INSIGHT: Companies will make moves in more confident markets

12 April 2010 20:21  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS news)--Expansion, expansion, expansion is the growth cycle outlook for the OECD and euro areas and for the top five Asia economies, the OECD said on Monday.

The forecast is based on the fact that the OECD’s composite leading indicators (CLIs) for February “continue to point to economic expansion, albeit at a different pace across countries and regions”.

Economic activity looked strongest in the US and Japan but there are suggestions that China’s growth is slowing. Brazil and India remain in recovery mode.

The indicators also reflect continued confidence in the world’s capital markets.

Analysts at Close Brothers last week said they see “sustained momentum” behind a recovery in merger & acquisition (M&A) appetite in the chemicals sector.

European chemicals distributor Brenntag has succeeded with an IPO (initial public offering). “We believe this generally bodes well for other possible IPO candidates, including Cognis, Flint and Perstorp,” addes Close Brothers. By contrast, amines producer Taminco earlier in the year decided to pull its offering, unsure of its possible success.

The more positive outlook extends across much of the sector and is backed by the financial market and general economic confidence.

This may continue to be a slow recovery overall. And, indeed, in most markets there is a long way to go to claw back the growth apparently lost since the middle of 2008. Yet, growth there is and end use demand, as well as higher oil based feedstock costs, and not simply inventory re-building, appears to be underpinning some markets.

Their renewed strength will be reflected in what are likely to prove to be a strong set of financial results for the 2010 first quarter.

The Close Brothers analysts also point to news of price increases, new capacity decisions and, on the part of LyondellBasell, its financial restructuring plans, as evidence of increased confidence in the sector.

Senior managers were understandably cautious during the fourth quarter reporting season and not willing or to be drawn on the outlook. Further economic consolidation and the expansion in the growth cycle suggested by the OECD CLIs simply add more weight to the assertion that companies will continue to move to capture the sort of opportunities that have been denies to them for one reason or another for so long.

In the news recently, Abu Dhabi industrial investment arm IPIC has indicated yet again that it is interested in an acquisition in Europe.

Heavily indebted industry major INEOS has reiterated that it is talking to potential investors in its operations at Grangemouth in Scotland.

Money is flowing more freely again on the back of greater confidence in economic growth. A great deal more can be achieved in the chemicals sector now than just a few short months ago.

To discuss issues facing the chemical industry go to ICIS connect

By: Nigel Davis
+44 20 8652 3214

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly