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New Market Study Published: Czech Republic Petrochemicals Report Q1 2013

New Energy market report from Business Monitor International: "Czech Republic Petrochemicals Report Q1 2013"


Boston, MA -- (SBWIRE) -- 02/01/2013 -- This Czech Republic Petrochemicals Report examines the potential of the country's integrated petrochemicals sector and the competitive dynamics at play in the domestic market. However, BMI warns that there will be a deterioration in the outlook for industry and that companies operating in the sector are likely to register weak margins over 2013.

The report also assesses the strengths of the Czech petrochemicals sector and looks at the country's transformation into one of Central Europe's leading exporters of basic chemicals and polymers, as well as its position as a significant supplier of the domestic automotive and construction sectors. It also assesses the strategies being employed by petrochemicals producers to improve competitiveness and protect margins, and counter the effects of the downturn in the eurozone.

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The chemicals and downstream industrial sectors registered a rapid slowdown in 2012 as exports were hit by the economic crisis in the eurozone. Petrochemicals margins have been volatile, with the rise in oil prices feeding through the value chain and eroding the profitability of polyolefins. Production and sales of chemicals, rubber and plastic fell throughout 2012 while unfavourable economics have prompted the country's largest petrochemicals producer Unipetrol to cut refining and urea capacity. Despite falling polyethylene (PE) sales, Unipetrol is planning to double its high density PE (HDPE) capacity at its Litvinov site, with operations due to start in Q216.

Over the last quarter, BMI has revised the following forecasts/views:

- The competitiveness of the Czech petrochemicals industry will depend on exchange rate differentials. On the upside, we expect the Czech koruna to come under pressure in the near term, with Czech exposure to the eurozone likely to reduce the value of the koruna to the euro.
- Due to cuts in refinery capacity there is the potential for increased reliance on imported ethane and propylene.
- Over the long term, the automotive industry will remain a key driver of demand for polymers in the Czech Republic. The packaging and consumer goods industries are likely to follow the same pattern, although meeting domestic demand is likely to offer better opportunities than exporting products abroad.
- In BMI's Petrochemicals Risk/Reward Ratings (RRRs) for CEE, the Czech Republic scores 58.7 points out of a maximum of 100, unchanged from the previous quarter. It now shares second place in the rankings with Poland, which has seen an improvement in country risk ratings over the past quarter. The Czech Republic's score has improved as a result of plans for PE capacity expansion. However, the export-oriented nature of the country's manufacturing sector means that the petrochemicals industry is heavily exposed to external risk and the country is in danger of slipping to third place.

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