Abstract
BMI' s latest Hungary Petrochemicals Report raises concerns over the divestment
of a stake in the
Hungarian refiner MOL to a Russian oil company, which
could put the refinery and petrochemicals
industries at the mercy of
Moscow' s political interests.
In April, Austria' s OMV announced that it
had sold its 21.2% stake in MOL to Russian oil company
Surgutneftegaz for
EUR1.4bn. The stake was acquired as OMV sought a US$20bn hostile takeover
bid
of MOL, which was abandoned in August 2008 following an investigation
by the European Commission
(EC). However, MOL has complained that it was
not consulted over the deal and voiced concerns that the
sale to
Surgutneftegaz, which is owned by a close ally of Russian Prime Minister
Vladimir Putin, could
undermine the company' s independence and threaten
European energy security. The sale of the MOL
stake to a Russian company
that has very close links to the Kremlin represents an expansion of
Russia' s
presence in Central Europe at a time when most countries are
seeking to reduce Russian influence over
their energy sectors following
the gas dispute between that country and Ukraine in January 2009. MOL
operates Hungary' s only gas supply network and owns all the country' s major
oil refineries, thus playing
a vital role in the country' s energy
security. Economy minister János Kóka has stated that it is in
Hungary' s
interests for domestic companies to expand into multinational companies,
rather than allowing
foreign companies to acquire a monopoly in the
country.
Further downstream, efforts are underway towards further
consolidation. In April 2009, BorsodChem put
its PVC business up for sale
and was reportedly in talks with potential buyers. Its chlor-alkali business
is
not included in the planned possible sale, which is being carried out
to enable the company to concentrate
on its isocyanates business, regarded
as being more profitable in the long-term. The reported sale comes
after
the appointment in December 2008 of Wolfgang Büchele as BorsodChem' s CEO; he
had previously
argued for consolidation within the PVC industry and
contended that it was not considered a strategic
business over the
long-term. In contrast, the isocyanates market is forecast to grow at a higher
rate than
Hungary' s GDP. Meanwhile, the government has pledged support for
the company in order to avert the
planned lay-off of 550 employees at its
Kazincbarcika industrial complex.
Hungarian petrochemical production will
suffer as a result of an expected deep recession in 2009.
Hungarian
industrial production contracted by a staggering 23.3% y-o-y in December 2008,
by far the
worst outturn recorded in Hungarian Central Statistical Office
(KSH) figures dating back to January 2002.
Slowing domestic demand,
coupled with reduced export demand from the EU, will depress demand for
petrochemicals products. With 75% of Hungary' s polymer output sold abroad, the
performance of export
markets will be a major determinant of the sector' s
performance. A decline in production of up to 30% is
expected. While we
still expect a recovery beyond 2009, we caution that this is likely to be more
modest.
It will take until 2011 before the Hungarian petrochemical
industry achieves output at 2008 rates.
Recent expansions in cracker
capacity to 610,000 tonnes per annum (tpa) have helped reduce ethylene
feedstock imports to virtually zero, with 90% of olefins output consumed
within Hungary. Despite a sharp
drop in polymer exports in 2009, export
levels should recover by 2011. By 2013, we expect polyethylene
(PE)
exports to have reached 515,000 tonnes, 5% up on 2008 levels, while
polypropylene (PP) exports
should be about the same level as they were in
2008, at 115,000 tonnes. By 2013, the Hungarian
petrochemical industry' s
ability to expand its exports is expected to be constrained by capacity.
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