oil peaked at $147/bbl (blue line) and naphtha at $1147/t […]

Qingdao probe the ‘straw on the camel’s back’ for world markets

The blog’s new Research Note in the ‘Your Compass on China’ series highlights the way that China’s commodity imports have been used to finance its housing bubble.  This is clearly a shock for investors, who have till now believed the imports were a sign of its superior economic policies and long-term growth prospects. The Qingdao probe could […]

Winners and losers from the end of China’s property bubble

As promised yesterday, the blog looks today at the potential Winners and Losers from President Xi Jinping’s ‘China Dream’.  It is a complete break from the policies of the previous leadership, which ended up being based on a ‘wealth effect’ created by an unsustainable property bubble. Xi’s programme is emphatically about the longer term.  There […]

President Xi Jinping’s ‘China Dream’

A new type of leader seem to be starting to emerge in China and India.  President Xi Jinping in China, and premier Narendra Modi in India, are not spending much time studying the output of focus groups or investment bank analysts.  Nor do they have ‘spin-doctors’ worrying about every phrase on the 24-hour news channels. Instead, they […]

Prime Beijing house prices drop 40% since December

China’s property market is the epicentre of the global debt bubble discussed yesterday.  It has been red-hot since urban residents became free to buy their own home in 1998.  Before then, they lived where the state told them.  With interest rates held low to boost state-funded infrastructure spending, people had few options for investing their money. The […]

Next ACS webinar on Thursday 5 June

“Not with a bang but with a whimper”. The blog’s 6-monthly webinar for the American Chemical Society (ACS) takes place next Thursday, 5 June, at 14.00 Eastern Summer Time.  And once again, the ACS has kindly arranged for blog readers to register for it free of charge. As feared in last December’s Year-end Review, the promised economic […]

US caustic soda exports weaken on China slowdown

What a difference 2 years can make.  That’s the obvious conclusion from comparing US exports of caustic soda today, with those seen in the years to 2012.  As the chart, based on Global Trade Information Services data shows: Net US exports fell 4% in Q1 (red column) versus 2012 (blue), and were 19% below 2013 levels Detailed […]

China’s president highlights ‘new normal’ of economic growth

China’s President Xi Jinping became the first world leader to highlight the move into a “new normal” at the weekend: “China is still in a significant period of strategic opportunity. We must boost our confidence, adapt to the new normal condition based on the characteristics of China’s economic growth in the current phase and stay cool-minded” “Through […]

China’s PE imports jump 26% as credit bubble peaks

Strange things are happening in China’s polyethylene (PE) market, as the chart shows: Imports suddenly jumped 26% in Q1 (red column) versus last year (green) This would be an extraordinary amount at any time, but especially now with the economy slowing It comes at a time when China’s own production continued to increase, up 8% As a result, […]

Geopolitics lead to Boom/Gloom Index tumble after record high

The IeC Boom/Gloom Index (blue column) proved its value again last month.  It shot to a new record high, and this was then followed by a record high for both the S&P 500 (red line) and the Dow Jones Industrials.  But now the Index has fallen sharply.  This highlights the major divergence between developments in the […]

China’s polyester market flashes red warning signals

China’s polyester market seems to be trying to tell us something quite important about the real state of China’s economy, as the chart above shows for the main raw material, PTA (terephthalic acid): It focuses on the margin between PTA prices and naphtha feedstock (Singapore basis) Normally this is a premium between $200/t – $300/t as shows […]

Free China outlook webinar on Wednesday

The blog’s recent Research Note on the likely impact of China’s economic reforms has attracted enormous interest. As a result, it will hold 2 free webinars on Wednesday to discuss the outlook in more detail. The webinars will be co-hosted with John Richardson, author of the Asian Chemical Connections blog – and co-author with the blog of Boom, […]

China’s credit cuts will send seismic tremors around the world

Monday’s Interesting Quotes post highlighted how China’s leadership clearly recognise they have a massive debt problem, as detailed in the blog’s recent Research Note. Further evidence for this was provided by yesterday’s bank lending figures, which showed total lending down 19% versus March 2013 at Rmb2.07tn ($333bn), and the lowest increase in money supply since 2001. This makes […]

Interesting Quotes (7)

Every now and then, somebody in a senior position says something that really deserves to be noticed.  Often this is when they are in a state of Denial.  This was the case in the blog’s first post in the Interesting Quotes series, when CitiGroup CEO, Chuck Prince dismissed worries about subprime losses in August 2007, saying: […]

Oil prices vulnerable to China property market fall

Oil futures markets are a wonderful thing, in theory.  They are supposed to enable price discovery, whilst their liquidity is meant to enable companies to reduce inventory levels.  Instead of tying up working capital, they can simply go to the market and buy what they need, when they need it. But the chart above, of US oil […]

China’s slowdown accelerates as IOUs substitute for credit

The end of Q1 seems a good moment to look back at the position of the benchmark markets in the IeC Downturn Monitor.  Compared to previous quarters, there has been surprisingly little movement: Benzene has remained the most volatile, with supply outages temporarily pushing up prices (green line) HDPE has trended higher, but these are […]

US shale gas expansions highlight lack of demand

One good thing may come out of the current excitement over the US ethylene expansions being discussed on the basis of shale gas developments. Boards may decide to look at seriously at the way yesterday’s ‘demographic dividend’ has now become today’s ‘demographic deficit’.  That would be a major step forward for the US and the […]

China’s struggle for a new economy

“To most outsiders the language of official declarations is mind-numbing. Yet, having listened to Premier Li Keqiang and vice-premier Zhang Gaoli, I found (their plans) at least analytically convincing. They clearly recognise the need for decisive action in response to the challenges faced. What they want to do also makes good sense both on economic […]

China’s electricity consumption shows growth at 4.5% and slowing

There’s a lot of wishful thinking underway about China’s future growth.  All the experts who told us that its growth was ‘inevitable’ and would never end, are now having to face the issue that clearly growth is now slowing fast. Their response, of course, is to remain in Denial mode.  They imagine that a magic […]

China’s lending problems begin to worry wider world – too late

Suddenly, people are starting to talk about China and the risks it creates for the global economy.  There is a lifecycle to the way that such issues develop in the general consciousness, as John Mauldin has observed.  And so this development suggests that we are now well along the process, as highlighted in the chart above: […]

Surprise! Economists suddenly wake up to reality about China

“Forget the Crimea annexation or a U.S.-Russia standoff. The biggest international threat to U.S. economic growth is the slowdown in China, say economists polled by The Wall Street Journal (WSJ).” That was last week’s headline in the WSJ.  These, of course, are the same economists who have been busy telling us for years that China […]

China focuses on domestic PE production, ME/SEA imports

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 […]

Q4 results show companies still waiting for something to turn up

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 […]

Sentiment weakens as US stock markets wait for more QE

Sentiment, as measured by the IeC Boom/Gloom Index has weakened considerably over the past 3 months as the chart shows: It peaked at 12 in November, hitting its highest level since before the 2008 Crisis began (blue column) It then drifted lower in December, before rallying back to 9 in the New Year But now […]

Beijing smog makes it “almost uninhabitable for human beings”

Chapter 6 of Boom, Gloom and the New Normal in October 2011 was one of the first detailed analyses to highlight the way in which pollution was rapidly moving up the political agenda in China.  Controversial at the time, it warned: “Recent growth in China and India has come at a price: Poor air quality, chronic water […]

US PVC exports fail to grow in 2013, despite shale gas boost

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 […]

China’s rural areas need basic goods, environmental clean-up

Average incomes in China are very low by Western standards, and certainly not “middle-class” as the blog discussed yesterday.  It is also easy to forget that almost half the population still lives in rural areas.  Official data shows their incomes have shown major growth over the past 20 years, but are still less than a third of urban incomes today. The chart […]

China’s urban consumers depend on property ‘wealth effect’

One of the great myths of modern times is that China is now full of middle class people with Western levels of consumption.  Nothing could be further from the truth. Annual per capita incomes have certainly soared over the past two decades.  But the main impact has been to lift people out of absolute poverty, […]

BBC reports ‘How China Fooled the World’

Last night, the BBC ran a 1 hour documentary by its senior editor Robert Peston, who won countless awards for his work during the subprime crisis.  It completely confirmed the arguments put forward by the blog in recent months about the scale of the economic crisis now facing China.  The BBC introduced the documentary as follows: […]

China’s lending bubble could now lead to zero GDP growth

China has been primarily responsible for driving global growth since the Crisis began in 2008.  Auto sales, for example, would have seen negative growth world-wide without China.  And auto manufacturing is the world’s largest manufacturing industry.  The chemical industry has been in a similar position.  Whilst China is also now responsible for nearly 50% of global […]

“The dog ate my homework”: excuses for economic slowdown

There were never any excuses from policymakers during the BabyBoomer-led SuperCycle from 1983 – 2007.  The Chairman of the US Federal Reserve, Alan Greenspan, came to be styled ‘The Maestro’.  Whilst the Governor of the Bank of England argued that his efforts had created the NICE decade of Non-Inflationary Constant Expansion. Central bankers came to be seen as wise […]

JP Morgan says ‘Buy China’, as coal stocks show economy slowing

China seems to be trying to tell the outside world something quite important about the impact of its economic policy changes.  But to judge by most expert commentary, the outside world is convinced they are bluffing.  Thus JP Morgan issued a Buy recommendation yesterday on the Shanghai market: “Chinese stocks will probably rally as much […]

“Bad news barrage sinks New Year consensus”

Markets stopped operating in their true role of providing price discovery sometime ago.  Instead, they became dominated by the central banks, determined to prove their theory that increased asset values can stimulate sustained economic recovery. They, of course, have the firepower to bend markets to their will.  Nobody else could have spent $16tn in this manner […]

Seven global implications of China’s new policies

Everyone remembers the old joke, “Why did the elephant wear dark glasses?”, and the answer, “So that she wouldn’t be recognised”.  A new version popped into the blog’s mind this week, when finishing its new Research Note on the impact of China’s new policies on the global economy: “Why did nobody notice that China was the ‘elephant […]

And now the stumble?

Last week the US Federal Reserve announced the second move in its so-called tapering process, and reduced its bond buying by another $10bn/month.  But there was only a temporary repeat in stock markets of the enthusiastic response to its first reduction in December.  We are thus about to test whether the blog’s theory of ‘two steps and a […]

Global auto industry sales growth depends on China

Autos remain the world’s largest manufacturing industry, and the single biggest source of demand for chemicals and plastics.  According to detailed analysis by the American Chemistry Council, each new US auto is worth $3,539 in terms of sales – and involves a wide range of products including antifreeze, plastic dashboards, bumpers and windows, as well as upholstery […]

The Deng, Jiang model for China’s economic growth under Xi

Major change is already underway in China, with potentially enormous implications for all of us. Corruption is being stamped out via a policy of ‘shock and awe’ Similarly, wasteful lending is under attack in both the official and the so-called ‘shadow banking’ sectors Thirdly, pollution is being tackled by literally ‘sending in the bulldozers‘ to […]

From Jiang to Hu and the lost decade

President Jiang Zemin inherited a difficult economic and political situation when taking power in 1993, as did Deng in 1977 and  current president Xi last year.  Jiang had to set in motion China’s second economic cycle of the post-Mao era, or risk seeing the country fall back into poverty and the political turmoil of another Cultural Revolution. Similarly today, […]

Deng’s economic policy in China’s post-Mao period

China’s economic policy has gone through 2 complete cycles since Chairman Mao’s death is 1976.  Under new president Xi, it now seems to be about to start a 3rd cycle.  If this cycle follows the pattern of the previous cycles, it will have very major implications for anyone doing business with China, either directly or […]

You can’t print babies to create new demand

What would you have done 5 years ago, in 2009, if you had been given $16tn to restore global economic growth? Would you have boosted spending in areas such as education, health and infrastructure in the belief this would create a sustained boost to economic capability?  Would you have cut taxes in order to encourage entrepreneurs to develop new businesses and promote […]

China auto sales jump to meet pollution quota deadline

China’s auto sales moved past Europe’s in 2010, and are now close to US levels.  But even China is not expected to maintain this surge in 2014.  As the chart above shows, sales soared in the past few months (red line) versus 2012 (green).  But as the automotive association explains, this was mainly because: “Panic consumption over […]

China auto sales could drop if lending squeeze continues

Imagine for a moment that you had become president or premier of China following the leadership transition in March.  You know that the country’s economic model has to change.  But you also know that you have to carefully develop your powerbase, whilst also putting in place new policies. Probably you would take things cautiously at […]

“No pain, no gain” the outlook for China in 2014

Its been a great year for polyethylene (PE) demand growth in China.  But whether this relates to real or speculative demand, and whether it will continue next year, is another story.  As the chart shows, with trade data from Global Trade Information Services: Overall demand has surged 14% in 2013 (red column) versus 2011 (blue) […]

European oil travels the world as market complacency increases

The blog has a suggestion for a quiz question for anyone planning party games over the Christmas period: Q.  What was the longest distance travelled by a cargo of crude oil in 2013? A.  9000 km (5500 miles) from Scotland to China Isn’t that amazing?  We are constantly being told that supply is short, and that today’s high prices are […]

China and NEA’s ‘demographic dividend’ turns to deficit

October’s post ‘Women now have half the number of children compared to 1950‘ attracted great interest amongst blog readers from around the world.  It highlighted how global life expectancy has risen 50% since 1950 to average 70 years.  Over the same period, the average number of children being born has halved to just 2.5 per woman. It thus suggested today’s […]

EU, US caustic soda output slows as China’s exports rise

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 […]

China focuses on the need for jobs, as Western companies reshore production

Its all about jobs.  That’s the clear message from this month’s critical Economic Plenum in China, confirming the blog’s analysis back in February 2012. Of course, there was a lot of detail about future reform plans, which will certainly help to move the country’s economy in the right direction.  But in the short-term, the key […]