The chemical industry has a turnover of $3.4trn, and is the world's 3rd largest industry. It matters to the global economy.
Many of its leaders are about to meet next weekend in Berlin for the annual European Petrochemical Association (EPCA) meeting.
The blog strongly believes that this should not be seen as a 'business as usual' meeting. We cannot simply assume that the global economy is in fundamentally good shape:
• IMF head, Christine Lagarde, has warned the global economic situation is entering a "dangerous place"
• World Bank president Robert Zoellick has described world finances as being in a "danger zone"
These are not sound-bites being made for effect.
The danger signs have been building for months. The blog, after all, introduced its IeC Downturn Alert nearly 5 months ago, on 2 May.
Coincidentally, this matched the peak of the US S&P 500 Index, since when financial markets and crude oil prices have fallen dramatically, as shown in the chart above.
• First we saw customers around the world buying 'hand to mouth'. They tried to run down inventories built up during the 50% rise in crude oil prices between December-April
• Then everything went quiet during the summer. The retailers destocked after seeing end-user consumption fall due to the impact of higher oil prices
• Then it became clear that China's economy, the previous motor of the global economy, was slowing fast, as the government reduced credit to combat high inflation
• Now, in September, it is clear that demand has not returned after the holidays. And the wider economic outlook is getting worse, not better.
The blog made similar efforts to alert the industry to the issue of demand destruction before the 2008 downturn, and was later awarded the title of 'The Crystal Blog'. But sadly, its warnings were not taken seriously at the time when they could have had an impact.
The industry's leaders need to ensure that 'this time is different' in Berlin. It is no exaggeration to say that the very future of some companies, and of important sectors of our industry, may be at stake.
Price movements since April, and ICIS pricing comments this week are below:
Benzene NWE (green), down 26%. "A swathe of imports coming into the ARA region were also keeping supply ample as demand struggled amid weak end user confidence."
Naphtha Europe (brown dash), down 19%. "The impact of refinery run cuts is starting to show, and it is thought that the naphtha oversupply would have been more severe if not for these".
HDPE USA export (purple), down 18%. "The Asian market has slowed down, in part because of a national holiday, and in part because of concerns about the global economy. Asian prices were expected to fall in China because of tightening credit rules."
S&P 500 Index (pink dot), down 17%.
Brent crude oil, down 14%.
PTA China (red), down 4%. "Most buyers were adopting a wait-and-see stance because of the unclear market trend. Only a few end-users purchased cargoes on a need-to basis."