12 April 2013 09:58 [Source: ICB]
"Get used to it. This is China for the rest of 2013," said an Asian aromatics trader, referring to what he said was the weak state of petrochemicals demand. Everywhere you look it can be viewed as bad. Asia's purified terephthalic acid (PTA) spot prices dipped to a seven-month low on 1 April, according to ICIS. Prices subsequently rebounded on an improvement in China's PTA futures markets, but polyester makers remained burdened by finished-goods inventories.
China's economy looks shaky this year
The key polyethylene (PE) market continues to disappoint. Prices have fallen over the past month on demand weakness that has taken several producers and traders by surprise.
Perhaps, though, the deep sense of disappointment among several traders and producers partly reflects unrealistic expectations about 2013 that dominated sentiment early in the first quarter. Markets might still grow, but less than had been forecast.
The problem was that people had thought that China would benefit from more economic stimulus during 2013. Instead, lower stimulus is taking place because of a major restructuring of China's economy. Another challenge that has come to the fore in the past fortnight is China's financial sector, which, according to some commentators, represents a bigger systemic risk than the US sub-prime crisis.
But, as was the case with the mountain of evidence regarding the rapid pace of overall economic rebalancing, it has been obvious for several months that the financial sector would have to be dealt with this year.
For instance, US fund manager GMO, in a report from 22 January, said: "Between 2007 and 2012, the [China's] ratio of credit to GDP climbed to more than 190%, an increase of 60 percentage points. The financial sector has grabbed a great deal of attention over the last two weeks because of new government initiatives."
Getting used to a very different 2013 than many people had expected is only half the battle. Evidence is increasing that the chemicals industry also needs to come to terms with a very different China over the long term.
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