06 May 2009 17:40 [Source: ICIS news]
By Nigel Davis
LONDON (ICIS news)--The European Commission’s depressed economic outlook tells it like it is for a region which lags behind others in this global recession.
Against that backdrop Europe’s chemicals makers will find it takes them longer to recover than their peers from the widespread industrial de-stocking that has hit so hard since late last year.
The projected 4% decline in gross domestic product (GDP) in both the European Union and the eurozone is a full two percentage points lower than the forecast made in January.
Since the start of the year economic activity has weakened across the EU with the decline broad based. And hardly any EU countries are expected to avoid a GDP contraction in 2009. This recession is global: the Commission forecasts a 1.5% fall in world GDP this year before recovery in 2010.
But for chemicals makers it does look as though de-stocking is coming to a halt, which implies a somewhat better time ahead. This is linked to the trend seen in some other sectors and points to what the Commission says might be “a timid recovery”.
“With unprecedented falls in trade and production during recent quarters, the low point may be within reach,” it says in the latest forecast.
“The full and swift implementation of the numerous measures proposed to restore stability in financial markets and support the economy could also prove effective more quickly than currently anticipated, restoring investor and consumer confidence more rapidly. In either of these situations, the recovery could come earlier and/or be more pronounced than projected.”
But the bottom of any downturn is incredibly difficult to call and companies are right to be cautious.
At the macro level, the Economist Intelligence Unit’s Robin Bew on Thursday gave some perspective: he said in a broadcast interview that things are still getting worse but at a much more gradual pace.
That is reflected in some of the comments made by European chemical companies. Understandably less upbeat than their North American counterparts, they continue to see difficulties ahead.
BASF CFO Kurt Bock also made the valid point that de-stocking in some product chains, for instance those related to automobiles, had still not worked through.
There is little to be optimistic about for the second quarter and possibly for the second half.
Borealis CEO Mark Garrett suggested on Tuesday that “real demand” would not recover before the end of 2010. Rhodia’s Jean-Pierre Clamadieu on Wednesday said he had a feeling that “things are developing fairly well”, but could not be more specific than that.
Rhodia’s customers had indicated that de-stocking was coming to an end, but that was not showing up in the polyamide and specialty maker’s order books.
The situation in Europe and North America had, however, contrasted with that in Asia (largely ?xml:namespace>
De-stocking was not, however, expected to lose its grip in Europe and
A broad geographic spread will pay off this quarter for those companies that have taken the opportunity to push out of Europe and
Domestic European business particularly is likely to be tough as the region’s economies remain depressed.
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