11 June 2012 00:00 [Source: ICB]
Crude futures have reacted sharply to China's slowed manufacturing growth. Not surprisingly, chemical prices in Asia have also dropped as markets absorbed the implications of a 2.9 point fall in the Purchasing Managers Index (PMI) between April and May.
Martin Brudemuller: Asian growth is not meeting expectations
BASF vice chairman Martin Brudermuller said in a recent newspaper article that Asia as a whole is not showing the momentum that might be expected. "The struggle over China's future direction seems to be harder fought than we had imagined," he told the Frankfurter Algemeine Zeiting.
BASF is clearly worried about Asian growth. It wants to be making 45% of its targeted €115bn of sales in 2020 in Asia, and China currently accounts for 50% of its business in the region. India is attractive but can be frustrating, while markets in southeast Asia are offering more opportunities.
But when the world's largest chemical company signals concerns about Asia growth many people sit up and listen.
Brudermuller said that he is convinced that China is "so firmly anchored in the global economy that it must remain on the path towards greater openness. But there are very intensive discussions being held in the party about the direction China should take, and factions are forming. For investors, the times when a project was unanimously rubber-stamped by politicians are over."
BASF's capital projects in China remain on track, according to a company spokesman, and it is unlikely that the company would cut back. But business has been weaker in 2012. BASF's Asia-Pacific sales fell by 5% year on year in the first quarter and the region is becoming more vulnerable, Brudermuller said.
Slower China manufacturing growth has a direct impact on oil demand so prices have reacted. And the knock-on effect in chemicals is coming at a bad time.
Weak demand and poor olefins margins are forcing plant closures in Asia. In Europe, cracker margins remain healthy but ethylene demand is weak despite a drop in the monthly ethylene contract price. The contract and spot naphtha-based ethylene margins spread in Europe is now the widest since the peak of the global financial crisis in December 2008.
Sample issue >>
My Account/Renew >>
Register for online access >>
|ICIS Top 100 Chemical Companies|
|Download the listing here >>|
Asian Chemical Connections