The implications of China’s emerging “new normal” are “massive” said Roberts, sharing his company’s insights at the 8th London Chemical & Tanker Conference.
“China accounts for around 25% of global products demand,” said Roberts. “Shifts in china will have a big impact. For the first nine months of 2015, we saw a 7% increase in imports into China, which goes against what you read in the press about stock market performance.”
“You can play China two ways,” he continued. “My personal view is that even in a lower growth environment of 6-7% per annum that is still phenomenal growth, the economy is still 2.5 times the size it was 15 years ago.
“On the end user chemical demand we’ve seen an increase of 15-20% demand year on year within China, and as their economy moves away from primary export driven to secondary and tertiary service-sector industries, that should be a positive influence on chemical demand, as marginal propensity to consume shifts away from the oil producers and more to the emerging nations.
“For example, new car sales in China are massively ahead of the US; to put that in perspective in the US for every 1,000 people there are roughly 1,000 cars. In China for every 1,000 people there are about 150 cars. So the potential impact of that on the chemical tanker business is pretty massive.”
On the other hand, “you can spin it the other way. You can say there’s a lower growth environment,” Roberts continued. “The housing market, which is of course key to the chemical tanker sector… at the height of the US’ sub-prime mortgage crisis, the ratio of the average house price versus the average earnings was 9:1. In tier-one cities in China at the moment, it’s 15:1. So there are concerns about the housing bubble and the impact on the chemical tanker market if that does go pop.”
“But broadly, I think, we are optimistic about China,” he concluded.
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