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Belgium Petrochemicals Report 2012
Business Monitor International, Dec 2011, Pages: 38
While Belgium is by no means the worst positioned economy in Europe, weakening external demand on the back of fiscal austerity throughout the continent over forthcoming years, in addition to spending cuts at home, will limit the industry's growth potential over 2012.
Belgium's chemicals and petrochemicals market was one of the best performing in the EU in 2011, and contributed to the 4.5% growth in EU chemicals output estimated by Cefic. Strong orders from durable goods manufacturing, particularly in light vehicles and machinery and equipment, coupled with a lack of downstream diversification in the Belgian petrochemicals industry, led to bottlenecks in certain chemical sub-sectors as demand outstripped supply. Construction remains an important chemicals customer and performed comparatively better in the Benelux countries than elsewhere in the EU.
However, activity moderated in H211 and the threat of contagion from the eurozone debt crisis will remain a key threat to economic growth and stability over the medium-term.
The contribution from net trade has also been instrumental in driving Belgium's economic recovery. The pick-up in exports is mirrored in the sharp turnaround in capacity utilisation rates. According to the forward-looking indicator compiled by Eurostat, Belgium's capacity utilisation rate hit 82.6% in Q211, up from 81.2% the previous quarter, and homing in on the 84% readings seen at the peak of the last cycle.
The export sector has benefited from the recovery in global demand. We do not expect to see a marked reversal in export growth, but do expect to see some moderation in activity; this is in part due to base effects, but is also as a result of the eurozone losing momentum and German growth moderating.
As Belgium's export sector is dominated by relatively low technology goods supplying downstream processors in Germany and elsewhere, the country will face increasing levels of competition in this area from emerging market exporters, as they seek to move up the value chain. As such, growth in petrochemicals production will not return to pre-crisis levels, and it could take until 2014 before the industry is anywhere near pre-recession levels.
Over the long run, Belgium's relatively competitive external sector should allow it to take advantage of rising demand in emerging markets, boosting long-term growth. Moreover, there are notable efficiency improvements in the pipeline, such as Ineos' planned 1mn tpa ethylene terminal at Zwijndrecht, which is due to begin operations in 2012, and will supply feedstock to plants in the Antwerp-Rotterdam area.
Confidence in the future of the Belgian petrochemicals industry has also been demonstrated by Lanxess' planned EUR20mn investment in expanding capacity at its Zwijndrecht butyl rubber plant, with EUR400mn being invested in 100,000tpa of new capacity in Q113. Indian polyester manufacturer JBF Industries is also building a 390,000tpa PET plant at Geel that is scheduled to open in 2014 and will utilise some of BP's PTA production at the complex, thereby adding value.
Belgium scores 71.0 points in BMI's West Europe Business Environment Ratings for the petrochemical industry. This puts it in third place in the ranking, out of a total of six, up one place since 2010, due to the decline in the UK's score. However, the country's score has fallen 0.2 points, due to a decline in longterm external factors. It now lies just 0.8 points ahead of the Netherlands and 0.7 points behind France. While Belgium has a significant and integrated petrochemical industry, it performs less well in terms of risk and structural factors. Improved financial infrastructure and a better long-term financial risk rating would improve Belgium's score.
Business Monitor International's Belgium Petrochemicals Report provides industry professionals and strategists, corporate analysts, petrochemical associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Belgium's petrochemicals industry.
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