15 August 2008 17:28 [Source: ICIS news]
By Nigel Davis
LONDON (ICIS news)--The European economies paid a price in the second quarter for a strong start to the year.
GDP declined by 0.2% in the 15-nation euro area compared with the first quarter and by 0.1% in the EU27, according to the EU’s Eurostat service.
Fears of a sharper slowdown are growing given weakness in ?xml:namespace>
Consumer market weakness is largely the driving force but a number of factors are combining including the on-going credit crunch and the high price of oil.
Analysts see Europe as a late-cycle economy that lags the US by as much as 18 months so the latest data should not come as a surprise.
The question marks remain over performance in the third quarter and over the longer term outlook. Some believe that this will be a multi-year decline.
Chemicals producers are beginning to feel the impact across a broad swathe of markets although it has been difficult to separate out the traditional seasonal affects in August.
Markets closest to the consumer are faring the worst.
“People making chipboard or MDF (medium density fibre) are really struggling,” a
Southern Europe, particularly, has suffered over Europe’s summer period and in the
The automotive business, so important for chemicals derived from upstream products such as phenol and acetone and a great consumer of coatings, has been relatively steady so far this year but there is talk manufacturers cutting back.
There is a growing sense of nervousness but, as yet, little concrete evidence of demand growth stalling.
Polystyrene looks very difficult, however, linked as it is more directly to the disturbed construction sector and important packaging markets.
It is the automotive and construction sectors that will be watched most closely over the next month and more for clearer signs of the downturn.
The collapse of these twin segments in the
Demand for coatings in the
In its second-quarter statement, coatings maker PPG said that industrial demand (demand in its industrial segment) was down 10% in the second quarter and 10% in the first half.
The impact was not simply in housing construction and automotive. The
Quick reaction in the second quarter to the rapidly rising oil price and the still, relatively, strong pattern of demand across the European economies and those farther afield, saw to that.
Europe’s industry continues to benefit from growth in
But there is little doubt that the second half will prove to be more difficult than the first for the region’s chemical makers and that critical questions will be asked of demand.
Companies across the chemicals spectrum can only to some extent export themselves out of trouble and could find life difficult as their pricing power weakens in a lower oil-price environment.
The sector could find itself in a hard place as the year draws towards its close.
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