LONDON, March 3, 2016 /PRNewswire/ --
Major change has been underway since the global financial crisis hit in 2008, forcing petrochemical markets around the world to operate in persistently chaotic conditions. Major expansions in debt and artificial financial stimulus have failed to deliver real growth. Uncertainty and instability continue unabated, fuelled by multiple factors and, crucially, making it impossible for organisations to adopt a 'business as usual' approach and still achieve success.
In response, ICIS has published a new Scenario Study which clearly assesses pivotal events and trends, their impact, and the opportunities that are subsequently arising. Produced by a team of leading industry experts from ICIS and International eChem, this Study is a robust and intelligent critical assessment of the present economic landscape, and provides a roadmap for navigating towards future profit and growth.
Aimed at senior executives, strategists and analysts in the petrochemical feedstock and product markets, the ICIS Study analyses the potential impact of developments on the olefins, aromatics and polymer value chains over the next 10 years. It has been developed by a team of experts who have many decades of industry experience in all the main product areas and geographies, and is under-pinned by data from the global ICIS Supply & Demand Analytics platform.
The Study challenges entrenched assumptions including:
- The "China chill". What is the real impact of China's change of economic direction: business as usual or a major shift for global supply and demand patterns? The Asian Development Bank claimed more than half of China's households had become "middle class" by 2007: was this realistic?
- Stimulus programmes. Have central bank efforts to restore growth been successful or simply created a debt mountain which will be difficult to repay in a low-growth world?
- The demographic cliff. Global fertility rates have halved since 1950, while life expectancy has risen by 50%. Globally, 1 in 5 people will be in the New Old 55+ generation within 15 years (nearly 1 in 3 in the developed world). What is their likely impact on demand patterns?
- Oil and petrochemical super cycle. China has been the growth engine of the chemical industry since 2009 and strong ethylene demand growth was confidently predicted. Could the "China chill" now lead to a lack of export demand for new and existing capacity outside China?
- Affordability versus value-added. Core end-user markets including retail, autos, electronics and housing have seen a paradigm shift by consumers now focusing on price and affordability. Is this a temporary or permanent shift in demand patterns and what are the upstream implications?
Paul Hodges, co-author of the Study, explains some of the background thinking. "A number of myths are now being exposed: China is not middle class; oil prices are not going to be relatively more expensive than gas; central bankers cannot control the economic destiny of 7.3bn people by printing money. Petrochemicals and polymers now face a major supply glut and at the same time, paradigm shifts are taking place in demographics which will ultimately change the supply and demand landscape completely."
Subscribers to the ICIS Study: "Demand - the New Direction for Profit", can examine the data and analysis underlying these key trends and see how industry experts predict three very different potential scenarios will play out for petrochemicals markets. The scenarios extrapolate the impact of a continuing tension situation; a comfortable middle; and a stall in demand growth. Explanation and guidance is also provided on how to correctly prepare, plan and pivot for different crude oil price scenarios.
Having made clear that a new approach is required, upcoming opportunities in the petrochemical value chain are then identified. Ethylene, propylene, butadiene, aromatics and their derivatives are all covered, as is inter-polymer competition.
"This Study makes clear why change is now an imperative and gives insight into how best to move forward. To survive, organisations must develop new business models focused on developing new products and services to respond to critical areas for the global economy such as water and food availability, and to supply the 1.8bn New Olders. Staying the same is simply not an option," concludes John Richardson, co-author of the Study.
To find out more go to http://www.icis.com/scenariostudy
About the authors
Lead Author Paul Hodges (IeC) is a trusted adviser to major chemical companies and the investment community. He has worked in the chemical industry for 30 years. Initially he spent 17 years as a senior executive with one of the world's leading companies (ICI), both in the UK and the USA, where he held senior executive positions in petrochemicals and chloralkali, and was Executive Director of a $1 billion ICI business. He founded IeC in 1995, has strong professional relationships with the leading players, and follows developments on a detailed day-to-day basis. He is the co-author of Boom, Gloom and the New Normal: How the Ageing Western BabyBoomers are Changing Demand Patterns, Again (http://www.new-normal.com ), and has been recognised in the Financial Times and elsewhere for his success in correctly forewarning of the global financial crisis. Paul is an invited member of the World Economic Forum's Global Agenda Council on the Future of Chemicals, Advanced Materials & Biotechnology 2014-2016, a Member of the Energy Institute, and a Freeman of the City of London. He is a graduate of the University of York, and studied with the IMD business school in Switzerland.
Lead Author John Richardson (ICIS) is a highly experienced chemicals consultant and trainer, who has been working in the industry for 19 years. Based in Asia-Pacific, John has deep knowledge of the companies and people who have transformed the region into the world's major production and consumption region. His aim is to provide insightful, fact-based consultancy analysis of the key issues facing the industry. His views are highly valued by senior executives, who appreciate his balanced and independent approach. From 2006 until 2013, John was Director - Asia of ICIS training, in which role he successfully launched the ICIS training business in Asia. This provides a wide range of courses covering petrochemicals, oil refining, fertilizers and base oils. He now works for the ICIS consulting team, with responsibility for the Asian Polyethylene and Polypropylene Price Forecast Reports. John has also co-authored an e-book, Boom, Gloom and the New Normal: How the Ageing Western BabyBoomers are Changing Demand Patterns, Again. The book, which has been published by ICIS, examines how demographic factors and events in financial markets have reshaped the global economy. His Asian Chemical Connections blog has a wide regional and global readership.
Editor Joseph Chang (ICIS) is Global Editor of ICIS Chemical Business, a weekly publication focusing on making sense of chemical prices worldwide. This includes price trends, and the factors impacting these trends in both the short term and the long term. He has been with ICIS and one of its predecessor publications for 18 years, specialising in coverage of financial topics such as macroeconomics, capital spending patterns, equity and debt markets, and mergers and acquisitions. Joseph has a degree in Finance and International Business from New York University's Stern School of Business.
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