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EU plunge in chemicals production steeper than global decline

September 14, 2020
Chemical Value Chain

Chemicals production in the EU suffered a steeper fall in percentage terms in the first half of 2020 than the worldwide decline in chemicals output, plunging by 5.2% year on year (YOY) compared with a global decrease of 3.4% YOY, according to European chemical industry association Cefic’s latest quarterly report.

Producer prices in the EU27 countries were 4.8% lower to end-June than in the first half of 2019, with total combined domestic and export chemical sales for the first five months of the year falling by 7.9% YOY to €202.2 billion ($239.6 billion), it says. Weak domestic demand in Europe and the deterioration of the business environment due to the impact of COVID-19 negatively impacted sales, it says. Chemical production capacity utilization in the EU27 area in the first half of the year was about 9% below the 2019 equivalent figure.

Cefic says that chemicals production in France and Italy has been “most impacted” by the COVID-19 crisis compared with other countries. Chemicals output in France and Italy fell by at least 12% in first half 2020 compared with the previous year, followed by Spain and Portugal with a YOY drop of more than 6.5%. Belgium and the Netherlands registered a decrease of about 6% in chemicals production over the same period, with Germany reporting a drop of 3.6%, while Poland saw output decline by 1.7%. The UK reported a YOY drop of 6.2% in chemicals output, Cefic adds.

Some of the EU’s chemical sectors providing for essential supply chains during the pandemic did post growth over the period, with soaps and detergents reporting production growth of 2.9% for the first six months of 2020 compared with last year, it notes.

EU27 chemical exports outside the EU27 area in the first five months of 2020 fell by €2.7 billion, or 3.7%, compared with the prior-year period to €72.4 billion, according to the report. EU27 chemical exports of petrochemicals to the US rose by €2.3 billion, or 8.8%. This was countered, however, by a significant decrease of EU27 exports to the US in specialty chemicals and consumer chemicals over the same period. EU27 chemical exports to China totaled €6.3 billion, up 1.2% YOY. Data for April and May showed two consecutive declines in EU27 chemical exports outside of the area, with “no clear sign of recovery” for exports being seen, according to Cefic.

Chemical imports into the EU27 countries from outside the area declined by 1.4% YOY, or €800 million, to €56.2 billion in the first five months of 2020. A fall in imports of polymers, down €2.1 billion, and consumer chemicals, down €400 million, contributed most to the decrease in total imports, it says. There was, however, a “significant increase” of imports into the EU27 area of specialty chemicals and petchems over the same five-month period, it adds. EU27 chemical imports from China increased by 0.6% YOY to €6.5 billion.

The chemical production data for the EU27 area shows “signs of fragile recovery,” according to Cefic. Data for June shows 2.9% of output growth compared with May of this year, but this is still about 9% below the pre-crisis level when comparing June with February of this year. Output has recovered gradually, with the weakest economic point of the crisis appearing to be reached in April, Cefic notes. “It is hopefully behind us, but the spillover effect of the crisis will continue to appear for a while,” the report adds.

Small and medium-sized enterprises (SMEs) operating in the chemicals business “are still facing liquidity issues following the COVID-19 outbreak. Many of the SMEs are family owned mid-size companies, which typically do not have a large backstop. They will continue to face delayed payments in the near future from customers, but it is too early to capture a complete measure of these effects,” Cefic says.

The 3.4% decline YOY worldwide in chemical production for the first half of 2020 reflected a weak trend in key customer sectors that slowed chemicals growth in all countries, according to Cefic’s report. India and Japan were most affected compared with the prior-year period in terms of chemicals output, falling by 14.1% and 9.2%, respectively. The US and the EU27 area reported similar falls of about 5% over the same period, while China’s chemicals output fell 2.1% YOY. “China is still an exception; output has already experienced the V-shape and [the] production level in July was the highest one ever,” Cefic says.

The EU chemical industry “has been severely hit by the current economic downturn,” but Cefic is “encouraged to see some first, although very modest, signs of recovery in European chemical output,” says Marco Mensink, Cefic’s director general. The impact of the pandemic varies between different sectors within the industry, with the overall decline in cross-sectoral manufacturing activity, including automotive and refining, likely to affect the pace of some investments, he says.

“This makes the need for a coherent policy framework to support European investments into these technologies all the more critical and timelier. At Cefic, we are calling for a ‘sectoral Green Deal’ to drive greater policy coherence,” Mensink says. With the “right policy framework,” the EU recovery package could be an opportunity to prioritize investments into innovative Green Deal solutions, such as e-crackers, chemical recycling, hydrogen, carbon capture and storage (CCS) and carbon capture and utilization (CCU) infrastructure, and other new technologies, he says.

By: Mark Thomas

Source: Chemical Week

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