Boston, MA -- (ReleaseWire) -- 03/06/2014 -- The Czech petrochemicals industry is set for a recovery in 2014 in line with growth in key domestic plastic and chemicals converters, which primarily serve export markets. However, BMI's latest Czech Republic Petrochemicals Report warns that recovery is tenuous and depends on external markets and feedstock prices.
Based on the latest production indices published by the Czech Statistical Office, BMI estimates that in 2013, chemical output fell 3.3% year-on-year (y-o-y), and rubber and plastic grew 1.5%. The industry bounced back from the effects of flooding of the Elbe River, which disrupted operations in the Czech chemicals industry in Q213, notably Spolana's and Synthos's operations in the PVC and PS segments.
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However, Unipetrol's cracker faced unplanned shutdowns with knock-on effects for downstream polymers production. Nevertheless, the trends in plastic and rubber H213 were strongly on the upside, pointing to solid growth in 2014. On the upside, Unipetrol's average olefins margins were up 9.5% y-o-y to EUR368/ tonne while polyolefins margins grew 6.3% to EUR253/tonne. This was partly the result of falling naphtha feedstock costs as oil prices eased.
Over the last quarter, BMI has revised the following forecasts/views:
- Unipetrol's 2013-2017 five-year strategy includes increasing the utilisation of its 545,000 tonnes per annum (tpa) cracker by 13% with a new PE installation, a dicyclopentadiene plant and PP debottlenecking. Unipetrol plans to increase its PE capacity at its Litvinov site. It has submitted plans to replace the ageing 120,000tpa HDPE unit with a 300,000tpa plant, thereby raising its total PE capacity from 320,000tpa to 500,000tpa.
- In October 2013, Unipetrol signed a licence agreement with INEOS, based on which it acquired the right to use a production process and technology for the new PE plant. It indicated it would choose a contractor in 2014, which suggests construction could start after the initially scheduled Q114, possibly pushing completion to late 2016.
- BMI believes the recovery in the Czech petrochemicals industry could be jeopardised if oil prices rise and the koruna depreciates against the US dollar, which could put pressure on margins at a time when buyers are not willing to take on price increases. Indeed, olefins margins peaked in April 2013 and fell in subsequent months, while polyolefins margins remained stable in H213 with little sign of any further upward movement to a return to 2011 levels.
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