PODCAST: Industry needs wartime-like focus on meeting basic needs

Author: Will Beacham

2020/04/06

BARCELONA (ICIS)--The chemical industry needs a wartime-like focus on meeting the basic needs of society as coronavirus continues to cause unprecedented disruption to chemical markets around the world, according to senior industry commentators.

Meeting medical and food supply chain requirements will allow the industry to find bright spots of demand, as well as enhancing its reputation, according to John Richardson, ICIS senior consultant, Asia.

“For now we need a wartime-like focus on medical and food supply requirements. There is good demand for packaging including polyethylene (PE), polypropylene (PP), polyethylene terephthalatae (PET), polystyrene (PS). For protective screens there is good demand for polycarbonate (PC) and poly methyl methacrylate (PMMA),” said Richardson.

ICIS Insight editor, Nigel Davis points out that some supply chains are changing fundamentally. For example as demand for biofuels has collapsed, glycerine production is falling and prices are spiking as a result in Europe. Glycerine is used for personal care products.

CRISIS IMPACT ON CHEMICALS
The commentators believe we are only just starting to see the impact of this crisis on chemicals, with important sectors such as automotive and now construction grinding to a halt in some countries.

According to International eChem chairman, Paul Hodges, the unprecedented collapse in economic activity is much worse than 2008/9 and more comparable to the Great Depression of 1929 or 1974 oil crisis and stock market crash.

“Europe benzene and US ethylene markets are telling us something very important. Europe benzene prices are at pre-1975 levels. There is a huge surplus of ethylene in the US, with crackers still running [because ethane is a by-product of shale oil exploration] so there must now be a vast inventory of polymers in the US,” he added.

He points out that US refiner Flint Hills has declared force majeure on crude oil purchases because it has run out of storage space. Some crude oil suppliers in Wyoming are paying 19 cents/bbl for customers to take the crude away.

LONGER TERM
In the longer-term the industry will see growth in demand from mobility, rather than traditional automotive, plus personal health and care. There will be a drive from global towards regional supply chains as they are too fragile in an emergency.

CHINA EXPERIENCE
Although China is about one month ahead of Europe, with virus restrictions now being lifted, its economy is still suffering with disrupted logistics and the after-effects of the two-month shutdown on businesses and consumers.

ICIS is organising a series of free webinars and regular industry updates to help bring the industry community together in this time of crisis. Register here. 

Read John Richardson's Asia Chemical Connections blog.

Read Paul Hodges ICIS Chemicals and the Economy blog.

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Listen to this podcast interview by Will Beacham