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Spain Petrochemicals Report Q2 2010
Market |
Energy and Utilities |
Report Type |
Market Research |
Country |
Spain |
Published |
3 March 2010 |
Number of Pages |
60 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
Our latest Spain Petrochemicals Report states that the country’s industry suffered the sharpest downturn in the EU in 2009. With no sign of any major rebuilding of inventories by downstream customers in Q110, there is a prevailing mood of caution amid continuing difficult credit and liquidity conditions that suggests recovery is unlikely to begin until H210.
We estimate that the Spanish petrochemicals market declined 18% year-on-year (y-o-y) in 2009 amid a collapse in the automotive and construction sectors, with primary plastics demand plummeting 27%. This compared with a 10.6% drop in EU petrochemicals output and a 19.7% drop in polymers output as demand across Europe slumped. With exports also performing poorly, the local petrochemicals industry was in sharp decline with output down by around 20%.
Our estimates are based on the trends observed in key petrochemicals consuming industries, namely construction, consumer goods and vehicles. These serve as a barometer of the domestic industry’s health. A collapse in construction following the burst of the housing bubble has dragged down the market and we expect yet more decline in prices amid a situation of oversupply. This has caused significant damage to the PVC industry, which is partly reliant on the construction sector for demand. Meanwhile, engineering plastics have been hit by the downturn in the automotive industry, which has been adversely affected by both the recession and the long-term eastward shift in European car-making. In terms of exports, the Eurozone economy remains weak and the appreciation of the euro against the US dollar makes Spanish exports outside the currency area highly uncompetitive in a very challenging global market.
The outlook for Spain’s petrochemicals industry in 2010 remains broadly negative. Spain’s economy contracted for a sixth consecutive quarter in Q309, at a time when the eurozone economy as a whole posted a positive figure (of 0.4% q-o-q). This is in line with our core view that Spain is likely to underperform its major European peers in the recovery. We forecast 2.5% growth based on trends in the construction and automotive industries. We believe the Spanish petrochemicals industry will not exhibit any recovery until H210. The domestic market will be particularly poor due to weaknesses in private consumption and fixed investment. This will be partly offset by a modest recovery in exports, but overall the situation facing the industry is gloomy. However, the automotive sector, which is one of Spain’s key petrochemicals-consuming industries, is unlikely to return to pre-recession levels of output over the next five years. Following a 20% slump in output volume in 2009, production will fall by a further 10% in 2010. Most of the decline is attributed to the economic climate in Europe, Spain's biggest export region, and in particular the state of the French market.
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