In December, the blog suggested that “2010 might see the industry return to its normal seasonal pattern, with a strong H1, followed by a slow Q3 holiday season, and then a final burst of activity in October/November before the Xmas break“.
The chart above, from the excellent American Chemistry Council’s weekly report, provides welcome evidence that this may indeed be happening. The red columns show destocking/restocking down the main polymer value chains. Clearly Q4 saw destocking for year-end reporting reasons, with consumers drawing down inventories by 110kt (250m lbs) a month.
But January and February saw this trend reversed, as customers restocked in advance of expected better demand from key industries such as auto and construction. The ACC estimate this led to inventory builds of 75kt (165m lbs) in January, and 25kt (55m lbs) in February. As a result the trend line (black) has become positive for the first time since 2006.
Much is now riding on Q2 demand. We cannot expect a V-shaped recovery of demand back to levels seen in the 2003-7 Boom. But we should hopefully see an improvement versus Q2 last year, even though today’s high levels of crude prices will act as a “tax” on discretionary expenditure by causing consumers to focus on higher transport/heating costs.