Boston, MA -- (SBWIRE) -- 06/28/2013 -- There is currently a great deal of uncertainty surrounding the future of Romanian petrochemicals producer Oltchim following the decision to file for insolvency in January 2013 after an attempt to privatise the firm failed. Nevertheless, the relatively strong domestic market is registering growth in the consumption of petrochemicals - particularly in the construction and automotive sectors - and with domestic production at low levels due to structural and financial problems within the industry, Romania appears to be one of the few European markets with the potential for import growth.

BMI estimates that chemical production fell by 2.3% y-o-y in 2012, while rubber and plastic production fell 12.0% y-o-y. This was a reversal on the gains registered by the Romanian petrochemicals industry in 2011, when chemicals output grew 9% and rubber and plastic grew 6%. The situation was within the forecast range BMI estimated in the previous quarterly report with the chemicals industry improving towards the end of the year due to a partial resumption of Oltchim's chemicals activities

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Oltchim's ongoing financial problems continue to disrupt operations. In February 2013, Oltchim stopped production at its propylene oxide (PO) and polyether polyols units, each with capacity of around 120,000 tonnes per annum (tpa), due to a shortage of feedstock. Some deliveries of polypropylene were stopped by the Romanian railway company, CFR, due to Oltchim's debts to it.

Petrom has said it will demolish the Arpechim refinery if it does not find a buyer for the unit, a move that would eliminate the prospect of integrating Oltchim into its former main supplier of feedstock. Petrom's closure of the Arpechim refinery has had a deleterious impact on downstream operations. Much of the country's petrochemicals production is reliant on the refinery, which suffers because it does not have access to a port (even though it imports most of its feedstock), meaning it is not commercially viable as a standalone operation. The closure of the refinery has cut off naphtha feedstock supply to a 200,000tpa cracker that was acquired by Oltchim in early 2010.

BMI has revised the following forecasts:

- Having reached a low in terms of output, BMI believes that a further contraction is unlikely in 2013 and there is potential for growth in H213 - if only because of base effects.
- In terms of the domestic market, the country's economy will improve modestly in 2013 with real GDP growth of 1.7%. We expect improving private consumption and the recovering agricultural sector to support growth over the next few quarters, although a more significant uptick in economic growth is not expected in 2013 and 2014.

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