By John Richardson

HERE IS your print-out-and-keep 10-point guide, summarising the key themes I’ve covered over the last two weeks with important updates. I hope this helps your petrochemicals business in its planning process.

Before we begin, I am afraid to say that we have probably lost a year’s worth of demand growth.Growth likely to be negative across most petrochemicals. No meaningful recovery in markets seems likely until the end of 2020 as things stand today (let’s hope they change). No recovery until the end of 2020 should therefore be your base case for planning purposes.

Please contact me at john.richardson@icis.com on how ICIS can help you manage this crisis with our constantly updated data and analysis. Events will  continue to move quickly and so we are here to help:

  1. The great news, and I was sceptical about this until a few days ago, is that China appears to be on top of the crisis thanks to huge and highly coordinated government efforts. Why I was sceptical was because of several changes in the methodology of assessing the number of cases. But from speaking to people who sell to China, they are seeing a big recovery in economic activity. This article, covering the recent World Health Organisation visit to China, seems to further confirm China’s success.
  2. There is one major caveat here, though, and that is whether there will be a secondary wave of infections when China fully gets back to work. We need to keep a watch on this.
  3. Even with the Chinese economic stimulus that’s going to kick in once everyone is fully back to work, lost demand is lost demand. The Lunar New Year was a major consumption season so think of all the bus, train and car journeys and all the buying of gifts which didn’t take place during that period. This lost demand cannot be replaced later in the year.
  4. It will also take a good while for supply chains to come back to normal even in the best of possible outcomes. Chinese ports are clogged-up with goods that were made before the outbreak that still need to be shipped. This article from the New York Times is worth parsing in detail.
  5. As the virus has gone global, no other country in the world can replicate what China has done because of its unique levels of control. So, we need to study the disruptions that have taken place in China and consider how they might play out globally
  6. Whereas economic stimulus will work in China once most people are back to work, provided there are no secondary outbreaks, it won’t work in the West because travel restrictions, factory and school closures etc. have only just started. You cannot stimulate economic activity that isn’t taking place.
  7. In May 2003, the Q2 company results came out and the results were grim. Even though by then SARS was being brought under control, the negative effect on stock market sentiment and so economic activity was big. We can expect the same in May this year when the Q2 results come out, but on a bigger scale because this is a bigger event than SARS, for reasons I’ve mentioned in earlier posts.
  8. There will be several waves of disappointing financial results if this crisis isn’t over until the end of the year, whereas in the case of SARS it was only one wave of bad results.
  9. One of the major  global problems will relate to logistics. Think of what’s happened because of events only in China. Containers are stuck in the wrong ports and there is a global  lack of backhaul cargoes.  Now consider the implications if most of the rest of the world suffers the same logistics problems. There could be a major impact on trade flows of petrochemical feedstocks, petrochemical products and customers’ products all the way down to finished goods. Petrochemicals markets may become much more regional.
  10. The inevitable global recession may morph into a financial crisis. Those who read the blog will know I’ve been warning about this for several years. Here is an FT article that gives some important context.
PREVIOUS POST

Coronavirus: China ethylene glycols demand could fall by 1.2m tonnes as imports also diminish

04/03/2020

By John Richardson IN GEORGE ORWELL’S magnificent parody of communism, Animal ...

Learn more
NEXT POST

Sustained collapse in oil prices: Effect on petrochemicals and the global economy

09/03/2020

By John Richardson IT COULD be a game of chicken designed to pull Russia back to...

Learn more
More posts
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
Challenges facing China as it tries to bridge the rural-urban wealth divide
26/09/2021

By John Richardson THIS COULD be the biggest event in our industry since at least the Global Financi...

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