04 September 2009 17:57 [Source: ICIS news]
By Nigel Davis
It predicts overall chemical industry capacity utilisation in 2010 to be 79%, up from 75% in 2009 but below the trough of 81% in 2001 and 83% in 1993.
This is hardly good news. The shape of the recovery is beginning to be called; and there is not a great deal of confidence in chemicals.
One might have expected more broadly based and cyclically protected companies to fare better as demand begins to improve but that does not look as though it will be the case. The trouble with recession this time round is that it is deep rooted and widespread.
Companies of all sorts, in myriad industries remain under pressure and consumer confidence is low. The macro-economic data look positive, and the world may be pulling out of recession faster than some expected, but all is relative.
As industry economists are wont to point out: it can take years for a sector recovery to fully take hold following a damaging recession.
Financial and commodity markets have already discounted a recovery but it is the sustainability of the recovery that is open to question.
A reflection of this is being seen across many chemicals markets. Upstream, prices have moved higher: olefins and aromatics have gained ground. But price increases have been hard won or just stalled down many product chains as companies have met customer resistance.
End-use demand is not increasing, yet. Chemicals production, prices and sales all remain depressed, although improved from the start of the year.
Chemicals production in
The disquiet over continued growth in
At a more mundane level it is right to ask just what will happen when recession-driven tax incentives are withdrawn and ‘cash for clunkers’ plans end.
The economic outlook improved last month for the first time since the third quarter of 2007 but it is far too early to take the rising arc of the upswing for granted.
The crude market is certainly overblown. Petrochemical and plastics prices have been driven higher on the back of rising oil and, thankfully, thus far sustained
But the world’s big chemicals markets in
Chemical companies are likely to be forced to face higher feedstock and energy costs in the second half, particularly if they have bought forward on rising prices.
Nomura expects to see this negative feedstock and energy cost impact on BASF margins in the first half of 2010.
If capacity utilisation remains as low as the bank suggests then times will indeed be hard for the chemicals giant and for much of the industry running into next year.
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