The blog’s 7th birthday

Blog Jun14Who would have believed the blog would still be here, 7 years after it began with a post from Thailand in June 2007?  Who would have believed the range of developments that have appeared for it to discuss over this period?

It started at the end of the SuperCycle as central banks pumped cash into the global economy, and prices soared along with demand.  It was a lonely voice in the wilderness, worrying about US subprime loans.  Then we had the Crisis itself, famously forecast by the blog and memorialised in the article ‘The Crystal Blog’ in November 2008.

Nobody wanted to learn the lesson that you can’t create sustainable growth by increasing debt levels.  Instead, we had the central banks and governments pumping unheard-of amounts of cash into the global economy.  China decided to launch the biggest credit bubble in history.  Unsurprisingly,  much of this stimulus, as in China, has actually made matters worse, not better.  And since 2011, growth has actually begun to weaken.

In the middle of this second period, the blog began to publish its view of the outlook with fellow-blogger John Richardson.  ‘Boom, Gloom and the New Normal’ argued the seemingly obvious point that:

  • Economic growth is dominated by personal consumption, usually 60%+ of developed economies
  • In turn, consumption and wealth creation is primarily dependent on the generation aged 25 – 54 years
  • Their earnings increase as their careers progress, whilst they spend more as their children grow up
  • As a result, growth was now inevitably slowing due to ageing populations and low fertility rates

It then developed its view of how this New Normal would force businesses to refocus their activities.  And it described what this would mean for manufacturing, the commercial world, and research, as well as for political stability.  Its summary of the likely outlook for the world in 2020, published 3 years ago, has clearly stood the test of time:

“The New Normal World in 2020
“All of us would love to be able to see into the future. Chapter 4 of our new eBook, ‘Boom, Gloom and the New Normal’, does just this. It offers 10 predictions about how the world will look in 2020:

  • A major shake-out will have occurred in Western consumer markets
  • Consumers will look for value-for-money and sustainable solutions
  • Young and old will focus on ‘needs’ rather than ‘wants’
  • Housing will no longer be seen as an investment
  • Investors will focus on ‘return of capital’ rather than ‘return on capital’
  • The term ‘middle-class’ when used in emerging economies will be recognised as having no relevance to Western income levels
  • Trade patterns and markets will have become more regional
  • Western countries will have increased the retirement age beyond 65 to reduce unsustainable pension liabilities
  • Taxation will have been increased to tackle the public debt issue
  • Social unrest will have become a more regular part of the landscape

“The transition to the New Normal will be a difficult time. The world will be less comfortable and less assured for many millions of Westerners. The wider population will find itself following the model of the ageing boomers, consuming less and saving more. Rather than expecting their assets to grow magically in value every year, they may find themselves struggling to pay-down debt left over from the credit binge.

“Companies will need to refocus their creativity and resources on real needs. This will require a renewed focus on basic research. Industry and public service, rather than finance, will need to become the destination of choice for talented people, if the challenges posed by the megatrends are to be solved. Politicians with real vision will need to explain to voters that they can no longer expect all their wants to be met via endless ‘fixes’ of increased debt.”

The blog’s readership has proved amazingly loyal over the past 7 years.  Readership has grown steadily, as shown in the map, with the majority reading the blog on a more or less daily basis.

Readers are also very keen to promote the blog to their friends and colleagues.  As a result, the blog has had the privilege of speaking at a wide range of events around the world, including major conferences, Board Retreats, business meetings and industry events.  It also writes regularly for the Financial Times and presents 6-monthly webinars for the American Chemical Society.

The blog is very grateful to its readers for their support, and to all those at ICIS for their encouragement and assistance.  Thank you all very much.

 

WEEKLY MARKET ROUND-UP
The blog’s weekly round-up of Benchmark price movements since January 2014 is below, with ICIS pricing comments:
PTA China, down 3%. “Due to worsening market conditions, several PTA makers have either kept their PTA units shut or were operating at lower run rates”
US$: yen, down 3%
Brent crude oil, up 4%
Naphtha Europe, up 6%. “Improved ethylene margins in turn could encourage producers to ramp up cracker run rates, boosting demand for feedstock naphtha”
S&P 500 stock market index, up 7%
HDPE US export, up 7%. “Prices just slightly too high to garner much interest from the international market”
Benzene, Europe, up 9%. “Limiting the increases downstream on styrene are market fundamentals, with downstream demand weak, supply plentiful and spot prices little changed since early June.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. 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 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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