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Israel Petrochemicals Report Q1 2012
Business Monitor International, Dec 2011, Pages: 45
Business Monitor International's Israel Petrochemicals Report provides industry professionals and strategists, corporate analysts, petrochemical associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Israel's petrochemicals industry.
The Israeli petrochemicals market will become more difficult for domestic producers while export growth will come under pressure, according to BMI’s latest Israel Petrochemicals Report.
Israel’s domestic chemicals and plastics market will not be immune to the slowdown in the global economy in 2012. Israel's slowing growth is taking place against the background of debt crises in Europe and volatility in the financial markets, the fear of a major slowdown in global growth, and continuing geopolitical instability in the Middle East. The Bank of Israel forecasts a slowdown in the growth rate in Q411 for the first time since Q209 as economic uncertainty increased and the Israel Purchasing Managers Index fell below 50%, indicating economic contraction.
The slower growth will be due to domestic consumption, manufacturing exports and sales of services abroad. This will have both a direct and an indirect effect on the local market and the petrochemicals industry. Household consumption and construction are among the main market segments for Israeli plastics and both are set to come under pressure in the year ahead.
Low inflation rates and consequently low interest rates should help stability in the household goods industry, which consumes a third of Israeli petrochemicals output, as well as packaging, which makes up a further 15% of local demand. However, with over half of plastics and rubber production by value exported, the high level of exposure to the EU and North American markets will undoubtedly have an impact on some producers, particularly in the PP segment. Modest depreciation of the shekel is unlikely to have a significant impact, coming after a period of strong appreciation that has undermined Israeli competitiveness.
Although faltering growth in key developed export markets will continue to weigh on the relatively large external sector, increasing diversification towards faster-growing emerging markets, as well as ongoing product specialisation should lessen the constraint.
In BMI’s Middle Eastern and African Petrochemicals Business Environment Rankings matrix, Israel lies in sixth place, with a score of 55.5 points. The country lies 1.0 point behind Iran and 3.1 points ahead of South Africa. With no planned significant growth in petrochemicals capacities over the medium term, Israel’s score is unlikely to change much over the next five years, although it could be improved by better Political, Economic and Business Risk ratings.
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