Boston, MA -- (SBWIRE) -- 09/24/2013 -- BMI View: 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.

In the first four months of 2013, rubber and plastic output grew by 7.0% year-on-year (y-o-y) while chemicals output rose 10.8%, according to Romania's National Statistics Institute, INS. Growth in production came alongside GDP growth of 2.2% y-o-y, up from 0.3% in the previous quarter. First quarter growth was driven by strong net exports, as weak import demand coincided with steady export growth. However, we predict overall GDP growth of just 1.7% in 2013, up from 0.7% in 2012.

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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, including naphtha feedstock supply to a 200,000 tonnes per annum (tpa) cracker that was acquired by Oltchim in early 2010.

BMI has revised the following forecasts:

- Oltchim was reportedly operating at just 22% of its capacity by end-Q213, a situation that was undermining its profitability at a time when the government is planning to privatise it. The government is seeking to boost capacity utilisation to 50%, at which the government claims the plant would break even.
- Having reached a low in terms of output, BMI believes that a further contraction is unlikely in 2013 and growth should be sustained in H213 - if only because of base effects. The restructuring and integration of the Romanian petrochemicals industry is seen as key to its revival. Until the situation is resolved, the country's petrochemicals industry will operate below its full potential, although this will be partly outweighed by growth in production at Rompetrol's high-density polyethylene (HDPE) plant in Navodari.
- Romania ranks 13th in BMI's Central and Eastern Europe Petrochemicals Risk/Reward Ratings (RRRs), scoring 44.7 points out of 100, down 0.4 points since the previous quarter due to low capacity utilisation rates and ongoing problems at insolvent petrochemicals producer Oltchim.

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