Diesel Demand In China To Fall As Banks Hoard Cash….

China, Economics

SHARE THIS STORY

..…LETTERS OF CREDIT TAKE 5-6 WEEKS TO OBTAIN, UP FROM 5-6 DAYS – THAT’S IF YOU GET THEM AT ALL

 

By John Richardson

MunchDIESEL consumption is another crucial measure of China’s real economic growth because China is the world’s manufacturing powerhouse. This means lots of demand for diesel to run trucks, trains and back-up electricity generators etc.

We should take note, therefore, that the country’s diesel consumption is set to decline in 2014 for the first time in more than ten years, oil companies in China have told Reuters.

Understanding what this type of data means for China will help chemicals companies move from denial to acceptance. 

We are also constantly coming across anecdotal evidence, from chemicals and other manufacturing sectors, which suggests that the slowdown might be even worse than some of the headline numbers indicate.

“The economy is every bit as weak as August data is indicating, in fact probably even weaker,” wrote Simon Hunt, a UK-based metals and China economics consultant, in an investment note based on his recent trip to China.

Sales of many appliances to end-users were weak, especially in the case air-conditioning units, added Hunt. He forecast that the sales volume of air-con units would fall by 12% year-on-year in 2014.

“Sales of other appliances such as washing machines, TVs and refrigerators are also falling,” he said, in the same research note.

And as regular blog readers will know, we have been predicting since late 2013 that credit growth would slow down in China during 2014. We have been proved right.

It is not only the supply of new lending that has fallen, however, but also the demand for loans. Growth in loan demand from both the manufacturing and non-manufacturing sectors has fallen to its slowest pace in two years, according to a People’s Bank of China Q3 survey of 3,100 local banks.

Local banks are now also hoarding cash because the rate of business failures is accelerating, said Hunt in his research note. The banks are obviously worried about their bad debt positions.

“The practice has been that when loans are repaid banks issue new ones. This historic practice is no longer a given,” he wrote.

“In the same vein banks are being selective in extending Letters of Credit (LC). An LC used to take 5-6 days before being issued; it now takes 5-6 weeks – if one is issued,” he added.

It would be nice to think that these problems will quickly go away, but, of course, they won’t. They will get worse before they get better – and we are talking about a five-year transition process, at best.

PREVIOUS POST

China And Tearing Up The Rule Book: A Ten-Point Guide

24/09/2014

By John Richardson WE thought it would be helpful for chemicals to summarise our...

Learn more
NEXT POST

China: Do You Really Know Where Your Product Ends Up?

26/09/2014

By John Richardson AS a senior Chinese official announces that investigations in...

Learn more
More posts
Here is your guide to Asian and Global HDPE markets in Q4 this year and in 2022
25/10/2021

By John Richardson THE COMING COLLAPSE of China, as I’ve discussed is before, is like commercially...

Read
China’s “Common prosperity” uncertainties multiply as we head into the unknown
21/10/2021

By John Richardson DON’T SAY I didn’t warn you. This article in The Wall Street Journal confirms...

Read
China provides major climate hope as latest IEA report underlines that it is all about the developing world
18/10/2021

By John Richardson WHEN I worked for a UK local newspaper as a “cub” or junior reporter in the 1...

Read
China’s less commodity intensive future requires major petchem strategic rethink
14/10/2021

By John Richardson THE THING about the collapse of China is that, like commercially viable nuclear f...

Read
China pulls multiple policy levers to fix energy shortages but don’t forget secular fall in demand
11/10/2021

By John Richardson Executive Summary CHINA’S POWER shortages could fixed by the end of this month ...

Read
China petchem project cancellations on “common prosperity” may not mean higher imports
06/10/2021

By John Richardson IT IS BEING suggested that China’s “common prosperity” policy pivot, the bi...

Read
China traditional Q4 petchems demand increase unlikely because of economic rebalancing
04/10/2021

By John Richardson A NEW RESEARCH PAPER by economists Kenneth Rogoff and Yuanchen Yang underlines th...

Read
China carbon limits and Evergrande tied together as short term growth challenges build
28/09/2021

By John Richardson Executive summary THE LIKELIHOOD that 227,000 tonnes of China’s polyethylene (P...

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