Is The China Party Over? Hope you’ve got plenty of aspirin..
Source: The Daily Telegraph
By John Richardson
Apologies to our readers for a fairly quiet week on the blog this week – my fellow blogger Malini and I have been immersed in a week of training courses for our rapidly-growing training business, ICIS training. We will be back with a roar next week.
But we cannot let the week pass without commenting on this story from ICIS news.
This blog has frequently warned about how excess liquidity in China has created the potential for inventory distortions accelerating a downward price-spiral.
And sure enough these lines from the ICIS news story indicate how worries over the European debt crisis combined with high stock levels threaten to add to the momentum of price declines.
“The polyethylene market, meanwhile, was plagued with high stocks, with Chinese petrochemical majors PetroChina and Sinopec currently holding a total of 750,000 tonnes of the material, industry sources said.
The stocks were just a quarter short of the peak of 1m tonnes in August 2008, before the financial crisis struck”
One contact ours said on the sidelines of last week’s Asia Petrochemical Industry Confwerence (APIC) in Mumbai: “My management has been asking me for the last 18 months ‘where are all the volumes you’ve been shipping to China going?. Actual demand growth surely can’t be that good’. I told them to enjoy the export boom while it lasted while expecting it to be brought to an end at any timy by some big economic event beyond our control.”
How right he was to warn his board to be prepared for a dramatic weakening of market conditions.
Let’s hope that his board took notice.