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Romania Petrochemicals Report Q2 2012

Business Monitor International's Romania Oil and Gas Report provides industry professionals and strategists, corporate analysts, oil and gas associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Romania's oil and gas industry.

The Romanian petrochemicals industry has been held back by the inability of Oltchim, in which the government has a majority stake, to buy the raw materials needed to restart the Arpechim petrochemical unit, the closure of which has led to severe shortages of feedstock at the firm. Oltchim cut its output to 30% of nameplate capacity in H211 to cut costs because the company cannot finance its working capital. The restarting of the 56,000tpa (tonnes per annum) propylene production facility in June 2011 will be a boost to local PP production, although this represents only a small portion of Romanian petrochemicals production. Ultimately, the fate of the sector will rest on privatisation of Oltchim and its possible integration into the Arpechim refinery, which is currently offline. Under a deal with the IMF, any takeover can only take place after privatisation, which is expected to be completed by mid-2012 providing a buyer is found. The integration of the Arpechim refinery with Oltchim’s petrochemicals operations will be crucial to creating a fully integrated petrochemicals company.

Of concern to the engineering plastics market is the fate of the automotive sector. The long-term scenario is more favourable with investment raising capacity helping to drive up demand. The Romanian petrochemicals industry will fail to keep up with the requirements of the automotive industry, particularly if Oltchim’s capacity utilisation remains low, which will inevitably mean growth in imports of engineering plastics. In terms of the PVC segment, Romania's construction sector was hit particularly hard by the global financial crisis, but growth is expected to return with 3.7% y-o-y forecast for 2012. The Romanian PVC market is set for a rise in demand from 2012. Again, without Oltchim at full capacity, demand will be increasingly met with imports.

The future of the Arpechim refinery, which was closed by Petrom in March 2011, is crucial to the survival of the Romanian petrochemicals industry. Much of the country’s petrochemicals production is reliant on the refinery, which is smaller and has more complex logistical issues – namely lack of seaport access for imported oil – that make it commercially unviable, at least as a stand-alone operation. The closure of the refinery cuts off naphtha feedstock supply to the 200,000tpa cracker Oltchim acquired from Petrom in early 2010. Until the situation is resolved, the country’s petrochemicals industry will operate below its full potential. By 2011, Romania had modest olefins capacities of 200,000tpa ethylene and 100,000tpa propylene. Polyolefins capacities in 2011 reached: 160,000tpa HDPE; 160,000tpa LDPE; 80,000tpa PP; 60,000tpa PS; and 170,000tpa PVC. The industry’s structure, poor infrastructure and low capacities have long been a barrier to growth and investment.

Romania ranks in seventh place in BMI’s Business Environment Ratings for the Petrochemicals industry in the CEE, with 45.1 points out of 100, down 0.7 points since the previous quarter due to a decline in its market risk score. This puts it 1.3 points behind Slovakia and 5.5 points above Ukraine. The country’s score has remained relatively stable as a result of optimistic forecasts, particularly given the long-term outlook for the economy’s structural characteristics and the improved position of financial markets.
Executive Summary

SWOT Analysis
Romanian Petrochemicals Industry SWOT
Romania Political SWOT
Romania Economic SWOT
Romania Business Environment SWOT

Global Petrochemicals Overview

Petrochemicals Market Overview

Table: World Ethylene Production By Country, 2011 And 2016 (’000 tonnes capacity)
Financial Results

Table: Financial Results Of Major Petrochemicals Companies, 2010
Global Oil Products Price Outlook
European Petrochemicals Overview
Romania Market Overview
Market Structure
Industry Trends And Developments

Petrochemicals Business Environment
Table: Central And Eastern Europe Petrochemicals Business Environment Ratings

Industry Forecast Scenario
Table: Romania’s Petrochemicals Indicators, 2009-2016 (’000tpa unless otherwise stated)

Macroeconomic Outlook
Table: Romania – Economic Activity, 2011-2016

Company Monitor
Lukoil Romania

Glossary Of Terms
Table: Glossary Of Petrochemicals Terms

BMI Methodology

How We Generate Our Industry Forecasts
Chemicals And Petrochemicals Industry
Cross Checks
Business Environment Ratings
Table: Petrochemicals Business Environment Indicators And Rationale
Table: Weighting Of Indicators
Companies Mentioned
- Lukoil Romania
- Oltchim
- Petrom
- Rompetrol
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