Chemical Insight, May 26, 2005
The mood at the Asia Petrochemical Industry Conference (APIC) earlier this month varied between optimism and pessimism.
But if you dug a little deeper during discussions, all convictions waned to be replaced by a mood of overriding uncertainty.
Firstly, nobody was sure of inventory levels in the key China market. What happened last year as petrochemical ramped up was that buyers piled into the market to build up stocks ahead of requirements. And in the current down cycle, even those who are not sitting pretty on high inventory are buying the bare minimum to keep their operations going because of the anticipation that prices have further to fall.
July a critical month for petrochemicals in Asia
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July a critical month for petrochemicals in Asia
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Also, nobody was clear over the severity or longevity of the credit clampdown in China. The government has reduced trade and long-term credit availability in an effort to cool the economy down, making it harder for buyers to open letters of credit. This is contributing to weak consumption.
Another motive for buyers to stay out of the market is the widespread anticipation that the renmimbi will be revalued soon. No buyer wants to make substantial purchases now just in case next month his raw-material costs end up falling on a stronger currency.
And last but far from being least, nobody at the conference could precisely gauge the extent of demand destruction caused by the recent ramp up in pricing.
There was a widespread feeling, though, that the cracker and aromatics industry had been greedy in a headlong push for higher and higher, and ultimately unsustainable, pricing. While the polymer producers and converters managed to pass on price rises, manufacturing industry has not been so lucky.
There were anecdotal reports during APIC of manufacturers forced into bankruptcy, or close to it, because of rapid increases in raw material costs and retailers unprepared to adjust pricing for finished goods. But what everybody was certain about was that July is a critical month.
Another motive for buyers to stay out of the market is the widespread anticipation that the renmimbi will be revalued soon. No buyer wants to make substantial purchases now just in case next month his raw-material costs end up falling on a stronger currency.
And last but far from being least, nobody at the conference could precisely gauge the extent of demand destruction caused by the recent ramp up in pricing.
There was a widespread feeling, though, that the cracker and aromatics industry had been greedy in a headlong push for higher and higher, and ultimately unsustainable, pricing. While the polymer producers and converters managed to pass on price rises, manufacturing industry has not been so lucky.
There were anecdotal reports during APIC of manufacturers forced into bankruptcy, or close to it, because of rapid increases in raw material costs and retailers unprepared to adjust pricing for finished goods. But what everybody was certain about was that July is a critical month.
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taro23
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July a critical month for petrochemicals in Asia
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In July, China's buyers traditionally come back to build stocks ahead of the peak August-September manufacturing season for goods that are shipped west for Christmas season. If July is flat, we could be looking at a year of negative demand growth for many of the key olefins, aromatics and polymers. Also, the down cycle might have gained such momentum that pricing will stay depressed for the longer term.
The other scary thought is that we are not too far away from 2007-08, when supply is set to increase significantly because of lots of project activity. The assumption held at APIC was that 2007-08 would not be as bad as 1997-98 because of strong demand growth and comparatively less new capacity.
Copyright (c) 2005 CNI-Reed Business Information
The other scary thought is that we are not too far away from 2007-08, when supply is set to increase significantly because of lots of project activity. The assumption held at APIC was that 2007-08 would not be as bad as 1997-98 because of strong demand growth and comparatively less new capacity.
Copyright (c) 2005 CNI-Reed Business Information
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taro23
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- โพสต์: 121
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July a critical month for petrochemicals in Asia
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In July, China's buyers traditionally come back to build stocks ahead of the peak August-September manufacturing season for goods that are shipped west for Christmas season. If July is flat, we could be looking at a year of negative demand growth for many of the key olefins, aromatics and polymers. Also, the down cycle might have gained such momentum that pricing will stay depressed for the longer term.
The other scary thought is that we are not too far away from 2007-08, when supply is set to increase significantly because of lots of project activity. The assumption held at APIC was that 2007-08 would not be as bad as 1997-98 because of strong demand growth and comparatively less new capacity.
Copyright (c) 2005 CNI-Reed Business Information
The other scary thought is that we are not too far away from 2007-08, when supply is set to increase significantly because of lots of project activity. The assumption held at APIC was that 2007-08 would not be as bad as 1997-98 because of strong demand growth and comparatively less new capacity.
Copyright (c) 2005 CNI-Reed Business Information
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