China still top chemical consumer amidst economic slump

Despite the slow economic growth in China’s economy in 2015, that saw the country grow 6.9% in the first three quarters, it is still the world’s largest consumer of chemicals, consuming more than one-third of the world’s base chemical production, which is greater than all of Europe combined or all of North America.

To meet growing chemical demand, China has invested not only in conventional petrochemicals, but also in unconventional chemicals, said Paul Pang, Vice-President, China, for IHS Chemical.

“By 2020, close to 40% of olefins in China will come from unconventional feedstocks, such as methanol-to-olefins (MTO), coal-to-olefins (CTO), and propane dehydrogenation (PDH),” Pang said.

“This is up from 20% in 2015, and up from a rate of nearly zero percent of olefins coming from unconventional sources just five years ago. We at IHS Chemical expect investments in unconventional olefins production to peak this year at more than US$20 billion.”

Pang will discuss this and other growth opportunities in the third Asia Chemical Conference in Singapore from 5-6 November 2015.

Meanwhile, Nariman Behravesh, Chief Economist at IHS, said that the world economy has been growing below average. “The world economy is stuck in low gear. Since 2011, global growth has been ‘range-bound’ between 2.5% and 2.8%, well below the average growth rate of the past two decades But he also pointed out that lower oil prices are actually benefitting the plastics industry and stimulating plastics demand in Asia, particularly in countries such as China and India. “Lower oil prices are driving consumer spending in Asia for many lower-cost consumer goods and electronics, as well as processed foods and soft drinks, all of which are packaged in plastic.”

The rest of Asia, however, is likely to feel the pain from the slowdown in China’s growth rates. “The mood of chemical producers in much of the rest of Asia is one of apprehension,” said Tony Potter, Vice President, Asia Pacific, at IHS Chemical. “Nonetheless, it has been a good year for many olefin and polyolefin producers, since cracker margins were buoyed by a tight market, and product-price declines generally lagged those of the underlying oil and naphtha prices.”

IHS expects average margins to slip in 2016, however, due to concerns over China’s economy, as well new supply coming on-stream. “Producers fear that China’s economic performance will be less robust than forecast,” Potter said, “which could undermine demand. Additionally, they know that in 2017, the global market will have to accommodate large volumes of new material from the new coal-based Chinese plants, and the new ethane crackers expected online in the US.”

Potter cautioned, however, that not all olefins value chains are equal. Investments in coal and ethane-based olefins are creating supply gaps in C4s and aromatics. In addition, he said, the supply-demand stories for elastomers and fibres are complicated by large inventory overhangs of natural rubber and cotton.

Martin Laudenbach, President, Asia Pacific, at Solvay, will deliver a keynote at the conference, where he will also discuss Asia’s role in the next chemical cycle.

A number of other industry and IHS experts will join Pang, Potter and Solvay’s Laudenbach in presenting insight and analysis relative to the outlook for the global and Asian chemical industries.