29 February 2008 17:50 [Source: ICIS news]
By Nigel Davis
LONDON (ICIS news)--“?xml:namespace>
But chemicals markets are showing signs of strain - in polymers particularly.
Market anticipation of the great wave of polyolefins capacity expected from the Middle East is already having an impact in
Product is being test marketed in
This is not the time to be making forecasts or predicting the outcome of the year.
Bayer CEO Werner Wenning on Thursday, for instance, would not be drawn on the 2008 prospects for his company’s MateralScience business, which makes polycarbonate and polyurethanes.
Wenning said that fourth-quarter demand for Bayer MaterialScience products in the
He was confident that first-quarter 2008 MaterialScience EBITDA (earnings before interest, tax, depreciation and amortisation) would match those of the fourth quarter of last year.
“For BMS we have to observe quarter by quarter. It is very difficult to make or give good guidance for the long term,” he said.
Currently, it is extremely difficult to look too far ahead in chemicals. Feedstock and energy cost volatility is a constant headache. Demand growth projections are fraught with uncertainty.
It is widely felt that the global credit crisis cannot but have an impact on the industrial sector and manufacturing demand. But the sharp downturn expected by some has only really been felt thus far in products sold into
Over the past two weeks, European chemical company CEOs have talked of full order books. It remains to be seen also, as Wenning pointed out, whether there will be a sharp downturn in the
The industrial sector thus far seems to have been remarkably resistant.
“The world looks better through manufacturing than any other lens,” said Norbert Ore, chairman of the business survey committee of the Institute for Supply Management, on Thursday.
The ISM believes that manufacturing sectors in the
“Manufacturing will weather the storm quite well in 2008,” Norbert said at the ISM meeting in
The question then is how badly overcapacity in some segments in chemicals affects, or perhaps rather infects, the whole.
Market sentiment is a fickle thing but if more of the industry’s customers feel they are beginning to get the upper hand - and begin to reflect consumer uncertainty and weaker demand growth - then chemicals makers will suffer.
We have not seen that to any great extent in upstream chemicals yet.
Further downstream, companies such as Rhodia have been able to hold on and indeed increase prices and volumes and maintain margins in the face of steep feedstock cost increases. The European companies have suffered from the weakness of the US dollar too.
“Fundamental demand drivers for our products currently remain sound and Rhodia expects to see further volume growth in 2008, especially from the high growth markets of Asia and
Rhodia will continue to defend operating profit by passing on cost increases through price rises, it added.
Retaining that pricing power is all important in the current climate of feedstock cost volatility and demand uncertainty. The industry needs a few more positive signals on the demand front before it can show any real confidence for the year.
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