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Czech Republic Petrochemicals Report Q4 2010
Business Monitor International, Aug 2010, Pages: 56
Business Monitor International's Czech Republic Petrochemicals Report provides industry professionals and strategists, corporate analysts, petrochemical associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on the Czech Republic's petrochemicals industry.
The uptick in Czech petrochemical production figures from Q409 is based largely on favourable base effects, and while there are other factors to push output higher in 2010 and into 2011, the industry remains vulnerable to a slowdown in car making brought on by decreased demand in Germany and the volatility of the Czech koruna against the euro, according to BMI’s latest Czech Republic Petrochemicals Report.
As a highly trade integrated economy, the Czech Republic is heavily exposed to fluctuations in final demand, with Germany's deep recession and concomitant collapse in industrial orders, having a substantial impact on the Czech petrochemicals industry. Key sectors determining output will be the construction, automotive, packaging and consumer goods industries. These are witnessing varying levels of demand as a result of weaknesses in the domestic and external markets for end-products. On the downside, the German consumer is going to remain very subdued. This will cast a shadow on hopes of reviving exports of Czech petrochemicals and products that utilise petrochemical products, forcing them to diversify markets.
A number of challenges across segments are likely to prevent an early return to pre-recession petrochemicals consumption rates. Growth in engineering plastics, particularly in the PP segment, will be highly influenced by growth in the car industry, with Czech carmaker ?koda Auto reporting 25% yearon- year (y-o-y) growth in sales. However, the tide could be turning for the sector with signs of a decline in sales in Q210. With the end of scrappage schemes in most countries in Europe, sales have fallen back to lower levels, ending the short term increase created by the incentive packages and giving a bleak outlook for the market. BMI is forecasting a fall of over 6% y-o-y in European car sales, to 15.5mn units this year. However, in the long term, the automotive industry will remain a key driver of demand for polymers in the Czech Republic. The packaging and consumer goods industries are likely to follow the same pattern as the automotive industry, although domestic demand is likely to fare less badly than exports. PVC is likely to come under pressure from continued weakness in construction. Following a strong start to 2010, the Czech construction industry has slumped again with quarterly figures showing a drop in industry value for the year. The industry is expected to shrink by 10% in 2010 as total capital investment falls 20%, although growth is expected from 2011.
The volatility of the koruna is also likely to add considerable uncertainty to the domestic petrochemicals producers as well as their customers in the Czech Republic, particularly in the export-oriented automotive sector. This will influence decisions by domestic petrochemicals consumers that can easily source from neighbouring Poland and Slovakia. Consequently, Czech plants will be under pressure to compete, while export markets – particularly in the Middle East – are seeing a sharp rise in domestic production capacities at a time of moderating demand growth.
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