INSIGHT: A stronger Europe helps lift global growth

25 May 2007 17:02  [Source: ICIS news]

LONDON (ICIS news)--Chemical players in Western Europe will remember April and be glad, to paraphrase the jazz classic.

Growth continued strong and outpaced the stronger demand seen in other parts of the world.

Europe is currently looked on with some envy. It is the world’s largest and most sophisticated chemicals market. Healthier national economies are underpinning business growth.

Not surprisingly, China, India and the Asia-Pacific region outside of Japan remain the global powerhouse of chemicals growth but the latest global data from the American Chemistry Council (ACC) show just how important to Europe stronger growth in the big German market, and in France, have become.

The ACC’s global index of production for chemicals expanded 4.7% in April, with above average growth from Africa and the Middle East, Central and Eastern Europe and Asia-Pacific.

By contrast, North America continued to struggle, largely with the twin effects of the housing downturn and the difficulties being faced by domestic auto giants. Both segments are important customers of chemical producers of many types.

The hit to output was severe in the first few months of 2007, with growth losing most if not all its momentum. North American chemicals production growth excluding pharmaceuticals in March for instance was flat.

The global data shown here and in earlier reports are presented on a seasonally adjusted basis that the ACC says is comparable to that of the US and Canada.

The trade group says that production in the US rebounded in April with gains in coatings and adhesives offsetting softness in other specialties.

Basic chemicals output fell with declines in inorganics, bulk petrochemicals, organic intermediates, plastic resins and synthetic rubber. Production was higher in pharmaceuticals and consumer products.

By contrast, European production output strengthened, particularly in the non-pharma businesses in March.

Production in Central and Eastern Europe has increased this year on a par with the latter part of 2006. Not surprisingly, output has continued to grow strongly from the Africa and Middle East region.

Asia-Pacific growth excluding pharmaceuticals has been strong but not as strong in as in the final quarter of last year, despite spectacular growth from China of more than 20% in both February and March and continued strong growth in India.

A rebound in US growth from May would serve the sector well. There are conflicting views on the housing market, with some but by no means all talking of some recovery. On the positive side, high inventories appear to have worked through the system to the benefit of chemicals growth overall.

The outlook for Europe and for most of the rest of the world is largely positive and companies can expect to build on the healthy expansion of production in the first four months of the year.

The industry will remember April and smile but it can expect to be content a while longer.

Chemicals production volumes Q4 2006 and January 2007

(% change year on year – three month moving average)

	12/06	01/07	02/07	03/07	04/07
World total – chemicals	4.9	4.5	4.7	4.6	4.7
North America	3.5	1.7	1.5	1.3	1.5
US	3.7	1.8	1.6	1.2	1.1
Latin America	5.5	4.8	4.0	3.0	2.0
Brazil	0.2	0.1	-01	-0.9
Western Europe	3.4	3.4	3.6	3.7	4.3
Central and Eastern Europe	3.8	3.7	4.3	5.5	6.5
Africa and the Middle East	9.2	9.2	7.8	6.3	5.6
Asia Pacific	6.9	7.6	8.3	8.5	8.2
Japan	0.7	0.2	0.3	0.6
Asia Pacific excluding Japan	10.1	11.5	12.5	12.5
China	17.9	19.3	21.0	22.3
India	7.0	8.8	8.0	8.7
South Korea	2.7	4.1	4.5	4.4
World total – chems excl pharmaceuticals	4.6	4.1	4.4	4.8
North America	3.1	0.2	-0.2	0.0	0.6
Latin America	5.1	4.0	3.5	2.7
Western Europe	1.9	1.5	2.3	3.4
Central and Eastern Europe	3.5	4.2	5.3	7.1
Africa and the  Middle East	9.8	9.6	8.0	6.4
Asia-Pacific	13.8	8.0	8.8	9.2
Pharmaceuticals	5.9	6.3	5.8	3.9

Source: ACC

By: Nigel Davis
+44 20 8652 3214

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