2011 saw ‘long-drawn out fundamental downturn’ begin

Chemical companies


D'turn 2Jan12.pngThe chart above shows how the benchmark products in the IeC Downturn Monitor moved during 2011. The yellow shaded area covers performance since 29 April, when the Monitor launched.

It shows a year of two halves:

• The period to the end of April was the last time that governments embarked on major ‘stimulus efforts’.
• These cost at least $5trn, but failed to deal with the real problems – the US housing market; China’s over-dependence on exports; the Eurozone debt issues
• They also made the problems worse, by providing liquidity to the ‘high frequency traders’ to drive oil prices up to recession levels

Financial crises such as today’s usually follow a predictable pattern. Markets see a sharp fall, then a temporary rebound, followed by a long-drawn out fundamental downturn.

The downturn marks the period where the world readjusts to changed circumstances. It only ends when policymakers and companies refocus on looking forward, rather than on returning to the previous ‘normal’.

Sadly, there are currently few signs that this forward-looking approach is yet being widely adopted.

ICIS pricing movements for the benchmark products since the Monitor’s launch are below:

HDPE USA export (purple), down 22%
Benzene NWE (green), down 20%.
Naphtha Europe (brown dash), down 20%. ”
PTA China (red), down 18%.
Brent crude oil (blue dash), down 14%
S&P 500 Index (pink dot), down 7%


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