Demand for chemicals is steady in China, Japanese chemical companies are upgrading their profit forecasts, and economic growth is accelerating in India. In sum: The outlook for the Asian chemical industry in 2018 is good.
Predictions of strong economic growth in China, India, and Indonesia translate to “a positive outlook for the Asian chemical industry as a whole,” says Steve Jenkins, vice president of chemicals consulting at market research firm PCI Wood Mackenzie.
In Japan, the economy will not be that strong, but chemical companies will be able to grow their margins by focusing on technologically advanced materials, Jenkins says. The continued weakness of the yen will raise profits in yen terms, he adds.
In China, the world’s largest market for chemicals, consumer demand is buoying chemical production, Jenkins notes. The widespread use of smartphones to order from online retailers, for instance, is stimulating demand for consumer goods in once-stagnant inland provinces.
Meanwhile, strict enforcement of environmental regulations is changing China’s chemical industry, Jenkins notes, in part by leading many firms to upgrade their facilities to stay in business.
Environmental controls are having a wide impact, agrees Peter Huo, vice president for sales and marketing at the Chinese polyurethane chemicals producer Wanhua Chemical.
Even when their operations are compliant, Wanhua and its competitors have had to cut production as a result of China’s crackdown. Wanhua, for example, had to temporarily reduce production at some of its plants because “some of the buyers of our products had to stop theirs,” Huo explains.
But on the whole, Chinese demand for polyurethane materials and other chemicals was steady in 2017, a trend that Huo expects to continue for at least the first half of 2018. The combination of constant demand and lowered supply due to the crackdown is boosting profit margins, he notes.
The main risks facing Asia are financial. A major slowdown of the U.S. stock market could “derail the current buoyant mood,” Jenkins warns. And government officials in China are mentioning more often the need to reduce debt levels in both the private and public sectors, a shift that could dampen the economy as a whole by reducing funds available to invest or expand, Huo says.
