Feb. 26, 2011 -
PRLog -- The Slovakian petrochemicals industry is on a steady recovery trajectory assisted by growth in the domestic car industry, which is a major local consumer of plastics, but the sector will remain relatively small in global terms, according to BMI's latest Slovakia Petrochemicals Report. In the first 10 months of 2010, output of chemicals and chemical products grew 7.7% y-o-y while production of rubber and plastic products rose 11.4% y-o-y, according to the Statistical Office of the Slovak Republic. BMI estimates that chemicals output grew by 5.5% for the year as a whole, while plastics output grew 11.0%, which only partly offset the declines seen in 2009 when the automotive industry reported a sharp decline in production. While Slovakia's robust economic recovery continued unfettered in 2010, we hold to our view for a slowdown in headline growth heading into 2011 as a result of the new coalition government's fiscal consolidation measures and less accommodative base effects. This view is predicated not only on the fact that accommodative base effects will continue to wear off, but also given the new centre-right coalition's push for fiscal consolidation over the medium term. Over the longer run, while Slovakia will outperform many of its CEE peers as a result of its relatively stable macroeconomic environment, the country's growth potential will be stymied by its overreliance on external demand, set to come under pressure on the back of government austerity measures across Western Europe. With Slovakian petrochemicals output largely dedicated to exports and domestic consumption by export-oriented industries, the performance of external markets will be crucial to continued growth in the sector and it make take until 2012 before the sector returns to pre-crisis levels of output. In 2010, Slovakia's petrochemicals capacities included 210,000tpa ethylene, 50,000tpa benzene, 40,000tpa ethylene oxide, 40,000tpa ethylene glycol, 180,000tpa low density polyethylene, 255,000tpa polypropylene and 65,000tpa xylenes. The industry is small by international standards and largely fulfils domestic demand, although it has become more efficient and productive as a result of the consolidation of Slovnaft's petrochemicals operations into MOL and the implementation of a common single-channel polymer sales operation between MOL's TVK and Slovnaft. A lack of locally sourced ethane and naphtha feedstocks will force Slovakia's petrochemical industry to depend on imports, which will erode competitiveness. However, expansion may be justified in the context of growth in the automotive industry, which has seen exponential growth in output in recent years. Despite the country's potential, ethylene and PE capacities will most likely remain constant at 210,000tpa and 180,000tpa respectively until 2012 or 2013 when a new LDPE plant will replace some ageing units in Bratislava. BMI estimates that PE capacity will rise to 400,000tpa from 2013, as part of Slovnaft's expansion plans. There are also plans for expansion of ethylene capacity, with the option to either complete the final phases of the cracker's de-bottlenecking or opt for another plan that enables larger scale operations in the country. Slovakia lies in sixth place out of 10 markets included in BMI's Business Environment Ratings for the petrochemical industry in Central and Eastern Europe. It scores 46.2 points out of 100, 0.9 points behind Turkey and 0.1 points ahead of Romania, unchanged since 2010. While Slovakia has a relatively small petrochemicals industry, the country's infrastructure, improved regulatory environment and the potential for growth, particularly with rising demand from the automotive industry, makes the country an attractive destination for investors in the petrochemicals and plastics industry.
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