The above chart reflects the weekly changes in the 4 benchmark petchem products that launched the IeC Downturn Alert exactly a year ago. PTA (red line) was the only product to ever rise above its price on 29 April 2011 - and then only by $10/t, and for just 1 week.
The original aim was to try and help avoid the problems seen in H2 2008, when operating rates remained high down the value chain whilst demand fell. More recently, it has hopefully provided business and commercial managers with an insight into the overall state of the global market.
The key question today, of course, is whether we are about to see a repeat of last year's May downturn? Superficially, the two situations appear the same - crude oil prices peaked in recent weeks at $125/bbl and end-user demand is weakening. There are also some key differences:
• A year ago, the blog was very much alone in worrying about a downturn. Most expected Q1's strong performance to continue
• Today, the overall mood is one of uncertainty. Few people are confident about Q2 performance, but some expect an H2 recovery
• Capacity utilisation globally has slipped to 86.8%, compared to 88.8% a year ago, according to the American Chemistry Council (ACC)
• The ACC also report that US railcar loadings are down 0.7% versus 2011, despite the stimulus from much lower natural gas prices
The blog would like to be optimistic, and it has been searching for possible bullish scenarios. Sad to report, it has failed. Instead, it worries that the impact of high oil prices is much worse today than a year ago:
• They have now been above $100/bbl for a record 200 days. Even in 2007/8, the run ended after 170 days
• Recession has followed every single time since 1970 when oil prices have risen above $50/bbl ($2012)
Equally, reviewing the current state of play with its New Year 'banana skins' does not increase confidence:
• The Eurozone debt crisis is becoming quite scary. Spain's foreign minister was not exaggerating on Friday when warning "This is like the Titanic. If there is a sinking, even the 1st class passengers drown"
• China's housing bubble is not only bursting, but is now accompanied by its worst political crisis since Tiananmen Square in 1989. Little seems likely to change in the run-up to the leadership changes in October
• US housing markets remain difficult, as discussed on Saturday
And on the ground, ICIS reporters paint a consistent picture of difficult markets, as captured below in the blog's usual round-up of ICIS pricing comments this week, and price movements since 29 April:
PTA China down 13%. "A spate of plant shutdowns in South Korea, Taiwan and China did little to underpin prices."
Naphtha Europe, down 10%. "Market has become more bearish. Propane stocks are said to be abundant"
HDPE USA export, down 10%. "Offers fell, along with other global prices. However, traders said prices for US material were still too high to work in most other regions"
Benzene NWE, down 4%. "Availability for the prompt market is being squeezed by restricted pygas supply"
Brent crude oil, down 5%
S&P 500 Index, up 3%