17 March 2009 17:31 [Source: ICIS news]
By Mark Victory
LONDON (ICIS news)--A rise in second-quarter European chemicals demand, which usually follows a “spring bounce” in construction activity, may not take place this year due to the ailing economy, market and industry sources said on Tuesday.
“There’s usually a pick-up in construction come spring, when the weather is warmer and drier – no one wants to build in the cold and ice. Will there be one this year? It’s doubtful,” said one ethylene dichloride (EDC) trader.
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The construction industry overall had experienced an 8% drop in production in the final quarter of 2008, the biggest single-quarter fall since 1980, according to Brian Green, editor of Housing Market Intelligence.
Referring to the extent of the economic downturn, Green said construction had “not seen things like this outside of war in the modern era”.
A nylon producer said: “[Construction has] really stopped. We’re not talking about a decrease of 2%. It’s really stopped.”
The Construction Products Association forecast in January that there would be no recovery in total construction output until 2012. It also predicted a fall in output of 9% across 2009, with a further 4% in 2010.
“It will be like this until [we’re] out of summer,” said one nylon buyer “[...there will be] no real recovery [in construction demand] until the back end of the third quarter.”
The slowdown in building activity has heavily affected the consumption of chemicals. However, there are many within the petrochemicals market who remain bullish about the second quarter with epoxy resins producers reporting a pick-up in demand.
Many in the industry are also paying close attention to the effects of state stimulus packages on demand.
The German government has earmarked €18bn ($23.4bn) for investment in the construction industry over the next two years, and so far the country's builders have remained buoyant.
“The government package for some is like the light at the end of the tunnel,” said one bisphenol A (BPA) trader.
According to others, however, it may not be northwest
A PA producer said: “In [northwest
There were also concerns about how long it would take for government assistance to be felt.
With market conditions so volatile, forecasting has become increasingly tough.
“At the moment, we can’t forecast for the second quarter since it is tough just trying to get the next two weeks right,” a major coatings manufacturer said.
“Surely it will be better than in quarter one, but what will be the real impact in terms of demand? It is impossible to predict,” said a producer of plasticisers.
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Alex Nimmo, Stephanie Wilson, Heidi Finch, Julia Meehan, Caroline Howard, Carl Roache, Stefan Baumgarten and Truong Mellor contributed to this article
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