Eight Steps To Realising This Will Be Worse Than Lehman Bros

China, Company Strategy, Economics, Europe, US

By John Richardson

RoadpictureWE are going through a process of realisation at the moment. It is not a linear process   – i.e. not all people will be at the same stage.

Equally, chemicals and other company executives will move backwards and forwards between different stages in the eight-step process.

We can only hope that the majority of CEOS and politicians get to number eight as quickly as possible and so realise that events in China will have greater global impact than the collapse of Lehman Bros in 2008. China’s economic rebalancing is a far bigger deal for the global economy than the US sub-prime crisis.

Only when people have reached stage eight in our process can they start realistic planning for the future.

Here are our eight steps:

  1. People start to notice demand is down but attribute it to a modest slowdown.
  2. They see a longer slowdown – and assume new stimulus.
  3. Then, as the slowdown carries on, they assume production cutbacks.
  4. Then they think it is all cyclical.
  5. Then they realise supply is increasing back in the West due to disorderly arrivals of raw materials from China.
  6. Then they start to recognise that all this is connected and has the same cause – the withdrawal of credit in China.
  7. They will still prefer not to put two and two together and to link the perceived demand to the collateral trade.
  8. Only at the very end will they very reluctantly recognise that they invested in new capacities on the basis of totally false assumptions about the pace of growth and real demand.
PREVIOUS POST

Broad Commodities Sell-Off Threatens Petrochemicals

12/09/2014

By John Richardson IRON ore prices are now down by nearly 40% so far this year t...

Learn more
NEXT POST

China Doing "More With Less" In Steel And Plastics

16/09/2014

By John Richardson CHINA is still a poor country relative to the West and here ...

Learn more
More posts
Polyethylene producers must avoid repeating the mistakes of Q1
05/06/2020

By John Richardson AFTER a very challenging first quarter, nobody wants to make further write-downs ...

Read
China’s PP production growth could lead to big declines in 2020 imports
01/06/2020

By John Richardson PLEASE DON’T say I didn’t warn you. China is rapidly moving towards polypropy...

Read
Coronavirus, impact on the developing world and the scale of demand losses
29/05/2020

By John Richardson ALL OF us are struggling to come to terms with a collapse in the global economy t...

Read
Coronavirus, reshoring and the polyester industry: Good luck with that
27/05/2020

By John Richardson POLITICIANS, not just including the Populist variety, are talking a lot about res...

Read
Beware of the fragile nature of the oil and petrochemical price recovery
22/05/2020

By John Richardson RECENT rises in oil and petrochemicals prices should not in my view be taken as a...

Read
China petrochemical inventories build on what could be false hopes of a V-shaped rebound
19/05/2020

By John Richardson AS PETROCHEMICALS storage space in China fills up on the hope that the country ca...

Read
Further polyethylene rate cuts seem inevitable with no certainty on who will blink first
18/05/2020

By John Richardson IT IS NOT just a razor-like focus on petrochemicals demand that will get you thro...

Read
What petrochemical companies must do to adapt to a smaller coronavirus economy
15/05/2020

By John Richardson PETROCHEMICAL companies can adapt to the coronavirus New Normal by running their ...

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