Asian Chemical Connections

Quite possiby says International e-Chem and Wood Mackenzie in a new study which predicts that by 2015, China could have a deficit of as much as 35m tonnes.

When you consider that total global output is around 300m tonne/year, this is quite staggering.

On paper, China should be balanced on naphtha because of a huge refinery construction wave. However, the consultants argue that the refineries will be run primarily to make gasoline. The importance of gasoline supply to China as a means of stimulating economic growth, thereby maintaining social stability, was illustrated yesterday when the government raised fuel prices by 10%. The hope is that the price hike will end shortages through boosting refinery production as a result of improved refinery margins.

And globally, will there be enough naphtha to supply China? Many of the 700 or so refinery projects being built could be delayed or cancelled because of rising construction costs and tight contractor and raw material markets.

Even if there is enough supply on paper, will refiners want to make the naphtha that China and the rest of the world needs? Quite possibly not as naphtha only accounts for around 5% of total refinery output.

Therefore, globally, as in China, refineries exit primarily to maintain supply and make money from the transportation sector.

I was in India this week as the Times of India carried a front page cartoon of a bull dressed in a Superman outfit with an 'S' on his shirt to mark the Sensex surging past 20,000. All the talk was of the index taking 20 years to reach its first 10,000 with the second 10,000 added in only 20 months.
The belief among just about everybody you talked to at the first Asian Chemical and Petrochemical Conference* in Mumbai was that Asia had decoupled from the US - meaning, even a US recession would not have a major impact on growth in India, China and elsewhere.
Indeed, investors have been pouring cash out of western and into Asian markets in response to the sub-prime mortgage crisis, lower US interest rates, and the prospect of continued strong economic growth in Asia. *The conference was organised by ICIS and the Indian Chemical Council.
As far as petrochemical demand was concerned, delegates and speakers were forecasting double digit growth for the foreseeable future.
Is this just too good to be true?

If anybody can spot the blatant hypocrisy, or disturbing ignorance, which is a prominent feature of the extended entry below, please feel free to comment.

I expect the guy from Hood River will want to have his say.

Hopefully, completely empty if you happen to live in China and can only afford to drink tap water.

However, it's not the environment that this is this week being viewed as the biggest threat to the economy, but rather inflation as this article from ICIS news explains.

Please read this - http://www.nytimes.com/2007/09/28/world/asia/28water.html?_r=1&pagewanted=all&oref=slogin

Don't worry, just keep concentrating on the short term - after all, all you have to do is keep your boss happy and make it through to retirement with loads of money in the bank.

Or let's assume you are worried. What can the chemicals industry do to address this crisis other than promoting PE100 pipes to move ever-tighter water resources around?

Do we have a responsibility to inhibit rather than push the growth of chemicals and how on earth would this ever fit in with any corporate strategy or individual career objective?

And from a purely selfish dollars and cents objective, as the groundswell of public opinion goes could you face more incidents like this? - http://www.youtube.com/watch?v=tyLHwz52wsk

What kind of world is my 10-month-old son going to inherit?

Click on the link here for a virtual way of boosting your green credentials without having to recycle one actual plastic bag, being knocked into the gutter by a gargantuam-bellied white van driver while cycling to work or cancelling one flight to the other side of the world to broaden your dinner party conversation - http://www.willyoujoinus.com/energyville/index.aspx?playagain=true

I discovered that on Simon Robinson's Big Biofuels Blog - visit http://feeds.feedburner.com/TheBigBiofuelsBlog

Maybe Singapore airlines has got the wrong end of the stick by trying to ban first class passengers in their new cabins in the sky from indulging in a little hanky panky.
Perhaps the answer is to equip the walls of these private cabins with super sound-absorbing polymers (polyurethanes, maybe?).
Any suggestions from polymer experts out there would be gratefully received and I'll pass them onto the airline.

Maybe I've been to too many conferences this year, and indeed over the last decade, and have seen too many forecasts go wrong.

Call me cynical, or plain wrong, but...........

After all the optimism, all the hype and a lot of investors' money, the industry has shot itself in the foot by failing to build demand ahead of supply.

Plus the negativity caused by food versus fuel and environmental counter-arguments to supporting this current generation of technologies is making some Asian governments hesitate on providing the support needed to bolster demand......

Asian industry leaders are playing lip service to the environmental crisis the world confronts .
George Monbiot, the excellent author and journalist, argues that what the West needs is a recession to give the planet a breather.Asia also needs a substantial economic slowdown to give policymakers and technology developers more time.

Now, please be patient - the sting is in the tail. This could have great relevance to your business…..

The industry in which I work - the media - has been decimated by the Internet with billions of dollars of earnings and hundreds of thousands of livelihoods sucked out of traditional publishing by online advertising.

And now the threat comes from the democratisation of content through Web 2.0, where the traditional “top down” approach to content is being removed by a huge army of amateur content providers.

Two books, The Cult of the Amateur by Andrew Keen and The Long Tail by Chris Anderson, present opposite extremes of opinion over the merits of Web 2.0

Keen, with his Luddite hammer firmly in his grip, paints a nightmare Web 2.0 world of hopelessly inept amateurs dessiminating inaccurate garbage which becomes the accepted wisdom because of the power of the Internet.

He attacks Wikipedia, for example, on the grounds that the intellectually challenged are given as much weight as those with expertise and experience.

The Long Tail, on the other hand, argues that while at the micro level mistakes abound in the free online encyclopaedia, the Wisdom of Crowds theory guarantees that it is more or less as accurate as the paid-for Encyclopaedia Britannica. And the beauty of Wikipedia is that you can correct mistakes immediately they are spotted rather than wait for a reprint of Encyclopaedia Britannica or any other paid-for work of reference edited by committees of professional experts, Anderson adds.

I sometimes like to believe Keen’s hope for the future will be realised, which is outlined in the last chapter of his book. This involves a consumer backlash against the rubbish being generated by all the useless amateurs out there who are destroying the media - and also the music and film - industries.

I sometimes prefer Keen’s vision of the future because it would involve the value being retained in the “old media skills” I have spent years acquiring; change is never easy, especially if it comes at the expense of your livelihood.

But if Anderson proves to be more right than Keen (with the truth, as always, likely to be somewhere between the two extremes) what could this mean for the chemicals industry?

Your research departments are already flooded with free news from paid-for services, either legally or illegally acquired.

Why on earth pay for BASF’s financial results when they will appear on Google half an hour after they are released, unless time is such a factor for your business that you need the numbers immediately they are released? If so, then subscribe to a wire service.

The value in paying for exclusive news - and also in-depth and informed analysis written by experienced old hands - remains, provided, of course, the content cannnot be copied or stolen and you are short on ethics.

Equally, revenue is willingly and often freely spent on reports produced by in-house research departments and consultants.

But what if Anderson is more right than he is wrong?

In the future, the Wiki approach could lead to a free way of for, example, predicting when a plant will start up. If the Wisdom of Crowds theory is valid, collective knowledge might prove as accurate as the persistent digging of an experienced old hack.

Supply and demand and also price forecasting could also go the same way. Why pay for a grey hair with years of industry experience to pass down pearls of expensive wisdom from his intellectual mountain top, when, to more or less quote Mulder, the truth is already out there?

It is certainly worth further discussion, and maybe even an experiment. Watch this space…..

For three wonderful years, petrochemical producers have had the pricing power thanks to tight supply and demand balances and very strong growth economic growth.

Now with crude close to pushing past the pyschologically important $100 a barrel barrier and construction sectors in the West slowing down on the sub-prime crisis, the polyvinyl chloride industry in Europe has reported a sea change reports Nigel Davis of ICIS news.

Speciality chemical producers Rhodia and Clariant have both annnounced price rises. If they fail to achieve their targeted increases, it will be a further indication of the shift in dynamics.

It is too early to make a call on Asia. Maybe the economic decoupling that everyone talks about will leave producers here with the power to push through increases.

However, with naphtha in Asia at another all-time high yesterday of $888-890/tonne CFR Japan, any naphtha cracker operator would be bleeding money based on current product prices. Cost increases are necessary and so the next few weeks could be critical.

And nobody probaby needs reminding that from the second half next year, supply will begin to lengthen as new capacity is commissioned. We could face the perfect storm of persistently high feedstock costs, lower economic growth and longer supply.

Quite possibly not, according to a Deutsche Bank report.

However, as the report makes the clear, the same types of imbalances are building in the Chinese economy which led to Japan's "Lost Decade" of the 1990s.

Time to take stock and have a contingency plan?