VIDEO: Chemicals markets heading for major downturn - Hodges

14 April 2011 11:27  [Source: ICIS news]

By Will Beacham

BRUSSELS (ICIS)--Sustained high oil prices are very likely to trigger a severe downturn in demand for chemical products, a leading industry commentator said late on Wednesday.

Every time oil prices remain above $50/bbl in real terms for a sustained period there is a downturn in demand for chemicals, according to Paul Hodges, chairman of UK-based consultancy International eChem.

“Over the past 40 years we’ve seen four periods in which oil prices have seen a sustained period over $50/bbl in real terms, 1973-74, 1980-81, 1990-91 and 2007-8. Every single one of those periods was followed by a major downturn in demand for chemicals,” Hodges said on the sidelines of the ICIS Purchasing Conference.

Hodges said that structural changes to population demographics in mature economies will also cause lower demand for chemicals.

“After the war there was an absolute surge in the number of babies being born. For the last 10-15 years companies have not needed to worry about where demand was coming from because all these baby boomers created more of it. Now these people are ageing and after 55 people stop spending and start saving.”

He added: “So we won’t see the same sustained growth in demand for the next 10-15 years. This means we will have to be looking up and down the value chain to examine the opportunities around oil prices, changing consumer tastes, and issues such as Japan.”

Hodges, who writes the Chemicals and the Economy blog for ICIS, said there will be increasing volatility in European aromatics markets for products such as benzene due to structural changes in oil refining and chemical production.


By: Will Beacham
+44 20 8652 3214



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