23 September 2009 13:38 [Source: ICIS news]
By Lucy Craymer
LONDON (ICIS news)--The UK chemical industry's output might not return to pre-recession levels until 2020 after hitting hard times amid the recession with a series of plant closures and job cuts, an analyst said on Wednesday.
“That [chemicals excluding pharmaceuticals] part of the industry will not get back to the point where it was in 2008 for a long, long time,” said David Thomas, Oxford Economics' senior industrial economist for chemicals and consumer goods.
Thomas estimated output for the industry would not recover until the fourth quarter of 2020.
Alan Eastwood, Chemical Industries Association (CIA) chief economist, added that he was surprised at the initial speed that economists were forecasting the ?xml:namespace>
If you looked at past recessions, which were the equivalent of this downturn, it was surprising how long it took to recover, he said.
Furthermore, Oxford Economics estimates that investment levels would not return to those of 2008 before the end of 2020.
“Investment has absolutely collapsed,” he added, suggesting that most of the money sunk into the industry would go on maintenance, refurbishment and upgrading existing plants rather than new builds.
PricewaterhouseCoopers' performance improvement consulting director Mike Clements said most of the
“Companies are going to have put money up or do something else,” he said.
Plants that produced hard-to-move goods or were part of a production chain were unlikely to be replaced by those elsewhere in the world, he added.
The lack of investment in new
Along with LyondellBasell’s closure, Croda has said it would close its tallow fatty acid plant in Merseyside and La Seda de Barcelona announced it was planning to close its 500,000/tonne/year purified terephthalic acid (PTA) plant.
“Once one of the plants goes, other plants start to go,” Clements said.
The prophecy quickly became reality when Croda followed Dow’s decision and announced it would close its Wilton plant, which was heavily reliant on EO as a feestock, because of the issues relating to moving the product.
Eastwood said integration had always been important to the industry and the lack of this was now causing problems.
“Me and my colleagues shook our heads when ICI [which owned the
Furthermore, companies are looking to the
Paul Satchell, a consultant at International eChem, said the
However, this did not mean wholesale closures for
To encourage chemical companies to remain the CIA believes the government needs ensure reliable energy supplies – volatile and high costs have caused concern for chemical companies in the past.
Eastwood described the running of the chemical industry as a self-inflicted wound.
There is also concern that national and regional government agencies are not joined up and Eastwood said it would be better for the industry if it was more coherent if it wanted to attract more overseas investors.
But while the industry, which contributed £10bn ($16.3bn/€11.1bn) to the UK GDP in 2007, is facing tough times, the experts do not expect it to disappear but believe instead it will adapt. However for that to happen, its value needs to be appreciated.
“It has been over shadowed by the finance sector. The
($1 = €0.68/ €1 = £0.90)
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