Chem company margins stay stable through to end of 2012 – Bernstein

16 January 2013 10:56  [Source: ICIS news]

LONDON (ICIS)--European and US chemical industry revenues remained resilient in the closing months of 2012, despite the sluggish economy and slight pricing instability for some sectors, US-based analyst Bernstein Research said on Wednesday.

Gross month-on-month margins for European companies were stable in November and for US companies in December, as slight price falls were offset by a proportionate sequential decrease in costs, the firm added.

Pricing for specialty chemicals increased by 1% year on year through November and December in both regions, strengthening margins in Europe and keeping them stable in the US. However, the US specialty chemicals market marked its third consecutive month of sequential decline, according to the company

Commodity chemicals prices were up 2% year on year in Europe and flat year on year in the US, but exhibited a slight decline month on month during the period.

The margin contraction was driven by weak petrochemicals pricing, which declined by 1.3% month on month in Europe in November, and by 1.2% month on month in the US in December, Bernstein added.

The company identified paints and coatings, chlor-alkali, and industrial gases as its favoured sectors, due to the potential for companies in those markets to maintain prices in a weak economy.

European firms AkzoNobel, Air Liquide and Linde and US-based companies Sherwin-Williams, PPG and Praxair are among the companies well-placed to prosper in spite of the current deflationary price environment, according to Bernstein.

The Wall Street analyst is also bullish on Norwegian fertilizer producer Yara, claiming that strong demand for ammonia will offset a predicted fall in urea pricing.

“For Yara, our thesis rests largely on our belief that pessimism on urea pricing is unwarranted, since the ammonia supply-demand balance is tight,” Bernstein said.

Petrochemicals majors such as Germany’s BASF – currently rated 'market-perform' by Bernstein – would become more favoured when cost inflation resumes, the company added.


By: Tom Brown
+44 208 652 3214



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