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Chemicals and the Economy

Supply shortages drive olefin market profitability

The above chart would have seemed unbelievable at any time in the past 30 years. It shows the performance of propylene and butadiene relative to ethylene. Not because it shows butadiene prices racing ahead relative to ethylene (green line). This happens routinely during a downturn, as tyre demand is more robust than for polymers. If […]

Uncertainty grips New Year trading

Markets are worryingly quiet for the start of a New Year. There is some restocking underway, but the main interest lies in the crude oil market. Since Brent peaked in April, there has been a clear pattern each month: • Prices have peaked at the start of almost every month • The only exceptions have […]

The banana skin risk

This week’s news provided more evidence to support the blog’s fear that the global economy is close to recession: • The German economy, Europe’s motor, saw negative growth in Q4 • US retail sales grew just 0.1% in December, despite good auto sales • China’s auto sales fell in Q4, and house prices fell in […]

Germany in the firing line as Greek default nears

Interest rates are key to the direction of the global economy. But not in the way that was true during the 1982-2007 economic SuperCycle. Then, there was a global surplus of savings, due to the vast numbers of people in the Wealth Creating 25 – 54 age group. So interest rates reduced dramatically in most […]

Welcome to Austeria

ICB has just published the blog’s annual New Year Outlook. The interview above summarises its key points. ICIS deputy editor Will Beacham opens the interview with the key question: “A year ago, we were about the only people who didn’t have unbridled optimism for the whole of 2012. Why do you think there was all […]

US auto sales rise, as older cars have to be replaced

December’s US auto sales provide a classic example of Kahneman’s illusion, discussed on Saturday. Initially they appear encouraging to our System 1 minds. As the chart shows (red line), they were the 2nd highest of the year, and one of the few months to top 1.1m sales since the start of the Great Recession. But […]

Record high oil prices hit demand

The blog is quite surprised at the mainstream media’s lack of interest in the fact that average Brent oil prices were at record levels in 2011 in real terms (adjusted for inflation). The annual average of Brent prices recorded by the US Energy Information Administration was $111.26/bbl, well above even 2008, when Brent prices peaked […]

Seeing is not believing

Prof Daniel Kahneman is the blog’s favourite living social scientist. He won the 2002 Nobel Prize for economics for his insight that: • Economists are wrong to assume human beings are motivated by self-interest and make rational decisions • In fact, human judgement may take short-cuts that systematically depart from basic principles of probability • […]

2012 sees rising political risk, and protectionism

The world enjoyed an economic SuperCycle between 1982-2007. Its largest economy, the USA, suffered just 16 months of recession during the whole 25 years. As a result, social and political issues took a back-seat. Politicians instead competed to occupy the middle ground. Former UK premier Margaret Thatcher’s phrase ‘you can’t buck the markets’, became received […]

2011 saw ‘long-drawn out fundamental downturn’ begin

The 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’. […]

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