The woes of the European chemical industry have often been written and commented on in the last couple of years with the majority of coverage rather negative in terms of its future and its ability to compete with the rising prowess of the US and the Middle East. However, a glimmer of hope now appears to be on the horizon with CEFIC now predicting an increase in growth of 2% for 2014 and 1.5% for 2015. It should be noted that the former figure is an upward revision from the previous forecast of 1.5%. This is also on the back of the fact that the same organisation has also announced that for the first four months of 2014 European chemical output grew by 2.8% year on year.
This will make happy reading for producers who operate in the European region but we need to dig a little deeper to really ascertain what is going on underneath. In reality, whist these figures are positive they are really just headline figures as the industry is still facing several challenges not least from regional competition. Overall, chemical output is up but petrochemical output and prices are down – a 0.8% drop in output compared with April 2013 with monthly output remaining below trend growth rates since September 2011, and is still far below post-crisis peak during Q1 2011. Indeed, the performance of the petrochemicals sector bough down EU chemical prices as whole in April, down by 1.9% compared to April 2013, petrochemicals fell 4.1% alone. We should note that the drop in output was partially offset by a 5.1% increase in speciality chemicals output and a 2% increase in basic organics.
So what do we take from this? In terms of Specialised Products markets this news is somewhat of a double edged sword. We cannot detract from the positive but modest figure of 2% growth for 2014, it may still be 6% below the peak level of chemical production recorded in 2008 but any increase is good news. On the other side of the coin, the more sector specific figures may not look so rosy and there are still challenges ahead to reverse what looks to be a depressing situation. In order to rise to this challenge there needs to be concerted effort amongst policy makers and stakeholders to put into place effective programs which can realise, maximise and secure competitively priced energy and feedstock. There is plenty in the pipeline (the Transatlantic Trade & Investment Partnership (TTIP) comes to mind) and for the European Chemical industry to re-emerge as a global player then effective policy management is central to achieving this goal. Perhaps, once the institutional overhaul and political wrangling in the rabbit warren of the EU is complete the chemical market can start to look ahead with a more positive attitude. We can also draw some solace from the fact that a proportion of exports from the US and the Middle East may end up in Europe and thus the hub-and-spoke characteristic of the region could in turn keep chemical tanker demand healthy going forwards. And so, there may be light at the end of the tunnel!