Industry Outlook For Europe Dims

Europe’s chemical output will contract by 1.0% this year because of a weaker than expected economy, the Continent’s main chemical trade group predicts. In contrast, the key U.S. chemical association says chemical output in the U.S. will continue to grow slowly, propelled by consumer spending.

In December, economists at the European Chemical Industry Council had forecast a modest 0.5% rise in production for the year, following a decline of 1.5% in 2012. However, high unemployment and weak growth in consumer income has held back new vehicle sales this year. In addition, European construction activity remains at historically low levels.

The disappointing chemical industry performance “tracks the weak level of activity in the broader European economy,” the council says. Indeed, the group reports that European chemical output slipped 2.5% for the four months ending in April compared with the same period a year ago. It is counting on improvement as the year goes on.

The council hopes that exports will continue to expand. But Council President Kurt Bock, who is also chairman of BASF, says European chemical makers face stiff competition from U.S. rivals that benefit from low-cost shale gas feedstocks.

“European policymakers need to address the energy and feedstock issues if we are to preserve Europe’s industrial core,” Bock says. The council is pressing for shale gas exploration in Europe against strong environmental opposition (C&EN, June 3, page 9). It met with European Union officials at the end of June to promote more favorable energy policies.

Meanwhile, U.S. chemical production edged up 0.7% for the five months ending in May, according to the American Chemistry Council. The group’s Chemical Activity Barometer, a leading economic indicator, was up 3.5% in May compared with last year, suggesting better conditions ahead for the U.S. chemical enterprise.

“Virtually all production-related indicators strengthened in June,” says ACC Chief Economist T. Kevin Swift.