European chemicals industry to recover in 2010

Brussels - Most sectors of the European chemicals industry seem to have reached the bottom, after a steep fall, and some early signs of improvement are beginning to appear, according to the European Chemical Industry Council (Cefic) 

The group forcast output in the chemical industry, excluding pharmaceuticals, to decline by 11% this year followed by growth of 5% in 2010. A reversal of the recent phase of de-stocking at all levels of the supply chain should give a stimulus, said Cefic, which also pointed to the reopening of plants and production lines as signs of recovery taking hold.

However, Cefic said the industry continues to be severely hit by the economic crisis: the latest indicators showing a considerable fall in capacity utilisation and investment. The worst hit sectors, it noted, include basic inorganics, petrochemicals, and polymers, due to a slump in demand from their downstream markets.

The industry group also warned that the pattern of recovery remains uncertain, as underlying demand is still very weak and production will remain low compared with the pre-crisis level. Consumer confidence, it said, will take time to recover, not least because unemployment has yet to peak.

"Most chemical sub-sectors will show an upward trend and experience an improvement compared to 2009," said Cefic. "After an initial rebound led by restocking, underlying demand is expected to stabilize in 2010 rather than show a swift upward trend. We therefore estimate it will take some years before production returns to the pre-crisis level."

Against that, Cefic went on to warn that the OECD and IMF as well many economists believe that the world economy is facing one of its biggest crises since World War II.

"The relatively good news," concluded Cefic, "is that the forward looking Ifo World Economic Climate Indicator rose in the second quarter of 2009 for the first time since autumn 2007, although the assessment of the current economic situation worsened again, falling to a new record low. It predicts zero growth for EU GDP in 2010, after a fall of 3.9% in 2009. World GDP is expected to decline by 2.6% in 2009, with a modest improvement next year of around 1.7%."