It seems likely that this week’s European Petrochemical Association annual meeting in Berlin will mark a turning point in the petchem cycle.

Looking back over 2007, Boy Litjens, CEO of Sabic Europe, told ICIS@EPCA that performance this year had been ‘excellent’, and that they would ‘definitely report the best results ever’. He was also hopeful about the outlook for 2008, but thought that 2009 onwards might prove to be ‘difficult years’ for the industry.

Litjens went on to add, however, that ‘I am realistic enough to say that somewhere in 2008 and 2009 the economy is going to turn down’. But in his view, the pressure from new Middle Eastern and Asian capacity won’t really begin to be felt ‘until the fourth quarter’. So the key issue is whether demand begins to turn down before this.

The views that I picked up on this issue over the 4 days were mixed. The US market definitely seems to be weakening, and although European and Asian demand is still robust, industry margins are coming under pressure:

• There seemed no doubt in the minds of US delegates that the US housing market will get worse (some thought a lot worse) before it bottoms. This means there will be a lot less demand for chemicals/polymers in this important sector.
• However, US producers were encouraged by the decline in the US dollar, and hoped that this would enable them to compensate for lower domestic sales via increased exports to Asia, and Europe.
• European producers generally saw demand continuing to be strong, although many noted that the major downstream buyers were taking a more aggressive stance on pricing.
• Asian delegates, particularly those from China and India, remained very confident. They see strong demand in their domestic markets out till at least 2010.
• Feedstock pricing and availability was a major concern for everyone with whom we spoke. The volatility seen during 2007 is expected to continue, and this makes margin forecasting much more difficult.

It used to be said that ‘if America sneezes, the rest of the world catches a cold’. My sense from our EPCA meetings is that we may find ourselves needing to rewrite this phrase, if housing and subprime problems do tip the US economy into recession next year. This might cause us to discover instead that ‘when America catches a cold, the rest of the world sneezes’.

PREVIOUS POST

Dow warns

26/09/2007

Dow CEO Andrew Liveris has spelled out very clearly his concerns about the impac...

Learn more
NEXT POST

US housing worsens

08/10/2007

Its now 3 months since we first saw the impact of the subprime crisis. At that t...

Learn more
More posts
OPEC+ faces difficult decisions as Covid returns, recession risks rise, and oil prices crash
28/11/2021

OPEC+ oil producers saw prices tumble $10/bbl (13%) on Friday as the world woke up to the fact that ...

Read
‘Watch out below!’ as supply chain chaos comes to an end
14/11/2021

“What goes up, comes down” is usually a good motto when prices start to reach for the sk...

Read
Industry now needs to step up, if Net Zero is to be achieved
31/10/2021

Net Zero is clearly the key issue of our time. With COP26 about to start, 3 key elements need to com...

Read
The Fed’s stock market bubble is at risk as China bursts its real estate bubble
24/10/2021

The US stock market bubble just keeps rising. And every investor “knows” that the US Fed...

Read
EU patience starts to run out as UK threatens to break the N Ireland Protocol
17/10/2021

Unsurprisingly, it turns out that Brexit still isn’t “oven-ready”, despite the UK ...

Read
An end to the China bubble would risk a Minsky moment
05/10/2021

My letter in today’s Financial Times warning of the risk to Western financial markets from the bur...

Read
Xi aims to “bring order out of chaos” by bursting China’s property bubble
03/10/2021

China is at the start of its biggest economic shake-up since 1978, when Deng Xiaoping launched his p...

Read
The end of China’s real estate bubble will impact global supply chains, exports and growth
26/09/2021

“How did you go bankrupt?” Bill asked. “Two ways,” Mike said. “Gradually, then suddenly....

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