• Buyers had to restock in the New Year, as CFOs had cut working capital for year-end reasons
• In the West, Easter is delayed until April, and the USA has benefited from the warmest winter in 50 years
• China's holidays took place in January, so February and March should have seen a strong recovery
Yet overall, as ICIS pricing reports make clear, demand has been more typical of the quieter summer months. And even more worrying is the tone of the comments being made to the price reporters:
• A polypropylene producer warned "we have to give our converters some time to recover. Either they recover or go bankrupt".
• Whilst a PET buyer with "below budget" sales added "we are sailing towards a storm. Reduce your sails and get ready for the storm"
The immediate problem is the oil price. Today's levels have always led to recessions in the past, and petchem markets make it clear that this time is unlikely to be different.
Crude oil prices have now been stable for 3 weeks, even though the major investment banks such as Goldman Sachs, and the high-frequency traders, have done their best to push it higher with scare stories about possible supply problems. But so far they have failed.
If crude prices now start to slip, destocking combined with today's low levels of demand could therefore make Q2 very difficult indeed.
The chart shows price changes since the IeC Downturn Monitor launch on 29 April, with ICIS pricing comments below:
PTA China (red), down 14%. "Demand remained weak amid high polyester inventories"
Benzene NWE (green), down 11%. "Market is balanced to long and demand from downstream derivatives is nothing more than steady"
HDPE USA export (purple), down 7%. "With China not buying at normal levels, traders said Asian and Middle Eastern producers who normally sell into China are now targeting South America"
Naphtha Europe (brown dash), down 3%. "Interest from the petrochemical industry is mediocre"
Brent crude oil (blue dash), no change
S&P 500 Index (pink dot), up 2%