Onshore Energy Conference — Dubai Onshore Energy Conference — Dubai 02 | Page 43

THE P H REPORT
We expect that creating policy
options and ‘doing deals’ will be
President Trump’s keynote strategy
evidenced by the continuing weakness in
Capacity Utilisation data for the global
chemical industry. As we discuss below,
this suggests that 2017 is likely to see the
start of a global recession.
President Trump’s Inauguration speech
on Friday also clearly marked the end of
an era in international relations. President
Kennedy’s vision at his Inauguration in
1960 is no more:
“Let every nation know, whether it
wishes us well or ill, that we shall pay any
price, bear any burden, meet any hardship,
support any friend, oppose any foe to
assure the survival and the success of
liberty.”
Instead, President Trump set out a new
vision in his Inauguration speech:
“We assembled here today are issuing a
new decree to be heard in every city in every
foreign capital and in every hall of power.
From this day forward, a new vision will
govern our land. From this day forward,
it’s going to be only America first, America
first. Every decision on trade, on taxes, on
immigration, on foreign affairs will be
made to benefit American workers and
American families.”
Those who hoped that President
Trump might revert to “business as usual”
policies once he left the campaign trail
and arrived in the White House, have been
disappointed.
Instead, as befits someone who came
to wider prominence with his 1988 book,
‘The Art of the Deal’, it seems likely that
President Trump will be keen to create
options for himself at the start of his
Presidency. “Doing deals” is likely to be his
keynote strategy.
In this month’s Report, we therefore
look at the outlines of this New Normal
world. We start with our usual focus on the
data from the global chemistry industry.
Given its position in the supply chain,
the continued downturn in its Capacity
Utilisation (CU%) suggests that the world
is likely to enter a global recession during
the year.
We then turn to the US and focus on
auto and housing markets, which seem
poised to enter their usual one-in-a-decade
downturn. These are critical to the outlook
both for the US economy and for the
chemical industry. The auto market was
worth $60bn of chemical sales in 2016, as
each new US auto uses $3500 of chemicals
and plastics, whilst the housing market was
worth $17bn, with every new home using
$15,000 of product.
We then update on China, following
a week of discussions with government
officials in Beijing. These meetings
highlighted the challenges it faces in
endeavouring to control the “Impossible
Trinity” of exchange rates, capital
movements and monetary policy. We also
look at Saudi Arabia’s first Budget under
its Vision 2030 programme, which comes at
a moment when it can no longer rely on its
‘Oil for Defence’ alliance with the US.
Finally, we return to the US and
highlight concerns over the outlook for the
major petrochemical expansions, due to
come online in 2017, given the lack of major
growth in PE and PVC exports over the
past year. We worry that a battle for global
market share is likely to ensue, with a
consequent impact on industry profitability.
1. Global recession seems likely in 2017
November saw a further decline in global
CU% data for the chemical industry from
the American Chemistry Council (ACC), as
chart 3 shows:
 T  he CU% fell to just 78.3%, even though
companies down the value chain were
building inventory ahead of expected
New Year price rises
hey had been galvanised into action by
 T 
the euphoria surrounding expectations
of an OPEC-Russia deal to reduce output
levels, and talk of major oil price rises
E
  ven with this support, the CU% has
fallen in every month since January
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