BLOG: PC trade flows: The need for new approaches to reflect trade tensions

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson: The soundtrack of my youth was the Canadian rock band, Rush. In the fabulous Tom Sawyer, the lyrics include: “His mind is not for rent, always hopeful yet discontent, he knows changes aren’t permanent, but change is”.

Don’t let your mind be rented by anybody who tells you that the global chemicals industry isn’t going through the most profound set of changes in its modern-day history.

Nobody knows all the details of the changes that will be permanent. Anybody who claims they do know will lead you down a path away from essential scenario planning.

We do know that in this world of flux and chaos at a micro level, the following macro trends are here to stay: Sustainability, ageing populations across most of the G20, much more volatile geopolitics, ever greater economic, social and political disruptions caused by climate change and the end of debt bubbles.

How will, for example, geopolitics and rising trade tensions reshape global polycarbonate (PC) trade flows, demand and trade flows?

In today’s post,  I look at scenarios for China’s net imports or net exports of polycarbonate in 2024-2030 based on levels of trade tensions and its ability to export to third-party countries such as Mexico. These countries have become a means by which China is getting around the trade tensions by relocating export-focused manufacturing plants.

The ICIS base case forecasts that China’s PC demand growth will fall to an annual average of 3% in 2024-2030 from 17% in 1992-2023.

Assuming this 3% demand growth, capacity growth at 4% and an operating rate of just 47% in 2024-2030 (the 1992-2023 operating rate averaged 68%), ICIS forecasts that China’s PC net imports will be around 460,000 tonnes a year.

Let’s imagine in a world of increased trade tensions, China decides it cannot afford to rely on large volumes of imports. Because of the trade tensions, it also cannot export significant quantities of PC to countries such as Mexico to make autos, etc.

Under this outcome, let’s keep demand and capacity growth the same in the base case but raise operating rates to 55%. Average annual net imports fall to just 80,000 tonnes.

What if, though, trade tensions are not that bad? If we again keep demand and capacity growth the same as the base case but raise the operating rate to 63%, China becomes a net exporter at an annual average of 460,000 tonnes between 2024 and 2030.

I plan to attempt to build new demand and supply models today’s demographic, geopolitical, debt, sustainability and climate change realities.

This is going to be immensely difficult. Failure will be a big part of any success. But given today’s events, do we have any other choice?

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.