Thoughts from the road on the road ahead

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Just back from a road-trip holiday to Yellowstone and the Grand Tetons where my family and I escaped the Texas heat and found a way to enjoy time away from work.

We maintained our social distancing, eating takeout while on the long drive to Wyoming and Montana and doing most of our sightseeing via sparsely populated backwoods trails. But man, what scenery … here is Jenny Lake at the foot of the Grand Tetons.

The 4,000 mile round trip left a lot of impressions on me, and not just of the majesty of Yellowstone, which is a place that everyone should visit in their life. Unfortunately, my impressions from the road did not leave me with a peaceful easy feeling (apologies for stealing from The Eagles):

  • Sadly, the US as a whole may not push through this pandemic with the same success that other countries have experienced. The American individualism that makes the great US experiment attractive to many plays against my country during an event such as this, especially with numerous amplified and polarized traditional and non-traditional media outlets and voices dividing people into camps that talk at each other and not with each other. From Texas to Montana, we saw an assortment of mask mandates that varied by state and/or business, as well as compliance measures for them. A coherent, national strategy will not come from the current administration, and without that you will continue to see coronavirus flare-ups in several areas. This in turn leads to travel and business restrictions in response and a drawn-out crisis that likely will not end until either the vaccine arrives, or therapeutic drugs are developed that allow the US economy to operate without worry (similar to dealing with flu season), or the virus mutates into a form that is less reproductive and dies out on its own.
  • We came home to the question of what to do with our children as the new school year approaches. Grade schools and universities across the country are struggling to devise a safe, effective way to operate. Most are looking at a hybrid model that has some students on campus while at least 50% of classes are conducted online. Others are going entirely online, while the school district our children go to is giving parents the choice of either sending their kids to in-person class (which will have plenty of social distancing) or having them attend online, but they have to stick with that choice for a full half-year before possibly deciding to do the other instead. We feel our children need the in-person social interaction, but what about their safety and the safety of others they may come into contact with? It is a hard choice and not one we are looking forward to making, but we are going to have to make it soon.
  • US economic numbers have been better than many would have expected, but understand that they have been buoyed by a lot of liquidity pumped into the system by the Federal Reserve and the first federal stimulus package of aid to businesses and workers. Those benefits expire at the end of July, and while there is talk of a second stimulus package, it already is being discussed as being smaller in nature. My hunch is that there will not be a second stimulus package passed and put into law before the end of July, as Democrats will want greater amounts of aid to states and local governments as well as bigger stimulus checks to the American people, something the Republican Senate right now will not go along with. However, with Trump keenly looking for something, anything to point to economically as helping his re-election, I think he will eventually push the Republican Senate to sign onto higher payments and benefits to the unemployed and businesses so that (in his mind) he feels like he’s bought himself political capital (and votes) come November.

Perhaps I am being too cynical with the above – I truly hope I am and that reality evolves into something much better. But if I am right, here is what chemical supply chain participants should right now be planning for:

  • Demand for anything that helps fight coronavirus will remain strong in the US even as it wanes in countries that have it under control. So isopropanol (IPA) and industrial ethanol will continue to be hot markets here as sanitizer demand remains elevated.
  • US air travel will not return to anywhere near pre-pandemic levels this year, and travel from the US to international destinations will face continued restrictions or bans. This will negatively impact jet fuel and crude oil demand, as well as for engineered plastics such as acrylonitrile butadiene styrene (ABS), nylon and polycarbonate (PC) that go into airplane manufacturing.
  • Back-to-school demand for clothes (i.e. polyester fibres) will be lukewarm as more stay home for classes taken online. I guess you could expect shirt demand to fare better than pants/skirt/kilt demand.
  • Bankruptcy rates will rise, with the hospitality, restaurant and bar sectors in particular danger as they are largely predicated on congregating people in areas where social distancing cannot be maintained. Also, concerts by and large are not going to happen in 2020. As a concert junkie myself, that really, really hurts.
  • Supply chains remain at risk to possible hotspot flare-ups. Whatever your supply chain, you need to know its resiliency and have plans to place to mitigate risk of not having supply or customers to take your product.

I maintain that no one in our space is better positioned to provide the insights and data to help companies doing business either in the US and/or globally navigate these uncertain waters – and our positioning is only getting better with Monday’s announcement of ICIS’ purchase of Chemical Data. More on that acquisition and its effects on the chemical data landscape in my next post.

Disclaimer: The views in this blogpost should in no shape or form be taken as actual forecasts and are my personal views only.

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