United Kingdom Petrochemicals Report Q3 2016 - New Report Available
Fast Market Research recommends "United Kingdom Petrochemicals Report Q3 2016" from Business Monitor International, now available
[ClickPress, Tue Jun 14 2016] The British chemicals industry as a whole is in transition to higher-value, lower-volume production, having closed many basic chemicals and polymers capacities in recent years. This should put the industry in good stead for profitability, although existing petrochemicals facilities will continue to feel the challenge of feedstock prices in competing with US and Middle Eastern rivals. The main downside risk comes from the lack of access to competitively priced feedstock in a global market facing over-supply .
The British petrochemicals industry experienced a downturn in Q116 with production indices suggesting a contraction of 1.3% y-o-y. Rubber and plastic output fell 0.7% while overall chemicals output fell 3.7%. This came in the context of a 1.3% contraction in manufacturing compared with Q115. The latest survey of business confidence for members of the Chemical Industries Association (CIA) shows that more than 88% of businesses expect sales volumes to remain or exceed 2015 levels when there was a record 5% growth, a decline of 2pp over the previous quarter. This would suggest that the industry expects a turn-around in fortunes in the rest of the year with exports leading growth; 95% expect to maintain or grow exports.
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The competitiveness of British petrochemicals production has been undermined by the lack of locally available and competitively priced feedstock as well as the strength of the pound against the euro. As such, British producers are in a weaker position to compete with foreign output.
Modest vehicle production growth of 2.4%, following 4% growth in 2015, will lead to slower growth in demand for engineering polymers from the automotive supply industry. Meanwhile, we maintain our forecasts for construction industry value real growth in the UK at 3.5% for 2016, which should help support consumption of construction-related petrochemicals products, particularly in the polyvinyl chloride (PVC) segment.
Over the next five years, ethylene capacity should hold at 2.52mn tpa with polymer capacities including 820,000tpa of polyethylene (PE), 495,000tpa polypropylene, 255,000tpa polyvinyl chloride and 157,000tpa of polyethylene terephthalate (PET). Risks are to the downside and we caution that some capacity will remain at risk of closure. Some segments, notably PET, are highly competitive; while other segments, notably PE, will struggle amid the onslaught of new capacity in North America and the Middle East.
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