Global debt issues to weigh on chemical sector for years - exec

15 March 2012 18:53  [Source: ICIS news]

PRAIA DO FORTE, BRAZIL (ICIS)--Debt-laden economies in the eurozone as well as worldwide will continue to weigh on the global chemical sector, a chemical executive said on Thursday.

“Sovereign debt in Europe is currently the focus, but the total sum of debt in an economy should not be ignored,” said Miguel Mantas, managing director at Luxembourg-based oxo chemicals producer OXEA.

This includes sovereign debt, financial sector debt, private household debt and corporate debt, he added.

Mantas spoke at the 6th EBDQUIM conference hosted by Associquim/Sincoquim (Brazilian Association of Chemical and Petrochemical Distributors).

From the start of the financial and economic crisis in 2008 to the second quarter of 2011, only three out of the 10 largest countries have reduced their total debt/GDP ratios – the US, South Korea and Australia, he pointed out.

Three countires – Japan, Spain and France – have increased leverage levels significantly, he added.

“We are still in the early phase of solving this debt crisis. The risk from total global leverage will therefore still take a long time to solve,” said Mantas.

A lack of decisiveness in the political front will likely continue in 2012, as 53% of the world’s population could be electing new leadership this year, including the US, France and China, he said.

“The debt problem needs political continuity and time, but 2012 will see the largest number of elections worldwide. This can lead to discontinuities and lack of decisiveness,” Manta said.

The European chemical sector is expected hold up better than the local economies because of its global customer base. The EU chemical sector is projected to grow by 1.5% in 2012, he noted.

However, EU chemical capacity utilisation has remained below the long-term average of 81.2% since the third quarter of 2011. In the fourth quarter of 2011, it fell to 80.0%, he added.

“With the exception of Germany, economic sentiment indicators are below their long-term average in all major EU economies. This is an indication that the situation will continue,” said Manta.

Chemical companies must develop strategies to manage diverse and quickly evolving risk scenarios, he said.

This includes controlling costs, increasing vertical integration and investing in higher-growth regions such as China and Latin America, Manta added.

By: Joseph Chang
+1 713 525 2653

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