Vulpes_vulpes_sitting

By John Richardson

Are there more hedgehogs in the chemicals industry than foxes? This thought came to the blog after meetings with industry executives this week during its latest visit to Singapore.

Bear with us and we will, we promise, as quickly as possible get to the point.

The philosopher Isaiah Berlin, in his famous essay “The Hedgehog and the Fox” divided writers and thinkers and two categories: The hedgehogs who view the world through the lens of a single defining idea and those who draw on a wide variety of experiences and for whom the world cannot be boiled down to a single idea.

The fairly senior (not too senior to have lost touch with conditions on the ground, but senior enough to get the picture) polyolefins company sales and marketing executives we have met with are definitely foxes. They listen to their teams on the ground in China and therefore have so far this year identified for us:

  • The rapid rise in the income levels of the country’s poorest people, thanks to a government mandate. This is quite likely to result in polyolefins demand growth in excess of what will be declining overall GDP growth numbers.
  • Growing food contamination concerns that have again benefited polyolefins growth well in excess of this year’s falling GDP growth. More and more people are switching to pre-packaged food, which, of course, is wrapped in polyethylene (PE) and polypropylene (PP) – and also higher-grade wrapping material that provides better shelf-life protection.

The hedgehogs cling on to the single defining idea that all you have to worry about, as we discussed many times before, is that all you have to do is build ever-larger volumes of competitive capacity and the demand will come.

We grow ever-more frustrated and bewildered in some of our discussions with those who cling to this single defining idea. In more detail, they still think, despite all the evidence to the contrary, that all we have to do is endlessly discuss feedstock advantage, location, technology etc and these factors alone will guarantee success. It is amazing how much time is devoted to these issues, whereas the demand side of the equation is given scant attention because it is too difficult to assess and/or it is thought to be the responsibility of other people – i.e. economists.

The blog thinks that we are at a crucial turning point. The announcements from today’s Federal Open Market Committee Meeting might or might not send emerging-market currencies, equities and bonds into a further tailspin. But what is clear is that we are nearing the end of unsustainable credit-supported growth via the Fed. We are also nearing the end of equally unsustainable credit-fuelled growth from the other big central bank that has also encouraged hedgehog thinking – the People’s Bank of China.

As my colleague Nigel Davis wrote in this very thoughtful ICIS Insight article:  “Developing nations can’t revert to pre-crisis growth strategies in a changed economic and global financial environment, the United Nations trade and development arm, UNCTAD, warned last week.

“Much slower global growth means that emerging economies would be better advised to place their bets and attempt to stimulate domestic demand through a broader based domestic consumer-driven growth model.”

Hear, hear.

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