I HAD A STRANGE experience during a client meeting last week: my contact surpassed my pessimism about the speed and nature of the recovery in chemical markets. Being outdone in what some might call doom and gloom (I prefer realism) is a rare occurrence.
The Developing World’s Potential
For the past four months, I’ve argued that, at some point in the late 2020s, the Developing World ex-China could take over from China as the biggest driver of global chemicals consumption growth by volume.
Note the “could” in the above paragraph. This scenario assumes that the Developing World ex-China can capitalise on its youthful population. More babies equal a lot more demand as working-age populations bulge.
Meanwhile, China and the West are heading in the opposite direction. Fewer babies mean shrinking working-age populations.
The chart below, an updated version of the one I ran in 2023 and 2024, serves as a reminder that, based solely on demographics, the Developing World ex-China holds significant potential.
Current Consumption Dynamics
By the end of this year, ICIS forecasts that China will account for 41% of global demand for nine of the biggest synthetic resins, despite comprising just 18% of the global population.
In contrast, the Developing World ex-China is projected to drive only 32% of demand for the same polymers, despite holding a 68% share of the global population.
China’s population is shrinking. ICIS economist Kevin Swift suggests that its population could be declining more than official government numbers indicate. Meanwhile, the Developing World ex-China’s population is expanding.
This vast region includes Africa, developing Asia & Pacific (excluding Australia, New Zealand, and Singapore), the Middle East (including Turkey, which is sometimes listed as part of Europe), the Former Soviet Union, and South & Central America (including Mexico, which is sometimes listed as part of North America).
Was the Chemicals Supercycle a One-Off?
What if the robust, mainly China-driven global demand growth we witnessed during the 1992-2021 Chemicals Supercycle was a historic one-off?
We need to consider the impact of climate change on the developing world ex-China.
The UN’s International Organization for Migration has cited estimates up to 1.5 billion environmental migrants within the next 30 years.
In her book Nomad Century, Gaia Vince suggests that more than 1 billion people could be on the move by mid-century due to climate pressures—and most of these individuals may originate from the developing world. For instance, Vince cites a study indicating that six provinces of Vietnam, home to 37% of the country’s population, could be underwater by 2050.
“The effect of humid heat on outdoor workers costs India the equivalent of 7% of GDP each year,” wrote The Economist in a 4 January 2025 article. Additionally, 45 million Indians may be forced to migrate by 2050, according to a 2020 ActionAid International study.
Climate Change’s Immediate Relevance
You might think that climate change has little relevance for today’s chemical markets. I strongly disagree. We are already seeing the effects of climate change on demand patterns due to the increased incidences of floods, droughts, and wildfires—and the science suggests that this will worsen.
In a more regional world, marked by nationalism and protectionism, the Developing World ex-China may struggle to replicate China’s export-focused growth model. If the US, for example, successfully reshapes much of its manufacturing—using AI and automation to offset higher labour costs—what will this mean for the export-driven growth model that served China so well during the Chemicals Supercycle?
Sustainability and Localised Supply Chains
Will the “less is more” sustainability movement, particularly in the West, reduce the demand for new products—especially those produced with significant carbon intensity and transported over long distances?
Could plastics recycling become the upstream starting point for more localized supply chains? I think not, but this could be another aspect of a downside scenario for the growth of developing-world economies.
The AI Revolution
Then there’s AI, the 40,000-pound gorilla sitting very noisily in the corner of the room.
AI will, I believe, radically reshape the world of work. As mentioned, AI could help countries like the U.S. reshore manufacturing. To what extent will AI development and its wealth creation also be concentrated in the rich world due to access to finance and technologies? Or does the emergence of models like Deepseek mean we’ll see a democratization of AI?
Focusing on Certainties: Supply
All the above are, of course, immensely complex themes and essentially unknowable given today’s analytical capabilities. This will, I believe, change as AI develops.
But what we do know now is that the weight of negative influences on the Developing World ex-China is so substantial that assuming another growth miracle—akin to what happened in China from 1992 to 2021—isn’t a basis for sound scenario planning.
We should thus place most of our focus on the one thing we can measure precisely: supply.
Global Propylene Operating Rates
The above chart on scenarios for global propylene operating rates follows from the chart on global ethylene operating rates that I included in my 11 February post:
- What would it take to return global propylene operating rates to the very healthy 1992-2024 average of 80%?
- Assuming global production, which is about the same as demand, remains unchanged from our base case, global capacity would have to grow by an average of around 2 million tonnes a year versus our base case of 5 million tonnes a year.
- Advantaged projects in the Middle East seem likely to proceed under this alternative scenario, and China might continue its push toward self-sufficiency.
- This implies capacity closures elsewhere to achieve the 2 million tonnes a year of 2025-2035 capacity growth.
Conclusion: Three Actions for 2025
So, let’s boil this down to the three things you should do during the rest of this year:
- Monitor Supply Adjustments: Keep up to date on plant shutdowns, project delays, and cancellations. How quickly supply adjusts is key, as demand will be subdued. This will help you capitalize on any sudden regional tightening in markets, even if you have to wait several more years for a global recovery.
- Stay Ahead on Trade Protectionism: Be proactive in forecasting and reacting to new antidumping and other trade protectionist measures. Build a trade data analysis and strategy team if you don’t have one already. Notably, there’s been a significant increase in antidumping investigations into Chinese chemicals and polymers in 2024. As China grapples with weak domestic growth and adds more capacity, this trend may continue.
- Integrate AI into Work Processes: Incorporate AI into your operations to reduce costs by saving time on basic tasks. The next phase involves using the technology to improve the accuracy and flexibility of forecasting in response to increasingly complex market conditions.
Complicated? Yes, of course. This is the nature of the post-Chemicals Supercycle world. We need better and better data and analysis to profit from this complexity. Watch the ICIS space as we move forward with our customers.