Europe chemicals to gain from EU green deal spending plans - bank

Author: Tom Brown

2020/06/04

LONDON (ICIS)--European chemicals players are expecting to see increased business momentum on the back of the EU’s green deal expected to unlock hundreds of billions of euros of investment in sustainability projects, according to Credit Suisse.

A virtual conference organised by the bank hosted management teams from 20 chemicals, agriculture, packaging and cement firms address investors, with all chemicals firms present noting expectations for an increase in sales on the back of the mooted EU green investment plan.

However, little visibility on uplift from the measures is expected over the next 12-18 months.

The European Commission - the EU's executive body - has proposed a raft of green investment measures at the heart of a €750bn coronavirus recovery stimulus package.

Specifics on funding are expected to be published this week; they would reportedly include €91bn/year in grants and loan guarantees for building renovations such as insulation and rooftop solar arrays, €25bn in renewable energy tenders and €20bn/year in grants and guarantees on clean transport over the next two years, and development of clean hydrogen production.

Chemicals firms are active in increasing building energy efficiency, vehicle lightweighting and in renewable energy components, meaning that the proposed funding could be a windfall for the industry and serve to drive its focus more strongly onto the sustainability agenda.

The focus on clean hydrogen means that France’s Air Liquid, which has invested in production and carbon capture and infrastructure, may be the most direct beneficiary, if the measures are improved by European Parliament and the 27 member states, Credit Suisse noted.

Other key themes among producers included improved conditions in the Asia construction sector, which could be on its way to full recovery, and strong increases in China solar energy targets driving demand.

Some chemicals mergers and acquisitions (M&A) emains on track, but the coronavirus pandemic is keeping various practicalities of the process different, the bank noted.

“Strategically, plans to acquire/divest appear on track, but likely delayed as site visits/due diligence is challenging and balance sheet preservation remains the key focus,” the bank said, citing updates from chemicals management groups.

The bank was also encouraged by feedback from Clariant and AkzoNobel, both of which analysts at the bank rate as likely to outperform the general market.

The sale of Clariant’s masterbatches and pigments division is likely to leave the firms “a niche specialty chemical player with attractive end market exposures”, according to Credit Suisse, and improving raw materials tailwinds and lower costs are likely to drive margin growth for AkzoNobel despite volume challenges.

Front page picture source: Chine Nouvelle/SIPA/Shutterstock

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