Asian chemical markets can’t decouple

Its 2 months since I was last in Asia. It is clear that earlier optimism about the region’s resilience in the face of a possible US recession in 2008 has begun to disappear.

Typical is the comment by Kanit Saengsubhan of the Thai Fiscal Policy Institute. He sees Thai growth in 2008 falling below earlier 5% government projections ‘if the US sub-prime mortgage crisis deteriorates further’. And he voiced uncertainty over just how severely Thailand might be hit. ‘In a moderate case, economic growth in the next year could stand at 4.5%, he commented. ‘If the situation becomes more severe, chances are that growth will be less than 4.5%.’

Asian chemical demand is critically dependent on the West. The Asian Wall Street Journal pointed out on Friday that ‘Chinese “exports” often aren’t very “Chinese” at all. The mainland is still largely an assembly point for other countries’ parts’. Thus the current boom in Asian chemical demand is underpinned by an expected 30% increase in this year’s EU-China trade deficit to $253bn (€170bn), and a further rise in the US-China deficit above last year’s $232bn.

As I wrote post-EPCA, we may well be about to discover that ‘when America catches a cold, the rest of the world sneezes’.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. Paul is also an invited member of the World Economic Forum’s Global Agenda Council. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such as oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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