THERE ARE TWO scenarios or roads down which the petrochemicals industry could travel over the next ten years, with arrival either at Supermajors or Deglobalisation.
Asian Chemical Connections
A petrochemicals world dominated by Supermajors, especially those running COTC plants, or one where greater regional cooperation (more on this in later posts) and increased protectionism allow older, smaller and less carbon efficient plants to survive.
SHORT-TERM tactics should involve maximising returns within regions along with a greater focus on exports anywhere in the world
The developing world outside China cannot repeat China’s economic growth model because of climate change, ageing populations in the West and sustainability
Environmental, social and political factors – along with integration into upstream petrochemicals – have held back plant closures. Now, things seems very different.
There is a big new wave of lower-carbon and very advantaged cracker projects on the way, including Saudi Aramco’s crude-oil-to-chemicals investments.
I BELIEVE WE are heading for the biggest period of change in the global petrochemicals industry since the 1990s.
This was when globalisation took off with the formation of the World Trade Organisation (WTO), when China’s economic boom began, when the global population was more youthful and before climate change became a major threat to growth.
Flat 2023-2050 demand growth in China and the developed world would leave the global market for nine synthetic resins 1bn tonnes smaller than the ICIS base case.
In my downside scenario for China’s HDPE demand in 2023-2040 is correct, the country’s total consumption during this period would be 134m tonnes lower than the ICIS Base Case.
YEAR-ON-YEAR chemical company financial results could we improve in Q2-Q4 2023; But this should not be seen as a return to the Old Normal.