Abstract
The Czech Statistical Office has announced that exports for chemicals and
related products increased
marginally for 2008, while imports fell. As a
result, the share of chemicals in the total export sector rose
to 5.9%
while the share of imports fell to 19.9%, thus reducing the overall trade
balance for the sector.
The deficit in the trade of ‘plastics in
primary forms’ fell to reach CZK4.3bn (US$191mn), while for
‘plastics in non-primary forms’ the deficit was also reduced.
However, whether Czech producers can
continue to increase their overseas
sales in 2009 is yet to be seen, as their main exporting partners –
Germany, Slovakia and Poland – are all suffering in the current economic
climate.
Unipetrol – the largest energy group in the Czech Republic
– sold 1,522kt of petrochemicals in 2008; this
represented an
increase of 6% year-on-year (y-o-y). However, much of the volume growth was
generated
in the first half of the year. In Q408, sales slumped by 17%. In
value terms the petrochemicals sector had
a terrible year. The earnings
before interest and taxes (EBIT) for 2008 was CZK359mn (US$17.7mn), an
89%
decrease on 2007’s figures of CZK3,348mn (US$164.75mn). Overall the
company’s net income
slumped by 95%.
In Q408, Unipetrol’s
ethylene production fell by 29% to 30kt, while benzene production fell by 31%
to
35kt. Propylene production, meanwhile, slumped by 44% to 5kt.
Polyolefins output has also been
impacted, with production of HDPE falling
8% in Q408 to 57kt, while PP production fell by 26% to 39kt.
BMI believes
that the poor performance would have continued into Q109 because margins had
been so
impacted . In Q408, margins for polyethylene (calculated by
subtracting total revenues from costs) stood
at EUR36.48, compared to a
figure of EUR270.59 in Q108. Considering that the price of crude oil has
more than halved since the middle of 2008, reducing costs significantly, the
reason for the collapse in
margins has been a seismic fall in demand.
Unipetrol saw a substantial fall in production volumes for both olefins and
polyolefins in Q408, due to
falling demand. In the quarter, ethylene
production fell by 29% to 30kt, while benzene production fell by
31% to
35kt.
BMI believes that petrochemical markets are extremely volatile and
growth is unlikely to be sustained in
2009. We expect Czech GDP to
contract by 2.1% in 2009, as external demand, domestic consumption
and
capital investment all shrink. That said, we believe that the country is at
considerably less risk of a
systemic financial crisis than many other
emerging European economies, and we forecast a modest
recovery in 2010.
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