IT REALLY ISN’T doom and gloom if you take the longer-term view. Instead, for the chemical companies with the right strategies, the opportunities to build new sustainable business models are huge. The winners will make an awful lot of money while also doing the right things for humanity and our natural environment.
Asian Chemical Connections
China PP demand and net import outlook for 2023
China[s PP demand growth in 2023 could be as low as minus 3% as it swings into a 2.6m tonnes net export position from this year’s likely net imports of around 3.4m tonnes.
China’s long-term GDP growth risks and polymers demand
Cumulative downside demand in the above chart would total 5bn – 91m tonnes lower than our base case.
China chemicals growth and the 20th Communist Party Congress
China’s share of global demand growth in the seven big resins jumped to an astonishing 67% in 2002-2021. Northeast Asia ex-China’s share of demand fell to minus 1% with Europe and North America worth just 4% and 2% of growth respectively. The chemicals world had become dangerously lopsided.
Naphtha markets underline why “Micawberism” is not the answer
The January-September 2022 multiple of BFOE crude prices per barrel over CFR Japan naphtha prices per tonne averaged just 7.9. The lowest multiple so far this year was 6.9 in August. The January-September 2022 average was the lowest annual average since our naphtha price assessments began in March 1990.
China’s dominance of global polymer demand delivered huge global growth. But what now?
China accounted for 33% of global growth in the seven major synthetic resins between 1990 and 2001. But this jumped to 63% in 2002-2021. In distant second place during both these periods was the Asia and Pacific region at 15% and 17% respectively.
China could become the world’s third-biggest PP net exporter in 2022-2040
China’s cumulative net imports of polypropylene (PP) might be as big as 91m tonnes in 2022-2040 – the ICIS base case. Or China’s total net exports during the same period may reach 90m tonnes.
This is the first significant chemicals downcycle for many years
Every tonne of polymer you decide not to produce because there isn’t a viable market will save vital revenues – especially as feedstock costs will remain very volatile. Every tonne of polymer you do produce because the market works will earn you crucial money at a time of declining overall sales.
China’s styrene demand in 2022 could be negative for the first time since 1990
China’s net styrene imports in 2022 could also fall to just 290,000 tonnes from 1.5m tonnes in 2021 and 2.8m tonnes in 2020.
If you think this is a typical chemicals downcycle, think again
THERE IS A FEELING out there that the chemicals and polymers industry is undergoing a typical downcycle that will last a few years, followed by yet another spectacular fly-up in margins. But I believe a great deal more is happening beyond the usual cycles of over-building followed by under-building.
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