Europe intermediates confidence in future profitability falls, CMCI shows

LONDON (ICIS)–Players in European intermediate markets have lost confidence in future profitability despite viewing current and future business conditions as more favourable, analysis of the June ICIS Europe Chemical Markets Confidence Index (CMCI) showed on Wednesday.

Intermediate chemical markets are also more confident that current order book volumes are higher than 12 months ago, but confidence in future order book volumes has fallen slightly.

Intermediate confidence in future profitability has fallen by 12.5 points since last month, while confidence in future profitability among building block chemicals has risen sharply, moving the Index from negative in May to strongly positive in June, and there has also been a marginal rise in confidence in future profitability among downstream markets

This may be linked to fears over producers’ ability to pass through firmer crude oil prices in recent weeks weighed against buyers’ growing confidence in increased GDP and higher consumer purchasing power, while producers at the top of the chain are seeing the benefits of higher recent stability.

It may also be linked to some movement in expectation late in the week over the potential power shifts and change in macroeconomic dynamics caused by the Brexit vote, although, again it remains too early to isolate any real impact from the UK referendum and the immediate instability it brought into the market on Friday 24 June, when the confidence index data was still being collated.

Coupled with this, crude oil prices have once again become volatile in the wake of the referendum, with WTI futures losing 6% of their value between the settlement on Thursday 23 June and Monday.

Nevertheless, despite the fall in confidence in growing profitability in the next 12 months, intermediate markets still remain strongly positive on all current and future indicators except current profitability compared with 12 months ago, and the majority of indicators have seen a rise in confidence since May.

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