Sector News

Europe chemicals 2019 sales growth could be weakest since 2015 – UBS

December 13, 2018
Chemical Value Chain

Weakening automotive industry production, softer construction markets and a decline in oil pricing could lead in 2019 to the weakest revenue growth for European chemicals since 2015, according to analysts at investment bank UBS.

Average organic sales for the sector could be closer to the 3% contraction recorded in 2015 than the flat growth the bank had previously guided for, following Germany-based chemicals producer BASF’s downgrade to its 2018 earnings outlook last week.

UBS also said the strongest commodity chemicals supply growth since 2015 next year, potentially 50% above 2015 levels, increasing pricing risk at a time when the Chinese government looks set to dramatically expand its domestic emissions reduction programme and reduce basic chemicals demand.

Analysts’ forecasts of a 1% year-on-year contraction in volumes for diversified chemicals producers in the fourth quarter of 2018 may be too optimistic in light of BASF’s projections, which include a €200m hit to earnings before interest and taxes (EBIT) due to logistical woes on the River Rhine.

Revenue growth in 2015 was hit by weak demand and a drop in oil pricing, and next year there may be a repeat of those conditions on the back of weaker end markets, softer China demand, and recent declines in oil pricing, UBS said.

Industry inventories are already high, and Baader Bank recently guided for potentially significant industry destocking in late 2018 and early 2019, in contrast to the strong buying activity seen during the same period a year earlier.

Despite potential for shrinking growth next year, balance sheets for European companies are at their strongest since 2010, with the potential for €60bn to be put to work, UBS said, meaning that strong mergers and acquisitions (M&A) activity in recent years may be set to continue.

Source: ICIS News

comments closed

Related News

January 29, 2023

Dow and 3M cut thousands of jobs

Chemical Value Chain

3M and Dow have announced they are cutting thousands of roles from their global workforces in response to economic pressures. Dow has said it will cut 2,000 jobs across its global workforce (around 5%) in a bid to save US$1bn in 2023. The company says it will also cut costs by shutting down “select assets”, though it did not note where it would halt operations.

January 29, 2023

Sweden discovers Europe’s largest rare earths deposit

Chemical Value Chain

Sweden’s state mining firm has discovered what could be Europe’s largest rare earths deposit, and says it could help the bloc reduce its reliance on imports of minerals needed to manufacture clean technologies and meet climate targets.

January 29, 2023

Avantium to supply Henkel with plant-based FDCA

Chemical Value Chain

Henkel and Avantium have been partners since 2019, when Henkel joined the PEFerence consortium. This consortium of partners, coordinated by Avantium, aims to establish an innovative supply chain for FDCA and PEF (polyethylene furanoate).

How can we help you?

We're easy to reach