Europe June CMCI suggests shift in power towards chemical buyers

LONDON (ICIS)–Chemical producers’ confidence has fallen across all indicators except future order book expectations compared with May, analysis of the June ICIS Europe Chemical Markets Confidence Index (CMCI) showed on Wednesday.

June Producer CMCI Change Versus May Producer CMCI

Producers saw a sharper fall in confidence than buyers and traders/distributors, indicating a shift in dynamic from broadly a seller’s market in May to more of a buyer’s market in June.

Nevertheless, all producer confidence indicators bar profitability compared with 12 months ago remain in positive territory in June, albeit at a much lower level than May, with the most dramatic shift in expectations of increasing profitability over the next 12 months.

In May, producers were the persona group with the highest confidence in increased profitability over the next 12 months. In June they have the lowest confidence.

Buyers’ confidence in future profitability has increased broadly in line with the fall in producer confidence, reinforcing the view that there has been a shift in the power dynamic over the past months. In fact producers were the only persona group to see a fall in expectations of future profitability.

As well as a sharp fall in profitability expectations, and likely going hand-in-hand, there was also a sharp fall in expectations of improving future business conditions.

It is unclear what role the so-called Brexit vote played in the fall in confidence in future business conditions, as the index was collated in the week preceding and in the immediate aftermath of the vote.

Although it is likely that it played a role for some players’ views on current and future conditions at the end of the week, it is too early to see the full manifestation of the impact.

The newly established ICIS Europe CMCI aggregates sentiment from hundreds of petrochemical market players actively involved in price negotiations across more than 60 different markets.

The Europe CMCI runs from +100, to -100, with zero on each index representing neutral, or uncertain conditions, a negative score indicating bearish expectations and a positive score representing bullish expectations. The indexes also gather sentiment on the comparison between the current situation and the situation across the past 12 months to give a complete picture of current market conditions and confidence. The information is gathered in the third week of each month.  A full methodology is available on request.

For more details on the overall Europe CMCI data, click here