Faltering economies slam Q3 chemical margins – US ChemSystems

06 October 2011 18:24  [Source: ICIS news]

HOUSTON (ICIS)--Chemical profit margins across the globe were hammered in the third quarter as confidence in the economic outlook waned, consultancy Nexant ChemSystems said in a report issued on Thursday.

“Consumption of petrochemicals has slowed considerably as leading regional economies faltered,” Nexant ChemSystems said in its quarterly business analysis.

“Worryingly, Asian demand has also continued to be soft and has failed to counter fragile Western demand,” the consultancy continued. “Feedstock costs meanwhile continue to be problematic as crude oil prices have remained stubbornly firm despite the weak economic outlook.

“Even US petrochemical profitability has declined despite the strong advantage seen in cracking light gases on the US Gulf coast as domestic and export market derivative prices weakened.”

The consultancy said the third quarter saw a “dramatic change in fortunes for European petrochemical producers”, with average profitability across the industry collapsing to its lowest since the global financial crisis took hold at the end of 2009. 

Demand stalled as confidence in sustainability of debts in Greece and several eurozone nations fell, Nexant Chemsystems said.   

In the US, markets weakened while supply lengthened. Consumption of propylene and butadiene (BD) derivatives was hampered after prices rose to record highs in the second quarter, the consultancy said.

Average industry margins in the US fell about 15% to their lowest in six quarters, according to the report.

Meanwhile, Asian markets weakened steadily after a period of strong demand in early July, the report said.

“Demand [in Asia] stalled as a succession of economic indicators pointed to a rapid deterioration in regional economies across the globe,” the report said. “The supply side shortened due to a busy period of maintenance at derivative units, coupled with extensive unplanned outages at several large complexes.”

The Middle East was one of the few regions where profitability was maintained.

Middle East margins on olefins and polyolefins delivered into the European market “decreased as confidence in the eurozone economies deteriorated”, the report said. “Margins for exports into Asia improved modestly, buoyed by tight supplies.”

Globally, intermediates were the only sector to achieve an increase in profitability, mainly as a result of to seasonal strength in the polyester industry, Nexant ChemSystems said.

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy


By: Brian Ford
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