Asian petrochemical demand to soften on bearish macroeconomic outlook
Petrochemical demand in Asia is likely to slow on a bearish macroeconomic outlook which is likely to dampen demand for products from regional factories. The stronger US dollar, woes over an economic slowdown in the US and Europe as well as softer demand from China will weigh on overall petrochemical consumption.
The strengthened US dollar will make imports costlier and weigh on buying sentiment and may curtail production. With major national banks around the world hiking interest rates to curb inflation, this has weighed on manufacturing levels for various countries.
China, a major importer, reported a lower figure under its manufacturing purchasing managers’ index (PMI), dipped further into contraction territory at 47.0 in September from 48.1 in August.
The World Bank also recently trimmed India’s growth forecast for 2023 by 1% to 6.5% , down from its earlier estimate of 7.5% in June, citing that the “ spillovers from the Russia-Ukraine war and global monetary policy tightening will continue to weigh on India’s economic outlook” and that “elevated inflation on the back of higher prices of key commodities and rising borrowing costs will affect domestic demand, particularly private consumption, while slowing global growth will inhibit growth in demand for India’s exports”.
The Singapore purchasing managers’ index (PMI) fell to 49.9 in September from 50.0 in August, falling below the 50.0 threshold for the first time since June 2020, data from the Singapore Institute of Purchasing and Materials Management (SIPMM) showed earlier this month.
Similarly, Malaysia also revised its growth forecast for 2023 to 4-% from 6.5-7%, citing prolonged geopolitical uncertainties and pessimistic global financial outlook. The Malaysian Petrochemicals Association (MPA) earlier said that the petrochemical industry is expected to grow by 5% to 6% annually – but this may be affected by “numerous external economic uncertainties like the Russian-Ukraine conflict,”.
Demand for downstream styrenic markets is expected to stay subdued – especially for acrylonitrile butadiene styrene (ABS) and caprolactam, expandable polystyrene (EPS) as manufacturing demand for the packaging as well as consumer goods is poised to stay soft.
China’s restrictive “zero- COVID” policy has also weighed on petrochemical consumption, with production of major olefin ethylene down 9% in August from a year earlier, according to the customs bureau.