16 March 2004 19:35 [Source: ICIS news]
PARIS (CNI)--The French chemicals and pharmaceuticals industry is hopeful that the upturn which began to be felt in September 2003 will continue in 2004, Alain Devic, newly elected president of the trade group Union des Industries Chimiques (UIC), said here Tuesday.
Although Devic saw the upturn as "fragile and modest", he based the better outlook on improved internal demand and exports plus stock rebuilding. However, he did not see growth exceeding 3.2%, and even 2.9% when excluding the pharmaceuticals industry.
Exports should grow 5% in value after remaining stagnant at Euro51.8bn ($63.1bn)last year, but would depend on the euro/dollar exchange rate and on how companies reacted to an adjustment of their margins.
Devic also saw investments picking up, albeit at a modest rate of 5.5% to an estimated Euro3.6bn. They fell for the third year running in 2003, down 5.9% to Euro3.4bn, including pharmaceutical industry investments.
"The industry leaders", he said, "remain wary and even if they believe in a return to growth, they know it will be weak and that they will still have spare production capacity."
On the other hand, the share of environmental and safety investments will grow significantly, possibly by 34% in 2004 with priority given to "environment". Indeed, over the last three years, investments for capacity extension and modernisation have been less favourable to long-term development, falling from 44% in 2001 to 35% in 2002. Conversely, in 2003 environmental expenditure amounted to 28% of total expenditure for 2002 and 2003, compared to 20% in 2001.
In detailing French chemicals performance last year, Devic said overall production had dropped by 1.4%. However, it was up 1.7% if the pharmaceuticals industry was included. Sales were estimated to be around Euro87.4bn, up from around Euro84.5bn in 2002. Only the soap, perfume and household products sector posted a volume increase, of 1.1%, mainly because of the perfumery sector. Mineral output was down 5% although for fertiliser production it rose 2.8% after years of recession.
Organics, which enjoyed an upturn in the first four months of 2003, ended the year with a 2.4% fall. Both petrochemicals and plastics were burdened by high oil prices and demand weakness at home and overseas. However, synthetic rubber production improved by 4.3% in 2003, after 2.6% growth in 2002.
Chemicals-related industries, which comprise agrochemicals, paints and varnishes, explosives, glues and gelatines, photographic chemicals, industrial use chemicals, essential oils and data supports, proved more resilient, although volumes fell 0.7%.
Overall foreign trade, however, was stagnant compared to 2002 with exports down 0.1% to Euro51.8bn and imports 0.2% lower at Euro41.7bn. The trade balance remained stable at Euro10.1bn. Exports were hindered by low international demand and the euro appreciation over the dollar, while the drop in imports was due to weak domestic demand. Organics and pharmaceuticals continued to pull exports along, respectively accounting for 28.5% and 32% of total shipments overseas.
France's chemical industry's exports were 61% within the European Union (EU) but only 5% to Asia. Devic said Asian exports were insufficient considering the volumes imported by countries in this region.
Germany remained France's main client but exports dropped 1.3% in value in 2003. Italy, Belgium and Spain, respectively third, fourth and sixth biggest chemicals export markets for France, increased their purchases, mainly in pharmaceutical products, soaps, detergents and perfumes. However, they reduced imports of French base chemicals.
Trade with the UK fell 5% by value, more than with the rest of Europe. Imports dropped by over 10%.
The French chemicals industry, however, continued to benefit from the brisk development of Central and Eastern Europe, although it accounted for just 6% of total exports. But France increased its imports from those countries, mainly fertilisers, which accounted for 28% of total imports, and base organics 23.4%.
Exports to the US fell 10.7% in value and 5% in volume, pushing the country from fourth to fifth biggest buyer of French chemicals.
Following a 0.5% drop in selling prices in 2002, sales prices improved by 1.5% last year.
UIC reported a marked fall chemicals industry employment in 2003, especially during the second half and in base chemicals. However, 13 000 new people were recruited but with higher qualifications.
Devic said in an overall assessment of last year’s performance that although France's chemicals industry was one of the great world leaders, ranking second in Europe and fifth worldwide, "its performance has fallen below the average of Europe's chemical industry over the last five years". He said it invests less than other European countries, and its cost competitiveness was falling due to reduced working hours and high taxes.
Devic complained that the French chemicals industry was subject to rules and regulations which had no equivalent in the rest of the world, combining as they did EU rules and a surge of national legislation: over 500 new rules over the last 12 years.
He insisted that the industry must obtain a moratorium on the development of new regulations, must be taxed less, give priority to innovation, and bolster competencies and training of its workforce. It must also do its utmost to improve its degraded public image.
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