BLOG: Petrochemicals three years from now: A shrinking global market?

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

Earlier this week I suggested that there would be no end to the petrochemicals downcycle until 2026.

But what if this isn’t just a normal downcycle? What if we see no return to the old petrochemical market conditions because of long-term shifts in the global economy due to the end of the China “economic miracle”, ageing populations in most of the world, the sustainability push and the impact on economies of climate change?

Might artificial intelligence lead to such a large loss of employment that petrochemicals demand growth takes a further hit?

In as little as three years’ time, in handy bullet points, this is what the petrochemicals world could look like:

• There is sufficient petrochemical supply already available to meet demand as global demand is shrinking.
• As China is said to be some 45% of global petrochemicals and other manufacturing capacity, and because it is so plugged into global supply chains, this is one of three locations where we are seeing some petrochemicals capacity growth. China is adding more capacity, where it can find sufficiently competitive feedstocks, for supply security reasons.
• The other locations are the Middle East because of its feedstock advantages, now improving because of more natural-gas liquids discoveries, and the US where government policy continues to support manufacturing.
• Major consolidation is taking place elsewhere to accommodate this new supply and shrinking demand. Petrochemical plant closures are taking place in Europe, South Korea, Singapore, Japan, and possibly even Southeast Asia.
• When electrification of vehicles took off, excitement began over petrochemicals demand replacing lost oil demand into transportation fuels. Good look with that idea as petrochemicals demand is, as mentioned, actually shrinking.

Can you afford just one scenario, one plan? No, of course. Everything points to a much more ambiguous future than the comfortable and predictable petrochemicals world see enjoyed during the 1992-2021 Supercycle.

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.