11 December 2007 21:00 [Source: ICIS news]
By Nigel Davis
LONDON (ICIS news)--Chemical companies have been on a roll in 2007.
Industry output is reckoned to have grown by 4.1% compared with 4.5% in 2006 and 4.0% in 2005. US growth has slowed but ?xml:namespace>
Against the backdrop of an economic slowdown, however, the industry faces tougher times.
“Worldwide expectations for the coming months are rather negative and reflect the high uncertainty for businesses,” the European chemicals trade federation Cefic said in its monthly economics report issued on Tuesday.
We are in the tricky position where the global perception of the economic situation has worsened, for some, considerably, but remains above its long-term average.
Upstream in petrochemicals the fourth quarter is unlikely to prove to be good. Volumes have remained relatively buoyant but margins have been under pressure from higher energy and feedstock costs. Price increases have been hard won.
The ACC noted last week in its year-end report and outlook that chemical industry activity had moderated in 2007 paralleling the trend in broader industry. Leading indicators of global industrial production continue to suggest that the growth cycle had peaked, it said.
Chemical output growth in the
Bulk petrochemicals and organics output growth in 2007, based on data for the first 10 months of the year, is put at 4.3% with plastics growth at 1.9%.
These segments have been lifted by still relatively high domestic demand – including recovery in the automobile sector – and a considerable boost from exports.
The lift to the industry from trade this year cannot be ignored. Plastics exports have risen between 10-20% in the year-to-date, consultants say. The
The slowdown in manufacturing coming from light vehicles and the housing-related industries produced a downstream inventory correction during 2007. By the third quarter, however, demand and supply were back in balance and the industry posted strengthening year-earlier comparisons, the ACC says.
But the sector faces economic headwinds.
ACC chief economist, Kevin Swift, usually develops three growth scenarios for the industry to consider at this time of year.
Strong growth – the brightest scenario – was virtually unthinkable in 2008, he said.
There was a 55% chance that the economy would traverse a rocky road to a level of growth hit by the sub-prime mortgage fallout and housing downturn.
In the worst case, he said there was a 45% chance of recession.
Swift notes that jobs are still being created in the
The threat of recession is real but he is not one who believes that recession hit in November.
However, if non-farm payroll gains are not greater than 75,000 a month for three months in a row he contends that the downturn will have hit.
What of chemicals growth prospects then?
The question arises then of the impact of much slower
The upstream chemical industry, particularly, thrives when
To sustain 4% annual vverage output growth the sector needs strong
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