InterviewOutlook subdued for Europe chemicals - senior INEOS exec

07 September 2012 15:57  [Source: ICIS news]

LONDON (ICIS)--The European chemical sector faces continued challenging operating conditions throughout the rest of 2012 and into the first quarter of 2013, a senior INEOS executive said on Friday.

Lower downstream demand from key end-use markets caused by the eurozone financial crisis has caused cracker operators in Europe to lower operating rates, and this looks set to continue, according to Tom Crotty, director of INEOS with responsibility for corporate affairs and communications.  

Year-on-year, the industry has had nothing like as good a year as 2011, which was very strong, he said. “There were a lot of good signs of recovery but then the second wave of the euro crisis hit us and that knocked confidence and demand. However, we’re not looking at a 2008/9 scenario where demand literally collapsed. We’re seeing an easing back on demand so for the industry as a whole – it is profitable but not making mega profits in Europe.”

Crotty estimates that operating rates are slightly lower than they were last year. “My guess is that they’d be in the low 90's range rather than the mid-90’s range so I’m sure they’re down. From our [INEOS] perspective we do have the benefit of quite a good mixed economy with gas and naphtha crackers to play with. So we’re probably better than most – those figures may be an overestimate [for Europe as a whole].”

Demand for polymers has become erratic in Europe, with sectors such as construction suffering huge reductions in markets for building materials in regions such as southern Europe.   

He said: “Where you’ve got more exposure to the building cycle, there have been significant reductions, especially in southern Europe. You’ve only got to see economies like Spain and Portugal where there was huge consumption of polymers into house, apartment and hotel building; that’s just not there any more.”

Crotty said that INEOS has a focus on robust sectors such as food packaging which are not as dependent on the economic cycle.

“Where we haven’t seen the decline that we did see in 2008/9 is in the automotive sector. The car companies would say they aren’t that satisfied with demand in Europe but it hasn’t fallen away like it did in 2008/9.”

Crotty expects the current challenging conditions to continue into the fourth quarter and first quarter of 2013: “We don’t see a huge amount of change going into Q4 – a major signal for change is going to have to be an economic signal and it’s very hard to see where that is going to come from. I don’t see any rapid improvements but I also don’t think we’ll see any rapid deterioration. I think we’ll see much more of the same as we go into Q4 and Q1 2013.”

Crotty added: “There are signs of a bit of stability kicking in around the euro. The European Central Bank’s [ECB] position seems to be putting some confidence back.”

Yesterday, the ECB signalled that it would adopt a new strategy of buying unlimited amounts of sovereign debt from struggling EU states.

Crotty is also president of the European Petrochemicals Association and vice-president of trade group Plastics Europe.

By: Will Beacham
+44 20 8652 3214

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