BARCELONA (ICIS)--Chemicals executives must make business plans for a worse case scenario of collapsing demand and a prolonged economic downturn, according to an industry consultant.
Coronavirus has triggered a collapse of global markets at a time when asset values were vastly over-inflated by unprecedented levels of debt, said Paul Hodges, chairman of consultancy International eChem.
“The current stock market collapse is a sign that the central banks have lost control of the stock market, just as OPEC has lost control of oil markets," he said.
"We are going back to the original function of markets which is price discovery.”
He believes markets are now fundamentally unstable and will take years to recover.
“I don’t see why oil prices should stop declining until we get near $10/bbl. Cartels don’t work in the long run because all you do is encourage new production such as US shale oil.”
The chemical industry now needs to focus on:
- Employee health and safety
- Value chain risks
- Supply chains
- Credit risks
- No return to 'business as usual' – paradigm shifts
“What worries me is that people still believe the central banks can wave a magic wand and we don’t have to worry about contingency planning," said Hodges.
"They clearly cannot. It’s a very depressing and frightening time.”
Look out for Paul Hodges' article, part of our special North America issue of ICIS Chemical Business out on Friday 20 March; the e-magazine is part of the ICIS news package.
Podcast interview by Will Beacham