Global operating rates continue to slip

Economic growth


ACC OR Jul13There has been “$33tn in fiscal and monetary stimulus” since the financial crisis began in 2007 according to Bank of America Merrill Lynch.  Yet global chemical operating rates (OR%) remain well below their 91.1% average since 1987, and are also lower than in 2012, as the above chart from the American Chemistry Council shows:

  • Global OR% were 87% in May, compared to 87.5% in May 2012
  • US output was up just 0.9%, despite the shale gas advantage
  • Latin America was down 1.2%, and Europe down 0.3%
  • The major increases were the Middle East/Africa, up 4.2%; China, up 6.7%; Asia, up 5.6%

The US performance is particularly disappointing, as the ACC note:

“As export demand has weakened due to the recession in Europe and slower growth in key emerging markets, demand for manufactured goods has slipped and manufacturing activity has slowed.”

If the blog were still running a major business, it would expect this report to prompt major debate at Board level about the viability of the expansions now being planned in the USA.  Spend on these is now estimated at $72bn, and they clearly require buoyant export markets if they are to succeed.  Yet demand growth today remains slow, and is focused on the Middle East/China – where local production is also expanding.

Some producers argue that higher-cost plants in both regions will shutdown if new US capacity comes on stream.  Others hope European/Latin American plants will close if their economies continue to weaken.  But closing down existing plants is a difficult and long drawn-out process.

The key issue is that most producers, and investors, are still operating in SuperCycle mode.  They assume strong global demand growth, and that lowest-cost producers will always achieve sustained profitability.  Sadly, however, these arguments no longer apply in the New Normal.

Instead, $33tn of government stimulus has created major over-capacity in many industries, including chemicals.  Whilst ageing populations mean there is little sign of any pent-up demand or likely future market shortages.


China's polyethylene demand up 10% versus 2011, US imports drop again


Latest data on China’s demand for polyethylene continues the recent trend of s...

Learn more

Boom/Gloom Index remains in no-man's-land


This month’s IeC Boom/Gloom Index continues to flash warning signs over the st...

Learn more
More posts
G7 births hit new record low, below Depression level in 1933

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

From subprime to stimulus…and now social division

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

Resilience amidst headwinds is key for H2

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

Perennials set to defeat Fed’s attempt to maintain the stock market rally as deflation looms

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

Europe’s auto sector suffers as Dieselgate and China’s downturn hit sales

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

2019 Global Outlook – a mid-year update: ACS webinar on Thursday

There will be no shortage of important topics to discuss on Thursday, at my regular Chemistry and t...

US-China trade war confirms political risk is now a key factor for companies and the economy

There are few real surprises in life, and President Trump’s decision to launch a full-scale tr...

Uber’s $91bn IPO marks the top for today’s debt-fuelled stock markets

Uber’s IPO next month is set to effectively “ring the bell” at the top of the post...


Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more


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