D'turn 30Oct11.pngThe brave new world of modern finance continues to amaze the blog.

It still has problems with the idea that the answer to having too much debt is to borrow some more. But last week’s Eurozone summit not only did this (as noted by the German central bank), but added a new element.

Its new bailout plan suggests that the European rich should now borrow from the emerging country poor, via the IMF. Thus the support of Italy (income per capita of $34k) depends on loans from China (income of $3k). Or, to put it another way, the world’s second wealthiest region aims to borrow from people who have some of the lowest incomes in the world.

Of course, President Sarkozy made some reference to ‘old style reality’ when he told the French people on Thursday night that “the problem is that we spend too much and we must work more.” But this is unlikely to be the message on which he campaigns for re-election next year.

Naturally financial markets rallied strongly at the news, with the US S&P 500 Index jumping 4% during the week. But in the real world, where those of us in the chemical industry work, markets failed to show similar enthusiasm, as this week’s IeC Downturn Alert chart above shows. Even Brent crude oil managed only a $0.85/bbl rise, whilst naphtha actually fell.

This caution was shared in the world of electical appliances, a key market for chemicals. Whirlpool and Electrolux, the two largest companies reported:

• “Sales gains in Asia and Latin America are slowing and aren’t sufficient to make up for sluggish demand in the U.S. and Europe”
• Electrolux estimate “N American appliance sales this year will be 25% below the 2005 peak; W European sales will be down 15% from 2006”
• Whirlpool’s CEO noted that the only “people who are buying, are people whose appliances break”.

ICIS pricing comments this week, and price movements since the IeC Downturn Alert launched on 29 April, are below:

Benzene NWE (green), down 30%. “Market remains under downward pressure this week, largely due to continued weak demand.”
HDPE USA export (purple), down 28%. “The window of opportunity for sales into China has basically closed as prices in Asia and the Middle East continue to fall.”
Naphtha Europe (brown dash), down 21%. “Demand from gasoline is reasonably healthy, while from petchems remains poor”.
PTA China (red), down 14%. “Demand remains weak on the back of limited procurement from the cloth and weaving sectors amid tight credit and higher inventory.”
Brent crude oil (blue dash), down 11%.
S&P 500 Index (pink dot), down 6%

PREVIOUS POST

More Greek debt passes to the European Central Bank

29/10/2011

Stock markets soared after the eurozone meeting this week. But the head of the G...

Learn more
NEXT POST

Risks rise over future growth in China and India

01/11/2011

Many chemical companies now believe it is inevitable that China and India will r...

Learn more
More posts
No Deal Brexit still a likely option if opposition parties fail to support a new referendum
15/09/2019

Canada’s normally pro-UK ‘Globe and Mail’ summed up the prevailing external view of Brexit las...

Read
Day of reckoning approaches for US polyethylene expansions, and the European industry
08/09/2019

Planning for future demand in petrochemicals and polymers used to be relatively easy during the Baby...

Read
China’s renminbi and the global ring of fire
01/09/2019

China’s property bubble puts it at the epicentre of the ring of fire © Reuters  China’s de...

Read
Oil market weakness suggests recession now more likely than Middle East war
11/08/2019

Oil markets remain poised between fear of recession and fear of a US attack on Iran. But gradually i...

Read
Smartphone sales continue their decline, whilst $25 smart feature phones open up new markets
04/08/2019

Global smartphone sales have now been falling for 8 consecutive quarters, since Q3 2017. They are no...

Read
UK, EU27 and EEA businesses need to start planning for a No Deal Brexit on 31 October
28/07/2019

New UK premier, Boris Johnson, said last week that the UK must leave the EU by 31 October, “do or ...

Read
London house prices edge closer to a tumble
21/07/2019

After the excitement of Wimbledon tennis and a cricket World Cup final, Londoners were back to their...

Read
G7 births hit new record low, below Depression level in 1933
14/07/2019

If a country doesn’t have any babies, then in time it won’t have an economy. But that...

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