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
INEOS Styrolution, the global leader in styrenics, has today announced the official opening of a new world-scale ABS facility located in Ningbo, China, together with its joint venture partner SINOPEC. The facility has an annual nameplate capacity of 600,000 tonnes.
The merger of Röhm’s Acrylic Products business unit and SABIC’s Functional Forms business has resulted in the formation of Polyvantis. This new company will offer extruded products in the forms film, sheet, pipe and rod for markets that include building and construction, transportation and aviation, electrical and electronics, automotive and home and garden.
Abu Dhabi National Oil Co. (Adnoc) is considering plans to acquire upstream oil and gas company Wintershall DEA, an affiliate of BASF SE, according to a Bloomberg report citing people with knowledge of the matter. A deal to acquire Wintershall DEA could be worth more than €10 billion, the report said. BASF and Adnoc declined to comment on the report.