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Cefic Forecasts 4.5% Growth Increase for EU Chemicals Sector in 2011

28.07.2011 -

According to the latest Cefic Chemical Trends report, EU chemicals production continued to expand in April, up 2.9% over April 2010. The first four months of 2011 have been strong for the sector, with production up to 4.7% year over year. The trade group revised upward its annual summary forecast of chemicals sector economists, predicting growth in 2011 to reach 4.5%. This is up from the initial 2.5% predicted in November. Cefic said it doesn't expect 2012 to be as strong, forecasting 2.5% growth for next year.

Speaking at a press briefing in Birmingham, Cefic Director General Hubert Mandery said, "Strong growth since our last forecast was driven especially by a combination of robust manufacturing and continued strong durable goods exports. EU output by the end of this year will likely remain below all-time levels reached in 2007, but should reach the pre-crisis threshold toward mid-2012."

The chemicals trade group forecasts EU gross domestic product to grow by 1.8% in 2011, up from 1.6 % originally forecast in November. Cefic predicts expansion in 2012 to remain unchanged at 1.8 %, while expecting EU manufacturing to grow by around 6% in 2011 and 3% in 2012.
Alan Eastwood, economic adviser for the UK Chemical Industries Association, noted the uneven development in manufacturing output in the EU27 countries. While all of the countries are recovering from the economic downturn, Poland is leading the way in output, well ahead of Germany and the EU27 average. Bringing up the rear are countries such as Italy and Spain.

In terms of global demand, Eastwood said that China and the rest of Asia continue to be the main locomotive of strong overseas demand.
"Outside Asia, developed markets are expanding, but at slower rates, while the overall world economy continues to make slow but steady progress," he said.

Strong orders from EU durable goods manufacturing, especially light vehicles and machinery and equipment, have led to bottlenecks that now appear in chemicals subsectors as demand outstrips supply. Construction, an important chemicals customer, remains depressed but shows early signs of turning the corner. Automotive and plastics processing are two sectors where recovery has been particularly strong.
Sources of uncertainty include continued turbulence in the eurozone due to unresolved problems with sovereign debt. Outside of the EU market, geopolitical concerns have placed upward pressure on commodity prices, namely oil.

The industry has continued to fine tune its business since the pre-crisis levels in early 2008, paring down the workforce by 9% while net exports have reached a record high. Sources of increased competitive pressures will come from developing countries, especially increased capacity in Asia and the continued use of low-cost shale gas in the United States.