Déjà vu all over again in petchem markets

Economic growth

SHARE THIS STORY

D'turn 17Feb12.pngThis time last year, the petchem industry stood on the edge of an unseen precipice. Life seemed good. Prices were racing ahead and demand appeared buoyant. But in reality the buyers were only buying forward to protect margins, whilst end-user demand was slowing fast.

This year, the blog fears, we may be about to take one step forward.

As last year, the evidence comes from ICIS market reports. The highly experienced Linda Naylor last week reported buyers commenting as follows in European polyethylene and polypropylene markets:

“‘We expect an increase for ethylene in March, so we are buying our full contracted volumes in February, and also in January, even though our demand is poorer than we expected. That way, we won’t have to buy so much in March.”

“‘Our demand is below what we expected but we are taking our full contracted volumes to be able to have a buffer next month.”

Similar warning signs are reported by Becky Zhang in China’s ethylene glycol markets, and Helen Yan in Asian butadiene:

“‘The market is full of offers and this [has worsened the] bearish sentiment’, a major regional trader said. China’s port inventory reached a historic high of over 750KT, with increased import volumes arriving from all over the world. This is almost exceeding China’s maximum storage capacity of around 800KT.”

“‘BD prices are higher than BR and this is not sustainable,’ another synthetic rubber producer said.”

The chart shows how prices for the benchmark products have seen 3 major rallies since 2009. These followed the 3 major stimulus packages.

Today’s rally began with Q4’s US Federal Reserve’s $400bn Operation Twist programme. It is clearly much weaker than those which followed the March 2009 and August 2010 quantitative easing programmes.

Product price changes since the 29 April peak, with ICIS pricing comments, are below:

HDPE USA export (purple), down 11%. “Offers for re-exports from China were heard at lower prices than offers from the US Gulf”
PTA China (red), down 11%. “The current supply and demand balance as well as volatile external markets did not support a solid upturn”
Naphtha Europe (brown dash), down 7%. “Vitol continued its naphtha buying spree, taking 5 cargoes after it bought eight cargoes last week”
Brent crude oil (blue dash), down 5%
Benzene NWE (green), down 4%. “Continued buoyancy on crude and energy numbers counterbalanced by lower demand.”
S&P 500 Index (pink dot), no change

PREVIOUS POST

Greece's problems lead to EU auto industry job cuts

18/02/2012

Greece’s debt default saga seems never-ending. And it is tempting to hope ...

Learn more
NEXT POST

Auto sales have slow start in January

21/02/2012

January was not a great month for auto sales in the 3 major markets of the USA, ...

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
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
From subprime to stimulus…and now social division
06/07/2019

The blog has now been running for 12 years since the first post was written from Thailand at the end...

Read
Resilience amidst headwinds is key for H2
30/06/2019

Resilience is set to become the key issue as we look forward to H2, as I note in a new analysis for ...

Read
Perennials set to defeat Fed’s attempt to maintain the stock market rally as deflation looms
23/06/2019

Never let reality get in the way of a good theory. That’s been the policy of western central b...

Read
Europe’s auto sector suffers as Dieselgate and China’s downturn hit sales
16/06/2019

Trade wars, Dieselgate and recession risk are having a major impact on the European auto industry, a...

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