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Few signs of strong Q3 rebound as pandemic persists

Hopes for a strong post-lockdown rebound in demand for chemicals are evaporating thanks to a resurgence in coronavirus cases in the US and elsewhere, with few signs of a strong pick-up yet in the important automotive end-use sector.

The US suffered its largest daily rise in new cases since the pandemic began on Thursday, recording more than 60,000 positive tests. Cases passed the three million mark from two million less than a month ago. Several states are planning to reverse moves to reopen parts of the world’s largest economy.

This week the US Federal Reserve warned the outlook for the US economy remains highly uncertain with the magnitude of the impact and duration unknown, highlighting the need for more vigilance as well as fiscal stimulus.

This steady rise in cases is unnerving companies in US chemical supply chains which hope that the easing of lockdowns will stimulate renewed downstream demand.

Elsewhere, the number of new cases is still rising strongly in Brazil, where president Jair Bolsonaro tested positive this week. The virus is still spreading strongly in India, which is imposing new lockdowns in parts of the country.

The new outbreak in China seems to be under control, with no new cases being reported for two days in Beijing.

China has bounced back strongly, with purchasing manager indices (PMIs) back into positive territory for June, indicating expansion. However its export-reliant economy is unlikely to perform strongly until other regional economies improve.


June’s strong recovery in Asian chemical prices appears to be petering out. For example, Asia epoxy resin prices are falling again, after a strong rise in June. Near-term improvement seems unlikely as "confidence is shaken" by forecasts of a steeper global economic slump, a regional end-user said.

ICIS also reported a grim outlook for Asia phthalic anhydride. Spot trade liquidity has been “and could well be for some time out” thin, with most buyers visibly reluctant to stock up, a seller conceded.

Risks of second-wave infection, as well as of potentially deeper contraction in the global economy, continue to weigh on market confidence.

This week ICIS also reported bearish demand sentiment in Asia isopropanol (IPA) ,  China expandable polystyrene (EPS), Asia polybutadiene rubber (PBR), Asia butanediol (BDO), Asia paraxylene (PX) and China polycarbonate (PC).

China’s return to growth has not yet been mirrored across the rest of Asia with June PMIs still negative in all countries except Vietnam and Malaysia.

The June rebound in China petrochemicals prices and demand petered out towards the end of the month, with the ICIS China Petrochemical Index declining by month-end.

Europe’s economy is gradually reopening, with a switch from national to local lockdowns where new clusters of cases emergence. Spain, Italy and the UK have imposed new restrictions in small geographic areas.

Although PMIs for Europe rose strongly in June, they were still deeply in negative territory, signalling that contraction in important parts of the economy is ongoing.

This week the European Commission downgraded its forecast for the region’s economy. It cited longer than expected lockdowns that will cause significantly deeper recession than expected. Its new forecasts indicate EU GDP contraction of 8.3% this year, down from 7.4% it forecast in May.

It also foresees a weaker rebound in 2021, with growth of 5.8% rather than 6.1%.

However, there is some positive data for Europe with industrial output in Germany rebounding by 7.8% from April to May.