Asian Chemical Connections

By John Richardson

Dow Chemical's CEO, Andrew Liveris, was reassuringly upbeat about the state of demand in China last week when he described it as "quite robust" during an analysts' call on the release of the company's Q1 results

And very significantly, given that we can trust that his comments were based on plenty of carefully studied reports from his team in the field, he did not believe that China was suffering a big inventory overhang problem.

In the longer-term, he also echoed conventional wisdom that China's new five-year economic plan would stimulate domestic consumption.

"They are spending on infrastructure, energy, the environment, new materials for aerospace and automotive, and that is all very directed," he said.

"In the next five years, they want to spend $1.7 trillion (€1,120bn) in these sectors. I don't think we have a lot to worry about in the short term."

The blog wishes, based on the evidence of what it is hearing from its contacts, that it could share Liveris's confidence.

And March polyethylene (PE), polypropylene (PP) and polyvinyl chloride (PVC) official trade data also seems to point to problems of high stock levels and weak demand.

China imported 3% less high density polyethylene (HDPE) in March compared with the same month last year at 357,077 tonnes, while its exports of the same product more than tripled to 21,663 tonnes.

In the case of linear low density PE LLDPE), China's imports fell 14% year on year to 234,881 tonnes, but its exports of the polymer nearly quadrupled to 4,677 tonnes.

Its low density PE (LDPE) imports slumped 45% to 124,136 tonnes, while it shipped out 151% more LDPE at 7,000 tonnes.

PP import volumes also slipped, down 9% at 339,240 tonnes with a corresponding sharp increase in exports at 15,478 tonnes, nearly double the March 2010 levels.

China's polyvinyl chloride (PVC) fell 12% last month to 130,548 tonnes, while exports surged by 50% to 35,978 tonnes.

"The China market has been incredibly weak since the end of the Chinese New Year in February. This is the worst I have known it in seven years doing this and, as a result, I am playing a lot more golf," a Singapore-based polyolefins trader told us late last week.

"The trade data confirms all the efforts by traders to reduce stock levels through re-exports to other regions, such as Europe, where pricing has been stronger."

Liveris conceded that China was suffering from some transitory problems caused by tightening of credit.

The big question is if by transitory we end up reflecting back on an extended struggle against deeply-rooted inflation, with all its risks for growth.

Some perhaps good news emerged on Sunday 1 May when the country's purchasing manager's index (PMI) for April registered a decline compared with March, returning to its level in January.

This indicates that just maybe the government is beginning to win its struggle against inflation. However, a lower PMI indicates reducing manufacturing activity and therefore obviously less demand for petrochemicals.

And the government remains caught between a rock and a hard place: Overreact and it risks a sharp economic showdown or fail to instigate sufficient tightening measure and inflationary pressures will continue to build, leading to bigger problems down the line.

PE pricing in China recovered slightly last week as certian grades rose by $20-40/tonne, according to our colleagues at ICIS pricing.

But this improvement wasn't attributed to better demand but instead Sinopec's plans to cut production in May.

By John Richardson

RISING cotton prices might well have been the single-biggest factor on the strength in the synthetic textiles chain for the last year.

Other major factors have obviously been the surge in crude and supply constraints in both paraxylene (PX) and purified terephthalic acid (PTA) - but certainly not in mono-ethylene glycol (MEG)!

China has also added a lot of new polyester capacity after several years of low investment.

But now support from cotton is eroding as a result of a very familiar problem: Affordability.

Textile mills that were scrambling for scarce bales earlier this year are now seeing yarn inventories building up, according to this article in the Financial Times.

"High prices are finally rationing demand," Terry Townsend, executive director of the International Cotton Advisory Committee in Washington, told the newspaper.

Sales from the US, the biggest exporter, were slowing last week.

China, the largest cotton importer, cancelled orders for more than 100,000 bales in April after heavy buying in March, according to the US Department of Agriculture.

Hong Kong-listed Weiqiao Textile, the world's largest yarn maker, has cut the price it will pay for domestic cotton four times by a total of Rmb2,000 ($307) per tonne this month, according to Ray Butler of Cotton Outlook, an industry publication.

High cotton prices may translate into more expensive clothing this year, feeding inflation concerns, the article added.

"We have sort of hit a brick wall where spinners have just not been willing to enter the market. That is presumably based on poor orders for their products and mounting inventories of yarn," Mr Butler said.

And yesterday, the International Cotton Advisory Committee warned of a significant slowdown in demand.

"Very high cotton prices, problems of credit access, and the fact that cotton yarn prices did not increase as fast as cotton prices and started yielding ground in mid-March 2011, are all affecting mill use," it said.

."Global cotton use is expected to reach 25.1 million tons in 2010/11, almost unchanged from 2009/10. A slowing of spinning operations and an increased switch to chemical fibres are curtailing demand for cotton and are reducing its share of world fibres.

"World cotton production is projected to exceed mill use in 2011/12, which would result in ending stocks recovering to 10.1 million tons. The world ending stocks-to-use ratio, forecast to reach an all-time low of 33% this season, could rebound to 39% in 2011/12. This would remain lower than the 10-year average of 49% prevailing before 2009/10."

Prices were down by 24% as of late last week from their March peak.

Opinion is divided over whether this a longer-term trend as a result of reports that China, despite the recent surge in pricing to record highs, is planting less cotton.

But to what extent have farmers in China, and elsewhere, been hoarding cotton - and therefore, to what degree might unwinding of these stocks unwind the current decline in pricing?

Evidence from pricing up and down the synthetic textiles chain suggests that the cotton factor, along with credit tightening in China and other measures being taken to fight inflation, are having an effect.

PX prices continued to decline last week, according to our colleagues at ICIS pricing. Traders were struggling to obtain outlets for second-half of May cargoes as FOB Korea prices slipped by $35/tonne to $1,565-1,575/tonne.

PTA was now down by $200/tonne from its March peak as result of it being assessed at $1,320-1,330/tonne CFR mainport China last Friday.

Interestingly, though, MEG has stayed a rally with pricing up by $25-30 tonne, according to the blog's colleague at ICIS pricing, Becky Zhang.

This was the result of stronger crude and more buying interest among traders.
But the market did not feel the increases, after several weeks of decline, were sustainable. Buyers said that they were unwilling to build inventory because of uncertainties over the impact of China's credit tightening.

As we said last week, cotton could recover if reports about China planting less are true and more bad weather occurs (floods in Pakistan were, for example, a big cause of the recent shortage).

Another concern, though, is whether cotton, like all other commodities including petrochemicals, has reached a peak on the affordability issue.

It looks like commodities might be supported for considerably longer by the Federal Reserve's indications that US interest rates will be kept at their historic lows for a good deal longer.

This is despite QE2 likely to be brought to an end this summer.

But harmful inflation is harmful inflation as everyone should remember from 2008.

                                Jim Gallogly

                               Source of picture: ICIS 

By John Richardson

LYONDELLBASELL has joined the list of US producers that have disclosed ethylene expansion plans as a result of low-cost ethane and the belief that we are heading towards an up-cycle.

Jim Gallogly, LyondellBasell's CEO, said during an earnings call on Monday that debottleneckings are being considered for crackers at Channelview and La Porte, Texas. This could add at least 500m lb/year (227,000 tonnes/year) of ethane-based ethylene capacity

He also said that the company is conducting a study into a new cracker which could be as a joint venture.

Dow Chemical plans to build a world-scale ethylene plant on the US Gulf coast for start-up in 2017.

Chevron Phillips Chemical is studying the possibility of building a world-scale ethane cracker, and INEOS has undertaken engineering studies to debottleneck its cracker in Chocolate Bayou, Texas.

Westlake Chemical is expanding ethylene capacity at its Lake Charles complex in Louisiana.

LyondellBasell's announcement about its capacity intentions came less than a month after it declined to be drawn on the subject during the BB&T Capital Markets Industrial and Commercial Conference in New York last month.

However, Sergey Vasnetsov, the company's senior vice-president for strategic planning and transactions, laid the groundwork during the conference by predicting that the olefins and polyolefins industry was heading for an up-cycle in approximately 2014-16.

Stronger-than-expected GDP growth and/or major production problems could result in the good times occurring earlier than that, he added.

He presented an upbeat view of emerging-market growth without mentioning what we feel is a major risk: Inflation.

The former Wall Street analyst also made no comment on the threat to the fragile US recovery, if one can call it a recovery, of dealing with the budget deficit.

Interestingly, Vasnetsov said that the US ethane premium over natural-gas prices can be as much as 100%, a situation that will perhaps change as new fractionation capacity comes on-stream. He presented a slide during the event forecasting a 53% growth in fractionation capacity by 2015.

Perhaps the prospect of even more competitively-priced ethane is another reason behind all the recent capacity announcements - along with the consensus view that an upswing is on the way.

Consensus views can be very dangerous when they lead to over-investment.

By Malini Hariharan

The blog has been scanning equity analyst reports of South Korean companies and has noticed that earnings expectations for the year are being revised upwards despite market uncertainties.

Companies such as S-Oil are expected to benefit from a recovery in refining and paraxylene (PX) margins. Woori Investment & Securities has raised its estimate for complex refining margins in Asia from $8 to $9 for 2011 and from $9 to $10 for 2012.

S-Oil's results will also be boosted from increased volumes of PX available from a new 900,000 tonnes/year plant that it started up in April. PX margins are expected rebound in the second half of this year on strong demand.

Start up of a new 12,000 tonnes/year ethylene vinyl acetate (EVA) sheet plant and a 20,000 tonnes/year high-end film line in the second quarter is forecast to support SKC.

The strength in caustic soda and polyvinyl chloride (PVC) margins is expected to help Hanwha Chemical post strong numbers this year starting from the first quarter. Hanwha's 50% stake in Yeochun NCC (YNCC) means that the company will gain from strong ethylene, propylene and butadiene prices.

But in line with what the blog has been writing about Asian markets, analysts at Woori are cautious on Honam Petrochemical, South Korea's largest petrochemical producer, as second quarter earnings are likely to be affected by weak margins for polyethylene (PE), monoethylene glycol (MEG) and polypropylene (PP).

"Product margins for its major offerings have fallen steadily since March, and
2Q11 earnings are likely to plunge quarter on quarter. In fact, demand for Asian petrochem products has slowed sharply from China, presumably due to the Chinese government's tightening measures and the limited power supply for the polyester industry. We expect the country to continue its tightening policy in the near term," they said.

Honam with its exposure to commodity petrochemicals remains in a vulnerable position unlike other Korean companies with a diversified product portfolio.

By Malini Hariharan

Styrene butadiene rubber (SBR) prices, which have nearly doubled over the last year, may be heading for a much needed correction.

The strength in feedstock butadiene markets and strong demand from the automotive sector have so far helped support the high numbers. But a key concern is that China's tightened monetary policy will dampen sentiment and slow down SBR demand in Asia, writes Helen Yan, ICIS pricing editor for synthetic rubber.

Traders have started complaining about difficulties in accessing funds from banks and with credit expected to remain tight through the rest of the year restocking activity will be affected.

Growth in Chinese auto sales is also slowing down as the government's massive auto-subsidy program has ended. Additionally, rising fuel prices, implementation of anti-congestion programmes in some cities and new fuel-efficiency standards has also affected sales.

Chinese auto makers have projected 10-15% increase in car sales for the full year, down from 32% growth last year while foreign auto makers are projecting even slower growth of 5-10%.

Falling natural rubber prices are also expected to put pressure on SBR.

Chinese SBR imports dropped 20% in the first quarter to 79,000 tonnes and volumes in this quarter are likely to be lower if current market conditions continue.

A correction in SBR prices seems likely. The blog is waiting to see if this will drag down butadiene prices

By John Richardson

WE hate to say we told you so but the 15 per cent fall in oil prices last week - the steepest one-week decline in two-and-a-half years - was evidence of growing concern over the health of the global economy.

And as we predicted on 12 April, last week saw a broad sell-off of commodities in general.

Polyethylene (PE) prices in China were understandably down by $10-20/tonne, according to last Friday's assessment by our colleagues at ICIS pricing.

Price retreats were recorded across a broad range of chemicals and polymers, including a further $50/tonne fall in purified terephthalic acid (PTA), again according to ICIS pricing.

The fibre intermediate is now down by 11 per cent over a three-week period - a perfect example of how pricing has been driven-up by surging crude costs and is now on the retreat.

Cotton prices have also played a big role in strength up and down the entire polyester chain. Cotton futures prices are now down by 20 per cent in one month on concerns over a supply glut.

The run-up in crude and commodities in general has in our view been disproportionate to the underlying strength of the recovery. More expensive oil has been largely the result of the "one-way bet" on the Fed maintaining record-low interest rates for a long time to come.

The end of QE2 seems to have been a factor behind the rout in commodity prices last week.

But the biggest reason, we feel, is that investors suddenly realised, as the negative economic news built, that they were over-exposed on commodities and headed for the hills. A solid indication of this retreat was strengthening of the US dollar.

Despite good US job growth - the data for which was released on Friday - the US economy faces major problems, most importantly how to solve the budget deficit with Democrats and Republicans miles apart.

Sovereign debt issues in Europe could still create an global economic shock comparable to that, or perhaps even worse, than the collapse of Lehman Bros.

And, of course, there is China where most of the blog's attention has been focused over the last few weeks.

China confronts rising inflation, which has:

1.) Restricted the ability of chemicals and polymers producers to pass-on cost increases down value chains to finished goods
2.) Weakened the competitiveness of Chinese exports as a result of higher raw-material and labour costs
3.) Raised the prospect of major social unrest as a result of asset-price inflation that has widened the gap between the super-rich - those who made a fortune from China's huge late 2008 economic stimulus - and the average worker
4.) Left the government trapped between the devil and the deep blue sea. It might end up overreacting through too-stringent steps to contain inflation, or it may fail to take sufficient measures to reign-in rising costs, resulting in more of the social pressures we have just referred to

Last week's slump in commodity prices, if sustained, might make the job of tackling inflation in China - and other Asian countries such as India, which raised interest rates last week - a lot easier.

But the reasons why commodity prices declined should be of major concern for chemicals companies - particularly those that have presented a rather rosy view of China's immediate future and. Such companies may not, as a result, be prepared for the worst.

As we said, the global recovery is on very shaky ground. Support for this view is provided by recent surveys of purchasing managers working for Asian manufacturers. The resulting indices show that while orders have been growing, so have inventories, suggesting a slowdown in exports to the West.

This should be a big concern for the chemicals industry as we approach the peak manufacturing season in China, which runs from around July-August to September.

The peak season occurs as manufacturers of finished goods increase production in order to get finished goods on the shelves of Western retailers in time for Christmas.

A decline in imports of chemicals and polymers during this period - which are re-exported as finished products - would provide further support for our arguments.

Any declines could, though, be also the result of a low-end manufacturing having drifted to other emerging economies with lower labour costs - and so a wider examination of trade data might be necessary. 

By John Richardson

Calling all chemicals investors: If you hear any presentation from any company out there that talks about an uninterrupted boom in growth in China, please, please start asking some searching questions. Please.....

We have so far yet to come across any evidence of such questions after scouring the web. Instead, we have had the misfortune to listen to several rather dull "discussions". The discussions have sounded more like self-congratulatory one-way traffic involving chemicals companies saying how wonderfully well they have done with investors in agreement.

But now, at last, we should begin to see a little more realism emerging.

As we have written about before, rising wage costs now represent a significant threat to the export-growth model that has been the main reason for China's extraordinary growth in chemicals and polymers demand over the last decade.

Rising income levels (be careful what you wish for) are a factor - although in terms of relative wage costs, the China Economic Quarterly argues that China is still cheap when measured against other emerging economies.

But still, as the Wall Street Journal article we have linked to above indicates, purchasing managers at large Western retailers have reason to question the China out-sourcing model.

A recovery in manufacturing jobs-growth, even in the US, suggests fundamental changes are taking place. While wages costs are, of course, still much-higher in the States, strong productivity growth and a weaker dollar might have begun to reverse the drift in unemployment in some manufacturing sectors.  

Demographics, along with higher wage costs, represent a major long-term threat to the conventional China story.

The Economist magazine writes in its latest issue that the country's latest census shows a sharp decline in population growth, below replacement level, as a result of the one-child policy.

"Slower growth is matched by a dramatic ageing of the population," the article continues.

"People above the age of 60 now represent 13.3% of the total, up from 10.3% in 2000 (see chart). In the same period, those under the age of 14 declined from 23% to 17%.

"A continuation of these trends will place ever greater burdens on the working young who must support their elderly kin, as well as on government-run pension and health-care systems. China's great 'demographic dividend' (a rising share of working-age adults) is almost over."

Major demographic changes - both in the West and in Asia - will be some of the key themes we will explore in a new e-book to be launched on icis.com this month. This is in partnership with Paul Hodges, our fellow blogger.

The book also helps form the basis of our New Normal seminar, which takes place in Frankfurt next month.

By John Richardson

THE remarkable shift in the competitive landscape of petrochemicals resulting from shale gas was highlighted yesterday in an excellent post by our fellow blogger, Paul Hodges.

Drawing on data from the NPRA, with analysis from the ICIS data and analytics team and Bob Townsend of International e-Chem, Paul shows the steep rise in ethane versus naphtha/liquids cracking from 2006 to Q4 2010.

Switching to ethane has been a no-brainer for the US petrochemical industry, thanks to the shale gas technology break-through. The States is second only to the Middle East in competitiveness in ethylene derivatives.

Hence, the combination of the feedstock advantage and a weaker dollar has led to a sharp rise in US polyethylene (PE) and polyvinyl chloride (PVC) exports.

Our blog wonders, though, whether all the new cracker studies announced by US producers of late are a little premature, given the uncertain economic outlook.

We have also discussed the challenges to shale gas due to the environmental debate. A major incident - and/or a well-publicised study - could result in a regulatory clampdown leading to reduced availability and a further shift in the petrochemicals landscape.

The other immediate problem, as Paul also discusses, is the tightness of butadiene and propylene markets resulting from the switch to lighter feeds in the US.

The blog has heard talk of interest in making use of an old technology to produce on-purpose butadiene to meet the shortfall - n-butane dehydrogenation.

By Malini Hariharan

Malaysia's Petronas is expected to soon announce plans for a new refinery and petrochemical complex Pengerang, Johor, a project that the blog had discussed a few months back.

A report in the Malaysian newspaper Star says the project, named Rapid or Refinery and Petrochemical Integrated Development, would involve an investment of close to $17bn. The Johor government will be a partner in the project and multinational energy companies will be roped in at a later date.

The aim is to replicate Singapore's success in building Jurong island as a refining and petrochemical hub. Pengerang has been chosen as its waters can reach depths of more than 20m, which is what is needed for very large crude carriers (VLCC) and ultra large crude carriers, says the report.

This project will complement plans for a $1.7bn deepwater petroleum terminal at Pengerang.

Details of capacities and start-up dates were not disclosed but the blog had earlier been told that completion of the refinery and naphtha cracker is likely in 2015-16. The cracker would also provide feedstocks for new speciality chemicals planned by Petronas and BASF.

By Malini Hariharan

Tension is building up in the Indian polyolefin market with buying activity slowing down in recent weeks.

"The market is really dull; trading activity is very flat and end-users are taking minimum quantities. We are worried that the situation will worsen if we offer more discounts," says a concerned producer.

The slow down in the polyolefins market is being attributed to expectations of a big price correction across all commodities including crude oil and weakness in the wider Asian polymer market, especially China.

Increased local competition with heavy discounting by some producers is aggravating the situation. Volumes from Indian Oil Co (IOC), the latest entrant to the Indian polyolefins market, have increased as its plants are running at around 60% although all its problems have yet to be sorted out.

In polypropylene (PP), all major end-use segments are said to be facing problems. Orders for raffia bags from cement companies have slowed down following an easing in demand due to reduced spending on infrastructure projects.

A drop in auto sales plus a 50-70% cut in operations at the Indian plants of Japanese companies Toyota and Honda has affected sales of PP copolymer.

And the hefty $300 plus price differential between PP and high-density polyethylene (HDPE) is prompting processors to turn to the cheaper polymer for non-critical applications.

"The switch to HDPE is not very difficult as some processors still have the old moulds and for some end-products they only need to change the temperature profiles," says a second producer.

Not surprisingly, producers' inventory levels are rising with nearly 160,000 tonnes of polyethylene (PE) reported to be in stock, more than double the usual volumes.

A shifting of inventory is taking place; it is time for producers to hold product, says a trader.

The near term outlook remains bleak as cues from the international market are not strong. China's tight credit policy is unlikely to ease in the second quarter and the Indian government too is waging its own war against inflation by hiking interest rates which is likely to affect economic growth.

Any delay in a recovery in polyolefin demand and prices will put further pressure on naphtha-based producers who are already in a tight spot with negative margins on PE. Operations are being maintained only because of positive contributions from the C3 and C4 chains. Producers have resorted to exports in the last few months but even this is getting difficult as markets across the world are slowing down.

The weakness in the Indian market comes after a healthy 2010-11 which saw PE demand expanding by around 12% and PP by 17%. A repeat performance looks very difficult.

By John Richardson

MORE evidence has emerged of a slowdown in demand for polyolefins in China following the sharp decline in March imports.

The Middle East is now feeling the pinch as a result of the impact of inflation and the reduced availability of credit.

"I visited a propane dehydrogenation (PDH)-to-polypropylene (PP) producer in Saudi Arabia last week. The company's PP inventory level has risen from 25,000 tonnes at the end of February to 45,000 tonnes because of weak sales, primarily in China," an industry observer told the blog.

"Inventory levels in general throughout Saudi are climbing. They are now above 30 days and once they reach about 40 days, we will start seeing the Middle East cut prices."

What is interesting about the PP player's stock-build is that it is has occurred since the Chinese New Year holidays. The blog has consistently heard reports of weak demand immediately following the end of the week-long holidays.

This is an exceptionally long period of time in the recent history of sustained and very strong growth.

The observer's comments came shortly after extraordinarily forthright remarks from Torsten Penkuhn, the head of BASF's petrochemicals business in Asia, in a fascinating interview with my colleague Will Beacham of ICIS Chemical Business.

"We feel that underlying GDP growth in China is around 9%, with chemical industry growth perhaps into double digits," said the BASF man.

"But if you look at first-quarter results, you see 15-20% sales growth. So there is an underlying speculative element which comes from an anticipation of shorter availability of credit. There has been some pre-production by people worried about their credit lines being withdrawn."

This helps explain why trader friends of ours are playing a lot more golf after achieving very good sales during the early part of Q1.

And it led to us to speculate, during our discussions with the industry observer, that chemical company results may remain pretty good - perhaps even very good - in the second quarter. This might be due to pre-production and pre-buying in China that took place to beat the credit clampdown.

"This would involve just kicking the can down the road to a time when the slowdown in China starts to show up in the financial results," said the observer.

"Our views are in stark contrast to the views of just about every chemical company CEO during the Q1 results season," he continued.

"But perhaps some of the CEOs are out of touch on what's happening on the ground. Maybe they are sometimes the last people to see big changes in markets."

Volatility in crude oil has continued this week, including a 5.5% fall on the Nymex yesterday, resulting in trading on the exchange being halted for the first time in two years.

Weaker growth prospects in China are one of the factors behind yesterday's decline - and last week's broad sell-off in commodities.

Increasing concern over demand destruction caused by high crude prices has also contributed to the rout in oil.

Further evidence of this destruction emerged yesterday when the International Energy Authority revised-down its global demand-growth estimate for crude.

The inflation news from China doesn't get much better. Further credit tightening, higher interest rates and more restrictions on price increases seem likely.

By John Richardson

THE extent of the weakness in China 's polyolefins market has become more apparent as a result of reports that a much-anticipated increase in Middle East production hasn't happened.

Back in February, oil production in Saudi Arabia had been raised to 8.9m barrels a day from around 8.5m barrels in January, a Middle East industry source told the blog.

This was in response to the unrest in Libya , and elsewhere in the Middle East , that had driven crude prices to levels viewed by OPEC as threatening the global economic recovery.

"However, it quickly became obvious that the extra oil being produced by Saudi wasn't helping the market as it was sour, whereas the shortage was in the light, sweet crude that Libya produces," the source added.

Saudi oil production was therefore cut back to 8.4m barrels a day in March and 8.6m barrels a day in April, he said.

The result was that the country's petrochemical producers, who have suffered from reduced associated gas supply since early 2010, did not receive the expected increase in feedstock.

"Crackers in the Kingdom, are as a result, still running at operating rates of approximately 85% - the same as in Q4," he added

If all the crackers were running at 100% this would amount to 1m tonnes of more ethylene production - or one additional worldscale plant.

And when you add this to the 4% reduction in ethylene production by Sinopec in April and the 10% reduction reported to have occurred in May, markets should, if growth was strong, be in a lot better state.

The Asian cracker turnaround season is also still in progress, albeit nearing its end - and we are picking up reports of further logistics problems that are constraining exports from the Middle East.

But last week saw a $10-30/tonne fall in polyethylene (PE) prices in China , according to our colleagues at ICIS pricing - despite this pretty favourable supply scenario.

Polypropylene (PP) prices were flat as buyers retreated to the sidelines on the volatility in crude and a further increase in China 's bank-reserve requirements.

And a we reported last Friday, inventories are building in the Middle East, and perhaps, elsewhere, on weak China buyng.

Inflation fell only marginally in April - to 5.3% from 5.4% in March - indicating that further interest rate rises might also be on the way.

A further cause for alarm is that the reason why Sinopec has been forced to cut back on petrochemicals production is related to inflation.

This is not to do with weak petrochemical demand (the state-owned giant never cuts back on production for demand reasons), but is instead down to the need to prioritise gasoline and diesel production.

Refiners have been cutting back on fuel output because government price controls have prevented them from fully passing-on higher costs of crude.

A further factor behind this latest diesel shortage - following the one last December that also led to petchem production cuts - has been the switch to diesel-fired generators by manufacturers of finished goods. Diesel generators have been switched-on because of reduced supply from coal -and hydro-based power facilities.

One could argue that reduced industrial production on the constrained power supply we first reported last month  is good news for inflation.

But from a petrochemicals perspective we are coming up to the peak manufacturing season - when petchems are normally imported in great volume for re-export as finished goods to the West in time for Christmas.

Here are a couple of suggestions for chemical company CEOS:

1.)Do you really want to nail your reputations on forecasting a strong Q3 based on China ?

2.) Shouldn't you be a little cautious on how you explain any good second quarter numbers your companies report, as they might have been distorted by pre-production and pre-buying in order to beat the China credit crunch.

By Malini Hariharan and John Richardson

The power crisis in China, highlighted in this post last month and yesterday, has worsened and is likely to affect economic output in the second quarter.

More than 10 provinces, including Zhejiang, Hunan, Anhui, Jiangsu, Hubei, Sichuan and Henan, have been affected.

Small and medium-sized petrochemical producers in the affected regions have had to cut operating rates or shut down operations because of the power restrictions, reports the blog's colleague Judith Wang on ICIS news.

"Downstream plastic plants in Ningbo were ordered to shut down for one day a week from March," said a Chinese polypropylene (PP) trader.

In Zhejiang province, some polyvinyl chloride (PVC) facilities have had to reduce their operating rates by 10-20% from March.

"It looks like the power shortage will be [of] unprecedented intensity this year," an industry source said.

The shortage has been attributed to a a drop in coal supplies that has affected output at the country's many thermal power plants. Additionally, a drought in the south has curtailed hydro-electric output.

The China Electricity Council has estimated around 30 gigawatts of power shortfall in summer, about 3 percent of China's generating capacity

Experts point out that this year's power crisis is different from the ones that China has experienced in the past. The country has enough capacity but many power plants are not running at full rates as power prices are fixed while coal prices are rising.

To sort out the problem power costs will have to go up, but this will only fuel inflation which the Chinese government is struggling to control.

Some polyester producers have turned to diesel generators but the availability of diesel is becoming an issue, as again we discussed yesterday. The situation could improve in the coming months as the government has suspended diesel exports indefinitely to meet domestic demand.

Yesterday's post also talked about how refiners, under pressure from rising crude prices, had reportedly cut back on production of both gasoline and diesel. Gasoline and diesel price rises - as with coal - are limited by government pricing policy, making it impossible for the refiners to fully pass-on increases in oil prices.

Sinopec been ordered to cut back on ethylene output - by 4% in April and 10% in May - in order to divert more naphtha to gasoline production and gasoil for making more diesel.

It will be interesting to see whether the measures taken so far will be sufficient to meet transportation-fuel demand and provide sufficient diesel for electricity generators.

Further ethylene production cuts by Sinopec to meet fuel requirements might help support weak polyolefins markets.

The power shortages we just detailed come, however, at the worst possible time for petrochemicals demand as China's peak manufacturing season for finished goods is about to begin.

Failure to fully solve the extensive power problems will therefore be another reason - along with all the inflation-tackling measures and the harm done to the economy by inflation - to expect lower petchem exports to China.

By John Richardson

THE last 18 months has been stellar for the polyester chain thanks to tight supply upstream in paraxylene (PX) and purified terephthalic acid (PTA), record-high cotton prices and a booming economy in China.

But all good times must come an end if our worst fears about China come true.

The longer-term direction of cotton prices seems hard to read. Over the next six months, however, increased output threatens polyester growth. 

Separate from the overall picture, the biggest losers over the next few years might be the PTA players, according to a new report by Kunal Agrawal, Singapore-based chemicals analyst with BNP Paribas.

"In 2011-14, we see downstream PTA capacity expansion in the vicinity of 14m tonne/year, with significant capacity expansion in China, India and Taiwan," he writes.

Due on-stream in China this year are Zhejian Yisheng's 1.5m tonne/year plant, 900,000 tonne/year by SanFangXiang and the 2m tonne/year Xinaglu facility. Tonkgun is scheduled to commission a 1.5m tonne/year plant in 2012.

"While this creates strong demand for PTA's upstream feedstock - PX, where we see limited capacity expansion on PX in 2011-13 with new capacity expansions totalling 3.03m tonne/year until 2014.

"Key projects are S-Oil's 900,000 tonne/year expansion in 2Q11 and Reliance Industries' 1.25m tonne/year Jamnagar project in 2012.

"PTA capacity expansion ahead of PX expansion would mean stronger demand and
utilisation for PX, while PTA utilisations and margins could suffer from oversupply.

"PX utilisation rates in 2010 averaged 78.5%, and we expect this to improve to 83% by
2014.

"On the other hand, we see PTA expansions exerting a downward pressure on
utilisation rates. These we estimate could move from an average of 82.7% in 2010 to 75% by 2014."

Wouldn't it be nice if someone, anyone, had a plan?

By Malini Hariharan

The fight for the metallocene market is heating up with South Korean producers increasingly looking at getting a share of this attractive market.

SK Corp confirmed plans to build a new metallocene linear-low density polyethylene (MLLDPE) plant outside Asia once a new plant in South Korea starts operations, writes the blog's colleague Bee Lin from the Chinaplas exhibition at Guangzshou.

Possible locations for the new plant include the Middle East or South America where the company is involved in upstream projects in Peru and Colombia.

A plant in the Middle East would target Europe while a South American plant would be geared to meet US demand.

SK's new swing plant in South Korea, due to start operations by 2013, will have the capacity to produce 230,000 tonne/year of C8 MLLDPE or 150,000-200,000 tonnes/year of elastomers.

And the company is looking to ship product out of Asia from this plant. A company source made it clear that buyers in European and US markets frustrated by high prices being charged by existing suppliers would welcome a new entrant.

Meanwhile, ExxonMobil confirmed its focus on MLLDPE and LLDPE at its Singapore operations. This includes an existing 600,000 tonnes/year plant and two new plants with a total capacity of 1.3m tonnes/year.

"All our reactors in Singapore will be capable of making metallocene products in the future, and so as our business grows, then we won't be constrained to one reactor for metallocene and other reactors for other things," said ExxonMobil polyolefins business unit vice president John Verity in an interview.

The company, however, would not give a precise date for start up and would only say that the new complex which includes a cracker the PE plants would be commissioned in phases.

The blog is delighted to announce the title of its new eBook, jointly authored with fellow blogger, Paul Hodges.

It explains how Western BabyBoomers are changing chemical demand patterns, again. We believe it will become vital reading for all those working in the global chemical industry.

The first chapter of the book will be published online by ICIS next week. Paul and I look forward to bringing you more details then.

By John Richardson

THE euphoria sweeping through the US petrochemicals industry seems to indicate strong support for the "supercycle" theory.

Some of the comments made during the first-quarter results season certainly point that way, as does the upbeat mood of presentations made to investors over the past few months.

A consensus view appears to have emerged: we are through the bottom of the cycle; that not enough capacity will be added over the next few years; and that, therefore, by 2015-2016 everything will be wonderful.

Morgan Stanley first started talking about the chemicals "supercycle" - a view that has subsequently been supported by several other banks - in a report from October 2010.

"An inflection point in the global plastics market, driven by China and India [has been reached]. After a recent period of slower growth and a decoupling from global GDP growth, we now expect the strongest period of ethylene demand growth in the past 20 years," the report stated.

"We forecast that in the next five years, incremental annual consumption in China and India alone will equal the total current consumption in the US, until recently the world's largest ethylene consumer, and still responsible for 15% of the market.

"Global capacity should grow at just 2.3% in 2011-14. Utilisation rates are set to tighten from 85% today to 92% in 2014, resulting in improving margins and returns globally."

But, as Torsten Penkuhn, the head of BASF's petrochemicals business in Asia, told ICIS news in an interview earlier this month, the industry has a history of shooting itself in the foot by overbuilding capacity when confidence is high.

Where there is cheap feedstock and finance, companies will build. Individual companies are often unaware of the cumulative effect of all their competitors doing exactly the same thing.

Kunal Agrawal, a Singapore-based chemicals analyst with BNP Paribas, provides some numbers to support this view in a report released last week.

"While we believe the Middle East will find it challenging to approve and commission incremental gas-based crackers, we see significant opportunities globally for continued investments in naphtha-based crackers," he writes.

"We recently conducted a detailed bottom-up analysis on global refining capacity-addition plans during 2010-15. We found that at least 10m bbl/day of refining capacity is scheduled to be commissioned during the period, which, in our opinion, will provide enough feedstock for an additional 16m-17m tonne/year cracker capacity.

"These are projects for which either construction is already in progress or EPC (engineering, construction and procurement) contacts are being awarded.

"Sufficient naphtha and liquefied petroleum gas (LPG) will be produced by the 10m barrels per day of refining additions to supply a further 11m tonne/year of ethylene capacity that has yet to be announced," he adds.

This would be on top of the substantial number of studies into new crackers - and plans to expand existing facilities - that have already been announced in the US over the past few months. The mood of the industry has been transformed by abundant shale gas and confidence in the global economy.

Getting a cracker built by 2015-2016 that isn't already reasonably underway, certainly beyond the initial study phase, would be a big challenge.

But Agrawal adds in the same report: "We also believe the surplus capacity commissions through 2009-11 will require a couple of years of digestion before we see global utilisation rates tightening substantially."

Extra production is being planned during a period of increasing economic uncertainty.

The battle against inflation in China threatens to subdue growth for at least the next few quarters.

And, assuming the Chinese government wins the battle, it faces the huge task of weaning the economy off its addiction to exports - one of the main strategies under its current five-year plan (2011-15).

A period of transition appears inevitable as slower export growth (and therefore growth of chemical and polymer imports) is replaced by domestic consumption.

For the supercycle theory to come true, Asia must continue to do all the heavy economic lifting, as the outlook for the US and Europe is at best fragile.

The Morgan Stanley case was that strong Asian growth would be enough by itself, because the size of the continent's consumption meant that it would drive the global ethylene cycle.

Agrawal disagrees. He writes: "In our opinion, a chemicals bull cycle needs to be supported by robust developed market (48% of demand) and [our italics] emerging market growth.

"Excluding any new capacity expansions, beyond the ones which are already under construction (also excluding the recently announced US shale gas based expansions), we see global ethylene operating rates improving from the cyclical 2010 bottom of 84.6% to 89.7% by 2015," he says. This would be lower than the 91.5% average in 2004-2007.

The risks of rushing into investment look like they are mounting. But the age-old dangers remain for those companies that pause: losing ground on market share and economies of scale.

By Malini Hariharan

...is a debate that has starting moving out of the US. A desire for energy independence has seen countries like Poland to embrace shale gas with the government welcoming US companies to quickly develop the country's reserves, estimated at 5.3 trillion cubic metres.

This would be enough to meet Poland's annual gas consumption of 14 billion cubic metres for decades to come and put an end to its need to import 70% of its required gas from Russia, said the Polish economy ministry.

"Let's not be afraid, let's just do our own thing," said the country's foreign minister referring to the environmental issues related to shale gas.

"We just have to keep explaining to environmentalists and local people what it's about. From what I know, the technology keeps improving," he added.

Global majors have lined up to accept the government's open invitation. Total has signed up with ExxonMobil to acquire an interest in the exploration of shale gas while Chevron will be working on its own. And the Polish refining, chemicals and petrochemicals group PKN Orlen has plans to launch its own oil and gas extraction and energy production units in 2012.

But while Poland is moving aggressively France is likely to become the first country to ban development of shale gas.

The country's lower house of Parliament approved a bill earlier this month to ban drilling due to environmental concerns and cancelled exploration rights given to companies. The Senate will consider the bill in June.

A principal area of concern in France and also in the US is the fracking or fracturing process which involves blasting huge amounts of water, sand and chemicals to break shale rocks to release the gas trapped in them.

Environmentalists claim that the chemicals used in fracking cause contamination of ground water. They recently received a big boost in their campaign against shale gas after the Pennsylvania Department of Environmental Protection fined Chesapeake Energy $900,000 for contaminating water supplies in Bradford County, a busy drilling area in the Marcellus shale gas formation.

The agency concluded that contamination was caused by improper well casing and cementing, allowing seepage from non-shale shallow gas formations.

A second area of concern is methane leaks from drilling sites also contaminating drinking water.

Researchers at Duke University concluded after a recent study that methane contamination has taken place at sites in Pennsylvania and New York.

Methane was found in 85 percent of the samples, and at sites within a kilometer (0.6 mile) of active hydraulic-fracturing operations, levels were 17 times higher than in wells far from such operations, said the study.

Some residents have sounded an alarm about running faucets that ignite if a flame is placed nearby. These and other environmental issues have been superbly captured in this very hip rap song (special thanks to the blog's colleague Nel for discovering this).

Shale gas has given the US petrochemical industry a new life but with the green lobby getting stronger the industry may soon have to dance to a new tune. 

By Malini Hariharan

One view on the purified terephthalic acid (PTA) market, highlighted by the blog last week, is that operating rates in the next few years will be constrained by a shortage of feedstock of paraxylene (PX).

A rapid buildup in PTA capacity is taking place in China where new plants with a total capacity of 2.8m tones/year are due to start up in the third quarter of this year.

But some analysts are optimistic that earnings for PTA manufacturers will remain robust until 2012.

Polyester capacity continues to be added in China and plants are expected to maintain healthy operating rates.

Analysts at Woori Investment & Securities are predicting a continued 8%/year growth in Chinese demand until 2015 based on increased spending on apparel by urban Chinese and an increase in the use of synthetic fibres as cotton will remain relatively more expensive.

PTA supply is projected to grow by 11.3% in 2012. But the analysts point out that some new PTA producers in China with very large plants of more than 1m tones/year capacity will take time to achieve normal operations.

This includes the Zhjiang Hengyi Group which has a 1.5m tones/year PTA project lined up.

A slow down in the PTA industry is therefore expected only after 2013 when utilization rates start rising.

In the near term, the analysts are predicting a recovery in PTA markets in the third quarter of 2011.

"As the PTA-PX spread has fallen below zero in May on a plunge in PTA prices, concern is increasing the recovery in the PTA industry will weaken. The PTA price decline in 2Q11 is attributed to a rapid demand fall in China, which consumes 64% of global polyester fiber output. We attribute the weak demand to: 1) falling demand for polyester fiber stemming from a drop in cotton prices; 2) liquidity contraction stemming from China's monetary tightening; and 3) reduced power supply to textile producers following power consumption surges in March. Of note, due to the sluggish demand, the inventory cycle has risen sharply from less than ten days in 4Q10 to 4-5 weeks in May," they said in a recent note.

But prices are expected to rebound from September as power restrictions ease after the peak production season ends in August and PTA inventory is depleted. And cotton could once again extend support as abnormal weather conditions such as the flooding of the Mississippi in the US and drought in Hubei province in China are likely to once again curtail production.

Today, the blog is proud to announce the publication the first Chapter of its new eBook:
'Boom, Gloom and the New Normal: how Western BabyBoomers are changing global chemical demand patterns, again'
It is co-authored with Paul Hodges of International eChem - author of the Chemicals & Economy blog.
A new chapter will be published each month. Please click here for Chapter 1. We hope this will help to build discussion about its key messages.
These are as follows:
• It is most unlikely that we will quickly return to the Golden Age of chemical consumption between 1990-2008
• This was driven by the enormous purchasing power of the Western BabyBoomers (those born between 1946-70)
• They were the richest, and largest generation that the world has ever seen. But they are now moving into the 55+ age group, when people typically save more and spend less
• This is already impacting key sources of chemical demand, including housing and autos. These will not recover to previous peaks
• Equally, the age of outsourcing production to the emerging economies is also coming to an end
• Western demand is reducing, not growing, so there are no longer any capacity constraints to be overcome
• Instead, Western and emerging economies need to adapt to the New Normal, and its very different demand patterns
The eBook argues that the next wave of global growth will not be a simple replica of the past 25 years. Instead, it will require major innovation in business models and technology.
The industry will need to develop a sustained focus on key megatrends such as increasing food supplies, water availability and life expectancy, whilst reducing carbon footprint.
These represent major challenges. But the industry faced similar challenges in the 1970's, and overcame them to launch the Golden Age.
We hope the new eBook will prove valuable for everyone currently working in the global chemical industry. Please click here to download a free copy of Chapter 1. Paul and I look forward to your comments.

By John Richardson

THE blog attended the Asia Pacific Petrochemical Conference (APIC) in Fukuoka, Japan, today during which it heard mention of the phrase "China downturn" on 23 occasions from different contacts.

Confidence is clearly at a lower than last year than at APIC in Mumbai, when all the talk was about delayed introduction of new supply into the market and emerging-market growth way beyond anyone's expectations.

A toxic combination of power cuts in China that is said to have depressed petrochemical pricing since March - and the measures to combat inflation in both China and India - is behind the significant change in mood.

Another reasons for the shift in outlook is crude oil. Steady increases in pricing up until February, leading to chemical and polymer consumers buying forward, have been followed first by flat crude and now greater volatility and sharp declines.

"The momentum has changed. Petrochemical pricing went up too much in response to crude, it hit a ceiling and now the concern is where it goes from here," said an Indian industry source.

"Margins are under a lot of pressure, particularly for the higher-cost Northeast Asian cracker operators."

The optimists believe that inflation will be brought under control in China in 2-3 months.

But what if underlying inflationary pressure means that a lot tougher measures will needed to moderate the rise in the cost of living?

More to follow when the blog is feeling a little less full of Asahi.

By Malini Hariharan

Formosa Plastics Group's (FPG) problems appear to be escalating with the Taiwanese government ordering six plants to be shut from 1 June on safety concerns.

Local news reports state that the plants will have to remain closed until the Yunlin county government and the Council of Labour Affairs are convinced that safety measures have been adequately improved.

This move by the government comes after a small fire at affiliate Formosa Petrochemicals Co's No1 cracker on 12 May. The fire forced the shutdown of the 700,000 tonnes/year cracker and a number of downstream units including monethylene glycol (MEG) plants operated by Nan Ya Plastics. The cracker has yet to restart.

News reports state that the government's order late last week came as a surprise for the company. A full list of the the six plants is not yet available but it includes a vinyl chloride monomer (VCM) plant, and Nan Ya's MEG, and bisphenol A plants.

Concerns about safety at the Mailiao site have been mounting since last year when there were two accidents in less then a month. Formosa will have to work hard in the coming weeks to assure government officials and the local population about its safety standards.

By Malini Hariharan

Spot monoethylene glycol (MEG) markets have quickly reacted to news that Nan Ya Plastics, an affiliate of the Formosa Plastics Group, has been ordered by the Taiwanese government to shut down two plants.

Prices surged by $15-30/tonne to $1,140-1,160/tonne CFR China, reports the blog's colleague Becky Zhang on ICIS news.

Nan Ya has been asked to shut its 360,000 tonne/year No 3 and 820,000 tonne/year No 4 MEG plants. The company's two other MEG plants with a combined capacity of 720,000 tonnes/year have been shut since 12 May after a fire at the Mailiao complex damaged the pipelines that supply ethylene. The company had earlier announced that production would resume only in July after receiving approval from the local government.

The four plants account for about 10% of Asian MEG capacity.

As mentioned by the blog yesterday, the Formosa Plastics Group has attracted government scrutiny after a fire at its Mailiao site on 12 May. The Yunlin provincial government has ordered a shutdown of six plants until safety checks are carried out.

Besides the two MEG plants, Nan Ya has also been asked to shut a 130,000 tonnes/year bisphenol A line, a butanediol plant and an isononyl alcohol unit.

Formosa Plastics Corp (FPC) has been asked to shut a vinyl chloride monomer (VCM) plant and has also been fined New Taiwan dollar (NT$) 1m ($34,662) for above-normal pollution at the unit.

The plant was affected by the 12 May fire which brought down a system that diffuses pollution, a company source told ICIS news.

FPC hopes to negotiate with the Yunlin government to explain the reason for the pollution after the fire, the source said.

By John Richardson

THE article of faith publicly expressed at last week's Asia Petrochemical Industry Conference (APIC) in Fukuoka, Japan, was that the current problems with demand in China and India were only temporary.

Discussions the blog held were packed with the conventional wisdom that not enough capacity would be built over the next few years. For example, one estimatewe heard was that there was the need for 35 crackers to be built to meet global ethylene equivalent demand growth over the next decade; so far only 24 had been announced.

But as we mentioned last week, Singapore-based PNB Parabis chemicals analyst Kunal Agrawal estimates that 11m tonne/year of yet-to-be-disclosed ethylene capacity could be built by 2015, based on available refinery feedstock. This could be on addition to the 16-17m tonne/year of capacity already announced fed by these same refineries.

One has to also worry about Sinopec's propensity to add capacity for self-sufficiency reasons, regardless of the economics.

A lot of talk at the conference was about China's potential to make use of coal for this purpose.

But the blog feels that because the environmental and economic problems of the coal-to-mono-ethylene glycol (MEG) and methanol-to-olefins (MTO) processes are so huge, the advent of a large amount of coal-based capacity will not happen during the next wave of overbuilding. If Sinopec announces firm new projects for start-up during the upcoming cycle, they will be based on refining.

We will discuss the environmental issue surrounding coal-to-chemicakls in more detail later on, but here is a rather worrying statistic: According to the consultancy Tecnon Orbichem it takes seven tonnes of coal and 2.5 tonnes of methanol to produce one tonne of olefins. When the blog asked a senior chemicals industry executive where all this carbon disappeared to, he pointed his finger upwards.

If we had $50 every time we heard mention of shale gas during the conference the blog would be very rich. Sadly we are not, which is why we have written this post.

Sufficient ethane would be available for an additional 8m tonne/year of ethylene capacity in the US over the next 20 years, according to IHS director Russell Heinen in a paper he gave during the event.

In an interview with the blog, two senior executives of Shell Chemicals said that their company was studying North American expansions based on low-cost ethane.

"We have 700,000 acres of shale gas assets in the US and Canada and so we feel we are in a good position," said Iain Lo, Shell's vice president, business development and ventures.

The focus would initially be on additions to existing plants in Louisiana and Texas, but Sven Royall, Shell's vice president for global intermediates, said that "everything was on the table" - when asked about the possibility of a greenfield cracker.

Mention of Canada was interesting. With all the focus on US shale gas the blog had missed the possibility that shale assets in Alberta might also be exploited for petrochemicals.

Shell's comments come after a raft of announcements over the last few months of studies into new crackers and debottleneckings of existing facilities by other US majors, such as Dow Chemical, ChevronPhillips Chemicals and LyondellBasell.

One of the ethylene derivatives anticipated to be in tight supply over the next few years is MEG, given feedstock shortages in the Middle East.

Saudi Arabia in particular has met most of the demand growth over the six or so years. Now, though, it seems unlikely that it would be allowed to add more capacity in the Kingdom for strategic reasons, even if it could get its hands on more gas allocations.

Returning to coal-to-chemicals in China, there has therefore been a lot of excitement over the syngas (made from coal) to oxalic acid and then on to MEG process, bypassing the need for ethylene.

It takes 4-5 tonnes of coal to make one tonne of MEG via this route, said an industry observer. While not as bad as MTO this is still pretty grim.

So the conventional ethylene route seems the likely means of meeting perceived future demand over the next 5-6 years.

Shell, in the same interview with the blog, disclosed plans to add two OMEGA process MEG plants in Qatar (each 750,000 tonne/year) by 2016-2017.

The industry observer also told us: "It makes sense to build MEG capacity in the US to serve the local purified terephthalic acid (PET) and textiles industries, which are mainly based in South and North Carolina.

"The US is a significant net importer of MEG and so this new capacity would be backing-out exports.

"As far as ethane supply goes, it is not rocket science to reverse the flow of pipelines that currently go from the south to the north. Ethane could be made to flow from the Marcellus shale-gas fields to new crackers that may be built in Texas and Louisiana. These facilities would then supply the MEG to the Carolinas."

This entire post has talked about capacity. We have not discussed why the industry believes in the doctrine of a continued global economic boom.

The reason for this is that we are journalists and so always endeavour to faithfully report what people tell us.

What APIC told us was that the delegates we spoke to, and listened to during presentations, were either unaware - or didn't want to publicly discuss - profound changes in the global economy.

These are detailed in our new e-book - 'Boom, Gloom and the New Normal: how Western BabyBoomers are changing global chemical demand patterns, again.'

Changes in demographics in the West - and a major shift in both demographics and government policy in China - need to at the very least be discussed openly by the industry.

There may be good reasons to discount what we argue in our book, but we have yet to hear them.