Chaos looms in petchem feedstock and product markets

Chemical companies

Chaos Sept15Major change is underway in world markets for all petrochemicals. It is no exaggeration to say that we now face chaos on the supply and demand side – affecting both feedstocks and products.

Producers and consumers cannot afford to ignore the risks that this development creates for their business. Nor can investors afford to indulge in the wishful thinking that says central banks can quickly return growth to previous levels:

  • On the supply-side, oil prices have tumbled, and yet inventories remain at record levels – suggesting further price weakness cannot be ruled out.  This has had a major impact on the relative values of oil and gas-based feedstock.  US shale gas cracker investments no longer have the secure long-term advantage assumed when they were conceived
  • On the demand side, there is increasing evidence that today’s globally ageing populations mean a “demographic deficit” is replacing the “demographic dividend” created by the baby boomers when they were in their prime spending mode. The same trends are developing in many emerging economies, with China’s working-age population already in decline

As I note in a new analysis for ICIS Chemical Business, companies need to respond quickly by developing new, less product-oriented and more service-driven offerings.

These developments raise a fundamental question as to whether the petrochemical industry is undergoing a generational change, that challenges current supply-driven business models based on forecasts for GDP growth.

These concerns are highlighted by the impact of China’s New Normal policies. These have dramatically slowed economic growth, even if one takes the official numbers at face value.  Its move towards a service-led economy is challenging previous certainties about its ability, along with that of other emerging markets, to underpin high levels of demand growth for major petrochemicals and polymers.

Additional levels of uncertainty are created by the impact of the major stimulus policies implemented by central banks post-2008. These appear to have created only a fragile recovery, and have left behind a legacy of debt which will inevitably depress future demand. China’s stock market downturn over the summer has also emphasised the fragility of many global financial markets.

Petrochemical companies and investors have come to a fork in the road.

It is no longer possible to believe in the concept of a quick “return to trend” following the financial crisis. Equally, there are clear signs of major secular change taking place in core end-user markets such as automotive and construction. Plus, there are major question marks on the outlook for emerging economies, with two of the previously all-conquering BRIC countries (Brazil and Russia) already in recession

Please click here to download a copy of the ICIS Chemical Business analysis.

My weekly round-up of Benchmark prices since the Great Unwinding began is below, with ICIS pricing comments: 
Brent crude oil, down 54%
Naphtha Europe, down 52%. “Exports high on Asia refinery turnarounds”
Benzene Europe, down 62%. “Traders have also fixed exports to the US Gulf to help clear out some of the length in the European market.”
PTA China, down 43%. “Some end users came to the market to build stocks for the upcoming holiday”
HDPE US export, down 36%. “Prices for domestic exports remained stable during the week”
¥:$, down 18%
S&P 500 stock market index, down 1%


US incomes have plateaued since 2001 as Boomers turn 55+


More and more people are lining up to support our argument that central bank sti...

Learn more

Impact of $25/bbl oil – free pH Report webinar tomorrow


The consensus failed to forecast last year’s oil price collapse.  So is today...

Learn more
More posts
Look for Winners and Losers in 2021

“There are decades where nothing happens; and there are weeks where decades happen”. Lenin’s f...

Chemicals in the eye of the storm as UK heads for a WTO Brexit on 1 January

On Friday, the UK premier confirmed what many of us have expected for a long time. There is unlikely...

Chemical industry has key role in helping to create a more sustainable world

The chemical industry has a critical role to play in enabling the world to “build back better&...

Local circular plastics solutions to replace mega projects business model

NEW YORK (ICIS)–There will be a paradigm shift away from mega crackers producing massive volum...

Reshoring set to create Winners and Losers as advanced manufacturing takes over

Not many companies still operate in the same way as 500 years ago, or even 50 years ago. But in manu...

Polyethylene’s crisis will create Winners and Losers

Polyethylene markets (PE) are moving into a crisis, with margins in NE Asia already negative, as I h...

Day of reckoning approaches for US polyethylene expansions, and the European industry

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

Stormy weather ahead for chemicals

Four serious challenges are on the horizon for the global petrochemical industry as I describe in my...


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