China’s petchem imports soar on oil price speculation

Chemical companies, Consumer demand, Economic growth, Financial Events, Oil markets

China PE Jul09.jpg

After yesterday’s post, Edwin Pang of Credit Suisse in Hong Kong has raised an interesting question over the likely rationale for China’s massive increase in petchem imports, such as polyethylene (PE), in 2009.

As the chart shows, its monthly PE demand (production plus net imports), was very steady in 2007-8. It averaged 980kt in 2007, and 970kt in 2008. Yet in 2009, it has soared to record levels, averaging 1270 kt/month.

This makes no sense at all in terms of real demand. China’s total exports are down 26% so far this year. And it defies belief that the government’s fiscal stimulus could have caused such a massive increase in domestic demand, in so short a time.

The blog’s view is that the rise is instead due to traders’:

• Desire to bet on the rising oil price, and a global economic recovery
• Ability to access cheap credit, as part of the fiscal stimulus

This creates a serious risk that a vicious circle could develop, if the oil price continues to slip, and global demand does not recover in H2.

The blog therefore continues to worry, as it noted back in March, that “China may well end up having to dump this inventory on world markets, at whatever price they will fetch”.

PREVIOUS POST

China's speculative surge slows

08/07/2009

Q2 saw an outburst of speculative frenzy all around the world, and in a wide var...

Learn more
NEXT POST

Crude oil prices tumble on S&P 500 weakness

12/07/2009

Sometimes, the blog gets lucky with its timing. A week ago, it wrote bearishly o...

Learn more
More posts
Global chemical industry – key trends for success in today’s New Normal
02/08/2020

The chemical industry is the best leading indicator for the global economy. On Friday, I had the pri...

Read
Oil prices signal potential end to the V-shaped recovery myth
26/07/2020

Oil prices have moved into another ‘flag shape’ – which previously provided critic...

Read
Bankruptcies now the key risk as hopes for V-shaped recovery disappear
19/07/2020

Governments, financial markets and central banks all originally assumed the Covid-19 pandemic would ...

Read
Reshoring set to create Winners and Losers as advanced manufacturing takes over
12/07/2020

Not many companies still operate in the same way as 500 years ago, or even 50 years ago. But in manu...

Read
Merkel warns of need to prepare for No Deal Brexit
05/07/2020

Most people missed the fact that last Tuesday was the last possible date to delay the UK’s exi...

Read
The Top 5 pandemic paradigm shifts
28/06/2020

The Covid-19 pandemic has accelerated the fundamental changes which were already underway in global ...

Read
Oil prices start to reconnect with coal and gas
21/06/2020

Oil prices are finally starting to reconnect with other fossil fuel prices, as the chart shows.  It...

Read
Economic risks rise as the lockdowns end
14/06/2020

It is now 13 years since I wrote the first post here, in June 2007. A lot has happened since then: ...

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