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Polymers demand slumps in Europe, China

Economic growth, Oil markets

ICIS news reports that polymer demand is falling sharply in two key markets, China and Europe. This is a bad omen for demand in other chemical markets, as polymers are closely tied to GDP growth. Linda Naylor reports that PE volumes in Europe may be down 7% in 2008. Meanwhile, John Richardson and Malini Hariharan report that PE and PP demand in China ‘could be flat or even negative’.

The cause is almost certainly the distortions caused by the run-up in crude prices since 2006. The blog has warned many times that 2007-8 was likely to prove a repeat of 1979-80, when oil prices also rose sharply. Last October, it suggested that the ‘apparent boom in demand’ was in fact just downstream consumers rushing ‘to cover themselves before product prices moved higher’. The rest of 2008 and 2009 could be very difficult indeed, as consumers destock down the value chain.