The pandemic, Chinese trade policies, and market discontinuities has had a tremendous impact on petrochemical markets in 2020 and 2021. Victoria Meyer sits down for a conversation with John Richardson about strategies to enable companies to be headed in the right direction. John Richardson is a Senior Consultant at ICIS. John focuses on the petrochemical markets (including polypropylene and polyethylene) in China, Asia and Europe. He shares the objective analysis you need to manage your business in today’s incredibly uncertain world. ICIS is the global source of Independent Commodity Intelligence Services. He shares how he sees recycled products drive towards sustainability and circularity, and taxes. Learn a lot of valuable insights on market demand, economics, sustainability and circularity so you could grow as a professional.

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Understanding Market Demand To Manage Your Business Amid Uncertainty With John Richardson

I am delighted to be speaking with John Richardson, who is a Senior Consultant at ICIS. John has been working in petrochemicals, plastics and covering polyolefins for years. If you follow John at all on LinkedIn or on any of the ICIS publications, you know that he got a deep and interesting view on what’s going on globally in polyolefin. I was delighted to be able to bring John on and talk about the world of plastics, polyethylene, polypropylene, and petchem. John, welcome to the show.

Thank you, Victoria.

There may still be a few people in our universe that are not familiar with ICIS. Can you give us a real quick highlight about what ICIS is and what they do?

Our heritage goes back to magazines in the 1960s. Stenography existed and those hard copy magazines, but our big breakthrough growth was when we acquired a price reporting business in Paris in the 1990s. That’s ICIS-LORs it was called in those days many years ago.

I remember the LOR piece of it.

That’s a London Oil Report. We’re doing an objective, independent price reporting in pet chem for the first time ever. We led the way and that grew enormously. We got a huge office in Singapore, Houston, London, doing LORs of petrochemicals weekly, even daily now. It’s become daily for some petrochemicals as the markets got more volatile. We’ve also expanded in a major way to ICIS news and into analytics, which is several years ago. We’ve got short term analytics, supply and demand analysis, live disruption trackers, all sorts of products that are monitoring the global markets and consulting as well. Importantly, we do consulting. It’s grown a lot in many years.

John, your focus, at least the parts that I see of you is in polyolefins, polyethylene, and polypropylene. Can you tell us how you got into that?

I moved to Singapore in 1997 to Deputy HR magazine, which no longer exists on petrochemicals. I chose polyolefins having talked to people, friends in the industry. I said, “It’s an important industry. It’s a huge part of petrochemicals, go for it. It’s easier than aromatics.” I’ll go for that. Since I was a journalist first, but several years ago, I became a consultant. Looking at the Asia Pacific, a lawn shiner, I tried to look at it globally as well. It’s the usual stuff, supply and demand analysis, price forecasting, and trying to predict the future.

TCSP John Richardson | Market Demand

We’re all trying to predict the future. Let’s jump in, what is going on in the world of polyolefins now? Give us a brief overview of what’s going on in the world.

It’s weird. I’ve never seen markets like this. If you look at our price history going back many years, I’ve never seen Asia’s so cheap versus US and Europe so expensive. Latin America is a lot more expensive. It’s West versus East. I’ll talk about the West first. As you know much better than me, we have huge storms in the winter. All that year’s capacity at 80% polyolefins capacity down at one point. Our CDI team in the US is saying, “It’s beginning to get back to normal.” It’s about back to normal now. It’s taking a long time.

All the issues about reduced refinery rates because of the pandemic, the jet fuel’s gone obviously, and there’s not as much propylene around for the US. It’s the same in Europe and that’s true as well with Europe refineries closing down for long-term reasons. Poly extra force was years in older plants and underlining that is strong demand. If you go back to April 2020, we were all doom and gloom. A lot of people I spoke to the industry, we were comparing what was happening economically with the global financial crisis. We’re wrong because despite the huge collapse of GDP, the pandemic has led to stronger demand.

We got people eating at home rather than restaurants. There’s more surface area demand for polymers. We got the pandemic, all the hygiene stuff globally, ATP bottles, PPE, non-woven masks, go on, can’t you? That’s here to stay, isn’t it? There’s a big drive on internet sales. Despite all the sustainability stuff, there’s a mountain of packaging that goes into their sales.

There is so much packaging. I bear witness to that on a weekly basis as I’m putting out recycling and wondering why I have so many boxes, bags, and what have you.

We saw that in China in 2014. These huge booming internet sales, which led to a huge boom in polyethylene demand in particular. Despite a brief economic downturn in China in 2015, that demand has gone up. I don’t think that’s happening in the West through now. People buy more online for safety reasons obviously, or shut down reasons. Now it’s a convenience, isn’t it? People get used to it. I see those markets are snug.

Let’s go to the developing world, focusing in my area of Asia. The demand fundamentals are very different because in Asia Pacific, Southeast Asia, you’ve only got three developed economies. You’ve got Australia, New Zealand, and Singapore. They behave like the US in terms of demand fundamentals. Cash-rich middle classes, regardless of the progress of the pandemic, will always be all right financially, with lots of government stimulus and strong underlying demand.

As you travel through the developing world a lot, people being pushed into extreme poverty by the pandemic because of the poor vaccination rates to the point where you cannot afford a whole bottle of shampoo. You’re on less than $1.90 a day. The other dynamic is a lot of people have been denied the opportunity of moving into middle income status, getting up the income tree.

How have they been denied? Is this pandemic-related or systemic?

The demand fundamentals are very different because in Asia Pacific and Southeast Asia, you’ve only got three developed economies.

It’s pandemic-related. The vaccination rate in Indonesia is about 10% and 9% in India, for example. Indonesia being the fourth most populous country in the world. You’ve got huge economic damage because of day-rate laborers can’t work. These are people that get paid cash every day. The reason why a lockdown is very severe because of weak healthcare systems.

It’s like this vicious circle. Unlike the West, the cost of financing for developing countries has gone up. It’s become more expensive. It’s hard for governments to borrow money, to throw money at people the way that we’ve done in the West. In Australia, the low-paid workers, the apprentices in Australia, were better off during the pandemic than when they were working.

It’s because of unemployment compensation and stuff.

It’s called job furlough schemes. There’s a lot of checks again. The US is the same thing.

We’ve had some of the same stuff.

The low-paid worker is better off. It’s a huge, extreme poverty effect. The dynamic has changed because normally, you see this great demand growth polyolefins in the developing world every year.

A lot of the growth is hinged on the fact that the developing world needs to catch up to consumption rates. It may not catch up in absolute numbers, but it’s got much higher growth.

The per capita consumption is so far behind the US and Australia. That means we’ve probably going to have a second year of negative growth in the developing world, including Asia-Pacific, minus those rich economies I’ve talked about. That’s a big deal. There’s the huge bear in the corner of the room, China. The 43% of global polypropylene demand is 30% odd of polyethylene demand is five times bigger in terms of consumption.

TCSP John Richardson | Market Demand

This is enormous. China became this giant around 2008, 2009 when they overtook North America and Europe in terms of volume. What you’ve seen in China again is there’s a slowdown in China in the first seven months of 2021 looking at the latest data that came out versus the last seven months of 2020. This is not the end of the world. China is still fine, but the reason is that the huge export growth they enjoyed in the last seven months of 2020, that’s come off the boil. Their manufactured exports were down 20% from 2021 versus the second half of 2020, semiconductor shortages, container shortages. It’s the difficulty of getting that stuff to market. It’s stuck somewhere. Demand is there.

This is not a demand issue. Is it a logistics and semiconductor issue?


How do semiconductors fit into this? I think of semiconductors as some little microprocessors, which probably run everything. That’s what you’re going to tell me, but what do semiconductors have to do with polyolefin demand?

For polyethylene, it’s the packaging. It’s the packaging, the wrapping, the shrink film that gets wrapped around the game console you’ve ordered for Christmas you’re not going to get on the TV or the auto components. For polypropylene, the copolymer impact is the auto components themselves because you can’t make the cars. Some electronics are not big for polypropylene. It’s more like polystyrene, styrenics and ABS that’s hit indirectly. The other thing is the containers and can’t get anything. The cost of moving East to West as you see to North America is off the charts. Isn’t it?

It’s gone up by 500%, according to some people.

The latest charts we get from Freightos, who supply data, is $24,000 for a 40-foot container and top of the range price.

How does that resolve? That’s my great mysterious question, quite honestly, is how did the logistics challenges get resolved to allow some of this flow to allow the demand to be met, or maybe when does it get resolved? What do you see? What are you guys predicting?

When an expert says something is born six months away from being fixed, that means he doesn’t know. The latest expert opinion, I’m not an expert. I’ve talked to a few people about it, who are experts, is that at least until the middle of 2022, before it’s resolved. This was supposed to be resolved by Q2 in 2021. That was what people were saying. Even by the Chinese Lunar New Year, at the end of February, they were talking about it initially.

The problem is they say that they’re busy making enough containers to meet this huge increasing global trade, this massive China boom. If you talked to other people and they say, “No, there’s still log jams of supply of containers and container ships because of this huge increasing global trade people in lockdowns.” The other thing is the positioning of the containers. I never had to worry about this before.

They were plentiful. They were where they needed to be.

TCSP John Richardson | Market Demand

Where they needed to be is the key point. It’s about having exactly the right number of containers. Not too many containers in one place, not too few in other places. It only takes a slight disruption in the global port system to make that imbalance worse, which is already there. Zhoushan ports were shut down in China. You probably read about it. It’s the fourth biggest container port in the world.

Yantian Port was shut down in May 2021, three terminals at Yantian in Guangdong. These terminals are enormous. It causes all this backlog of ships in the wrong places. Personally, what concerns me is we might eventually get enough containers. We’re getting there and producing them, but until or unless the world is fully vaccinated, they’re going to get this Delta or even Gamma version of the disease is going to get out, more infectious and cause port disruptions.

This is interesting, John, because I know you’ve written about this and obviously, you’re talking about this that you see that the COVID vaccination rates are playing a significant effect on demand particularly in developing worlds, which are lower vaccinated or have lower rates at this point, but does it get resolved? There are some that say the reason for vaccination and pushing higher vaccination rates is around herd immunity.

Herd immunity can also be met to some degree by developing natural resistance, which means people get infected and then have to recover from it, yet the developing world, in particular, has locked down so tightly because they don’t have the capabilities within their healthcare system, but nor do they have the vaccination. There’s this whole big resolution that needs to happen without a clear path at this point.

You’re right in terms of vaccination is not everything, but the problem is we’ve got a lot of comorbidities in the developing world. In a healthy Western population, obviously obesity is a big problem in Australia. We eat too much rather than eat too little. We don’t have endemic dysentery like you have in places like India. The problem is that to let it rip, there’ll be horrendous because of those comorbidities. Whereas to let it rip in poor communities in the developed world is a problem, isn’t it?

We’re trying to prevent that with different strategies in different regions.

That’s why they have to have these severe lockdowns because they haven’t got the healthcare to cope with. It’s difficult for the developed world to cope with this sometimes. I don’t know how it’s resolved until or unless we reach herd immunity.

How big of an impact does this make on demand? When we think about global demand, is this a 5%, 10%, 20% impact?

Polyethylene demand is going to grow about 14% in the developed world and 92% in the developing world over the next 10 years.

I’ve done some modeling for polypropylene on the blog. I’m assuming lower growth in China because of logistics issue, but growth picks up in China. What I see is like polypro growth in 2021 will be about 300,000 tons versus what we expected to be a few millions in 2021. That’s 2.3%, but then I see China growth being quite healthy after that, so 5%, 6% to 2025. What I did is I assume the second year of negative growth in the developing world rather than our base case V-shaped recovery.

I saw that in 2023 again on the basis that there’s an American Research Institute, Duke, who reckoned that the developing world will be fully vaccinated in 2023. Let’s assume that’s going to happen. It all swings back healthily and you get a strong recovery than the developing world. You get this pensive mountain, which you always get. You see global growth at 3% per annum rather than a 5% base case.

Will the developing world have the money given that they’ve been locked down and not working and the whole economics, will they have the money to be able to rebound?

I’m being optimistic.

You have to assume they do at some point.

They will catch up. The other thing is the China monster, which makes a difference. With polypro, we would expect a 9%, 10% growth in 2021 is about 1%, 2% for China. That’s massive because China’s 43% of global demand. Compared to 2019, China’s still massively ahead. It’s a few million tons ahead. It shows that 2020 was a bubble year, so that’s nothing to panic about. It’s this export problem there. Importantly, it says the extra supply, which we haven’t talked about. You’ve got Chinese polypropylene capacity going up to 13%. It looks like now, imports to shoot about 4.8 million tons versus 6.6 in 2020.

It’s a 50% drop.

China is now becoming an export player for polypropylene. It’s 970,000 tons of exports in the first seven months of 2021 versus 470,000 in the whole of 2020.

Where are most of those exports going?

Lots of Vietnam because they got a free trade deal. That’s within Asia, India, Pakistan, Bangladesh, but to the United States a little bit, despite the logistics barriers to fight all the concern about price fluctuations and containers, Brazil, Peru. You should see because China’s getting more towards self-sufficiency and because of the weak growth. South Korea has been exporting a lot more to the US a little bit more. Saudi and Singapore, because they’re the big exporters to China normally. Big capacity in 2021 in polypropylene HDPE. I suppose China is driving that as they pivot towards self-sufficiency in some products and South Korea is adding a lot.

TCSP John Richardson | Market Demand

This China’s self-sufficiency, one, is it real? What products will it be true? Two, what’s the effect on producers in other regions? What happens?

Polypropylene is the big one. Looking at maybe 4.8 million tons of imports in 2021 from 6.6. You play around with that data. You can get to a point by 2025 where China is a net exporter. That’s been a bit silly. I was throwing in all the unconfirmed projects and assuming a high operating rate. I used to shock people to make the thing plan. What’s going to happen is China will probably be importing copolymer for a long time, but it’s going to be a couple of million tons. There’ll be a net exporter in homo very much so. What does it mean? It means the people are like the Ramco. I’ve got to find a home for that polypropylene elsewhere in South Korea, Singapore, Thailand, Taiwan, the big exports to China, the big six as they’re called.

Polypropylene is not quite as unbalanced as polyethylene. Polypropylene only for only 43% of net imports go to China in 2020, whereas polyethylene was 69%. The good news with polyethylene is over the long term, they’re going to struggle to get any much close to self-sufficiency. If you look at our data out to 2031, I do some silly aggressive downsize to see what would happen. You’re still importing 13 million tons by 2031 versus 15 million tons on the upside. It is polypropylene. Luckily, it’s not as skewed towards China as polyethylene, so that was good news. It’s a case of south Koreans adding capacity in 2021. You look at Turkey, Europe, Latin America, that disparate, very difficult market of Africa with all different customs regulations. It adds up to an okay figure, but it’s difficult to navigate, isn’t it?

It’s not easy to navigate, not at all.

You need to go through traders. You’re giving money to the traders, aren’t you? You tell me about the US that’s fascinating. You’ve got this dependence on propylene. Relative to polyethylene, you’ve got little investment. Will it become a significant import market given the logistics constraints?

In some ways, that’s been a deliberate barrier. If you went back a decade or more ago, there was potential investment. There were some focuses on importing products into the US. That’s when the US was looking to be short and needed to create that import infrastructure. The logistics of the US polymers markets are very different than the rest of the world. It is a bulk market. Whereas when you are moving product elsewhere in the world in Asia, Africa, and anywhere else, it’s bagged and containerized.

It’s a very different logistics handling system. If the price is right, there’s always a way to overcome it. The US has not significantly invested in polypropylene. It’s been an ethane polyethylene market to a large degree. Where the propylene is coming in, it’s through PDH. There is a lot of propane. We’re seeing propane exports and stuff, but we’re not seeing that indirect investment in polypropylene. It’s almost as if the US players have decided to see that market because they don’t think it’s long-term profitable in the way that they would like.

The margins on these and polyethylene are huge. They’ve been humongous and fantastic if you’ve been operating, which is a big issue.

People are recovering. That storm in February 2021 hurt producers quite a lot. One of the things you talked about is how the markets have become a bit more regionalized. Prices are high in US and Europe, much lower in Asia and China. For a long time, there was a view that the markets would equalize to a large degree. Where do you see that going? Is this dislocation of pricing temporary or is something else going on?

What we’re seeing is the demand in the developing world being met by the developing world.

We’re going to predict the future. It seems to stay. Potential exports from Asia are bouncing off a container freight wall as somebody described it to me. It’s a nice way of putting it, the stuff getting out. It talks about China exports to Brazil and Peru. South Korea, more to the US. They are finding ways. It’s arbitrage because the price differentials are so huge despite the freight issues.

Relatively speaking, prices are not equalizing. They know what the way they normally do. The only thing that would turn it is if we start seeing operating rate cuts in Asia, bring prices up and looking out variable margin reports that we do weekly on all the grades. It’s all right. It’s not great. Asia is always well behind Europe and the US anyway because the great advantage of Asia is volume, isn’t it?

Yes. They’ve set a different target for margins. There are different prioritizations. The level of accuracy about what’s being produced is very different as well.

Also, decisions on production are different. Social, political stuff drives it. We could look at our variable cosmologies and say, “Turn negative. We will see the operating rate cuts.” We did see that in late 2019, if you do remember, in a lifetime away. This is the industry down cycle, isn’t it? This was when overcapacity of polyethylene from the US was going to drive everything down.

The market was going to tank and the world was going to be awash in plastics.

We saw those negative margins in November, December, January 2020 and big operating rate cuts and prices came up in February, then bang, the pandemic arrives, changes everything. I suppose potentially we could see that same, but the moment our margins are saying, “They’re okay.” Southeast Asia have picked up a bit. The issue is volume and margin equal volume. We do have a proxy for a volume called plank cost evaluator. I’m advertising here that we launched, which gives you an idea of proxy for short term demand in the key polypropylene. We need to watch that to see if that black line is like a cost curve that starts moving to the left. We now then the constant shifting down combined with margins, but the moment looks all right. With the freight issue not being resolved, the price differentials are here to stay.

For a period of time for however long it takes until that freight gets resolved because it will get resolved eventually. Let’s turn a little bit and talk about sustainability and circularity. Where I sit in the US, I am seeing announcements seems like daily from major petrochemical producers, the plastics industry, consumer products companies, you name it, about sustainability goals, technical advancements in mechanical and chemical recycling, which seems to be the holy grail at the moment, and then alliances. How is this going to affect the polyethylene and polypropylene market? Do you see these recycled products or this drive towards sustainability and circularity and there’s talk of taxes on virgin resin and stuff? What influence do you see this having on the market?

I’m going to use the same thing if you want to divide the world again. You got to collect, not carbon with it, which is a separate issue, but to do with the whole sustainability thing. If you look at the IOCs, they’ve got to walk the talk. Shell lost a court case in the Netherlands, Chevron, Exxon got these activist investors, as you know. That happened to be more aggressive in reducing carbon. They’re getting pressure from the brand owners, the legislators to Europe, especially. You’re saying in the US now as well to step up the game in recycling.

TCSP John Richardson | Market Demand

They’ve got a struggle to meet the huge demand growth in the developing world, which is going to come back post-pandemic. If you look at the data, it’s extraordinary. I need to revise it and push it out because I have all been saying. Polyethylene demand in the developed world is going to grow about 14% over the next 10, 11 years, 92% of the developing world, including China.

They’re motivated to walk the talk in recycling in carbon. It limits their ability to expand into the only way we can meet demand, in my view, which is virgin production. Chemical recycling is the holy grail, but you do the math. It doesn’t give you enough feedstock by having these things. You’d have to build and replace 1.5 million in the year cracker. You need more than 400 chemical recycling plants. It’s ridiculous. We had 3.3 tons of naps that make 1 ton of ethylene. They’re that calculation, 10,000 tons a year, 20,000 tons maximum, maybe for a recycling plant. They’re all small units. Thanks to landfills, logistics issues. There was talk about scaling up to 400,000 tons to one plant, but you need 17 million people plus 17 million people to supply that 400,000-ton plant.

Imagine the trucks arriving at a chemical site every day. That’s in a country like the United States with a good road system, getting better with the infrastructure. The developing world is complete pie in the sky. You’ve got people who haven’t got poor roads. It’s like Indonesia with all these thousands of islands spread around. They got the geographical issues. Chemical recycling is never going to produce. The simple lore of people moving out of poverty, driving demand for polyethylene, you’ve got to supply it. I see the NOC is in a strong position. That’s not facing the same pressure to build steam crackers. They’re still building refineries because electrification is an issue in Europe.

In developing world, you buy your first motor scooter, it’s going to be run on petrol gasoline. The IOCs are not going to vote for Christmas, not turkeys voting for Christmas. They’re going to push oil into transportation still because they have to sell oil. What frustrates me, sorry, Victoria, is the problem is how we chuck it away. There were 3 billion people in the developing world as the NOC, see the non-profits keep telling us, who either don’t have adequate rubbish collection systems. I have now been men at all.

I’ve been backpacking through Indonesia and you see people throwing plastic waste into the open environment. Not because he wants to, because it’s not a collection system. We need bin men and I hate to say this because people in the EU will say, “How dare you say this?” We need landfills. Landfills are better than the alternative of poluting in the actual environment. What we’re going to see is that people will realize you made all these investments in recycling in Europe and that’s good, chemical mechanical, and that’s becoming an important part of the marketing will be, but we don’t solve the problem with plastic waste in the oceans because there are eleven rivers.

Ten is the number I always hear. It’s somewhere in between.

Ninety percent of the plastic rubbish in the oceans comes from those ten rivers. All of which were in the developing world, eight in Asia, two in Africa. This is the core problem. That’s about the Alliance Against Plastic Waste, which you’ve probably heard of, the industry body.

It’s a great organization.

That’s what the pushing, let’s give people bin men. We’re going to get appointed, but we see a lot of investment in the West. A lot of brand owner pressure, right down to the people shopping in the supermarket saying, “I don’t want plastic waste issue.” We’ve seen the blue planet, too. It’s very emotional, but we’re not going to solve the problem until we deal with bin men. We’ll get to that point eventually.

I recognize the challenges that you talk about. In fact, something I think about is the fact that I’m recycling, handling my plastic, and reducing my plastic doesn’t change what’s going on in the ocean. My plastic products that I use aren’t ending up there anyway. It’s coming from areas where there’s less focus. It’s a bit of a conundrum and this is one that I have found across the industry over a variety of topics. It’s not necessarily about the chemical industry. It’s about the broader government and influences that we have this focus on the Western world, the US, Europe, North, and South America fixing these problems, holding itself to higher standards.

It becomes more costly to produce products. There was recently a congressman or senator in the US proposing a $0.20 per pound tax on resin to cover infrastructure, recycling, and make it more difficult. It’s like, “That’s great. That’s not going to work.” It’s not the right answer, but it doesn’t solve the world’s problems because the world somehow has to come together to solve this. One region fixing it doesn’t solve global warming, all the other rest of the world, plastics in the ocean. It’s challenging. One of the things I find interesting and coming back to the economics and the affordability, and you’ve touched on this.

The NOCs are still investing. They’re investing in refineries and petrochemicals. They’re doing this with probably less environmental controls. The IOCs, the publicly held companies in the US and Europe, are under much more pressure. They were all seeding and setting these very aggressive targets on carbon and plastics recycling and reduction, targeting 2030, and yet it’s going to have an economic effect. The economic effect is that, if you’re following all these constraints, your cost of production, cost of goods sold is going up, whereas others are not.

How do you see this? Have you looked at this in terms of how it changes demand, growth, based on the sheer economics of the influence of these different regimes?

The US has a lot of polyethylene, which is very cost-competitive. They’re in a good position. That’s okay.

Even with higher costs, they’re still good?

TCSP John Richardson | Market Demand

That should be okay, but there will be a need for investment to meet that demand growth. You can see the investment being concentrated in the developing world. We’re humbled to do it in terms of cost modeling it. I was speaking to a client in Asia, “Should we go into specialty chemicals, copolymer PP, and the rest of it?” “No, I just make polyethylene completely.” You got the feed stock. It’ll be all right. What we will see is tremendous demand growth for those commodities and difficulty in meeting it.

They will be met, but the investments will be in the developing world to meet it. Obviously, the feedstock issue was there for the Middle East for the lack of gas, but we are building these mega refineries to make transportation fuels demand still largely. That’s what you build the refineries that you can try and increase the pet cam ratio. There are still mainly refinery transportation machines. China’s building still more mega refineries. I see that the demand being met in the developing world by the developing world.

Leading to this whole self-sufficiency or a closer degree of self-sufficiency as we see the China approaching and then elsewhere?

US is fascinating. Tell me. You’ve had all these seething, will you carry on having all this ether. Will you be able to explore too, because of the environmental issues to build more polyethylene?

It’s a real challenge. The pet chem industry in the US has been able to manage that. We’re seeing knock-on effects in other things. Energy, in many ways, is an early indicator of some of this. There’s this whole desire to go to green energy, wind. There is a lot of conflict around land use. It falls into the same category. There’s a desire to be more green, to continue to develop, invest and leverage the natural resources we have. There’s also a conflict because people say, “Not in my backyard.” The not in my backyard doesn’t happen as much in the developing countries because they’re trying to create jobs and government has more power to influence this. It balances things out.

It’s interesting with all of the issues about methane, the IPCC report, methane being the big, bad enemy. Cows are more important than petrochemicals.

My oldest daughter is vegan and she tells me this it’s about the environment, “Fewer cows, less meat.” I’m like, “Okay, that’s nice.”

Constrain, the ability of the US to build more steam crackers as we go forward.

Who knows? I don’t see it right now. We’ve slowed down that pace of growth. What’s going to be interesting and a lot of this has to do with administration. With the current administration, permits have slowed. Everything has slowed. Big corporate investments requiring strong support from the EPA in terms of getting a permit and natural resources has slowed and stalled. We have to see how this gets resolved. I know the industry groups are quite active in trying to engage, educate, and help support the chemical position. It’s not clear. It depends on the effects of the administration, which can change every four years. It varies. The demand is there. People like their plastic and everything that goes with it.

TCSP John Richardson | Market Demand

The export demand will be there if you can build a supply issue. I said that’s interesting. The US can make use of that, but generally speaking, the IOC will struggle to meet that demand. If they build in Asia, they’ve got the same problems. They can’t build in Asia, which is not totally compliant using green and blue hydrogen and electric furnaces and all that stuff that increases the cost, isn’t it?

They’re being held to a different standard. What makes it difficult to compete is when you’re competing and being held to very different standards. It’s harder. It’s not insurmountable though. We’ve seen this. This is not a new issue. We’ve overcome this through the years. You see that the majors are working to overcome these barriers. It’s a bit more challenging, requires more science, engineering, and thought about how that works.

This is years away. If you did have a global trading system of green and blue hydrogen and perhaps some uncertainties in revenue stream in there, moving around with ammonia and trading hubs, you can start imagine the world.

That’s one of the things and I’ve talked to a lot of different people about this, the energy and chemical industry is inherently creative and problem solvers. We figured out how to overcome those challenges through the years and create economic benefit from it. If you think about the inherent circularity that already exists in chemicals, many products are made from a refinery off streams or chemical off streams. There’s this natural tendency and focus on how do you keep reusing and not wasting anything and creating greater value. That will come.

With hydrogen and I don’t profess to understand the difference between the green and blue. I need to maybe bring somebody on the show to explain the difference to me because I’m like, “I thought it was an invisible molecule.” Stay tuned. We’ll find that and make that happen. It’ll all balance out. This is an entirely moving and evolving business.

That is fascinating. You’ve got the mixed-feed cracker technology, using off-cuts that you don’t want to sell in the market because they won’t get you anything or not much anyway. All the heat you transfer and all that stuff on the complex. That means you have the skillset to solve it. That’s a very optimistic note.

I am an optimist. You may not be familiar with this, in the US, what was very popular when I was a kid was Schoolhouse Rock!. On Saturdays, we’d watch cartoons and they’ve had these little Schoolhouse Rock! segments. My favorite might’ve been Mother Necessity. Mother necessity, where would we be without the focus and ingenuity? We keep solving our problems, coming up with new ways of doing things. That’s true across the industry.

We keep solving our problems by coming up with new ways of doing things. That’s absolutely true across the chemical industry.

John, this has been great. Let me ask one final question. What are some leading indicators? What are you watching out for in terms of what’s going to change and drive the market, and what should we be looking out for over the future that’s going to influence what’s going on in the world of polyethylene and polypropylene?

Container freight rates, very simply, and producer operating rates. You’ve got the hurricane season in the Gulf now. There was supposed to be concerned about power outages in the US during the hot summer. Texas had a heat surge even.

I haven’t noticed any issues with rain. We had a lot of rain, so it was heating up, and then we’d get rain every afternoon. It brings it down so that there are some natural cycles, but we haven’t, knock on wood, experienced any real issues.

It’s the supply issues in the Western hemisphere, freight rates in the middle for everywhere and Asian operating rates would be the three things to look out for.

John, this has been great. If people want to get in touch with you, what’s the best way to do so?


I personally love following you on LinkedIn. You always have something sharp and insightful to post. That’s always been great, too.

I enjoyed the conversation and the optimism about the circularity of the industry. That’s nice.

Thanks, John. Thanks, everyone for reading.

Thank you, Victoria.

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About John Richardson

John Richardson is a Senior Consultant at ICIS. John focuses on the polyolefins markets (polypropylene, polyethylene) in China, Asia and Europe.

John has been very privileged to work with many of the smartest people in the petrochemicals industry over the last 22 years, helping steer their strategies in the right direction. Without fear or favour of internal company politics and conventional thinking, John provides the objective analysis you need to manage your business in today’s incredibly uncertain world.

ICIS is the global source of Independent Commodity Intelligence Services. ICIS connects data, markets and customers to create a comprehensive, trusted view of the global commodities markets, enabling smarter business decisions that optimize the world’s resources.