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Germany Petrochemicals Report Q3 2011
Business Monitor International, June 2011, Pages: 50
The Germany Petrochemicals Report provides industry professionals and strategists, corporate analysts, petrochemical associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Germany's petrochemicals industry.
BMI’s latest Germany Petrochemicals Report is confident about the outlook for the industry, forecasting output growth of around 4%, up from 2.5% forecast in the previous quarterly report.
The business environment is favourable with a strong start to 2011 reported by producers, who are unanimous in their belief that the year will see more growth although not at the 11% rate reported in 2010. However, BMI warns that risks still remark with increased market volatility. Reducing costs and increasing efficiency will therefore remain a priority for German plants in order to remain flexible. Rising raw material costs will also remain a challenge, although prices are not expected to rise at the 20-25% rate seen in 2010. Growth in German chemicals industries will be weighed down by low overall industry capacity utilisation, poor demographic trends, fiscal austerity and weak wage growth.
In 2010, exports led the recovery with growth of 20% y-o-y to EUR99.6bn, which was above the pre-crisis level in 2007. However, 2011 is set to witness increasing importance of the domestic market. This will be assisted by robust economic performance with leading economic indicators support the above consensus growth forecast of 3.0% for Germany this year. Domestic sales were up 14% in 2010, to EUR71bn, with domestic demand still 10% below pre-crisis levels. Growing confidence in the sector led to a 5% rise in investment in chemical plants, to EUR6.4bn. However, with expectations for future growth starting to moderate, amid the prospect of interest rate hikes and rising oil prices, BMI also holds to the 2.0% growth forecast for 2012, expecting slower growth in H211.
Domestic petrochemicals end markets are showing mixed results improvements. The construction industry in Germany, which represents a major European consumer of PVC, has shown excellent recovery from its precipitous decline at the start of 2009. Growth in Germany's construction sector was largely in line with our expectations in 2010. The market expanded by 1.8% in real terms during the year, just marginally below the expectation of 2.2%. Going forward, however, it is anticipated that growth in the construction sector will be subdued, totalling less than 1% per year across the remainder of the core forecast period (2012 to 2015). This will have a deleterious impact on construction materials, particularly plastic piping, at a time when raw material costs are soaring. BMI anticipates a stagnation, or contraction of the segment in H111 due to higher base effects and a slowdown in demand.
Meanwhile, the automotive sector continued its recovery in 2010. BMI sees significant resistance to production growth in Germany, both in the short and the long term. In the short term, increased raw material prices and pace of recovery in the overall European market amid austerity. The VDA is optimistic, however, that the incoming export orders for vehicles were strong by the end of 2010, which should help ease much of carmakers' caution. BMI forecasts production to grow an average 3% y-o-y over 2011-2015, which should increase total annual production to 6.90mn units by the end of 2015. This will mean a consistent but unspectacular growth in engineering plastics.
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