Germany’s petrochemicals market will see greater stability in H2-09 but it will remain in a trough, with BMI’s latest Germany Petrochemicals Report forecasting a 12.5% decline in both sales and output in 2009.
According to the Verband der Chemischen Industrie (Chemical Industry Association, VCI), in H1-09 German chemicals production was down 15.5% yoy, with capacity utilisation at just 72%. This came amid a similar decline in overall industrial output, although there were signs of a yoy increase in building and construction in Q2. Sales were down 16.5% yoy to EUR69.7 bln, with exports down 12% to € 62.3bln and imports down 10% to €42.6 bln. the report forecasts a 12.5% drop in both output and sales. Specialty polymers, PVC and PP, will be particularly badly hit by the sharp downturn in the construction, automotive and consumer durables industries and could see declines of around 20%. The situation is unlikely to pick up until H210. The situation will be made more difficult by large increases in capacity in the Middle East and Asia, with producers in the Middle East enjoying significant feedstock cost advantages. Consequently, the report is forecasting long-term annual growth of around 2%.
On the upside, Q2-09 saw greater product price stability as many customers reduced their stocks and began reordering, although throughout H1 petrochemicals prices were down 11% yoy and polymers were down 4.5% yoy. A force majeure on PVC plants in Wilhemshaven, Schkopau and Rheinberg came at a time of rising consumption, but it is believed that expectations of a tight PVC market and a recovery in prices are unlikely to be realised. The increase in consumption since the beginning of 2009 merely follows the market trend, but demand is still down by up to 25% over 2008 and producers have been unable to secure a sustained rise in prices. The styrenics sector is also witnessing cuts in output. BASF announced that it would permanently close a PS plant at its Ludwigshafen site by June 30 because of a decrease in demand for PS. The plant was idled in mid-April. Meanwhile, in July 2009, Dow Chemical shut down its 300,000tpa styrene plant at Boehlen because of a technical problem. It could not comment on how long the plant was expected to be offline. Germany has petrochemicals capacities of 5.75 mln tpa of ethylene, 1.55 mln tpa of HDPE, 1.13 mln tpa of LDPE, 810,000 tpa of LLDPE, 2.23 mln tpa of PP, 2.14 mln tpa of PVC and 530,000 tpa of PS. BMI expects companies to keep cutting costs – including shutting down plants, cutting jobs and operating at reduced rates. With financing conditions still difficult, firms are also likely to make more efforts to preserve cash, resulting in delays to large-scale investment projects. The report envisages no increase in ethylene capacities over the next five years, which will restrict scope for further downstream development. We also see little scope for Germany to increase its oil refining capacity from the current 2.39mn b/d. Further upgrading should take place, but the medium-term implication is one of refined products imports rising steadily.