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Chemical industry outlook positive for US, bleak for Europe

January 09, 2013

At the start of the new year, it is time to take a look at the chemical industry over the past 12 months and see how it is likely to fare in 2013. While many industry watchers predicted an increase in demand during the second part of last year, in fact the development took the opposite direction and left the mature markets -- North America, Europe and Japan -- still waiting for a pickup in activity, Chemistry World has reported.

The outlook for 2013 is brightest for the United States, as predictions are for the boost in U.S. shale gas production to have a positive effect on the chemicals sector. Rising output is likely to result in lower prices of feedstock and may cut energy costs. According to Kevin Swift, chief economist at the American Chemistry Council (ACC), chemical output at the close of 2012 declined as concerns were raised about the fiscal cliff. It is estimated that the total U.S. chemicals output for 2012 will come in at 0.5 percent lower than the previous year but forecasts for 2013 are optimistic.

As more investments are made in the sector, thanks to cheaper materials and lower costs, the ACC has calculated that chemicals production could grow by 2.9 percent in 2013, by 5.4 percent in 2014 and reach a peak of five percent in 2015. This growth in output will allow the United States to boost its export of petrochemicals and other bulk chemicals not just to new emerging markets like Asia Pacific but also to mature markets such as Europe.

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Meanwhile, the situation in the European chemicals industry is not as bright, Chemistry World said. Alan Eastwood, senior economist at the UK Chemical Industries Association (CIA) and chair of the economic forecasting panel of the European Chemical Industry Council (Cefic), explained that the outlook for the EU chemical industry is not very positive in the short term, as in Europe the sector performance is typically linked to GDP and the European Commission predicts a contraction of 0.3 percent for 2012, with the figure reaching 0.4 percent for the countries that use the common European currency.

Things are expected to get better in 2013 as the EU starts to recover after the summer, with GDP growth for the year predicted to be 0.4 percent. This could lay the foundation for accelerated growth in 2014, when the European Commission projects GDP growth of 1.6 percent.

The overall tendency for chemical companies in the mature markets so far has been a heavy dependence on exports to emerging markets. In 2013 this trend will continue, as developing countries are certainly a more reliable market, commented Amit Sharda, chemicals analyst at UK-based Oxford Economics. Western European chemical producers which have exported mostly to Eastern European countries could struggle, however, as demand there remains sluggish. Meanwhile, output in Russia slumped by 13 percent in 2012, Oxford Economics estimated, and output also dropped in Hungary and Slovakia. This year it may even fall in Poland, which was the only EU country to escape recession after the 2008 financial crisis.

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