Abstract
The German chemicals industry is shrinking as the country falls deeper into
recession, with BMI’s Q209
Germany Petrochemical Report suggesting
the downward trend shows no signs of letting up.
Customer destocking,
particularly in the auto and construction sectors, is severely impacting the
industry.
Jurgen Hambrecht, the chairman of BASF, the largest chemicals
company in the world, recently summed
up the headwinds facing the
industry: ‘Demand for chemical products has not picked up since the
start of
2009. A reversal of the trend is not yet in sight. On the
contrary, the situation in our sales markets is
worsening, and inventory
levels in the value chains are still too high.’
Destocking is
expected to persist at least throughout Q209 and some way into the second half
of the year.
Even when customers begin replenishing their inventories
again, they are likely to be cautious with their
orders given the
uncertain economic outlook, resulting in ongoing volatility. Demand is
unlikely to start
picking up until 2011. Even then, it is not anticipated
it will return to previous levels.
In response to the unprecedented
decline in demand, we expect companies to remain disciplined with
costs
and continue 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 in
large-scale
investment projects. The decline in the global price of oil, from US$140 per
barrel at its peak
in mid-2008 to around US$45 at the end of Q109 has
helped ease feedstock prices. However, going into
2009, the effects of
falling feedstock prices on petrochemicals margins will be outweighed by the
Europewide
recession, with GDP in the eurozone contracting by 2.5%, and
new supply coming online in the
Middle East and Asia.
Germany scores
81.9 points and is placed first in BMI’s Western European Petrochemicals
Rankings, 8.2
points ahead of France. BMI believes that Germany’s
score is unlikely to change, with no capacity
additions planned over the
next five years. However, with little new capacity coming onstream
elsewhere
in Western Europe over the period, it will retain its lead in
the region.
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