Low domestic demand in UK chemicals industry likely to slow growth into 2011

29-Oct-10
The UK chemicals industry is burdened by low domestic demand which is likely to experience slow growth in 2010 into 2011, according to BMI’s latest report. Much of the growth seen in Q4-09 and into 2010 was related to inventory rebuilding rather than any return to trend growth. A return to 2008 levels of output is not expected until 2012. Of increasing concern is the low level of capital investment in the UK industry, which is reportedly at its lowest level since the late 1970s. Chemicals industry investment collapsed, falling by around 18% in 2009 and is set to decline by a further 10% in 2010. Over and above restocking, there are significant uncertainties. It is likely to be hard for the petrochemicals industry to make the transition from a recovery based on inventory rebuilding to one led by sustained overall demand increases. All the evidence points to a large amount of productive capacity having been destroyed mainly through plants being closed down which will mean that the industry may not be able to ramp up production as quickly once global demand starts to return. It is estimated to take until 2012 for the UK to post above-trend growth of 3%. BMI forecasts of chemicals output growth of 1.5% in 2010, following an estimated 5% decline in 2009. UK producers are now cautiously optimistic, believing they have come through the worst of the recession, providing there is no double dip recession scenario. However, investors appear to be turning their backs on high-cost units in developed markets in favour of large projects in emerging markets in Asia and the Middle East. BMI foresees poor prospects for basic chemicals, particularly when converters are cutting back and closing their UK operations. While petrochemicals capacities in Asia and the Middle East are climbing with the creation of 1mn tpa plus ethylene crackers, the UK is seeing some of its smaller plants closed down, with Dow Chemicals confirming permanent closure of the UKs only ethylene oxide/ethylene glycol facility. Although the weakness of the pound observed in H1-10 will lift exports, this dynamic will remain fairly weak this year, and will only strengthen from 2011 onwards. Certainly, given still subdued global demand in general, and poor headline growth figures from the eurozone in particular, sterling weakness will have a limited impact on exports of petrochemicals and petrochemical end products, which are geared towards services and highvalue goods. It is also clear that the thrust of demand growth will come from China and India and this will be served increasingly by indigenous capacities and the development of megaprojects utilizing the Middle Easts competitive advantage in low-cost ethane. As such, smaller, less efficient and costlier plants are under threat in the long term. Where the UK can succeed is in higher value chemical products that require the research and development capabilities that are less common in emerging markets. A greater focus on low-carbon and cleaner technologies will define the future of British chemicals. While capacities will be cut, BMI believes that the industrys turnover will be sustained by an increase in the value of British manufactured products
  More News  Post Your Comment

Previous News

Next News

{{comment.Name}} made a post.
{{comment.DateTimeStampDisplay}}

{{comment.Comments}}

COMMENTS

0

There are no comments to display. Be the first one to comment!

*

Name Required.

*

Email Id Required.

Email Id Not Valid.

*

Mobile Required.

Email ID and Mobile Number are kept private and will not be shown publicly.
*

Message Required.

Click to Change image  Refresh Captcha
EPS block moulding, thermocole plant

EPS block moulding, thermocole plant

news-plastics-information