Boston, MA -- (SBWIRE) -- 02/20/2013 -- BMI's Romania petrochemicals report examines the fallout from the failed attempt to privatise local producer Oltchim in September 2012, and the outlook for the chemicals company as it seeks to overcome mounting losses, rising debts and a fall in competitively priced feedstock availability. We also look at the business environment, assessing growth potential in the context of a depressed export market and a slowdown in domestic growth due to austerity measures.
By 2012, Romania had modest olefins capacities of 200,000 tonnes per annum (tpa) ethylene and 100,000tpa propylene. Polyolefins capacities in 2011 were: 160,000tpa high density polyethylene (HDPE); 160,000tpa low density polyethylene (LDPE); 80,000tpa polypropylene (PP); 60,000tpa polystyrene (PS); and 170,000tpa polyvinyl chloride (PVC). The structure of the industry, poor infrastructure and low capacities have long been barriers to growth and investment.
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The monthly production index for chemicals and chemicals products fell 9.0% year-on-year (y-o-y) in the first seven months of 2012, while the rubber and plastic production index fell 12% y-o-y. This indicates that there has been a reversal in the gains that the Romanian petrochemicals industry made in 2011, when chemicals output grew 9% and rubber and plastics output grew 6%. The indications are that 2012 may be as bad as 2009, when the industry was hit by the effects of the international financial crisis of 2008. However, the context is different. The market is affected by the fallout from the eurozone sovereign debt crisis, but there is a specific crisis within the Romanian petrochemicals sector - with Oltchim's longstanding financial woes and the shortage of feedstock supply leading to depressed output across a range of segments. The restructuring and integration of the Romanian petrochemicals industry with local refinery capacity is seen as key to any revival. Until the situation is resolved, the country's petrochemicals industry will operate below its full potential. Hopes rest on yet another attempt by the state to sell Oltchim in 2013, although this will come after a deadline set by the IMF as a condition of giving the country bail-out loans.
BMI has revised the following forecasts from Q412:
- BMI estimates that in 2012, chemicals output dropped by 7% and rubber and plastics output declined 12%.
- With output at a low, BMI believes that a further contraction is unlikely in 2013 and there is potential for growth in H213 - if only because of base effects. Output will still rise further if Oltchim finds a new owner and is integrated with the Arpechim refinery, which should help overcome obstacles to feedstock supply.
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