BLOG: The “sound and fury” of new China stimulus and PE and PP spreads

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson.

To paraphrase William Shakespeare, I see last week’s fuss about China’s new economic stimulus as being full of sound and fury, signifying hardly anything.

The hard reality is that China is undergoing a period of a much lower GDP and therefore chemicals demand growth. Nothing can change this trajectory, for reasons I discuss in detail in today’s post.

During 2025, the problem will remain far too much global capacity chasing much weaker-than-expected demand up and down all the chemicals value chains because the consensus on China was wrong.

So, to add to my five forecasts for 2025 which I published last week, here is a sixth: There will be no significant improvements during next year in China’s CFR polyethylene (PE) and polypropylene (PP) price spreads over CFR Japan naphtha costs.

The 2024 final numbers are almost in. We can see that the downturn in spreads that followed the Evergrande Turning Point continues.

Let’s start with PE where 2022-2024 average spread for the three grades was just $300/tonne. This compares with a spread in 1993-2021 – during the Chemicals Supercycle – that averaged $532/tonne.

The average 2022-2024 PP spread was $240/tonne as against $562/tonne during the Supercycle.

Please don’t be distracted by unhelpful noise. Instead, place all your focus on retooling your tactics and strategies to deal with the post-Supercycle chemicals world.

Editor’s note: This blog post is an opinion piece. The views expressed are those of the author, and do not necessarily represent those of ICIS.