VIDEO: Don’t rely on Asia to save the chemicals industry – Hodges

31 October 2011 12:36  [Source: ICIS news]

LONDON (ICIS)--The global chemical industry cannot rely on strongly growing Asian economies to compensate for lacklustre growth in the west, a senior consultant said on Monday.

Per-capita GDP is so low in countries such as China and India that sales growth will be limited for big-ticket items such as flat-screen TVs. Where opportunities do exist they will be for growth in the supply of basic materials such as packaging for personal care products and detergents, according to International eChem chairman Paul Hodges.

He said: “When people talk about middle income in China and India they’re talking about people who are earning between two and 20 dollars per day. In China only 4% of the population earns over $20/day. The minimum wage in China is $6/day.”

Hodges believes people are wrong to rely on the emerging middle class in Asia to make up for stagnant growth in western economies: “People are moving out of poverty and into middle income but it’s not going to be a market for flat-screen TVs and the sorts of things we buy in the west, because our GDP is 10 times greater.”

He highlighted the market in India, in which average incomes are just over $1,000 a year.  “It has the best demographics of any country in the world – lots of young people and opportunities. But you have to ask what do people who earn $1,000–1,500 (€710–1,065) want to buy? In India people are now buying small sachets of soap. It’s a very interesting market if you’re selling polyethylene [PE] but it’s not a flat-screen TV requiring advanced materials.”

He added:  “People say to themselves that there is slower growth in developed economies but it doesn’t matter because there are so many middle classes in China and India. What we can’t sell in the west we’ll sell there: this is not true.”

The latest chapter of Boom, Gloom and the New Normal – How Western Baby Boomers are Changing Global Chemical Demand Patterns, Again is now available for free download at www.icis.com/NewNormaleBook. It is co-authored by Paul Hodges, chairman of International eChem, who writes the ICIS Chemicals and the Economy blog, and John Richardson, director, ICIS training Asia, who writes the Asian Chemical Connections blog.

ICIS and International eChem have also launched a training course, aimed at helping companies to become a winner in the New Normal. Visit www.icis.com/NewNormalSeminars

($1 = €0.71)

Author: Wil Beacham

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