CHEMICAL MANAGEMENT

Demographics are reshaping petrochemicals trade flows, investment patterns and demand

JOHN RICHARDSON | May 23, 2021

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TEN YEARS AGO, fellow blogger Paul Hodges and I  first highlighted the leading role that changing demographics would play in reshaping petrochemicals supply and demand. We have been emphasising the importance of demographics ever since.
Demographics have, of course, always been a critical shaper of economies throughout human history. But during the last 70 years, there have been such major changes in demographics that the study of demographics must be at the very heart of your company’s strategy.
The Babyboomer generation in the West led to a surge in demand as the rapid increase in babies born in the 1950s and early 1960s joined the workforce from the 1970s onwards.
This helps explain high levels of inflation during that decade because too much demand was chasing too little supply. Another driver of inflation was the Middle East embargos against oil exports to the West because of the West’s support for Israel.
Then came the 1990s and first the integration of Eastern Europe into the global economy. This helped dampen inflationary pressures because of the plentiful supply of workers in the east willing to work for low wages in export-focused factories. This reduced the cost of finished goods in the West.
Next came Deng Xiaoping’s critically important “southern tour” in the early 1990s and China’s gradual integration into the global economy. China increasingly leveraged its very youthful population to again make cheap goods to export to the West.
Hundreds of millions of young people were willing to migrate from the countryside to China’s coastal cities to work in export-focused manufacturing plants. The world began to talk about the “China price” and how it was further depressing global inflation.

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