China’s Auto Demand Growth: No Longer As Predictable

Business, China, Company Strategy, Economics, Environment, Olefins

ChinaButadiene2

By John Richardson

WE used to live in a linear world where GDP growth was nearly always on the increase and there was a very close linkage between the growth in any overall economy and the rise in demand for chemicals and polymers.

It’s all about throwing darts at a metaphorical dart board, of course. No one is ever going to hit the bull’s eye consistently (if we did we’d all become traders). Instead, it is about getting as close to the bull’s eye as possible.

And so it might be that, even in this non-linear and now more iterative world, the old ways of measuring growth might still get everyone close-enough to the bull’s eye.

We think it is at least worth asking the question, though, hence, our posts last Friday and back in July.

Autos demand growth in China serves as, perhaps, another good example of how everything feels as if it has changed.

Environmental concerns might mean that car ownership growth will have to slow down over the long term because:

  • China’s middle-income earners are having to put up with not only a rising cost of living in the major cities, but also terrible air quality. For example, Harbin, the capital of northeastern Heilongjiang province and home to some 11 million people, was virtually closed-down this week because PM2.5, or particulate matter with a diameter of 2.5 micrometers (PM2.5), reached a reading of 1,000 in some part of the city. A level above 300 is considered hazardous, while the World Health Organisation recommends a daily level of no more than 20.
  • Despite a huge road-building programme, congested roads and also railways are a big burden on China’s economy. Logistics costs equalled 10% of China’s GDP in 2010, double that of Japan. Building more roads and railways might seem the answer but what would this do for air quality? And how would this fit in with China’s efforts to rebalance the economy away from investment?
  • On the subject of rebalancing again, now that its demographic dividend is coming to an end, can China escape the middle-income trap? If it cannot, and, given that there will be less young people around to buy autos, what will this mean for future car sales?

Add in all these variables and how quickly will the new capacities we have detailed above be absorbed? Butadiene and synthetic rubber are, of course, used to make tyres.

And what do these variables mean for the total amount of butadiene and synthetic rubber capacity that will be needed in the future, the scale of individual plants and where the plants should be located?

PREVIOUS POST

Global Petchem Markets Turn Bearish

22/10/2013

By John Richardson EXCESSIVE inventory building down all the major petrochemical...

Learn more
NEXT POST

China's Debt Crisis Comes To A Head

24/10/2013

By John Richardson HOW much longer will China’s central government continue to...

Learn more
More posts
China moves closer to Iran as tensions with the US build: Implications for petrochemicals
02/08/2020

By John Richardson Opinions and emotions and can shape how we interpret data, but, as we all know, o...

Read
China polyolefins market H1 review: so far so good, but beware of the risks ahead
30/07/2020

By John Richardson ALL looks fine in the polyolefins world. The Old Normal appears to have reasserte...

Read
Polyethylene market recovery could be threatened by slower China crude buying, weaker economic growth
28/07/2020

By John Richardson EVEN by China’s standards, where just about every number is eye-wateringly larg...

Read
Why the polypropylene industry must switch from volumes to value
26/07/2020

By John Richardson EVERYONE knows about the oversupply in the polyethylene (PE) market as it has bee...

Read
China consulate closure underlines long-term split with US, potential big shift in petchems trade flows
23/07/2020

The views in this blog post are, as always, my personal views and do not reflect the views of ICIS. ...

Read
China’s real GDP could have been negative in Q2: What this may mean for PP
22/07/2020

By John Richardson CHINA’S official GDP growth of 3.2% for Q2, which was announced last week, may ...

Read
Iran and China new deal could hasten Belt & Road Initiative petrochemicals self-sufficiency
19/07/2020

By John Richardson ONCE AGAIN, please don’t say I didn’t tell you. A proposed new investment and...

Read
China paraxylene imports head for bigger declines as excess industrial production appears to boost GDP
17/07/2020

By John Richardson SOME PEOPLE see the 9.9% year-on-year rise in China’s crude oil imports in Janu...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more