Citigroup forecasts downturn for chemical sector

11 February 2008 12:09  [Source: ICIS news]

LONDON (ICIS news)--The global chemical industry will see a marked downturn in 2008 due to the economic slowdown and new capacities coming on stream in the Middle East, Citigroup said in a report released on Monday.

 

“The second half will be tougher than the first half, due to the Saudi crackers beginning production,” it said. “US producers will be supported by exports, most likely to the detriment of EU producers."

 

“However we expect the second half of 2008 to mark the beginning of a wider downturn in the commodity chemical sector, affecting both US and European producers,” it said.

 

The report added that the slowdown in the US and Europe would create additional risk in the sector.

 

“Our economists have recently reduced their 2008 estimated global GDP [growth] forecast to 3.2%. A recession in the US and slow growth in Europe should significantly affect key chemical end markets such as construction and automotive,” it said.

 

Emerging Asian economies are also expected to slow down with 8.2% growth due in 2008 compared with 8.7% growth in 2007, it said.

 

“Ethylene and toluene di-isocyanate (TDI) activities are boosting margins but caustic and PVC activities are depressing them,” it said.

 

The investment bank said it had a cautious view on commodities and advised investors to look at "defensive" companies that generate steady earnings such as as Bayer, Linde, Air Products, Praxair, Givauden, Symrise, Ecolab and Nalco, all of which it rated at "buy".   

 

Citigroup also gave the same rating to Wacker and agrochemical players Monsanto and Israel Chemicals.

 

By: Lucy Craymer
+44 20 8652 3214

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