01 February 2013 09:04 [Source: ICIS news]
SINGAPORE (ICIS)--Chemical producers are expected to remain cautious this year and wait for demand to improve before building their inventories or boosting capital spending, ratings firm Moody's Investors Service said on Friday.
“Until such time, they will act to reduce their costs and control expenses,” the company said in a report titled "Economic Uncertainties Bring Out Caution Across Chemicals Industry”.
Demand for chemicals and plastics in Europe is projected to fall as its construction and automotive industries “see sequential declines”, said John Rogers, a Moody’s senior vice president.
"European chemical producers also remain concerned [about] the continent's ongoing economic weakness, and some have already begun cost-reduction and rationalization efforts, with others expected to follow," Rogers said.
However, chemical producers in the US are cautiously optimistic about demand this year, with petrochemical commodity producers enjoying lower prices for raw materials such as natural gas, ethane and propane than their competitors in Europe and Asia, he said.
Chemical firms Westlake, Nova and CPC stand to benefit the most, followed by Lyondell and Dow, according to Rogers.
Meanwhile, weak demand from key importer China is expected to lower global prices for many chemical commodities and reduce margins for European, Asian and Latin American producers, according to Moody’s.
"China's demand for many commodity chemicals and plastics, in particular polyethylene, did not keep up with its GDP growth in 2012," Rogers said.
"This presents a risk especially for companies with considerable polyethylene capacity outside of North America, such as Ineos and Dow," he added.
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