Boston, MA -- (ReleaseWire) -- 03/14/2014 -- The Hungarian petrochemicals industry is seeing an improvement in demand as the automotive industry shows stronger rates of growth and external market conditions brighten. In recent months, a low density polyethylene (LDPE) plant has been brought back online while construction has begun at a new butadiene unit, indicating that investors retain confidence in the country's diversifying downstream sector. The first 11 months of 2013 witnessed chemicals output growth of 7.4%, while plastic and rubber production declined by an average of 2.8%. The Hungarian manufacturing sector as a whole reported growth of 1.2% with H213 seeing a strong recovery y-o-y, albeit from a low base. Plastics and rubber were under severe pressure amid a drastic decline in the automotive sector.
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In spite of the poor performance of manufacturing indices, figures from Hungarian petrochemicals producer MOL suggested that the industry is bouncing back from a slump seen in Q1 to deliver an overall stronger performance 2013. For 9M13, ethylene output was up 12.8% y-o-y to 504,000 tonnes, with propylene up 11.8% to 256,000 tonnes. The closure of the low density polyethylene LDPE II unit led to a 9.1% y-o-y drop in the production of the polymer to 110,000 tonnes, although the reopening of the plant in July ensured a strong uptick in output in Q3. High density polyethylene (HDPE) which represented 37% of polymers output grew 22.9% y-o-y to 274,000 tonnes. Polypropylene (PP) also recovered with 8.7% y-o-y growth in the product to 349,000 tonnes.
BMI has revised the following forecasts/views:
- With the likely resumption of production at MOL subsidiary TVK's temporarily closed 65,000 tonnes per annum (tpa) LDPE plant we forecast sustained growth in 2014, albeit with significant downside risks and recovering from historically low levels.
- As a result of a recovery in export and household consumption in 2014, real GDP growth will rise to 1.7%. However, industrial growth will lag behind, although the automotive industry is expected to see a strong boost to output in 2014, helping to lift polymer and rubber products, while the construction industry, which drives consumption in segments such as PVC, will exhibit only slow growth.
- In BMI's Europe Petrochemicals Risk/Reward Ratings, Hungary scores 58.2 points out of 100, up 0.4 points since the previous quarter due to an improvement in its country risk score with its long-term external risk improving markedly. It has moved from 10th to ninth place, 0.4 points ahead of the Czech Republic and 1.4 points behind Poland.
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