06 January 2009 13:02 [Source: ICIS news]
By Nigel Davis
LONDON (ICIS news)--The combined effect of economic recession and the credit crunch continue to drive the downturn in chemicals. And, as is becoming increasingly clear, this is no ordinary slump with the banking crisis having a severe knock-on impact across the global economy.
“[This] has all the hallmarks of an ‘extreme event’ of the type that could end up transforming the whole political, economic and financial landscape for decades to come,” analysts at Credit Suisse said in a report on Monday.
Investors are paralysed by the possible parallels with the 1930s and the risk of sliding into a latter day depression …“that could lead to untold human misery, renewed protectionism and ultimately the end of globalisation, frustrating the aspirations of billions of citizens of the emerging world and sparking extreme political instability”.
There is fear in the air as the world’s financial and commodity markets continue to be driven downwards.
Chemicals producers have suffered greatly since the beginning of October when the demand slump began. Markets subsequently have seized up with demand falling away and the credit crunch severely hampering deal making.
At the end of 2008 and in the first few days of 2009 it has become apparent that the most financially-stretched companies are feeling the heat. At times like these companies seek to preserve cash and generate more where they can.
The past few weeks particularly have been characterised by reduced operating rates, plant shutdowns and announcements of further cutbacks to secure tighter cost control.
Currently, it is not possible to see the floor of cycle for chemicals, let alone what may lie towards the horizon.
The sharply lower oil price has undermined producers’ ability to maintain prices which have fallen rapidly. Some margins have looked good on paper – in ?xml:namespace>
Industry analysts now are talking about a petrochemical industry downturn working towards a trough in 2011. Given that assumption – based also on a global overhang over four years of 27m tonnes of excess ethylene capacity – the outlook for 2009 is poor to say the least.
The low level of demand in the fourth quarter of 2008 is expected to persist into 2009 as recession bites harder in the world’s major economies. Of great concern also is the impact of recession in the developed world on
Given the exceptional economic and financial circumstances, trying to put numbers to a forecast for 2009 is especially difficult.
The American Chemistry Council’s (ACC) latest economics review, dated 12 December, noted a broad-based decline in
Output was down in Asia-Pacific for the fourth consecutive month and in
In its year-end analysis and outlook published in late November but working on data available early in the month, the ACC forecast US chemicals output growth, excluding pharmaceuticals, of -3.1% in 2008, -3.6% in 2009 and 1.2% in 2010.
Chemicals production growth globally is expected to have contracted sharply last year from 2007 to 2.2%. The forecast for 2009 is 1.5% and for 2010, 3.3%. These are forecasts for chemicals output including pharmaceuticals.
Western European chemicals output growth is forecast at -0.1% in 2008, -0.3% in 2009 and 1.7% in 2010.
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