No doubt there will be bumps along the way – and some of them big ones. The Asian economic crisis of 1997-1998 put the brakes on growth in the region and the impact reverberated around the globe.
And today the European debt crisis featuring a $1 trillion bailout of Greece and other fiscally troubled nations is threatening the nascent global economic recovery following the worldwide financial and economic crisis of 2008-2009.
But the long-term trend for Asia is clearly up, led by China and India. The mood at the Asia Petrochemical Industry Conference (APIC) in Mumbai, India, in mid-May was widely optimistic. While some expressed caution about the large amounts of new petrochemical and polymers capacity coming on in the Middle East and China, the overall sentiment was that rapidly growing demand from China and India would absorb that capacity.
There has already been huge growth in these countries over the past decade. But in the words of 1970s rock band Bachman-Turner Overdrive – you ain’t seen nothing yet!
“This century belongs to Asia. Increasing per capita income among the 2.5bn people in China and India will generate huge demand for goods and services for an extended period of time,” said Reliance Industries chairman Mukesh Ambani in his keynote address at APIC. “Billions of people are impatient to realize unrealized aspirations. And this will result in a jump in demand for petrochemicals and chemicals.”
The head of India’s largest refining, petrochemical and polymers company pointed out that even basic polymers are growing at double-digit percentage rates in the country. For example, consumption of polyvinyl chloride (PVC) grew by 25% in the country in 2009, he said.
It doesn’t hurt that construction in India is booming, as evidenced by the massive amount of projects underway in Mumbai and Delhi. India’s cities are buzzing with new construction activity – from condominiums to commuter railways. Amid the scorching heat, you can feel the vibrancy of economic activity.
Ambani sees India emerging as a major manufacturing hub for chemicals and polymers. And growing demand from Asia will create the need for “super-sized” projects in the range of $5-10bn (€4-8bn), he noted.
But the global chemical industry will also face challenges from unprecedented financial volatility. Deviating from historical patterns, the epicenters of the latest earthquakes have been in the Western world rather than in emerging countries.
“We grew up thinking the US and Europe were the most stable economies. But in the last five years, we’ve seen the US housing crisis and European sovereign debt crisis impact global markets,” Ambani noted.
The European debt crisis and the resulting austerity measures by governments in the eurozone has created major anxiety and negative sentiment worldwide, evidenced by tumbling bourses from Europe to the US to Latin America and Asia.
The world being more deeply interconnected than ever before, we will feel more shocks to the system and more often. Volatility is something the industry will have to get even used to. But through the panic, it’s critical not to lose sight of the long-term picture.
The opportunities are huge, and will require investments of similar magnitude for those with the vision, wherewithal and courage.
Photo credit: http://blog.lib.umn.edu/drube004/architecture/