Q4 to be 'the most difficult' since '01 - analyst

21 November 2008 18:13  [Source: ICIS news]

NEW YORK (ICIS news)--The fourth quarter (Q4) of 2008 is expected to be the most difficult for chemical companies in seven years, Deutsche Bank chemical analyst David Begleiter said on Friday.

German major BASF’s plan to temporarily shut down 80 plants worldwide and cut operating rates at 100 more highlights the difficulties producers are facing, the analyst said.

“For most, if not all, chemical companies, we expect Q4 to be the most difficult quarter since Q4 2001,” Begleiter said in a research note.

This will impact many US companies such as Dow Chemical, DuPont and PPG Industries, he said.

“BASF noted that conditions, already tough in October, have declined significantly in November,” Begleiter said.

“In particular, it noted, auto customers have cancelled orders on short notice. Demand in key markets such as auto, construction and textile has eroded severely, reflecting heavy customer destocking of inventories and weak underlying demand exacerbated by credit constraints,” he said.

While the weak conditions noted by BASF and the commentary on “preparing for tough times” ahead were not surprising, the magnitude of the announcement is unprecedented, Begleiter said.

Dow CEO Andrew Liveris had recently noted that fourth-quarter volumes would be down 10-20% on heavy destocking and severe demand destruction, Begleiter said.

Shares of Dow Chemical were up 31 cents (€0.25), or 1.9%, to $16.93 in early Friday afternoon trading. The stock has fallen nearly 63% from its 52-week high of $45.50.

Wall Street’s consensus forecast is for Dow to earn 53 cents in fourth quarter – down from 84 cents in the fourth quarter of 2007.

($1 = €0.80)

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By: Joseph Chang
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