New Energy market report from Business Monitor International: "France Petrochemicals Report Q2 2012"
Boston, MA -- (SBWIRE) -- 05/22/2012 -- Output in 2011 was supported by household spending and export growth, although these diminished as the year progressed. French chemical industry association UIC has cut its growth forecast for the country's chemical output for 2012 to 1.8% from 2.4%, due to the economic crisis and delays in restocking. BMI forecasts a decline in industrial production growth from an estimated 2.9% in 2011 to 1.7% in 2012, but the petrochemicals sector is highly sensitive to the economic cycle, so the industry will be heavily affected by this anticipated downturn, and can be expected to lag the still-struggling wider economy. On the upside, inventory levels have been kept low, and we do not anticipate the kind of shock experienced in Q408. This should ensure a measure of price stability, should demand slump.
The French petrochemicals industry will undergo the same process of 'delocalisation' as other industrial sectors. In the longer-term, however, we believe French production remains susceptible to production erosion, if not complete factory closures, particularly in the automotive sector, which is a major consumer of engineering plastics. For domestic production, the influx of imports remains a point of concern. Raw material supplies and the volatility of short-term costs are also areas of uncertainty for sustaining margins. Added to this are regulatory pressures as well as uncertainties associated with political events in the Middle East and the next round of elections in France.
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Downside risks include inflationary pressures and changes in purchasing power, which could affect demand for consumer goods. Stalling consumer confidence and fiscal cuts will start to weigh on household spending, while unemployment is set to remain above pre-crisis levels, particularly among the under 25s. Tighter fiscal policy and ongoing spare capacity will also limit fixed investment growth. On the political side, strike action is likely to be a continuing problem for the industry, leading to disruptions in output and possible long-term consequences for some plants.
France scores 73.3 points in BMI's petrochemicals ratings, up 1.6 points since the previous quarter. As a result, France rises from third to second place in BMI's Western European petrochemicals ratings, lying 8.1 points behind Germany and 0.9 points ahead of the Netherlands. France's score has been undermined by poor long-term financial and external ratings as well as the effects of strike action on the market risk environment, but its country risk scores are now improving. The petrochemicals sector needs to overcome deterioration in external competitiveness and stagnation in domestic demand to hold on to the capacity it has and prevent closures. France's score is in danger of being eroded by capacity shutdowns in coming years, although its situation is not unique in Western Europe.
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