EU chems 2020 output expected flat after 1% decline in 2019 – Cefic

LONDON (ICIS)–EU chemicals production is expected to have fallen 1% in 2019, year on year, with no growth expected in 2020 as a hostile trade environment and political uncertainty continue to weigh on demand, EU trade group Cefic said on Tuesday.

Sector demand this year was weakened by slower macroeconomic growth, trade conflicts and Brexit uncertainty, all sapping output in key end markets including the automotive and electrical appliances sectors.

Construction output has proven a brighter spot for producers as low interest rates and high infrastructure demand allowed the sector healthy growth in output, which is expected to continue into next year.

Overall 2020 chemicals sector growth in the region is not expected to exceed 2019 levels next year, as continued trade difficulties and political uncertainty look set to counterbalance an uptick in manufactured goods demand driven by rising real incomes.

“Despite slightly weaker growth forecasts, Europe remains the second largest chemicals producer in the world,” said Cefic executive director for industrial policy Rene van Sloten.

“Our competitive advantage and future growth could come from specialised, higher-value-added products and solutions for a climate neutral and circular economy if we have the right EU policy framework and sufficient support for innovative chemistry in place,” he added.

Overall chemicals sector output was down 0.7% in January-September 2019 compared to the previous year, as a 1.9% increase in first-quarter chemicals output for the EU was followed by two consecutive quarters of decline.

This was driven by a 0.6% decline in EU manufacturing output over the same period, with the sharpest slumps seen for the automotive, basic metals, electrical equipment and textiles sectors.

Cefic’s economic outlook taskforce projects a continuation of the economic slowdown across much of the globe in 2020, with EU28 GDP expected to fall to 1.2% next year, compared with growth of 1.4% in 2019 and 2% in 2018.

China’s economic growth is expected to slow to 5.7%, compared to 6.8% in 2018, and even the US, which has performed more strongly than many regions of the world, is expected to be sharply weaker next year, falling to 1.7% GDP growth compared to 2.9% in 2018.

India and Brazil are expected to be more robust next year, Cefic added, with GDPs expected to rise by around a percentage point apiece to 6.7% and 1.9%, respectively.

German chemicals trade group VCI projected that output in the country will rise 0.5% in 2020, compared to a 7.5% fall – 2.5% excluding the pharmaceuticals sector – this year.