Real Demand In The Real Economy

Brent%20Sept12.pngBy John Richardson

THE FED’S decision to launch quantitative easing 3 (QE3), a series of open-ended steps more radical than anything it has attempted before, is bound to drive petrochemicals pricing higher, in response to the surging cost of crude.

But as a corporate planner with a US polyolefins producer told us yesterday, before the Fed announcement: “The cost of crude is a major problem for us as it doesn’t reflect real demand in the real economy.”

As we discussed earlier this week, this is the problem with central bank action, which was further underlined by this post yesterday from fellow blogger Paul Hodges.

A sales and marketing executive with a North American polyolefins producer told us last week: “The issue today is that the majority supplier of polyolefins to Asia is no longer the regional producers. It is instead the Middle East which sits on much lower costs. It has the power to price according to market demand.

“The Asian naphtha-based producers are seeing great cost pressures in China and are therefore trying to export to better-priced markets such as Latin America, Africa and Russia.

“But this is offering limited help as long sailing times mean that Asian producers are not viewed as preferred suppliers.

“I am not sure if 2013 will be any different.”

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