BLOG: China PP sales turnover collapses by $4.6bn after the end of the Supercycle

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

We now have 32 months of trade and pricing data since the end of the 1992-2021 Chemicals Supercycle and so it is worth taking stock of what the numbers are telling us.

And as we have 32 months of information to draw on since the end of the Supercycle, which is from January 2022 until August 2024, it is worth making like-for-like comparisons with the 32-month period immediately before the end of the Supercycle – May 2019 until December 2021.

Focusing just on polypropylene (PP) with the story the same in many other products:

• South Korea and Taiwan saw declines in PP sales turnover in China of $1.1 billion and $694 million respectively when this two 3-month periods are compared. Despite its feedstock advantages, Saudi Arabia saw its turnover fall by $681m followed by Singapore at $633m and Thailand at $613 million .
• Losses across China’s top ten trading partners totalled $4.6bn. The only winner was, not surprisingly, the Russian Federation with a turnover gain of $102 million.

Another symptom of a chronically oversupplied market has been a collapse in margins as another chart in today’s post illustrates:

• In May 2019-December, the average of both naphtha and PDH-based PP margins was $281/tonne, but this fell to just $12/tonne in January 2022-September 2024. And this latter period has involved many weeks of negative margins.

A pivotal turning point in global chemicals markets, the most important since 1992, was the Evergrande Moment. And yet far are too few references to this essential context.

China’s debts and its demographics told us from as early as 2011 that a steep fall in economic growth had to happen. We also knew from 2014 onwards, thanks to a shift in government policy, that much-greater chemicals self-sufficiency was on the way.

This gave producers plenty of time to build strategies that reduced their dependence on China.

But how many companies took note of what the demographic and debt trends were telling us? How many took note of the threat to China’s exports from 2018 onwards as the geopolitical environment deteriorated?

My suspicion is that far too few companies were ready for the changes now well underway, which are reflected in the above demand, supply, sales turnover and margins data.

This was because people chose to believe misleading nonsense about the “rise of China’s middle class” when the numbers on China’s per capita incomes, the country’s birthrate and the rise in its debts exposed the myth.

The chemicals industry is science and data driven except, seemingly, in one critical area:  Macroeconomics.

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.