PTA

Rising interest rates, volatile exchange rates, high oil prices and plastic waste challenge aromatics industry

Fears are rising about the risks of recession, as I discuss in a new one-page summary of the key issues facing the aromatics industry, ‘What does the future hold for Aromatics?‘.  Please click here to download it. These issues will also be key topics at next month’s 17th World Aromatics and Derivatives Conference, jointly organised with ICIS, […]

The post Rising interest rates, volatile exchange rates, high oil prices and plastic waste challenge aromatics industry appeared first on Chemicals & The Economy.

China’s increase in chemicals self-sufficiency will hit US shale gas expansions

Some years ago, when China was well on the way to becoming the world’s largest importer of chemicals, a reporter asked the chairman of Sinochem, China’s largest chemical company if China intended to keep increasing its imports?  ”Not at all” was Su Shulin’s reply, “This is temporary.  It is not our strategy.  We will become […]

China becomes net PTA exporter, whilst cotton prices tumble

China used to be the world’s largest importer of PTA (the raw material for polyester). But not any more. Instead it has become a net exporter for the first time in history: □  Its imports ramped up from 400kt in 1995 to 7 million tonnes in 2006, as Western textile manufacturing moved East □  They […]

Global cotton markets wait for outcome of China auctions

China’s long-promised cotton auctions have begun this week.  Their outcome will tell us a lot about President Xi Jinping’s ability to force through his New Normal changes in the economy.  It will also, of course, have major impact upon the polyester value chain, given the competition between the 2 fibres. As the slide from the […]

China’s cotton auction key pointer for global economy outlook

Cotton markets are poised for another testing month in April.  The outcome will also have potentially major implications for the polyester chain – and in turn for commodities markets more generally. The reason is that China has announced that its long-awaited cotton auction will take place in the second half of the month.  Cotton stocks […]

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 […]

Outlook for the global aromatics industry – insights from senior executives at Amsterdam Conference

Aromatics markets often lead petrochemical markets, and provide good insight into economic trends.  This has certainly been true of PTA (terephthalic acid) and benzene over the past year. PTA demand into polyester and PET is dominated by Asia: benzene’s wide variety of uses means it is a good proxy for industrial production in Europe.  Recent developments have been […]

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 […]

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 […]

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 […]

China’s PTA, PVC exports jump as it moves to preserve jobs

To assume, as they say is “to make an ass out of u and me”.  That was certainly the case last week, when financial markets assumed that China’s slightly better PMI index was a sign that its domestic economy was stabilising.  They had temporarily forgotten the key message of February’s Research Note, namely that the government would aim to […]

Cotton prices slip as US supply rises and China’s imports fall

It seems that cotton prices are about to return to normal levels again.  The blog’s detailed discussion of the issues last September highlighted how current Chinese government policies seemed doomed to fail, at enormous cost to the wider world.  It now looks as though China’s new leadership agrees with this conclusion. Since late 2008, the previous leadership’s […]

Cotton reserves equal 3 pairs of jeans for every person in the world

Cotton will be one of the main case studies used by future historians to highlight the failure of post-Crisis policies from 2008 onwards.  It highlights all the key issues:…

Their tidal wave of liquidity took cotton prices, as the chart

Prices rise whilst demand falls

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…

Computers push oil prices higher, again

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…

Financial markets hope for more policy ‘lunacy’

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 Bernanke’ is hottest show on Wall Street

‘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…

A is for Agility in today’s VUCA world

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…

IMF warns of lower global growth

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…

Weak chemical markets suggest difficult times ahead

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…

Another Minsky Moment may be approaching

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…

Financial markets rally as real economy weakens

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 …

"A failure to stay ahead of events"

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…

What goes up, comes down

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…

Market volatility hits new peaks

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 …

Complacency rises as markets fall

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…

Buyers disappear as oil prices fall

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…

Cash-flow fears rise as the ‘storm’ gets nearer

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 …

Downturn Monitor approaches its anniversary

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…

Financial markets rally on false rumour

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…

Markets weaken as real problems remain unsolved

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…

Oil prices near Q2 2008’s record level

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…

Why benzene trumps traditional economic indicators

The blog is very pleased to have been invited to contribute to the Financial Times’ new FT Data blog.

Its first post looks at benzene’s excellent forecasting record during the current crisis. It also looks at what PTA may be telling us about the st…

Petchems ‘sailing towards a storm’

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 …

Financial and petchem markets differ on the outlook

“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…

Benzene, PTA warn new downturn may be close

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…

Markets wait for oil price lead

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…

Demand declines as Federal Reserve fuels oil price rise

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 …

Déjà vu all over again in petchem markets

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…

IEA forecasts show high oil prices destroy 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…

Paraxylene starts to dominate the polyester chain

Last April, China’s polyester market provided an early warning signal that the current downturn was about to start. Now, it is flagging an important change in relative positions within the value chain.

9 months ago, the divergence between crude oil …

Financial markets jump, but petchems remain slow

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…

Markets wait to see what happens next

‘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…

"All news is good news" for China’s GDP slowdown

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…

Uncertainty grips New Year trading

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 …

Record high oil prices hit demand

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…

2011 saw ‘long-drawn out fundamental downturn’ begin

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…

IMF warns of protectionism, and possible Depression

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…

DuPont warns and stresses "productivity initiatives"

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. …

Petchem trading slows as holiday period nears

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…

Markets slip in China and Europe

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…

Policy makers talk, whilst markets weaken

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…

UK government prepares for "economic Armageddon"

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 …

The Downturn arrives

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…

EU’s plan to borrow from the poor boosts S&P 500

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…

US financial markets defy gravity

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 party whilst petchems remain weak

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…

Groundhog Day again as Quarter 4 starts

The great film comedy Groundhog Day saw Bill Murray doomed to repeat the same day in his life, until he learnt to become a better person. Sadly, financial markets have yet to learn from his example.

Every quarter, the investment banks produce new sto…

‘Computers say buy….sell….buy….sell…’

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…

Time for leadership at EPCA

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….

Global economy weakens as China oil demand drops

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 …

September key for wider economic outlook

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…

Downturn continues as financial markets sink

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…

High Frequency Trading dominates as markets crash

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 …

Markets fall as politicians argue

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…