Moody’s worries about the chemical industry

Moody’s, the global ratings agency, is today forecasting a 70% chance of a U-shaped recession, and a 15% chance of either a V or L-shaped downturn. This broadly agrees with the blog’s own view, set out a month ago. Moody’s also singles out the chemical industry as being one of those most at risk from a lengthy downturn. It highlights 2 key risks as being higher crude oil prices, and a major downturn in commodity margins.

It also worries about the impact of the “weak credit environment” on “financially stressed companies”. It points out this will make it difficult for them to “sell assets and generate liquidity”, and could force them “to sell their best businesses”. Moody’s worries that this “would greatly impair their ability to recover in a weak operating market”. CFOs will also be be worried when they read the report (

Moody’s credit risks Jan09.pdf

).

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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