April 2010 Archives

BY JOHN RICHARDSON/SINGAPORE

It has been an amazing 18 months in global petrochemicals and plastics during which the tsunami of new supply from Asia and the Middle East has been constantly delayed. This, along with deep operating cuts by Western producers, has created tight markets.

The industry has further benefited from Chinese demand growth that has been far beyond any estimates. Overall polyethylene growth in China was more than 30% last year, according to Shanghai-based commodity information service CBI China.

But around 29m tonnes/year of ethylene capacity is due onstream in the 2008-2012 period, estimates the ICIS pricing Worldwide Ethylene Plant Report. With global ethylene growth at around 4-5%/year, the outlook for the market is grim.

Many exceptional factors drove Chinese growth to record-high levels in 2009 (see story on page 18). Going forward, increases in demand are expected to fall more in line with the expansion of overall GDP over the next few years. This is expected to occur as China raises its self-sufficiency in many basic petrochemicals and plastics.

It's been a fantastic 18 months for everyone - even some of the higher-cost producers. But eventually, this big volume of new capacity has to hit the market, leading to some more painful decisions for those too-far to the right of the cost curve.

Check out John Richardson's ICIS Asian Chemical Connections Blog

Photo credit: Syntagma Media

Expect the unexpected! That message has been driven home through the global financial and economic crisis of 2008-2009. Who could have foreseen Mother Nature's volcanic surprise? Along with stranding thousands of travelers, including this global editor, the volcano's economic impact will be felt throughout the world.

Jet fuel prices in Europe and the US tumbled early last week, according to global chemical market intelligence service ICIS pricing. And crude oil initially traded off before recovering. The bigger picture is the impact of all the travel disruptions on economic growth.

Airlines are losing an estimated $200m/day, and are demanding compensation from governments. But it's not just the fly guys that are suffering. The volcano is hitting everything from deliveries of goods to tourism to labor productivity. And the effects of a major disruption can be significant and long-lasting.

The reverberations from the global financial eruption in 2008-2009 are still being felt today. Last week, the US Securities and Exchange Commission charged Goldman Sachs with defrauding buyers of certain mortgage-backed securities. And the UK government is launching a full investigation into the matter.

Like the ash cloud over Europe, the haze hanging over the global economy has yet to fully dissipate.

Photo credit: Washington Post