Recently released market study: Spain Petrochemicals Report Q1 2010

PRLog (Press Release) - Jan 01, 2010 -
The Spanish petrochemicals industry will not experience a recovery until H210 as the automotive and  construction sectors continue to languish well into the year, according to BMI's latest Spain Petrochemicals Report.  In 2009 Spain had combined olefins capacities of 1.65mn tpa ethylene and 1.35mn tpa propylene. In the  polyethylene segment, it had capacities of 245,000tpa HDPE, 495,000tpa LDPE and 490,000tpa LLDPE.  In styrenics, it had capacities of 620,000tpa styrene monomer, 165,000tpa PS, 165,000tpa acrylonitrilebutadiene-  styrene copolymer and 60,000tpa styrene-butadiene rubber. In the PVC chain, Spain had  750,000tpa ethylene dichloride, 200,000tpa vinyl chloride and 515,000tpa PVC. It had 870,000tpa PP  capacity. In the fertiliser segment, capacities were 615,000tpa ammonia and 500,000tpa urea.  With reduced demand in petrochemicals such as ethylene and PP, the industry is struggling. Many  petrochemicals-consuming firms facing falling sales, rising arrears and lack of credit are going out of  business. Spain's construction, automotive and consumer goods sectors, which underpin petrochemicals  markets, are nowhere near turnaround. The eurozone economy remains weak and the appreciation of the  euro against the US dollar makes Spanish exports outside the currency area highly uncompetitive in a  very challenging global market. Consequently, losses in the industry will mount and there may be further  closures or consolidation of smaller enterprises and facilities. Recovery is also likely to be sluggish,  although the government's stimulus package will help ameliorate the situation facing petrochemicals.  BMI believes the Spanish petrochemicals industry will not exhibit any recovery until H210, with a fullyear  contraction in GDP of 0.9% in 2010 following a decline of 3.9% in 2009. The domestic market will  be particularly poor due to weaknesses in private consumption and fixed investment. This will be partly  offset by a modest recovery in exports, but overall the situation facing the industry is gloomy. However,  the automotive sector, which is one of Spain's key petrochemicals-consuming industries, is unlikely to  return to pre-recession levels of output over the next five years. Following a 20% slump in output volume  in 2009, production will fall by a further 10% in 2010. Most of the decline is attributed to the economic  climate in Europe, Spain's biggest export region, and in particular the state of the French market.  Producers have announced plant closures and reduced capacities in response to the recession. In the  longer term, European chemicals firms will find it difficult to compete with producers from emerging  markets in Asia and the Middle East. According to Cefic, labour costs account for 14% of chemicals  production in the EU and are a major factor weighing on competitiveness. What is more, labour cost per  employee grew by 3.5% pa on average in the 10 years to 2007. Countries such as China and India, where  labour costs are far lower, will gain a significant advantage unless European producers can use  technological advances to create cost advantages.

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