Helping you navigate the new normal
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
The post Oil markets enter the endgame as car companies rush to electrify appeared first on Chemicals and the Economy.
Plastics has long been the ‘odd one out’ in terms of recycling. Steel, aluminium, glass, cardboard, rubber and paper routinely have up to a 70% rate of recycling. But plastics has been stuck at around 10% for a long time. President Biden’s Earth Day Summit is likely to change this picture, and quickly. The reason
The post Biden’s Earth Day Summit puts plastics recycling on the fast track appeared first on Chemicals and the Economy.
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
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 […]
The post US-China tariffs could lead to global Polyethylene price war 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 $240/t in September […]
The post US ethylene prices near all-time lows as over-capacity arrives appeared first on Chemicals & The Economy.
We are living in a New Normal world. Populists such as Nigel Farage, Donald Trump, Marine le Pen and Beppe Grillo are gaining support as economic growth slows and social/political unrest becomes common. My presentation at our annual conference last week in Vienna highlighted some of the key issues, as Jessie Waldheim of ICIS news […]
Capacity Utilisation (CU%) is the best measure we have for the current state of the global chemical industry. It doubles as an excellent proxy for the outlook for the global economy. And as the above chart based on latest American Chemistry Council data shows, recovery still seems a long way off: Global CU% was down […]
2013 has seen 3 types of markets develop for the blog’s IeC Downturn Monitor portfolio as the chart above shows: Financial assets such as the S&P 500 (purple) have soared, as did the US$ 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 […]
Crude oil markets long ago lost their role of price discovery. Since early 2009, they have instead been dominated by pension funds seeking to find a ‘store of value’ as the US$ weakened, along with hedge funds enjoying a money-making ‘momentum play’. …
The blog is extremely concerned about recent market developments.
Nobody minds higher prices, if they are a response to strong demand and can be passed through to customers. But today’s high prices have nothing to do with strong demand. On the contr…
Trading volumes in financial markets are very low these days. Many ordinary investors are on holiday, and others are focused on the Olympics. So it is easy for the high-frequency computers to create major volatility – and large profits for their owne…
The last few days have seen financial markets rallying, whilst the news from the real economy gets worse. US GDP growth in Q2 was just 1.5%. And the Wall Street Journal notes the recovery since 2009 has been the weakest in the post-War period.
But …
‘Waiting for Godot’, the great play by Irish writer and Nobel Literature Prizewinner, Samuel Beckett, deals with the meaning of existence. Written just after the Second World War, its two characters wait endlessly for the arrival of Godot.
US financi…
Pity the poor purchasing manager, who:
• Must keep inventories low as end-user demand remains slow, and the CFO remains very worried about the working capital risk
• Must keep inventories high, to minimise the risk of running short if supply probl…
Once again, the chemical industry has performed its role as a reliable leading indicator of the global economy.
On Friday, the IMF warned their next forecast:
“Will be tilted to the downside and certainly lower than the forecast that was published th…
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 global economy is now in the middle of its 3rd downturn in the past 4 years. The chart above shows how the blog’s benchmark products have acted as leading indicators on each occasion (yellow highlight):
• In 2008, naphtha (red line) PTA (purple…
Petrochemical markets continue to provide plenty of warning signs about the deteriorating state of the global economy. As the above chart shows of price movements since January, even benzene is now weakening as supply disruptions fade.
The obvious …
Petchem markets are doing an excellent job in their role as a leading indicator for the global economy. But as we warn in Boom, Gloom and the New Normal, policymakers remain in Denial about their message.
The chart above spells it out clearly.
Vol…
Don’t panic is the blog’s suggestion, after last week’s market collapse.
Instead, the important thing is to plan for what might happen next. Scenario planning is absolutely critical to survival over coming months.
The blog’s advice is to assemble yo…
Petchem markets provided a perfect case study of Volatility last week, confirming the blog’s view that we are heading into a VUCA world where Volatility, Uncertainty, Complexity and Ambiguity will dominate.
This was also real volatility, where prices …
Financial markets are telling us something important about the outlook.
Profitable themes over the past month have been expectations of weakness in crude oil prices, in China’s economy, and in the financial sector; plus positive views on long-dated go…
Petchem markets continue to fulfill their role as leading indicators for the global economy. The chart shows the benchmark products in the IeC Downturn Monitor since January 2011:
• PTA prices in Asia (red line) have remained weak throughout, clear…
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 …
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…
Last week saw yet another example of the damage being caused to financial markets by the computerised high-frequency traders (HFTs).
As the chart shows, the S&P 500 jumped 20 points on Thursday (1.5%), whilst the Dow Jones Industrial average jumped ov…
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…
Finally, and far too late, policy makers are waking up to the damage that today’s high oil prices are doing to the global economy. Q1’s oil price averaged $119/bbl, just 7% below Q2 2008’s record $127/bbl ($2012).
Thus Saudi Oil Minister, Ali Naim…
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 …
“Two roads diverged in a yellow wood,
And sorry I could not travel both”
The opening of Robert Frost’s famous poem ‘The road not taken’ aptly sums up today’s market situation:
• Financial markets continue to be supported by the Fed’s Operation Twi…
As regular readers know, the blog regards benzene as an excellent leading indicator for petchem markets and the global economy. Its track record since the start of the crisis in 2008 has continued to be strong.
The reason is probably two-fold:
• I…
The March IeC Boom/Gloom Index confirms the blog’s sense that markets are sitting on a fence, waiting for something to happen. As the chart shows (blue column), it has risen back to 4.1, just at the point which divides strong from weak markets.
Simil…
The Wall Street Journal carried an interesting opinion piece on Friday, assessing current market conditions from the viewpoint of the film character, Forrest Gump. Gump’s key insight is that “Stupid is as stupid does”. Thus the Journal noted:
“Oil …
This time last year, the petchem industry stood on the edge of an unseen precipice. Life seemed good. Prices were racing ahead and demand appeared buoyant. But in reality the buyers were only buying forward to protect margins, whilst end-user demand…
Over the past 18 months, the main investment analysts have argued that high oil prices would have no impact on the global economy. Now, new forecasts suggest their optimism has been misplaced.
The chart above gives the International Energy Agency’s…
Dow Chemical is usually optimistic. 6 months ago, for example, it reported that “our transformed portfolio, underpinned by our cost-advantaged and flexible operations, is now performing at a new level.”
Last week, however, Dow reported that Q4 operat…
‘Would you buy, or would you sell?’ is always an interesting question in any market. Petchems provide a particularly balanced answer today.
• Buy arguments include – China’s buyers will return from holiday, and will need to restock; gasoline mark…
There is no arguing with markets when they are being driven by sentiment, either positive or negative. Last week’s news of China’s slower GDP growth gave rise to opposite interpretations in Asia and the West – but news media reported both were seen as…
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…
Markets are worryingly quiet for the start of a New Year. There is some restocking underway, but the main interest lies in the crude oil market.
Since Brent peaked in April, there has been a clear pattern each month:
• Prices have peaked at the …
The blog is quite surprised at the mainstream media’s lack of interest in the fact that average Brent oil prices were at record levels in 2011 in real terms (adjusted for inflation).
The annual average of Brent prices recorded by the US Energy Infor…
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…
Whisper it softly, so as not to alarm the CEO. But the world is starting to look worryingly like the picture of mid-2008.
Official bodies such as the IMF are always cautious in forecasting a downturn. They rightly worry that they could help to cause…
By now, companies should be reordering for the New Year. CFOs have achieved their working capital targets for year-end. And the commercial people should be planning Q1 sales.
So far, however, it seems that this restocking has proved rather weak. …
The blog was in Singapore last week, running the final New Normal workshop of the year with co-author John Richardson. The main topic during the breaks was the continuing concern over China’s demand.
This is reflected in the latest Downturn Monitor a…
Many investors and policymakers believe that the global economy is just in a ‘soft patch’. They expect a quick recovery early in 2012. This parallels their misguided confidence in Q1 that a strong recovery was underway.
But petchem markets, a much m…
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 UK government has now confirmed that it is preparing contingency plans for “economic Armageddon”, if the eurozone falls apart. This highlights the difficulties currently facing the world economy.
Meanwhile the Eurozone leadership has clearly …
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…
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…
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…
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…
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…
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….
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 …
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 …
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…
ICIS pricing is a very valuable resource, particularly at market turning points. It highlighted the start of the current downturn in April, when reporting that buyers had moved to operating on a ‘hand to mouth’ basis.
Now, its market editors are high…
The blog was almost alone at the end of April, when it launched the IeC Downturn Alert. Today, its fear that we are close to a global downturn has become mainstream.
As the American Chemistry Council report, “fears of another global recession are …
The blog’s IeC Downturn Alert is now 3 months old. The aim was to provide enough time for readers to develop robust contingency plans, as a new global downturn became more and more likely.
A key issue is that dysfunctional political systems in the eu…