Boston, MA -- (ReleaseWire) -- 01/08/2014 -- Germany remains the engine of the European chemicals and plastic industry and has been the strongest of the West European markets, according to BMI's Germany Petrochemicals Report.
Current petrochemicals market demand is very close to the pre-2008 peak at around 8.2mn tpa. Market activity has been generated by small- and medium-sized processors with German industry excelling in niche, high value market segments. In terms of production, BASF is planning to build 300,000tpa TDI complex in Europe, possibly at its Ludwigshafen site, by end-2014. However, there has been a modest decline in basic chemicals capacities with LyondellBasell's closure of 100,000tpa of PP and 240,000tpa of ethylene capacity in 2012.
Small-scale capacity is being shut down as German petrochemicals producers seek to cut costs and improve competitiveness. LyondellBasell closed a 100,000tpa HDPE unit in Wesseling, Germany in Q313. It was among the smallest and least efficient of the LyondellBasell HDPE units in Europe. The company has sufficient HDPE capacity to meet customer needs from its larger scale facilities, so the loss is unlikely to affect overall sales.
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Over the last quarter BMI has revised the following forecasts/views:
- BMI has cut the 2013 petrochemicals sales growth outlook from 1.5% to 0.8% owing to lower prices and a sluggish export business. Margins are being squeezed by the combination of a decline in prices and rising raw material costs; indeed, in November European ethylene contract and spot cracker margins collapsed by 35% and 59% respectively on the back of lower prices.
- BMI has reduced its output volumes estimate from 1.5% to 1.0%. Slower growth means that it could take two years for the industry to recover from the 3.0% decline in output reported for 2012, when the German petrochemicals industry experienced zero growth in domestic sales and the effects of the eurozone sovereign debt crisis.
- The planned revision of the exemptions on renewable energy tariffs, which could see German petrochemicals producers lose vital financial support and will not only reduce growth in the industry but would lead to a permanent reduction in capacity.
- Germany scores 81.8 points and is placed first in BMI's European Petrochemicals Risk/Reward Ratings, unchanged since the previous quarter as a result of market stabilisation and improved export performance which has improved its market risk score. This puts it 8.2 points ahead of the Netherlands and France.
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