INSIGHT: Chemical markets can improve further in 2014

26 March 2014 16:00  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS)--The world’s major chemical markets can be expected to improve further this year, Germany’s VCI said this week in its latest global business update.

The chemicals trade group’s measured analysis is that relatively strong global economic growth in the fourth quarter of 2013 will carry over into 2014. “Following the pull of the industrial countries, the emerging markets will overcome their weak phase, irrespective of their structural problems. All in all the recovery has a broad base,” it said.

The economic and industry data point to stronger growth across most chemical industry segments. Even petrochemicals managed a fourth quarter spurt. Given downstream growth, over time the upturn should be sustained.

Chemicals demand tends to grow in the early phases of an economic upturn, as the VCI points out, and the association’s data on key customer industries looks encouraging.

The economic recovery, however, is still vulnerable and prone to setbacks. The EU economies can be expected to grow more strongly this year. The US recovery continues at a relatively slow pace.

“The economic uptrend is intact in the advanced economies,” the VCI said. But emerging markets have come under considerable pressure from the financial markets and China’s growth potential in 2014 has come under increasing scrutiny. China’s manufacturing slowdown and credit shortage have begun to weigh heavily on regional petrochemicals demand.

China’s economic growth target for 2014 is 7.5% while the VCI currently believes that 7.3% is achievable. “After a weak start of the economy in the present year, measures should be taken to support the economy so that this [7.5%] target is reached,” the trade group said.

Further investment in infrastructure and housing would be among the most important instruments the government could use to expand the economy. Such investments would benefit chemicals demand.

And while the impact of China’s possibly restrained growth in 2014 loom large, there is concern about the fragility of growth in emerging markets such as Brazil and Mexico and the impact of the political crisis in Ukraine on Ukraine and Russia’s economies.

“At the moment, the prospects for 2014 are good for our industry,” said VCI director general Utz Tillmann. “The upward trend of late 2013 lasts; business is brisker in all chemical sectors. We are expecting the demand for chemicals to improve both at home and abroad, with special focus on our industrial customers in Europe. But obviously, setbacks are possible. At present, mainly the political crisis in Ukraine brings risks for the global economy.”

Industrial Production World

Change versus previous year in percent

 

2011

2012

2013

2014

Manufacturing Industry

6.4

2.7

3.0

5.0

Food

3.8

2.8

1.5

3.5

Automobile

7.5

5.1

3.5

5.0

Metal production & Metalworking

8.0

3.1

3.5

4.0

Plastics processors

5.0

2.3

4.0

5.0

Chemistry

4.8

2.7

5.0

5.0

Mechanical engineering

11.6

2.6

0.5

4.5

Electrical appliances and equipment

6.2

2.9

2.5

4.5

Textiles

3.9

4.1

4.5

3.5

Construction

0.3

1.9

3.0

3.0

 

 

 

 

 

 

2011

2012

4 th Quarter 2013

vs prev year

vs prev year

vs prev year

v. prev quarter

Manufacturing Industry

6.4

2.7

4.9

1.4

Food

3.8

2.8

1.4

1.0

Automobile

7.5

5.1

5.8

1.5

Metal production & Metalworking

8.0

3.1

4.5

1.0

Plastics processors

5.0

2.3

5.2

1.0

Chemistry

4.8

2.7

5.6

1.9

Mechanical engineering

11.6

2.6

3.0

1.5

Electrical appliances and equipment

6.2

2.9

2.8

1.0

Textiles

3.9

4.1

3.7

0.0

Construction

0.3

1.9

3.3

0.5

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


By: Nigel Davis
+44 20 8652 3214



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