Issue Date: January 9, 2012 | Web Date: January 12, 2012
Slow Growing Asia
Someone visiting almost any Asian country from Europe or the U.S. would conclude that the local economy is firing on all cylinders. But by Asian standards, a slow-down is under way that is affecting commodity chemicals.
The slowdown is most obvious in China, a major importer of chemicals and Asia’s largest economy. True, China’s economy is likely to expand 8.8% in 2012, according to the Asian Development Bank. But that number is lower than the 9.3% growth that China saw in 2011 or the 10.4% leap in 2010.
According to Yoshihiro Azuma, a stock analyst at the investment firm Jefferies, the Chinese construction sector will slow in 2012, regardless of government policies, because the country overbuilt during the past two years. Thus, Chinese demand for vinyls, polyurethanes, and phenol derivatives will be weak this year, Azuma predicts in a research note.
Unlike China, the Japanese economy will perform better in 2012 than it did last year. In March 2011, of course, Japan experienced the Great East Japan Earthquake, which led to a slight economic contraction. Public and private reconstruction spending will drive growth in 2012, according to the Organization for Economic Cooperation & Development.
Yet Japanese chemical companies aren’t optimistic. When Sumitomo Chemical announced financial results two months ago, it anticipated deterioration in earnings over the coming months, largely because of slower demand for electronic materials. Shin-Etsu Chemical says it expects a “severe business situation” in Japan because of rising unemployment and deflation.
India remains a bright spot, but according to a December report from the investment bank Morgan Stanley, growth prospects there are extremely fragile.
Morgan Stanley expects falling tax income to force the Indian government to reduce subsidies to households. In addition, the bank says Indian growth in personal consumption will moderate because inflation is eroding purchasing power. The Reserve Bank of India estimates that inflation currently exceeds 9%. In its latest financial results, released in October, India’s Reliance Industries said demand for polymers had gone flat.
- Chemical & Engineering News
- ISSN 0009-2347
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