March 3, 2016 [OPIS] - Germany's chemicals industry is braced for marginal growth in 2016, after a disappointing fourth quarter, as sluggish industrial activity is weighing on domestic demand, industry body VCI said on Wednesday.
“With weak industrial growth, only a minor rise in the demand for chemicals can be expected in Germany in 2016,” said the group, after “2015 did not come up to the sector’s expectations.”
Prospects are seen “somewhat more positive for foreign trade,” leading to the anticipation of a slight recovery in the coming months.
Sector output is projected to grow at an annual rate of 1% this year, including pharmaceuticals, following a 0.7% rise in the preceding year and a 2.6% quarter-on-quarter shrinkage in the last quarter, adjusted for seasonal effects.
Excluding pharma, last year’s chemicals output fell 0.7% on-year, including an equal 0.7% on-quarter dip in the last three months.
Capacity utilization eased over the year to 83.5% on average from 84.2% a year earlier, with 83.8% in the last quarter.
The cautious outlook further foresees a 0.5% drop in chemicals prices, which could bring sector sales revenues to 191 billion euros ($207 billion), up 0.5% on-year. Producer prices were in the final quarter at a five-year low, after a 2.9% on-year slide, while sales fell at an annual rate of 2.6%.
“All indicators of importance to the industry pointed downward at the end of the year,” VCI found. “[T]his holds true for chemical production, producer prices and sales.”
While German business was adversely affected by weak domestic demand, “weaker dynamics in China and in the USA” made themselves felt in foreign trade.
A “minor plus” was recorded in Europe though, Germany’s most important export market.
The gloomy assessment of recent sector developments ties in with official statistics showing a 5.6% drop in last year’s naphtha flows to chemicals factories to nearly 16.0 million mt (142 million bbl).
This could partly reflect operational issues, with chemicals manufacturer Ineos reporting temporary disruptions of naphtha supplies to its 1.17 million mt/y steam cracker at Cologne-Worringen, owing to low water levels in the Rhine river (see OPIS alert, March 1, 2016).
However, more LPG — mostly butane — was used for chemicals processing, with the data suggesting a 23% on-year rise to 1.35 million mt (16 million bbl).
