Boston, MA -- (ReleaseWire) -- 04/09/2014 -- BMI's latest UK Petrochemicals Report states that recent capacity closures will prevent any return to 2008 levels of production. Instead, the sector will focus on more high-value, low volume production, exploiting niche markets where it has a global competitive edge.
BMI estimates that British petrochemicals output grew by a mediocre 0.3% in 2013 following a decline of 17.1% in 2012, which was slightly less than the 0.4% we anticipated in the previous quarter. While the industry's performance improved in H213, there were signs that growth was moderating towards the end of the year and BMI believes that the recovery will remain precarious in 2014.
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In spite of reaching a nadir, and with evidence of growth returning, producers are winding down some capacities deemed uncompetitive. According to statements over the past quarter, Tata Chemicals Europe (TCE) is proceeding with plans to restructure its soda ash and sodium bicarbonate plants in Northwich, including the shutdown of soda ash and calcium chloride production. Meanwhile, Dow Chemical is to close its methyl methacrylate butadiene styrene (MBS) plant in Grangemouth, as a result of falling demand. The common theme is energy costs and logistical problems, as well as the challenge from larger, newer and better integrated producers in Asia.
- Industrial growth will outperform the wider economy, reaching 2.8% in 2014, up from an estimated 1.9% in 2013, providing a fillip to the petrochemicals sector.
- BMI believes that the automotive industry is set to contract over the medium term following growth over the past three years, which will affect some engineering plastics, particularly in the polypropylene segment.
- The dismal performance of the UK construction industry has been key in holding back the recovery in petrochemicals materials such as PVC and polymer tubing. Signs that the confidence in the construction sector is taking off is positive for the petrochemicals industry. However, we continue to warn that without a robust recovery in wages and business spending, the current rebound is at risk of losing momentum.
- The UK scores 71.8 points in BMI's latest Europe Petrochemicals Risk/Rewards Ratings, up 0.4 points since the previous quarter due to a rise in industry risk scores because of improved market prospects as well as the potential for access to low-cost ethane feedstock, both from LNG imports and locally available shale gas resources. It remains in fifth place in the regional ratings, 4.6 points ahead of Spain and 0.4 points behind Belgium.
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