Cefic forecasts 2012 standstill for EU chem output due to debt crisis

14 June 2012 17:21  [Source: ICIS news]

LONDON (ICIS)--Cefic forecasts a standstill for Europe’s chemicals output in 2012, as the eurozone debt crisis continues to impact the sector, the chemicals industry trade group said on Thursday.

Cefic said the eurozone debt crisis will weigh down European chemicals production in 2012 more than initially forecast, after a weak 1.3% growth increase in 2011.

Chemicals producers have expressed concern over the possibility of another prolonged period of uncertainty, slowing demand and increasing feedstock costs if Greece exits the eurozone and deepens the debt crisis.

“Domestic demand for chemicals will decline slightly as compared with 2011 as austerity measures in EU member states dampen business orders and inventory build-up remains flat, due to continued weak EU business sentiment,” said Cefic director general Hubert Mandery.

“The EU economy should stabilise during the second half, partially compensated by overseas demand and a weaker euro boosting eurozone competitiveness. A weaker euro should also help increase EU chemicals exports,” he added.

The trade group said that after a strong first quarter in 2011, EU chemicals output fell in each of the following three quarters, but recovered in first quarter of 2012.

“Cefic predicts chemicals output during the rest of 2012 will remain nearly 5% below peak levels reached in 2007. Growth in 2013 is expected to pick up slightly to 2% despite austerity measures and continued high unemployment levels,” Cefic added.

“The main source of uncertainty is the European public debt challenge. The Cefic forecast assumes that the linked issues of public sector debt levels, bank weakness and ‘contagion’ will somehow be contained,” said Cefic.

It added that wide differences in competitiveness among the eurozone members are putting strains on overall economic growth in the single-currency region.

“The US economy is growing, but worryingly high and rising public debt levels could scupper longer-term growth,” said Cefic.

Turning to Asia, Cefic said China’s economy could slow as it migrates from an investment-dependent economy to one sustained more by consumer demand but added emerging economies are the main drivers of world growth.  

“Recent downward oil price movements should foster long-run business activity, but short-term destocking could occur as firms in the petrochemical supply chain delay orders as they await lower prices,” it added.

Cefic president Giorgio Squinzi said: “Global competition remains fierce, both from the US shale gas boom boosting American manufacturing and from producers in the Middle East that hold a feedstock advantage and face lower energy prices relative to the EU market”.

He said that policymakers must look for ways to solve EU debt problems to help boost the economy and bring stability back to the market, adding that without solutions, the chemicals sector output will be dragged down further as the demand for cars falls and the construction industry suffers from continued overall weakness.

“Our sector will be on better footing when EU policy instils more business confidence, creates a more efficient regulatory policy, and rewards firms who innovate, create jobs and expand operations,” said Squinzi.

By: Leigh Stringer
+44 208 652 3214

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