A manufacturing slowdown is now well underway in China, as the latest official and unofficial Indices confirm. The government is mitigating this via its policy of self-sufficiency – which means a steady reduction in the need for imports – as well as by increasing exports of higher value-added products such as polyethylene (PE). PE is the largest volume plastic, used in […]
Chemicals and the Economy
US shale gas bubble will end in tears for ethylene expansions
A return to lower oil prices is good news for the global economy. But it is bad news for all those who have invested in expanding ethylene production on the assumption that US gas prices would maintain the temporary advantage of recent years. As the chart shows: Oil (blue line) has around 6x the energy […]
China sees $13.5bn of fake September ‘collateral trade’ invoices
China’s ‘collateral trade’ is still a major force in world markets for iron ore, copper and even plastics such as polyethylene. September’s data suggests $13.5bn of fake invoices added 56% to the value of China’s exports to Hong Kong, as property developers strove to raise cash to finish their buildings. Full details of the trade […]
Turkish plastics markets see imports fall for first time since 2008
Turkey is the blog’s “go-to” market when it wants to confirm trends in global markets. The reason is that Turkey has a very successful downstream industry, but has failed to invest in upstream capacity. This means it is essentially an opportunistic market from a sellers’ viewpoint. During good times, exporters will only divert product from […]
Polymer markets at risk if China’s ‘collateral trade’ unwinds
Global metal markets are at growing risk from developments in China’s ‘collateral trade’, as yesterday’s post highlighted. Worryingly, so are products such as polyethylene and ethylene glycol, as it seems likely these have also been used as collateral more recently. This will be bad news for producers already suffering from slowing demand: China’s economy continues to weaken as the […]
China’s $10bn trade deal fraud hits iron ore and copper markets
Iron ore prices on China’s futures market were at 5-year lows yesterday. Copper prices also weakened in Australia. This adds to the blog’s concern that China’s ‘collateral trade’ market is getting closer and closer to its ‘moment of truth’. This will come as an awful shock to most outside observers, who have been led to believe China’s vast imports […]
US ethylene outages boost European and Asian PE producers
Polymer traders must be already counting their end-of-year bonuses, as the value of the US$ rises whilst crude oil prices weaken. The biggest bonuses will likely go to polyethylene (PE) traders competing with US producers. The reason is that US ethylene spot prices are currently at record levels. An astonishing 10% of US ethylene capacity has been out […]
Eliminating the impossible in China’s polyethylene market
Very large amounts of copper, iron and other commodities are in long-term storage in China as part of the ‘collateral trade’. More recently, it seems large amounts of polyethylene (PE), ethylene glycol (MEG) and probably other chemicals have also started to be used for the trade. None of this used to matter when the Chinese economy was booming. Why […]
Polyethylene, shadow banking and China’s ‘collateral trade’
The blog’s latest post for the Financial Times, published on the BeyondBrics blog is below. By Paul Hodges of International eChem Strange things are happening in China’s polyethylene (PE) market. Despite a slowdown in the economy, demand is surging. Our research suggests that PE, like copper and iron before it, is the latest instrument of China’s […]
China’s PE imports jump 26% as credit bubble peaks
Strange things are happening in China’s polyethylene (PE) market, as the chart shows: Imports suddenly jumped 26% in Q1 (red column) versus last year (green) This would be an extraordinary amount at any time, but especially now with the economy slowing It comes at a time when China’s own production continued to increase, up 8% As a result, […]
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