By John Richardson
Fifty per cent of the blog (John Richardson) is on leave for the next two weeks.
Next week Paul Hodges will be posting on Asian Chemical Connections. Paul runs the ICIS Chemicals & Economy blog.Then from the week starting 22 August my fellow ACC blogger, Malini Hariharan, returns from her leave and will be posting articles.
Before I sign off here are some thoughts on events over the last week.
It has been the kind of week the blog has been expecting for two years or so, ever since the recovery from the late 2008 global financial crisis.
The recovery was based on hugely increased liquidity via the Fed and the Chinese government - but all this extra money flowing around the world merely papered over the cracks. And as we discuss in Chapter 3 of our e-book, 'Boom, Gloom and the New Normal - how the Western BabyBoomers are changing chemical demand patterns, again', one of the consequence of the Fed's largesse has been oil prices out-of-line with underlying demand. You can download a copy of the chapter for free here.
The loss of the US triple A debt status and fears over the Eurozone, which have now even spread to France, point to the deep, fundamental problems with the global economy that are going to take a generation or more to fix. This is something we discuss in Chapter 4 of our book, due to be published at the end of this month.
One of the big themes we have covered this week is China and what it might do to protect its economy from weaker demand in the West.
Premier Wen Jiabao said earlier this week that it was important to balance growth and inflationary expectations. He noted that price rises had to be slowed, but his statement omitted the previous emphasis on tackling inflation as being a top priority.
"I think we might see targeted measures in certain regions to help the small and medium-sized enterprises," a senior executive with a major polyolefins producer told us this week.
"But the government will have to be careful to structure these measures so that the money goes to SMEs and not to the bigger companies and the speculators."
This article from the China Daily suggests that help for the SMEs is probably on its way.
And perhaps interest rates and liquidity restrictions will be eased across-the-board because, a we have said, dealing with inflation appears to no longer by China's number one priority.
Beware of misleading reports of all being right in the chemicals world as a result of China adjusting economic policy to support is manufacturing industry.
Chemical prices might temporarily recover, as will commodity prices in general and stock markets, but this will constitute nothing more than a collection of bouncing dead cats. China cannot stimulate its economy on the same scale as 2008 because of the problems left behind by this earlier huge injection of cash into its economy, as we discussed earlier this week.
And every measure taken to help China's manufacturers will only weaken manufacturing industries in the West as China seeks to export its way out of trouble.
This could create trade tensions, even tariff barriers.
Exporters of chemicals and polymers to China might enjoy temporary benefits from new measures to support manufacturing industry.
But chemical manufacturers in their home markets will lose out as China floods Western countries with cheap, government-subsidised manufactured goods. An example could be a sharp rise in auto exports from China, as Paul Hodges discusses in this post from his blog.
The unavoidable problem is that total global demand for chemicals and polymers is down and will remain depressed for many years.