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Czech Republic Petrochemicals Report Q1 2012
Business Monitor International, November 2011, Pages: 50
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 Czech Republic's petrochemicals industry.
The Czech petrochemicals industry is facing a period of falling sales and lower margins as the German market experiences a sharp slowdown, according to BMI’s latest Czech Republic Petrochemicals Report.
The Czech Statistical Office reported that in the first eight months of 2011, the country’s chemicals output grew 4.3% year-on-year (y-o-y) while rubber and plastic output grew 12.5% y-o-y. However, during 2011 the Czech Republic’s leader petrochemicals producer Unipetrol reported volatile petrochemicals margins with its olefins margin at EUR292/tonne and polyolefins margin at EUR251/tonne in Q311, down 17.3% and 12.8% quarter-onq-o-q respectively.
Compared to Q310, the olefins margin was down 3.6% while the polyolefins margin was down 19.9%. The declines in petrochemicals margins were the result of a weaker export market, with German growth slowing considerably. Q311 marked a reversal of the success witnessed in H111 when petrochemicals drove Unipetrol’s profits with improved spreads for both olefins and polyolefins. BMI believes that the decline will continue over Q411 and into 2012.
With the eurozone continuing its monetary policy tightening path and global growth hitting a soft patch, BMI expects external demand to moderate, bringing down demand for Czech goods.
BMI is already seeing this trend play out, with growth in industrial production slowing to 4.7% y-o-y in April from 9.2% in March. Moreover, BMi's expectation that consumer spending will stage a recovery this year will buoy import demand and diminish the contribution of net exports to economic growth.
Going forward, BMI believes that export weakness, both for petrochemical products and key petrochemicals-using industries, such as the automotive sector, remain a major risk for the Czech petrochemicals industry.
Industry growth will be heavily linked to eurozone demand (particularly that from Germany), given that exports make up are 72% of GDP overall, with almost one third sent to Germany, and 57% going to the eurozone as a whole. 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.
Aside from the slowdown in export markets, the five week shutdown at Ceská Rafinérská´s Litvínov refinery from September 1 for maintenance led to a shortfall in naphtha feedstock availability for Unipetrol’s petrochemical plants. Reports suggested that sales of petrochemicals fell 10% q-o-q in Q311 as a result of the refinery shut down. As a result of both supply and demand factors, BMI estimates that in 2011 olefins production fell 17% and polyolefins fell 9% y-o-y and 2012 output will remain flat.
In BMI’s Petrochemicals Business Environment Ratings for CEE, the Czech Republic scores 55.8 points out of a maximum of 100, down 0.3 points since the previous quarter due to a decline in the country’s long-term external factors rating. It is in third place, 2.3 points behind Poland and 0.1 point ahead of Hungary.
The Czech Republic’s score is unlikely to improve significantly over the next five years, with other countries in the region set to raise petrochemicals capacity at a higher rate.
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