16 February 2009 16:56 [Source: ICIS news]
By Nigel Davis
The broad economic news gets worse by the day.
That steep fall in industrial production will hit chemicals hard and few sectors will be immune.
European majors will report over the next few weeks.
The stories are likely to be similar - depressed European demand and a distinct drop in demand in emerging markets.
Production plants were run at much reduced rates or idled towards the end of the fourth quarter. December was worse than expected in November.
Only agrochemicals and the life sciences offer anything approaching real immunity from recession, other segments are only more or less recession-proof.
Industrial gases producer, Air Liquide, had a reasonably good story to tell on Monday – and the share price responded positively. The company did not reveal fourth quarter profits but said fourth quarter sales had risen – by 10.9% in Europe, 2.1% in North America and 4.1% in
The industrial gases and engineering group was hit by the downturn in its large industries segment in North America and in speciality gases, which are sold into the electronics industry in
Air Liquide has described the decline in gases demand in some cyclical sectors as “brutal” and in one of its scenarios for 2009 envisages a downturn in gases sales to cyclical industries of 30%. If there is a partial recovery in the second half the negative impact from cyclicals could be as much as 10%.
The company's balanced gases services portfolio, however, should ensure that sales grow even in this extremely difficult year.
Unfortunately, a balance in chemicals generally cannot guarantee much in the current environment. So many chemical end-use industries are hobbled in this recession, the impact is geographically widespread too.
In a note to clients, Credit Suisse warned that the results from the European chemicals sector companies it covers are likely to be poor and potentially worse than consensus forecasts in many areas. Having said that, however, low expectations from investors and the tone of outlook statements are likely to rule the day as far as stock prices are concerned.
Companies might be expected to be conservative in the extreme in their outlooks given the changing economic news and low business visibility.
Downstream or specialty chemicals makers will be benefitting from lower feedstock costs volume demand will have been key.
There is some evidence, but not necessarily among the group of companies left still to report, of some stock-rebuilding. Any reinforcement of the trend could indicate that some markets have seen bottom. That does not necessarily mean, however, that an upturn is imminent. Product markets can be expected to bump along the bottom of the downturn for some time.
As the major
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