Europe: Economy And Chemical Industry Are Expected To Stagnate

Key indicators point to a period this year of little or no growth for the European chemical industry, analysts say. Fiscal belt-tightening across many countries has increased unemployment, reducing demand for goods and the chemicals used to make them. The European Commission predicts that the collective economy of the European Union’s 27 countries will shrink by 0.3% in 2013.

“The current EU downturn is weighing down on the chemical industry in Europe,” says Kurt Bock, chairman of BASF and president of the European Chemical Industry Council (CEFIC). The sector faces “increasing uncertainty as the domestic market continues to struggle and overseas competition remains relentless,” Bock says.

CEFIC is forecasting that the region’s chemical output will “remain stagnant in 2013.” Specifically, the organization predicts that chemical production will increase 0.5% in 2013, well below pre­recession levels. That is, however, an improvement compared with an estimated contraction of 2.0% in 2012.

The automotive and construction industries, two huge chemical markets in Europe, were “a drag on chemical demand in 2012” and offer few encouraging signs of improving, CEFIC says. Government-backed incentives to encourage consumers to buy new cars have run their course, and fallout from overcapacity in the construction sector is set to continue.

In an outlook survey conducted in the third quarter of 2012, consulting firm KPMG found that chemical executives in Europe are more concerned about the economic environment than they were a year ago and more worried about the economic outlook than their Asian and U.S. counterparts. The biggest concern among European executives is the potential collapse of the eurozone if some countries pull out of the common euro currency.

Despite their reservations, 74% of European chemical executives surveyed expect their companies to increase sales in 2013, thanks mainly to business outside of Europe.

Still, Martin J. Evans, a stock analyst with JPMorgan Cazenove, expects the economic conditions to hamper industry growth. “At a high level we remain cautious on the European chemical sector going into 2013,” Evans tells C&EN. “The sector suffered significant pricing pressure in the third quarter, and we do not anticipate a reversal of this in the short term with uncertain macroeconomic conditions and capacity increases.”