Europe Chemical Industry Outlook for 2016

LONDON (ICIS)–The following OUTLOOK ’16 stories were published by ICIS news between Monday 21 December 2015 and Tuesday 12 January 2016. Please click on the headlines to read the full versions.

OUTLOOK ’16: More of the same predicted for Europe butadiene
While European butadiene (BD) market players have few expectations that the soft underlying demand conditions which have kept a lid on prices throughout 2015 will show any significant improvement next year, there is some confidence that Europe will again manage the challenges, albeit perhaps from a trickier standpoint for sellers.

OUTLOOK ’16: Europe MPG, PO braced for winter uncertainty
The outlook for the European monopropylene glycol (MPG) market remained unclear as of mid-December 2015, mainly due to the uncertainty surrounding the winter weather. The El Nino effect was projected to increase the levels of snow this winter cycle, however there has been relatively little snowfall thus far. MPG prices in the first and possibly second quarters will depend heavily on demand from the de-icing sector barring any major price shifts in the upstream propylene and propylene oxide (PO) markets.

OUTLOOK ’16: Market to see if plasticizer prices remain closely linked to propylene
In light of a few sharp price falls in propylene, DINP and DPHP producers have increasingly started distancing themselves from propylene being a benchmark for their prices.

OUTLOOK ’16: Stability in Europe PET market challenged by global unknowns
Any expectations of stability in the European polyethylene terephthalate (PET) market are sure to be challenged by the continued volatility in global matters.

OUTLOOK ’16: 2015 pressures to continue for Europe ECH, epoxy
The European epichlorohydrin (ECH) market is sailing into the unknown waters of 2016 expecting a continuation of the calm seen in late 2015, however, winds of change on upstream and downstream markets, as well as the uncertain impact of Asian imports to Europe, could unsettle the balance.

OUTLOOK ’16: Europe VAM market subject to short-term tightness
The experience of 2015 has probably emphasised the lesson that vinyl acetate monomer (VAM) is a global market. Relative lack of production in European centres does little or nothing to diminish that underlying factor, and probably the only thing that can be said with regard to the course of events in 2016 is that the region will continue to be significantly exposed to developments arising in other parts of the world.

OUTLOOK ’16: Upstream, forex expected to impact Europe fatty acids/alcohols
Even though Q4 demand was seasonally low in the European palm-based fatty acids market, the outlook for pricing in Q1 and beyond remains unclear due to upstream factors. Palm-based fatty acid prices in Q1 were expected to fall due to an oversupply in Europe and weak demand towards the end of 2015, however there have been significant developments since then which may complicate the Q1 settlement.

OUTLOOK ’16: Europe toluene and xylenes still ruled by gasoline
European toluene and xylenes markets should continue to be dominated by gasoline blending in 2016, with downstream chemical buyers still limited in their volumes and largely contract based.

OUTLOOK ’16: Crude to dictate global methanol more than ever
One year ago, with Brent crude oil prices having slipped below $60/bbl for the first time since 2009, the ICIS outlook for methanol in 2015 highlighted the growing link between crude oil and methanol as an increasingly important factor when considering how the coming year would unfold. Now, with Brent below $40/bbl and the link with methanol even stronger, crude oil prices will be more influential than ever as 2016 develops.

OUTLOOK ’16: Europe TDI market to be well supplied with new capacity
The European toluene di-isocyanate (TDI) market will likely be well supplied in 2016 given the latest new capacity to have come online.

OUTLOOK ’16: Europe ABS, SAN markets to remain broadly stable
Growth in the European acrylonitrile-butadiene-styrene (ABS) and styrene acrylonitrile (SAN) markets in 2016 is expected to be fairly similar to the previous year, according to market estimates. Given the current situation and the progress of the European economy, ABS players do not expect big changes for the first quarter.

OUTLOOK ’16: 2016 the point of reckoning in Europe CX market
The European cyclohexane (CX) market will meet a point of reckoning in 2016, with any further changes to the European framework expected to happen then. A number of sources have said they expect 2016 to be an extremely competitive year, as market players work hard to affirm relationships ready for 2017.

OUTLOOK ’16: Shipowners to capitalise on lower crude, consolidate recovery
Shipowners look set to increase freight rates or renegotiate bunker clauses in the coming year in order to capitalise on lower crude oil prices and consolidate the recovery seen in 2015. Bunker fuel prices came down significantly amid lower crude oil prices but some shipowners have been unable to take advantage of this because of the bunker clauses they agreed to.

OUTLOOK ’16: No big game-changers expected for Europe acetic acid
The evolution of Europe’s acetic acid market appears somewhat impenetrable going into the New Year. In the last few months of 2015, it was relatively balanced and that possibly gives the closest thing to a clue to its behaviour over the next 12 months. So far as is known, there are no plans regarding major changes to capacity during the course of 2016. Neither significant additions nor any programme of plant closure have been publicised.

OUTLOOK ’16: Europe Group I base oil refinery closures to change market
The European base oil market in 2016 will be defined, at least in the first half of the year, by two refinery closures in northwest Europe that were scheduled to take place at the end of 2015.

OUTLOOK ’16: Europe TiO2 market needs further consolidation
There is an underlying and ongoing need for capacity rationalisation in the titanium dioxide (TiO2) market in 2016, not just in Europe but globally, amid a structural oversupply. This follows significant and successive price erosion in Europe during 2015, particularly for commodity grade TiO2, which is used in the main paints and coatings sectors, driven by persistent oversupply and flat demand.

OUTLOOK ’16: A confident start for Europe ethylene and propylene
What an extraordinary year 2015 has turned out to be for Europe’s ethylene and propylene producers, and many expect the buoyant mood to continue well into 2016.

OUTLOOK ’16: Europe chlorvinyls players hope for stability despite uncertainty
Demand growth in the polyvinyl chloride (PVC) market, producers’ attempts to maintain their improved margins from 2015 and the deadline for converting cells away from mercury production, will be the major issues for the market in 2016.

OUTLOOK ’16: Africa is an attractive but challenging market for PP, PE
With an ever-increasing supply of domestic polypropylene (PP) and polyethylene (PE) and an influx of foreign imports, China’s position as the go-to market for exporters has taken a bit of a knock in recent years, leaving some suppliers to wonder what is next for their PP and PE exports.

OUTLOOK ’16: Turkish PP, PE markets facing challenges, uncertainty
It is hard not to feel sympathy for participants in the Turkish polypropylene (PP) and polyethylene (PE) market, who were subjected to economic and political uncertainty within Turkey while being hit by crude oil volatility, supply shortages, regional conflicts and falling exports throughout 2015, leading to a rollercoaster ride in terms of pricing.

OUTLOOK ’16: Europe styrenics chain faces upstream monomer length
After a year largely characterised by soaring prices and healthy margins over raw materials, players in the European styrene market are approaching 2016 with a growing caution as upstream values drop and supply levels look poised to improve.

OUTLOOK ’16: Europe capro demand to be strong in Q1 amid crude concerns
The European caprolactam (capro) market is widely concerned over the evolution of crude oil prices in 2016 and the possible impact on benzene, capro’s key feedstock.

OUTLOOK ’16: New capacity fails to offset weaker markets for Europe chems
On paper, 2015 has been a lacklustre year for the European petrochemicals industry, the latest in a long stream of them. EU growth has remained tepid, with the European Central Bank forced time and again to resort to increasingly unorthodox monetary policy just to goose the eurozone economy agonisingly along the bottom of what could be considered a recovery.

OUTLOOK ’16: Asian MA imports to play bigger role in European market
European maleic anhydride (MA) market participants recently started seeing a new factor added to their pricing equations – a growing interest from Asian suppliers.

OUTLOOK ’16: Crude, ethanol pose conundrum for ETBE, MTBE could recover calm
Diverging paths could lie ahead for the ethers which are in some ways interchangeable: methyl- and ethyl tertiary butyl ether. That is, MTBE and ETBE.

OUTLOOK ’16: Solvents producers focus on margins, overseas adds uncertainty
After a changeable and uncertain 2015, the isopropanol (IPA), methyl ethyl ketone (MEK) and methyl isobutyl ketone (MIBK) markets are expected to become more stable in 2016 with producers focusing on recovering margins lost in the last six months.

OUTLOOK ’16: Regional supply, demand imbalances for Europe HCL
Northwest Europe (NWE) 2016 contract prices for hydrochloric acid (HCl) could see decreases on the back of increased availability and stable demand, meanwhile tight conditions in Spain are expected to continue into the New Year.

OUTLOOK ’16: Gasoline margins key to keeping refinery output up
Crude oil refineries in the Middle East, China and Europe are expected to contribute heavily to keeping global refining utilisation rates at its highest since 2007 for the foreseeable future, provided gasoline margins remain high. European refiners are keen to continue this year’s high run rates provided benchmark Brent crude oil futures remain at low levels and gasoline demand stays as high as it has for most of 2015.

OUTLOOK ’16: Europe phenol battens down hatches against supply tsunami
The 2015 wave of phenol capacity coupled with weak benzene pricing has meant European producers have had to focus on steering a course based on profitability not market share, and 2016 should see an acceleration of these trends. In 2015, global phenol producers were hit with a double-blow of strong increases in supply, and weak pricing caused by decreased benzene values.

OUTLOOK ’16: EU chems expect some growth, wary of industrial slowdown
Chemical industry economists are forecasting slightly stronger global GDP growth in 2016 after a difficult year clouded by much slower growth in China and overarching uncertainty. Low interest rates and cheap oil are expected to play their part in stimulating growth and while emerging markets are likely to remain under pressure, the large industrialised economies should look healthier.

OUTLOOK ’16: Virgin PET lends instability to R-PET future
The European recycled polyethylene terephthalate (R-PET) market is entering 2016 with the expectation of initial stability.

OUTLOOK ’16: Global fertilizer demand set to rebound in 2016 – IFA
Tough macroeconomic conditions meant 2015 was a challenging year for many fertilizer markets, but industry bosses expect demand to rebound in 2016 through a combination of stable crop prices and stronger growth in emerging economies.

OUTLOOK ’16: Big decisions queuing up for CEE petchem producers
Decision time beckons next year for several major players in central and eastern Europe’s (CEE’s) petrochemical industry, with the fate of numerous costly investments and acquisitions on management board agendas.

OUTLOOK ’16: Europe etac/butac performance depends on three key factors
This year the European ethyl acetate (etac) market has been characterised by relatively low prices in Europe, a weak euro versus the dollar and robust competition between sellers. It is these three factors – prices, the euro-dollar exchange rate and the extent of competition between suppliers – that will largely determine the market in 2016.

OUTLOOK ‘16: Europe melamine supply a point of contention into 2016
Supply in the European melamine market continues to be a matter of contention going into 2016. Since the end of September supply has been a key talking point in the market, which has been plagued by a series of supply constraints.

OUTLOOK ’16: Uncertainty clouds horizon for Europe ethanol market
Uncertainty looms on the horizon for the European ethanol market in 2016, from capacity changes to regulatory issues. It will be a year with much change.

OUTLOOK ’16: Europe ethanolamine players weigh up economic, capacity effects
European ethanolamine demand is likely to be at least steady, if not improve slightly in 2016, provided the exchange rate and crude oil prices remain favourable and economic recovery in Europe continues, according to market players.

OUTLOOK ’16: Europe aromatics face challenges of low oil, demand
With crude oil prices dropping to seven-year lows as 2015 comes to an end, players in the European aromatics sector are facing an uncertain landscape for the upcoming year. Combined with a generally lacklustre sentiment in the derivative markets, this is expected to weigh down on benzene pricing and demand.

OUTLOOK ’16: Acrylates oversupply to remain, but modest growth possible
The dynamics in the European acrylic acid (AA) and acrylates esters market in 2016 are likely to largely mirror those that framed 2015, with the market remaining extremely oversupplied, stable to modest growth possible, and a continued determined push by producers for margin improvement. Any potential growth is expected to be in line with GDP moves of a few percentage points.

OUTLOOK ’16: Europe M&A blockbusters leave no spare change
Europe’s mergers and acquisitions (M&A) in 2015 were marked by two blockbuster deals which paradoxically did not have Europe as its epicentre, with Belgium’s Solvay and France’s Air Liquide acquiring US firms Cytec and Airgas respectively. It was yet another sign of the challenging times European chemicals are going through.

OUTLOOK ‘16: Europe naphtha to take the bull by the horns
The European market got naphtha forecasts for 2015 all wrong, its predictions of a wimpy global naphtha industry with minimal sales has failed to materialise, and it is still coming to terms with how unexpectedly “finely balanced” the market turned out to be this year. History is bound to repeat itself if all the bearish forecasts on crude futures come true.

OUTLOOK ’16: Europe PE, PP supply to remain tight in first half
Polyethylene (PE) and polypropylene (PP) players in Europe have experienced a remarkable year with many veteran buyers not exposed to such a situation in the whole of their careers. Many participants did not find 2015 easy and the dramatic events of this year will affect markets into 2016.

OUTLOOK ’16: Europe MMA availability to lessen, growth possible
Methyl methacrylate (MMA) supply in Europe could balance or tighten in 2016 compared with the length seen in the market in the latter half of 2015. This will most likely be driven by reduced imports into Europe from Asia and the US, and will coincide with expectations of marginal growth for the MMA sector, underpinned by GDP growth forecasts of a few percentage points.

OUTLOOK ’16: Europe biodiesel market set for another lacklustre year
The European biodiesel market has weathered a number of difficult and uncertain years recently because of an evolving legislative environment and shifts in trade flows. Although there are no significant legislative or trade flow changes on the horizon to cause the market concern, 2016 looks likely to repeat the lacklustre conditions seen in 2015, for first generation biodiesel at least.

OUTLOOK ’16: The year the world drowned in oil
The international crude oil market is rarely stable and 2016 will not disappoint. Iranian crude oil returns to the international markets adding to the global oversupply while brimming US crude stockpiles is seriously testing storage limits. South Korea’s freight rebate policy reform could potentially skew international oil pricing benchmarks while China’s expected launch of a crude oil derivatives contract will challenge Brent and WTI benchmark status.

OUTLOOK ’16: Russia eyes new petchem projects despite tough economy
Russia’s petrochemical producers have pledged to pursue major projects despite the country’s economic slowdown, caused by falling prices of energy resources. As foreign funding became not so readily available amid international sanctions, these projects increasingly rely on government support.