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
France has launched an offshore green hydrogen production platform at the country’s Port of Saint-Nazaire this week, along with its first offshore wind farm. The hydrogen plant, which its operators say is the world’s first facility of its type, coincides with the launch of another “first of its kind” facility in Sweden dedicated to storing hydrogen in an underground lined rock cavern (LRC).
The project sets up the Hydrogen Valley in Rome, the first industrial-scale technological hub for the development of the national supply chain for the production, transport, storage and use of hydrogen for the decarbonization of industrial processes and for sustainable mobility.
At first glance, hydrogen seems to be the perfect solution to our energy needs. It doesn’t produce any carbon dioxide when used. It can store energy for long periods of time. It doesn’t leave behind hazardous waste materials, like nuclear does. And it doesn’t require large swathes of land to be flooded, like hydroelectricity. Seems too good to be true. So…what’s the catch?