Hungary Chemicals Report 2009

Industry Overview

After a promising start to 2008, the chemicals sector has been badly hit by the financial crisis, with exports being particularly impacted. According to Hungary’s Central Statistics Office the sale of industrial exports fell by 29% in January 2009. Higher than average drops were witnessed in the chemicals sector, with exports contracting by 35% year-on-year. Domestic sales of industrial products were 5% lower in January 2009. Again the chemicals industry was disproportionately impacted with certain segments experiencing a contraction of more than 30%. On a positive note, 5% volume growth was recorded for the manufacture of basic pharmaceutical products, while the production of coke and refined petroleum products increased by 44%

Business Environment

The global financial crisis has had particularly dire consequences for the Hungarian chemicals industry, due to the fall in demand from the construction and automobile industries. However, according to industry association Mavesz, the chemicals industry is not seeking a bailout from the government, even though some sources fear that domestic producers could see a 15-20% decline in turnover in 2009. Mavesz is calling for the government to take action to streamline the economy and reduce bureaucracy.

Trends And Developments

In December 2008, as reported by Portfolio.hu, the government pledged to pump HUF10bn (US$45.7mn) into the country’s only fertiliser plant, Népszabadság, in order to keep it afloat. The assistance will take the form of a state guaranteed loan, which will be added to a HUF14bn package (US$64.03mn) that the company has already received. The government is keen to the save the company in order to keep stability in the domestic agriculture sector. It is also thought that the authorities are not keen on letting the company fall into foreign hands.

Industry Forecast

In the short-term the chemicals sector is facing real difficulties. Hungarian industrial production contracted by a staggering 23.3% y-o-y in December, by far the worst production growth figure recorded by the Hungarian Central Statistical Office, which dates back to January 2002. Slowing domestic demand, coupled with reduced export demand from the EU will depress demand for chemicals products.

Meanwhile, core export markets, such a Russia and the US are set to experience recessions in 2009.