The recovery in global demand for petrochemical is likely to be more muted than earlier expected for the rest of 2023 due to tepid consumer spending, especially in China, a senior TotalEnergies TTEF.PA executive told Reuters.
The impact of high inflation on consumption resulted in poor demand for petrochemicals – raw materials used in a wide variety of consumer goods from plastics to automobiles – during the past eight to nine months, according to Ganesh Gopalakrishnan, TotalEnergies’s global head of petrochemical trading.
“Profitability is bad, because the sentiment is, everybody is drawing down from inventories across the chain,” he told Reuters on the sidelines of Asia Petrochemical Industry Conference in New Delhi.
The slow recovery in petrochemicals has hit demand for feedstock such as naphtha. Asia refiners’ profits for making naphtha this month slipped back to lows seen in January.
Gopalakrishnan said the recovery in China, the world’s biggest petrochemical consumer, failed to match expectations as the behaviour pattern of consumers in the world’s second largest economy has changed significantly since the COVID-19 pandemic.
“Consumers want to socialise, meet people. Instead of spending on goods, they have been prioritising differently now,” Gopalakrishnan said.
“But they cannot hold out consumption for long, maybe they can drag it but sure, after a quarter or two, consumers will be back to markets,” he added.
Next year, Gopalakrishnan expects India and Southeast Asia to be driving global petrochemical demand.
India is Asia’s third-largest economy and annually consumes 25 million to 30 million tonnes of petrochemicals. Its per capita consumption is about a third of global average.
“For Southeast Asia also, the population is young, and demand will be getting better in that region,” Gopalakrishnan said.
Africa is another untapped market which could emerge as one of key drivers of petrochemical demand globally, he said.
Source: Reuters (Reporting by Mohi Narayan; Editing by Florence Tan and Simon Cameron-Moore)