Caution reigns at APIC in Korea



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ASIA HAS roared back with a strong rebound in petrochemical and plastics prices. High hopes are being pinned on the region, and especially China, to lead the global economic recovery.

But as pointed out by James McIlvenny, senior vice president of Dow Chemical’s performance products division, China, which represents 2-3% of global GDP, is not in and of itself large enough to drive “real growth.”

McIlvenny gave a keynote speech at the Asia Petrochemical Industry Conference (APIC) in Seoul, South Korea, where the mood was cautious. While the recent price surge has given producers a nice window of solid profit margins, that window is likely to be shut.

Driven up by restocking, some demand recovery and as well as speculation, prices have risen on the order of 50% from their late 2008 lows. But many companies should view this period of strong prices not as a return to the good ol’ days, but as an opportunity to restructure and reposition for the future.

New and low-cost commodity chemical production capacity is on its way from the Middle East and China, and there is still too much capacity out there.

Players in the mature economies of Asia as well as the US and Europe will have to shut down high-cost plants to compete in the new reality. And they must seek to move further downstream into specialties through an enhanced focus on innovation.

No doubt we are entering a period of unprecedented heightened global competition. But we must take into account the lessons of the past and not hinder trade between countries.

This was a major concern at APIC – that countries with an eye towards protecting their struggling domestic economies would put up increasing barriers to trade.

Korea Petrochemical Industry Association chairman Won-Joon Hur, cited the “all-out protectionism back in the Great Depression of the 1930s (that) eventually led to the delay in the economic recovery.”

Indeed, let’s not make it harder on ourselves and let free trade flow where it may.

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6 Responses to Caution reigns at APIC in Korea

  1. Robbo 21 May, 2009 at 3:00 pm #

    Roared back? Is that the roar of a bear market rally that I hear in the background or is it sustainable? What do you think, Joe?

  2. ICBchief 21 May, 2009 at 3:59 pm #

    For the short-term, I wouldn’t bet on a continued sustainable rally in prices.

    The real test will come over the next several months when more capacity comes on from the Middle East and China.

    But if high-cost producers rationalize quickly, this can always mitigate the impact. It’s always dependent on how people react – if they shut down quickly, the downturn could be far shorter than people think.

    If everyone thinks we’ve hot bottom and keep running their crackers, get ready for a long torughing process!

  3. Jurgen Meltzher 24 May, 2009 at 3:07 am #

    This is a very poor piece of journalism and does ICIS no credit at all as an organization. To fly all the to Korea and to merely report a keynote speech which I could pick up from the Dow website (is this the same article that appeared in the magazine) is to me of poor value.

    I would like in-depth analysis of what’s really happening and not shallow corporate-speak.

  4. ICBchief 28 May, 2009 at 9:37 pm #

    Thank you for your feedback. Always appreciated and sorry you felt this way.
    Perhaps you misunderstand the purpose of this new blog – it is for the short Commentary section of ICIS Chemical Business and not meant to be a full feature with in-depth analysis.
    This particular commentary was meant to convey the overall mood at the event to readers as well as provide some insight.
    For greater detail, please visit ICIS news, where subscribers can find the many stories we reported from the event. Here is a selection:
    APIC ’09: Mab Ta Phut needs ‘practical’ environment standards
    APIC ’09: China EDC imports may set new record this year
    APIC ’09: China’s PVC import market prices seen losing steam
    APIC ’09: Exxon urges green, sustainable petchem operations
    APIC ’09: Japan must accelerate green efforts – JPCA
    APIC ’09: Zero tariff boosts ASEAN phenol exports to China
    APIC ’09: Exxon expects soft chem market through H2
    APIC ’09: Borouge on track to complete new projects
    APIC ’09: KPIA chairman warns against protectionism

  5. Jurgen Meltzher 1 June, 2009 at 1:29 pm #

    I read all of these articles. Many contained grammatical errors and few gave any perspective on the industry or said anything original that I couldn’t have picked up elsewhere without paying a subscriber fee.

    I feel a little patronised by your comment.

  6. ICBchief 2 June, 2009 at 6:07 pm #

    Hello Jurgen – never meant to be patronizing – just seeing whether we could help. We tried to contact you by email, but it bounces back. Please feel free to contact me at joseph.chang@icis.com. Thanks!

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