Western Consumers Benefit from Low Prices, Not the Case for Its Manufacturers & Energy Transition

In the US and Europe, price inflation continues to slow YoY relative to China. Still, lower relative Chinese prices remain detrimental to Western industry and its energy transition despite the benefits flowing to its consumers.
We discuss the 2011-2014 period when Brent crude oil prices moved higher relative to natural gas, and low-cost chemical producers in the US were able to serve a growing China market that reflected high relative prices.
Higher crude oil prices and related inflation impacted Western markets more than China post-COVID, which has allowed the Chinese to export relatively cheap goods to the West to offset weak in-country demand.
Cheap product imports, ranging from upstream commodities to end-market goods, pose a significant risk to the West in meeting its energy transition and sustainable market goals by expanding its production channels.
Otherwise, we see polymer prices facing downward pressure in 4Q, flag more corporate restructuring/strategic activity, and view industry comments toward low hydrogen demand as usually meaning it is too expensive.

Exhibit 1: Brent crude oil price movements post-COVID reflect a similar trend as the US CPI relative to the China CPI.