04 April 2012 13:38 [Source: ICIS news]
In a new report, Global Chemicals – A view from the road, the bank said that it had questioned questioned four leading chemical companies on their demand and growth prospects: French specialty chemical firm Arkema, Norwegian fertilizer producer Yara, French industrial gases firm Air Liquide, and Munich-based industrial gases and chemicals engineering firm Linde.
“The companies maintain their 2012 outlook for recovery in the second half and [expect] the first quarter of 2012 to be better than the fourth quarter of 2011, but [will be] down year-on-year,” it added.
“In our opinion, this is already well priced in at current valuation levels,” HSBC said.
The bank said that while most product chains have seen price increases, the fear of further rises has declined as feedstock prices are already at record levels.
It added that producers have been forced to absorb most of the rise in costs, with very limited product price increases being passed on to end customers.
“The continued disconnect between pricing and costs highlights this phenomenon,” HSBC said.
“Producers’ inability to pass cost increases through to end customers is indicative of the weak demand environment,” the bank added.
The bank said it did not believe the recent rally in chemical share prices have been supported by current demand “fundamentals”.
“Our base-case view is that the recent global rally in chemical share prices is unsupported by current demand fundamentals and that stock prices are building in far too much expectation of a second half 2012 recovery,” it added.
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