EPCA ’12: Economic environment is key challenge

06 October 2012 12:00  [Source: ICIS news]

By Nigel Davis

EuropeLONDON (ICIS)--Market conditions are challenging but delegates will want to come away from this year’s European Petrochemical Association (EPCA) meeting with a better idea of just how bad they really are.

Key end-use customers in construction and automobiles are under intense pressure from Europe’s economic woes and, particularly, the sovereign debt crisis. Demand from polymers in important economies in southern Europe has shrunk significantly. The auto industry has to contend with weak consumer confidence, poor demand and debilitating overcapacity.

For producers of polymers, intermediates and other chemicals sold into these industries visibility is poor and the future is uncertain.

But this is not 2008-09, when a drop in polymers demand was followed by the crash in the commodity and financial markets and the slump in petrochemicals output.

Producers don’t expect a rapid deterioration, but then neither do they expect a rapid improvement.

“We don’t see a huge amount of change going into Q4 [the fourth quarter],” Tom Crotty, director with responsibility for corporate affairs and communications at INEOS and EPCA president, told ICIS Chemical Business (ICB).

So far the industry as a whole is profitable, he added, but not making mega-profits in Europe. Demand has eased back and cracker operating rates have been trimmed down to the low 90s range rather than the mid-90s.

“I think we’ll see much more of the same as we go into Q4 and Q1 [the first quarter of] 2013,” Crotty said.

The sector clearly is struggling to maintain output through a period of weak demand. Producing and consuming companies face difficult price discussion as a close watch is kept on feedstock price movements and working capital costs.

The crude oil and naphtha markets continue to deliver surprises which petrochemical producers have to seek to ameliorate. Most players would welcome greater stability and in such a volatile environment err on the side of caution.

Europe’s economic woes have exposed the sector’s feedstock position and its investment profile. The shale gas revolution in the US has prompted a wave of planned investments that will revitalise the sector. Olefins producers have capitalised on greater ethane availability and the competitive ethane price.

Europe’s petrochemical makers are not in that happy position and operate in a much more cost-constrained environment.

Crotty says that the key challenge in Europe remains the economic environment and managing businesses through that.

Over the longer-term it has important feedstock, environmental costs and skills issues to address.

The annual EPCA meeting runs from 6-10 October.

Read Paul Hodges’ Chemicals and the Economy blog
Bookmark John Richardson and Malini Hariharan’s Asian Chemical Connections blog


By: Nigel Davis
+44 20 8652 3214



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