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Boston, MA -- (SBWIRE) -- 11/01/2013 -- The German chemicals market, which accounts for a quarter of EU sales, will be pivotal to the growth of overall European chemicals production. Hence, the slowdown in domestic demand will inevitably lead to a reduction in imports, meaning that European producers cannot bank on German demand to compensate for weaknesses elsewhere in the EU market. Many will fail to match the competitiveness of the country's diverse and highly integrated petrochemicals industry. Meanwhile, key growth drivers in the German industry will be in high-end specification plastics and speciality chemicals, rather than the basic chemicals and polymers traded by producers in the Gulf region. This should, in due course, spur investment in the expansion of existing capacity and increase research and development, with a focus on German operations.
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The German chemical industry experienced stagnation in production and sales in H113. Growth in exports, particularly to other European markets, was offset by weakening domestic sales. Although production is 3% below the pre-crisis level of 2007, the industry is performing better than its competitors in Europe. With stagnating production volumes and stable prices, total sales in the German chemical industry amounted to EUR90.8bn. Domestic business dropped by 1.0% to EUR35bn, because industrial customers ordered fewer chemicals. Foreign sales improved by 0.5% to EUR55.8bn.
Over the last quarter BMI has revised the following forecasts/views:
- The performance of the German market is disappointing and has prompted a downward revision in BMI's forecast for domestic sales growth from 2.0% to 1.5%. Accordingly, our petrochemicals output growth forecast has also been altered from 1.5% to 1.0%. Slower growth means that it could take two years for the industry to recover from the 3.0% decline in output reported for 2012, when the German petrochemicals industry experienced zero growth in domestic sales and the effects of the eurozone sovereign debt crisis.
- Industrial growth will shrink by 3.0% in 2013 before growing 2.5% in 2014, which will moderate domestic chemicals consumption growth. Crucially, automotive output is forecast to fall 3.4% and 1.7% in 2013 and 2014, respectively, which will have a negative impact on consumption of engineering plastics.
- In July 2013, Germany's Ethylene Pipeline South (EPS), the 370km-long link connecting crackers at Munchsmunster and Burghausen to the south-western ARG network at Ludwigshafen, in the state of Rhineland-Palatinate, was commissioned. The project will connect BASF's petrochemicals hub in Ludwigshafen with chemical sites in Bavaria and should boost downstream production margins and, in turn, competitiveness.
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