02 July 2010 17:24 [Source: ICIS news]
By Nigel Davis
LONDON (ICIS news)--Further evidence this week of a strong finish to the second quarter suggests that chemicals producers will reveal another good set of financial results starting in just a few weeks' time.
French specialties maker Arkema was particularly upbeat on Thursday, saying it expected a record second-quarter result. It has benefited from the stronger economic climate and the usual seasonal upturn in businesses such as fluorochemicals, specialties and coatings.
There have been other indications that the upturn has been widespread, driven largely by improved demand and better capacity utilisation.
Jurgen Hambrecht said on 23 June that BASF had seen (thus far) a better-than-expected second quarter. Remember, BASF’s first-quarter operating profits were up close to 98% year on year, mainly due to higher capacity utilisation. Renewed demand then was particularly strong from the automotive, electric and electronics industries and was feeding through into a stronger performance across core segments such as chemicals and plastics.
Regional demand was strong in Asia and ?xml:namespace>
It does not look as though much has changed in this respect for the chemicals giant and most other producers.
BASF has big plants in
Producers of all sorts are reaping the benefit of local,
Arkema has ramped up production from a new HFC-125 fluorochemicals production unit in
Cost savings continue to work their way through in most companies. Firms have learned to work with lower levels of inventory, with pared-back internal services and fewer employees.
There are no indications of the brakes being taken off in this regard. Companies may be somewhat more confident than they were but they are by no means in an expansive mood.
Current global economic uncertainty sees to that. Nervousness in chemicals markets is reflected by the sharp decreases in commodity chemicals and polyolefins prices in
Industry economists suggested in early June that the
Economic growth in
Most companies have benefited in the most recent quarter from strong volumes but the recovery has also very much been price led. Arkema, for example, has reaped a harvest from sharply higher acrylics prices just as it has become, with the purchase from Dow, the second-largest acrylics producer in the
How sustainable product prices might be in a weaker economic environment and given lower volume growth is anyone's guess.
Producers have managed output to demand extremely well through the downturn.
How they manage through what could be a particularly difficult period remains to be seen.
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