Offsetting the risk of being over-optimistic?
Source of picture: thetradingpit.net
MAYBE there should futures contracts in realism versus recklessness. That way any senior company executive who wants to take a punt on next year being better than 2009 can offset the risk by going “realistic” on the futures markets – and, of course, vice versa.
How on earth you would design futures contracts around such abstract and subjective concepts as realism and recklessness is a challenge I feel only able to deal with this weekend – over a few beers.
This post is not all nonsense. Stories posted by my colleagues from ICIS news indicated chemical industry leaders were going long on realism in physical markets during this week’s European Petrochemical Industry (EPCA) conference in Berlin.
Margins will not be back to 2007-08 levels until 2011, said Tom Crotty, INEOS Olefins and Polymers CEO.
Europe has yet to feel the full impact of new Middle East capacity, much of which has so far been sucked into China, he added.
The capacity down cycle will hit very soon as China’s broad-ranged overstocking leads to more of these Middle East volumes heading to Europe.
“Anyone who says that the industry is going to be in great shape in the middle of next year is fooling themselves,” said Shell Chemicals vice president Graham van’t Hoff.
“We’re still waiting for the major impact of excess capacity from the Middle East that we have to be braced for and ready to manage.”
Demand wouldn’t return to earlier levels for 2-5 years, he added.
Now that’s what I call wide-ranging scenario planning.
ExxonMobil, as they often do, talked about feedstock innovation and cost savings; hardly surprising as they are rather good at both.
And Albert Heuser, president of petrochemicals for BASF, expects overcapacity in the market in 2010-11.
If only this realism had been around in sufficient quantities during the boom years.
Will the experience and knowledge gained from this recession be retained to prevent another down cycle of recklessness?