United Kingdom Petrochemicals Report Q1 2014 - New Market Research Report

From: Fast Market Research, Inc.
Published: Tue Jan 28 2014

BMI's latest UK Petrochemicals Report states that while the British petrochemicals industry will return to its pre-recession level of output, 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.

The decline in chemicals and petrochemicals has abated and in Q313 petrochemicals production levels were up 8.2% year-on-year (y-o-y), following a decline of 3.8% in Q113 and modest growth of 1.6% in Q213. Following the better-than-expected results in Q313, which were accompanied by an overall improvement in British industrial output. Chemicals production also rose 3% y-o-y in Q313 and 0.6% for the first nine months of the year. While the growth rates are a welcome boost to the British chemicals and petrochemicals industries, they only mark the end point of a period of deep decline.

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With surplus petrochemicals capacity likely to be a feature across Europe in the near term, the UK's competitiveness will determine the industry's strength. The UK is heavily exposed via financial and trade channels; a failure to stem the crisis would drive the economy back into recession. Given the high degree of financial and trade interdependency with the eurozone, a failure among European politicians to resolve the debt crisis could lead to contraction in British chemicals markets.

* BMI has raised the petrochemicals growth forecast for 2013 from zero to 4.9% for 2013 and the chemicals growth forecast from -1.8% to 0.4%.
* Chemicals growth going forward will be moderated by the closure of plants with 105,000 tonnes per annum (tpa) of polyvinyl chloride (PVC), 500,000tpa purified terephthalic acid and 168,000tpa of polyethylene terephthalate. Producers say they are shutting plants due to energy costs and logistical problems as well as the challenge from larger, newer and better integrated producers in Asia.
* The Grangemouth petrochemicals complex came back onstream in October 2013 following an agreement with trade unions and support from the British and Scottish governments. It is expected to start importing competitively priced shale-derived ethane from the US from 2016, ensuring its future for the time being.
* In terms of end-markets within the UK, BMI believes 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, while the UK construction sector is in full recovery mode has gained further credence over the latter stages of 2013, with output levels much higher than 2012 when we believe the market bottomed out. This should give some upside for PVC and plastic piping used in construction.

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