10 July 2009 16:58 [Source: ICIS news]
By Nigel Davis
LONDON (ICIS news)--Petrochemicals producers are likely to release some miserable numbers for the second quarter over the coming weeks as the financial reporting season gets into full swing.
The quarter was difficult to say the least, against the backdrop of depressed demand and a rising oil price.
The export draw sustained businesses in
But volumes remained depressed and it was difficult to match expectations.
Increased consumption from Asia has indicated that the worst of the global downturn may be over but questions are being raised about the sustainability of demand in
It was the turn up in oil prices during the second quarter that increased feedstock price pressure and put a tight squeeze on margins.
The positive news is that the second quarter is likely to show an improvement on the first when companies were hit by the massive year end 2009 slump in demand and the subsequent shuttering of chemicals production capacities.
It has also been more widely apparent that de-stocking has come to an end although the shape of any recovery remains open to much debate.
Perceptions among sector players as to how long and how deep the current downturn may be vary greatly, Chem Systems says in its latest quarterly review.
While strong Asian consumption of petrochemicals suggested the worst of the global downturn may be easing, a renewed rally in crude oil prices applied intense feedstock cost pressure in the second quarter, helping to keep margins thin.
“The second quarter of 2009 saw industry performance stabilise, with a modest increase in volumes as demand in some industry sectors and regions (most notably
“However little improvement to profitability was achieved, as crude oil prices rallied and lengthy markets prevented producers from fully passing costs through to consumers.”
West European and North America producers it seems were lucky in that
The output of
Yet, despite this squeeze on availability, producers in European and
Higher feedstock and energy costs put great pressure on all players as crude prices surged through the quarter. Brent prices rose by more than 40%, climbing about $70/bbl at one stage.
The drop back in July heralds a still difficult period for the sector. Companies have moved into the quieter northern summer months with little in the way of robust demand.
The drop in crude prices by some $13/bbl at the start of July also does not augur well for companies trying to push through sometimes steep price increases.
Demand has not returned as it might and it will not given the uncertainties that bedevil so many markets. Consumer confidence is thin and buying power weak.
A positive impact from the upturn in the automobile market in Europe and
It is the likelihood of much weaker demand from
The significant increase in polymers demand in the first quarter and through the second appears to have been largely based on speculation on the rising oil price. Without the impetus behind that,
There are green shoots of recovery but the world’s economies are not yet bearing significant fruit. Petrochemicals producers put a difficult second quarter behind them as they do battle in a tough second half.
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