Boston, MA -- (SBWIRE) -- 01/07/2014 -- Although there are considerable downside risks over the short term, Dutch petrochemicals still offer some distinct competitive advantages in the medium-to-long term. The size and integration of the Dutch petrochemicals industry enables economies of scale, which means investors will sustain their interests in some segments where global market conditions are favourable.
In 2013, the Netherlands had capacities of 3.98mn tonnes per annum (tpa) of ethylene, 675,000tpa of polyvinyl chloride, 95,000tpa of polystyrene, 1.9mn tpa of polyethylene, 780,000tpa of polypropylene and 450,000tpa of polyethylene terephthalate.
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The rubber and plastic production index stagnated in 9M13, although there was an overall upward trend in index growth from a low-point in March. The chemicals index saw a 5.5% decline over the period, reversing the growth witnessed in 2012. The contraction was much deeper than the performance of the manufacturing sector overall, which declined 1.5% on average in the January-September period following a decline of 0.7% in the previous year.
- Higher oil prices coupled with lower product prices are likely to reduce margins of players operating in the Dutch petrochemicals and chemicals arena. In 2013, BMI estimates that the average price of naphtha per barrel was around US$105, down just 1.5% from the previous year's historic highs and nearly 20% greater than the level seen in 2008, when the financial crisis hit. The cost of naphtha is likely to remain stubbornly high at over US$100/bbl in 2014 and 2015, while ethane-based rivals in North America will be driving costs down as a result of shale gas exploitation.
- The Dutch petrochemicals industry has attracted investment with Thailand's Indorama Ventures increasing PTA capacity at the company's Rotterdam plant by 250,000tpa to 600,000tpa with commercial production beginning in 2014, thereby serving as a major feedstock supplier to PET producers in Western Europe including its own recently expanded PET plant in the Netherlands.
- With 73.6 points, the Netherlands remains in joint second place with France in BMI's Risk/Reward ratings for the European petrochemicals industry, although a deterioration in its long-term country risks rating means its score has declined by 0.2 points since 2013. It is now 8.2 points behind Germany and 1.6 points ahead of Belgium. The Netherlands scores close to the Western European average in petrochemicals-related scores and its risk ratings are still above the regional average, marking it out as a prime investment destination.
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