Improved outlook for polymers in Europe but run rates to remain low

Plants and production sites across Europe have been running significantly below capacity in a bid to cope with lower demand. Improvement in demand is anticipated in 2010, but utilisation is expected to remain below pre-economic-slowdown levels as per ICIS. The European markets saw huge destocking in 2009 that resulted in companies running plants at lower rates or idling them. These reduced rates have been raised and are improving but still lagging. Modest improvements are likely in 2010 on the rates seen at the end of 2009. Capacity utilisation is not expected to reach levels similar to those in January 2008 until 2011, or even 2012, considering that 2007-2008 were boom years. Economic growth is likely to be more anaemic and restrained given the effects of the credit crunch on global manufacturing. Verband der Chemischen Industrie released statistics that show utilisation rates in Germany were at an average of only 77% in 2009, compared to an average of 83-85% in previous years. Recent figures released by Eurostat show that EU chemical production continues to fall - production of chemicals and man-made fibres dropped by 5.4% in October year on year. Several factors could further affect demand in the market, including stimulus packages coming to an end, permanent plant closures and new capacity coming on stream in the Middle East. Ethylene nameplate capacity is expected to increase by 8% in 2010 due to plants coming online in the Middle East and, as a result, estimated capacity utilisation would be below that of 2009.
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