By John Richardson

SEVERAL contacts have said to me over the last two weeks that increased medical and food security demand for petrochemicals is a distraction from coming to terms with the huge collapse in demand for all of our products that go into the durable goods which people are no longer buying.

I agree entirely as I’ve been making this case for several weeks before it became accepted wisdom. The above chart illustrates the point well, using just polycarbonate as an example, the raw materials for which are phenol and further upstream propylene and benzene. As you can see, even assuming a strong rise in demand for protective sheets made from polycarbonate, the loss of autos demand will leave global demand much smaller over the next few years.

But some of these contacts have gone on to tell me that a return to normal consumer demand is only just around the corner, perhaps as little as a few months away as we get on top of the virus. Their worst-case scenario is that the recovery will happen sometime in 2021.

This is where I differ. I cannot see any return to normal patterns of consumer demand for several more years because the negative demand shock of the virus will I wory be at least as big as the Great Depression.

Even assuming the West can quickly get on top the crisis, we must consider the scale of the damage to the developing world. Also think of the loss of hundreds of millions of gig economy and service industry jobs. These job losses could weaken spending on non-essential items for several years to come.

Political dysfunction means we were not  adequately prepared for the pandemic, making its effects worse than would have been the case if we had better leaders.

I also see a debt crisis as likely. We didn’t learn anything from 2008. The cures for the Global Financial Crisis have instead created an even bigger debt hole than in the build-up to 2008 – something I have been warning about for several years.

Our spending behaviours will changeover the long term. For instance, a stronger sense of community could to a greater value being placed on experiences over owning things. Communities will naturally strengthen as always happens in times like this.  Less of us  may be willing to get on planes for leisure or business. Our employers may not allow us to do so as a result of new corporate risk policies.

In other words, I worry that there will be no return to the old consumer markets we were familiar with before the crisis. When it is all over, I believe we will need new ways of measuring the patterns of demand because the nature of demand will have undergone so many radical changes. This will require us to rethink what quantities of petrochemicals and polymers we make and what grades of polymers.

If you are a CEO of a petrochemicals company don’t think of meeting medical and food security needs as a temporary priority that will quickly disappear. Prepare for the long haul while of course hoping for a better outcome.

Petrochemical company C-suites need to work with governments to ensure that manufacturing value chains function properly, so we have enough medical equipment, hand sanitisers, protective screens, face masks and food and other packaging materials. This should be their main focus.

The reputational gains for our industry will be huge. People will understand the value of what we do much better by understanding what we actually do – for example, there will be hardly anyone left when this crisis is over who won’t know that modern food supply chains would collapse without plastic packaging. No longer will plastic packaging be only seen as a scourge of the environment.

Further, if the petrochemical companies work closely with governments, they will get the financial support they need to stay in business. Financial support won’t come without any strings attached. The strings will include retooling production to meet medical needs and ensuring that food supply chains remain intact.

PREVIOUS POST

Be very, very cautious about buying into the idea of a Q2 crude price rally

03/04/2020

By John Richardson IT IS the unprecedented nature of the demand shock that’s t...

Learn more
NEXT POST

After COVID-19: How US petrochemicals could become the laggard

08/04/2020

The big oil, gas and petrochemicals companies have already started planning for ...

Learn more
More posts
Why China’s polyethylene imports could be either 22m tonnes or 3m tonnes in 2030
27/10/2020

By John Richardson THERE are so many angles to this that, as with the potential outcomes of the US p...

Read
Debate about refinery closures, re-configurations a harmful distraction for the petrochemicals business
25/10/2020

In the second of a four-part series of blog posts that examines the paradigm shift confronting the p...

Read
Developed world polymers demand: layer after layer of new complexity
22/10/2020

By John Richardson THE PROPOSITION that petrochemicals and polymers demand in the developed will see...

Read
China rapid rebound promises another great year for petchems, but beware of the fault lines
20/10/2020

By John Richardson IT helped immensely that as the rest of the world was shutting down, China’s fa...

Read
Plastic rubbish: the pandemic is increasing rather than reducing the pressure for change
18/10/2020

This is the first of a series of blog posts where I will examine the environmental paradigm shift an...

Read
Retreat of globalisation and implications for petrochemicals
15/10/2020

By John Richardson EVER SINCE the Berlin Wall fell in 1989, and the last great geopolitical struggle...

Read
European petrochemicals at risk of delayed demand collapse as new business model emerges
06/10/2020

By John Richardson AS DELEGATES take part in this year’s virtual annual European Petrochemical Ass...

Read
US polyethylene: resilient demand could be at risk from delay to new stimulus
04/10/2020

By John Richardson THIS REMAINS a mystery that needs to be solved: why US polyethylene (PE) markets ...

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