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Chairman of International eChem advised chemical companies to check stock levels

May 23/2011

(ICIS) -- The volatility in chemical and oil markets indicates that the global economy is going through a structural change and entering the New Normal of lower growth in mature markets, according to a leading consultant.

Speaking before Monday's launch of a free eBook on the New Normal, co-author Paul Hodges, chairman of UK-based consultancy International eChem, said the volatility is being caused by central banks trying too hard to stimulate economies that should naturally be entering a sustained period of lower growth.

According to Hodges, the post-war baby-boom generation is ageing, and therefore spending less money on big-ticket items such as new cars and bigger homes. The oldest baby boomers are 65 this year and their average age is 53. But central banks have missed this demographic change and are trying too hard to stimulate economic growth despite the structural fall in demand.

The growth in demand for chemicals and other commodities seen in the first quarter of 2011 may not be based on real demand, but speculative buying based on the fear of continued rising oil prices, Hodges said.

Hodges said conditions are not yet the same as the crash of late 2008 because the oil price has not collapsed.

He advises chemical companies to check stock levels and check with downstream customers, not just with convertors but with retail customers.

In the long run, innovative chemical companies can emerge as winners from the New Normal if they are properly prepared, said Hodges. They can create products suitable for the ageing baby-boomer population in the West, and meet the needs of people moving into the first stages of consumption.

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