23 October 2009 17:17 [Source: ICIS news]
By Nigel Davis
LONDON (ICIS news)--If you have sought direction from the first flush of third-quarter financial results from the sector majors or, recently, from chemicals markets themselves, then you may not have been disappointed.
The talk has been of recovery, although globally the picture remains depressed. DuPont on Tuesday said it was almost sold out of the white pigment titanium dioxide but continued to struggle in its high-strength materials businesses.
Dow on Thursday talked of “early cycle growth in emerging geographies”.
CEO Andrew Liveris identified Greater China, s?xml:namespace>
This is welcome, sequential growth although chemicals demand remains well down on last year. Plant operating rates have been forced down. Dow’s average in the quarter was 78%, three percentage points higher than in the second quarter of the year.
The story is still that of coming off the bottom of the trough with demand growth driven principally by
“Challenges certainly remain,” Liveris said in a conference call, “particularly in the mature economies such as those of the
Such a message is likely to be repeated as this earnings season progresses. It is not so much a question of chemical industry executives being conservative in outlook – as suggested by one investment analyst this month. They see very little in the way of ‘green shoots’ on the economic horizon in either the
DuPont’s European businesses were dragged down in the third quarter by a poor showing from operations in c
In sharp contrast, statistics showed this week that China’s GDP grew by 8.9% in the third quarter compared with growth of 7.9% in the second quarter.
For the big western chemicals producers and their counterparts in
DuPont makes a great deal of its new product introductions. Dow is focusing more on closer to end-use market businesses following its takeover of specialty materials maker Rohm and Haas.
The drive to specialise, or rather to push the higher margin businesses, and to get closer to the customer, has been accelerated by the recession. It is changing the faces of the latest chemicals producers.
Lower margin, and in broad terms, basic commodity businesses have been more starkly exposed by the recession. Some are struggling to make a comeback.
Dow’s chloralkali business, for instance, remains under pressure, both, Liveris says, on the vinyl chloride monomer (VCM) side related to construction and on caustic soda because of weak fundamentals in the alumina and pulp and paper industries.
In such businesses companies have to move fast to match their manufacturing capabilities with expected ongoing levels of market demand. This is where it really hurts as operating rates remain low and plants eventually are shuttered or closed.
Dow and other companies clearly feel that the global economy is now on firmer ground. Trade is beginning to pick up, Liveris said this week. The good news is that exports from
“Market stability has improved,” he added, “but we continue to remain cautious about the ability of some economies to sustain growth. This is especially true of the
Liveris says that Dow’s 2009/10 operating plans still “do not count on material improvements in market conditions”.
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