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“Chemistry and the Economy: 2017 Mid-Year Update”
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Entering the Great Unknown 22 June 2017
Page 13
The pH Report About IeC: International eChem (IeC) is a London-based strategy consultancy advising Fortune 500 and FTSE 100 companies, investment banks and fund managers. Paul Hodges
is a trusted adviser to major companies and the investment community, and has a proven track record of accurately identifying key trends in global marketplaces. He writes regularly for the Financial Times, and was widely recognised for forewarning of the 2008 global financial crisis. Paul publishes The pH Report, and writes the ICIS ‘Chemicals & the Economy’ blog. His analysis of the key role of demographics in driving the global economy is now becoming accepted by senior policymakers and executives. Paul is non-executive Chairman of NiTech Solutions and a Director of Recycling Technologies. Prior to launching IeC in 1995, Paul spent 17 years with Imperial Chemical Industries (ICI) in the UK and the USA. He held senior executive positions in petrochemicals and chloralkali, and was Executive Director of a $1 billion ICI business. Paul serves as a Global Expert with the World Economic Forum, and is a Member of the Energy Institute and a Freeman of the City of London. He is a graduate of the University of York, and subsequently studied with the IMD business school in Switzerland.
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“THERE ISN’T ANYBODY WHO KNOWS WHAT IS GOING TO HAPPEN IN THE NEXT 12 MONTHS. WE’VE NEVER BEEN HERE BEFORE. THINGS ARE OUT OF CONTROL. I HAVE NEVER SEEN A SITUATION LIKE IT.” KEN CLARKE, FORMER UK FINANCE MINISTER, FEBRUARY 2017
Global economy – What is the ACC data trying to tell us? Oil markets – is the recent recovery for real, or will the OPEC-Russia output freeze continue to disappoint? China’s New Normal policies – the move away from stimulus, and the importance of the One Belt, One Road project Page 15
THE ACC’S CAPACITY UTILISATION INDEX IS THE BEST LEADING INDICATOR FOR THE GLOBAL ECONOMY
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CAPACITY UTILISATION HAS BEEN FALLING FOR 12 MONTHS, AND IS NOW CLOSE TO 2009’S LOW
Page 17
THE DISAPPEARANCE OF “PENT-UP DEMAND” MEANS VAST NEW SURPLUS CAPACITY HAS BEEN BUILT
Page 18
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GROWTH HAS SLOWED ACROSS THE ‘TOP 10’ ECONOMIES
Page 19
ALL THE MAJOR SECTORS HAVE SLOWED
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THE IMF HAS BEEN CONSISTENTLY OVER-OPTIMISTIC WITH ITS FORECASTS SINCE 2O11
Page 21
US AUTO MARKET HAS CLEARLY PEAKED
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Audience Survey Question ANSWER THE QUESTION ON BLUE SCREEN IN ONE MOMENT
What is the average U.S. new car loan? • $20,000 • $25,000 • $30,000 • $35,000 • $40,000
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AVERAGE US NEW AUTO LOAN NOW OVER $30k, WITH AVERAGE TERM AT 69 MONTHS Average used car loan is now $19k, with a loan term of 64 months
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US TAX RECEIPT DECLINE HIGHLIGHTS DISCONNECT WITH STOCK MARKET EUPHORIA
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“THERE ISN’T ANYBODY WHO KNOWS WHAT IS GOING TO HAPPEN IN THE NEXT 12 MONTHS. WE’VE NEVER BEEN HERE BEFORE. THINGS ARE OUT OF CONTROL. I HAVE NEVER SEEN A SITUATION LIKE IT.” KEN CLARKE, FORMER UK FINANCE MINISTER, FEBRUARY 2017
Global economy – What is the ACC data trying to tell us? Oil markets – is the recent recovery for real, or will the OPEC-Russia output freeze continue to disappoint? China’s New Normal policies – the move away from stimulus, and the importance of the One Belt, One Road project Page 26
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Audience Survey Question ANSWER THE QUESTION ON BLUE SCREEN IN ONE MOMENT
What country leads oil and petroleum imports to the U.S.? • Saudi Arabia • Canada • Nigeria • Venezuela • Russia
27
CANADIAN IMPORTS HAVE ESSENTIALLY BEEN REPLACING NIGERIA AND SAUDI ARABIA SINCE 2009 Co-products produced with each ton of ethylene
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SAUDI ARABIA IS FINDING IT DIFFICULT TO ACCEPT THAT THE US IS NO LONGER PLAYING BY THE OLD RULES THE DONALD J TRUMP VISION “The U.S. will become, and stay, totally independent of any need to import energy from the OPEC cartel or any nations hostile to our interests”
KHALID AL-FALIH, SAUDI OIL MINISTER “We have no problem with the growth of American indigenous oil supplies. As long as they grow in line with global energy demand we welcome them”
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OPEC FORMED AN ALLIANCE WITH MAJOR HEDGE FUNDS TO TRY TO MAINTAIN $50/BBL PRICE FLOOR “Dozens of hedge-fund managers and oil traders attended a series of closed-door meetings in recent months with OPEC leaders—organised by Ed Morse, of Citi” WALL STREET JOURNAL, 17 MAY 2017
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US OIL/PRODUCT EXPORTS ARE SOARING – PERMIAN COULD BE LARGER THAN GHAWAR Co-products produced with each ton of ethylene
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OPEC’S $50/bbl PRICE FLOOR MEANS US SHALE OIL PRODUCTION IS SET FOR RAPID EXPANSION Co-products produced with each ton of ethylene
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THE MEDIAN OIL PRICE HAS BEEN $23/BBL SINCE 1861 Co-products produced with each ton of ethylene
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WHAT WOULD A COLLAPSE IN OIL PRICES MEAN FOR STABILITY IN THE MIDDLE EAST AND OTHER REGIONS? Co-products produced with each ton of ethylene
THE DONALD J TRUMP VISION “The U.S. will become, and stay, totally independent of any need to import energy from the OPEC cartel or any nations hostile to our interests” Page 34
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“THERE ISN’T ANYBODY WHO KNOWS WHAT IS GOING TO HAPPEN IN THE NEXT 12 MONTHS. WE’VE NEVER BEEN HERE BEFORE. THINGS ARE OUT OF CONTROL. I HAVE NEVER SEEN A SITUATION LIKE IT.” KEN CLARKE, FORMER UK FINANCE MINISTER, FEBRUARY 2017
Global economy – What is the ACC data trying to tell us? Oil markets – is the recent recovery for real, or will the OPEC-Russia output freeze continue to disappoint? China’s New Normal policies – the move away from stimulus, and the importance of the One Belt, One Road project Page 35
CHINA’S NEW NORMAL POLICY IS A NEW ECONOMIC DIRECTION PRESIDENT XI JINPING, opening the 3rd Plenum November 2013 “The good meat is all gone; all that is left are hard bones to chew.” Xinhua, September 2014
“The indomitable growth of the three decades since 1978 is no longer feasible. New Normal China is less interested in growth rates and more interested in quality and efficiency of growth: pushing forward reform, adjusting structure and trying to benefit the people.” Page 36
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Audience Survey Question ANSWER THE QUESTION ON BLUE SCREEN IN ONE MOMENT
In 2016, how many megawatts did China produce in wind and solar energy? • About 50K in wind and 40K in solar • About 50K in wind and 80K in solar • About 80K in wind and 35K in solar • About 100K in wind and 50K in solar • About 150K in wind and 80K in solar
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CHINA IS DRIVING A MAJOR SHIFT TO RENEWABLES TO COMBAT AIR POLLUTION Co-products produced with each ton of ethylene
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CHINA’S MOVE TOWARDS A NEW NORMAL ECONOMY IS ESSENTIAL TO AVOID THE ‘MIDDLE INCOME TRAP’
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THE ONE BELT, ONE ROAD (OBOR) PROJECT ENABLES CHINA TO MITIGATE ITS DEMOGRAPHIC DEFICIT
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“BUSINESS AS USUAL” IS NO LONGER AN OPTION, BUT THE FUTURE HAS A RANGE OF NEW OPPORTUNITIES MOBILITY The sharing economy
SHELTER Renewables and conservation SUSTAINABILITY
HEALTH Digital healthcare
WATER Clean water and sanitation
AFFORDABILITY
FOOD Intelligent and reusable packaging
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SOURCE: THE pH REPORT
Disclaimer Strictly Private & Confidential This Research Note has been prepared by IeC for general circulation at the ACS webinar on 22 June 2017. The information contained in this Research Note may be retained. It has not been prepared for the benefit of any particular company or client and may not be relied upon by any company or client or other third party. IeC do not give investment advice and are not regulated under the UK Financial Services Act. If, notwithstanding the foregoing, this Research Note is relied upon by any person, IeC does not accept, and disclaims, all liability for loss and damage suffered as a result. © International eChem 2017. All rights reserved
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CREATIVE ENERGY FOR IMPORTANT ISSUES
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“Chemistry and the Economy: 2017 Mid-Year Update”
William Carroll
Paul Hodges
Adjunct Professor of Chemistry, Indiana University and Founder, Carroll Applied Science
Chairman, International eChem
Slides available now! Recordings are an exclusive ACS member benefit.
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View Past ACS Webinars and Blogs with Paul Hodges!
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Upcoming ACS Webinars www.acs.org/acswebinars Thursday, June 29, 2017
Tuberculosis: An Introduction for Medicinal Chemists Co-produced with ACS Medicinal Chemistry Division and the American Association of Pharmaceutical Scientists Dr. Carl Nathan, R.A. Rees Pritchett Professor and chairman of the Department of Microbiology and Immunology, Weill Cornell Medicine Christopher Boyce, Associate Principal Scientist, Merck
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“Chemistry and the Economy: 2017 Mid-Year Update”
William Carroll
Paul Hodges
Adjunct Professor of Chemistry, Indiana University and Founder, Carroll Applied Science
Chairman, International eChem
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