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Germany Petrochemicals Report Q1 2011
Business Monitor International, Dec 2010, Pages: 49
The Germany Petrochemical Report provides industry professionals and strategists, corporate analysts, petrochemical associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Germany's petrochemical industry.
The German petrochemicals industry will see a sharp moderation in growth in 2011 as sales suffer from the wave of fiscal austerity programmes seen around Europe, which have sustained growth since Q409, according to BMI’s latest Germany Petrochemicals Report.
In Q310, production of chemicals soared by 10% year-on-year (y-o-y), driven by exports. However, output increased by just 0.5% compared to Q210. Capacity utilisation was 85%, which is typical of the normal 84-86% rate and well above the 77.9% reported at end-2009. Slower sequential production growth reflects stagnating demand in the domestic market. Prices also stagnated, increasing 0.6% quarter-onquarter (q-o-q) and 4% y-o-y.
Nearly all plants were back in operation and BMI believes that the industry as a whole is operating at a comfortable profit margin with producers better able to pass on rising raw material costs to their customers. However, a higher base and the impact of fiscal austerity measures in Germany and across the EU will lead to lower rates of growth in H210. Verband der Chemischen Industrie (VCI, German chemical industry association) expects growth to remain slow during the rest of 2010 but it maintained its full-year output growth forecast for the German chemical industry at 11% due to the industry's strong performance in the first half, a rise from the 8.5% growth it forecast in mid-2010. This would offset most of the 10.0% decline in output in 2009 and return the German chemicals industry to close to pre-recession levels of output. It also implies y-o-y growth in H210 in the low single digits.
The publishers forecast remains more bearish than VCI’s. Although we have raised our chemicals output growth forecast from 7.0% to 9.0% in light of better-than-expected performance in Q3, we believe that growth will diminish to zero in Q410, with buyers keeping inventories low due to risk aversion as well as lower rates of demand in major export markets such as France and the UK. The chemicals industry will follow the broad economic trend with subdued or stagnant growth in 2011 amid a downturn in economic growth.
BMI cautions that a situation of oversupply could emerge that will depress prices, particularly in the vinyls chain which will take longer to recover from the effects of recession and tighter lending on the construction industry. This could ultimately speed up the closure of Germany’s smaller, older and less efficient plants in an effort to bolster petrochemicals margins. These include Shell Chemicals’ 2B Rheinland steam cracker at Shell Deutschland Oil’s Wesseling refinery complex, which has capacity to produce 240,000tpa of ethylene and is due to be closed by the end of 2011; production of benzene and toluene will end at the plant by the end of 2012. Despite these reductions in capacity, BMI believes Germany will remain one of the world’s most sophisticated, diverse and integrated petrochemicals industries.
Germany scores 79.9 points and is placed first in BMI’s Western European Petrochemicals Rankings, 6.7 points ahead of France. BMI believes that Germany’s score is unlikely to change dramatically, with no major capacity additions planned over the next five years. However, with little new capacity coming onstream elsewhere in Western Europe over the period, it should retain its lead in the region.
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