27 June 2011 11:32 [Source: ICIS news]
By John Richardson
Imports fell by 12% to 3m tonnes as exports doubled to 240,000 tonnes, he added in a post on the ICIS Chemicals and the Economy blog.
The surge in exports was the result of re-exports by traders who had shipped to
European, North American and northeast Asian producers lost market share in
The drop in demand feels nothing short of shocking when measured against forecasts of full-year 2011 growth at close to or above 10%.
“This is not destocking, as we have been arguing since March,” said a senior source with a global polyolefin producer. “This is a significant correction that the industry is going to have to get used to.”
A US-based chemicals analyst said: "We keep being told [by Wall Street] that the inventory rundown process in
Higher interest rates and tightening credit in
The Federal Reserve added to US macroeconomic concerns last week when it revised down GDP growth expectations and raised unemployment forecasts.
As The Economist magazine wrote in its 18 June issue, referring to the failure to resolve the Greek crisis: “Companies are currently sitting on piles of cash because they are wondering how strong economic growth will be.
“Politics gives them more reason to sit on their hands rather than investing and hiring immediately, providing a boost the world economy sorely needs.”
A Greek debt default is widely viewed as inevitable, with the only question being the timing. Economists have warned of consequences including insolvency of Greek banks, the re-launch of the drachma – and perhaps even the collapse of the euro as a whole due to widespread contagion.
Crude oil prices took an inevitable hit from the International Energy Agency’s decision last Thursday to release 60m bbls of its reserves.
The declines were also attributed to greater macroeconomic pessimism.
“Buying forward” supported chemical and polymer pricing and volumes in general from the fourth quarter of 2010 until late February 2011.
Crude was on a bull run during that period, with confidence in
Would any purchasing manager who values his or her career take the risk to stock-build in the current climate?
The country sucked in every spare plastic pellet, helping to keep US and European markets healthy – thanks to the biggest economic stimulus package in history.
Prime Minister Wen Jiabao declared victory in the battle against inflation last Friday.
But it could take several more months, perhaps quarters, before any such victory is achieved.
Inflation, which was at a 34-month high of 5.5% in May, will rise to 6% in June, according to some economists.
And so further interest-rate rises and credit-tightening measures could well be on the cards.
This was the expectation in Asian polyolefin markets late last week, where prices continued to decline and buying interest remained depressed. PE prices were down by a further $20–80/tonne and polypropylene (PP) by another $20–70/tonne, according to ICIS pricing.
Asian pricing has now been either flat or falling since the end of the Chinese New Year in late February.
European low density polyethylene (LDPE) spot prices fell by €100/tonne last week, with linear low density polyethylene (LLDPE) and high density polyethylene (HDPE) also down.
Discussions for July monomer contracts are due to start on 27 June, with reductions over June forecast. In June, contract prices fell for the first time in seven months.
Spot offers for some grades of US PE emerged late last week that were 19% lower than May contract settlements. This was the result of falling feedstock costs and pressure from overseas imports.
Sell-side chemical analysts have remained persistently bullish in the face of the mounting negative news, the US-based chemicals analyst added.
Some chemical companies are also continuing to talk about recent setbacks being only temporary.
The longer that this goes on, the harder it will be to remain optimistic and to refer credibly to difficult market conditions as temporary.
If global GDP growth estimates keep on being revised down, what might this mean for the chemicals supercycle theory?
Read John Richardson’s Asian Chemical Connections blog?xml:namespace>
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Asian Chemical Connections