"United Kingdom Petrochemicals Report Q4 2013" Published

From: Fast Market Research, Inc.
Published: Mon Oct 28 2013

BMI believes that the UK will not regain its position in output volumes over the long-term and will instead need to turn its attention to improving its competitiveness. While shale gas offers the opportunity for low-cost feedstock, this would have to be accompanied by product enhancement. Yet, industry leaders complain of regulatory confusion and lack of support, indicating that the drive to add value may not be achievable.

In volumes terms, BMI does not believe that the British petrochemicals industry will return to its prerecession level of output. What the industry will need to focus on, in order to survive, is competitiveness and value added. Potentially large reserves of shale gas could open the way to long-term supply of ethane to the petrochemicals industry, although the price of this feedstock remains uncertain. While ethane represents less than a third of the UK's current cracker feedstock, it could rise significantly if the UK is able to commercially exploit shale gas. Adding value will largely depend on research and development. Industry leaders are calling on greater clarity in what they claim is a "confused energy policy" and a kick-start for innovation, primarily led by tax breaks. The industry's demands would not only require an unlikely abandonment of long-term policies on greenhouse gas emissions targets, but also a tax subsidy that can may not be justifiable in the context of the country's ongoing austerity measures.

Full Report Details at
- http://www.fastmr.com/prod/700711_united_kingdom_petrochemicals_report_q4_2013.aspx?afid=303

Total has indicated that it is closing the UK's last polystyrene (PS) facility with 70,000tpa set to shutter, a move that is bound to have a knock-on effect on styrene monomer demand. Ineos is also closing a 105,000tpa polyvinyl chloride (PVC) unit at Runcorn, focusing all UK PVC production at its Newton Aycliffe site. It is also reconfiguring its Runcorn vinyl chloride monomer (VCM) plant to produce ethylene dichloride (EDC) for internal use, according to reports in early 2013.

* BMI estimates that petrochemicals output declined 3.8% y-o-y in H113, while chemicals output fell 3.3% over the same period. For the full year, we are forecasting chemicals output growth of -1.8%, a revision from the -3.9% we forecast in the previous quarter. Meanwhile, growth in the petrochemicals sector should be around zero with some modest upside, albeit following a decline of 17.8% in 2012.
* In terms of end-markets within the UK, BMI believes the automotive industry is set to contract over the medium term following strong growth in 2012, which will affect some engineering plastics, particularly in the PP segment. Meanwhile, the construction industry will remain in a trough following a sharp decline in 2012, depressing PVC consumption. Demand for chemical fertiliser is also to witness little growth over the medium term.

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