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January 10, 2011
Volume 89, Number 2
p. 11

Europe: Slower Growth To Follow Strong But Varied Rebound In 2011

Melody M. Bomgardner

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Chemical production in Europe rebounded solidly in 2010. But that recovery will moderate in 2011.

“We had a dramatic decline in 2008 and 2009,” says Moncef Hadhri, chief economist at the European Chemical Industry Council (CEFIC), “and we will not get back to the previous level until 2012 at the earliest.”

Chemical production through the first 10 months of 2010 was up 11.3%, but it remains 5.9% below the peak reached in 2007. The pace slowed in the final months, resulting in a 10.0% growth forecast for the year. Growth in 2011 will ease to just 2.5%, CEFIC says.

Inventory rebuilding was the primary driver behind the quick 2010 recovery, notes John Bonarius, European managing director for Chemical Market Associates.

“We had a virtuous circle in 2010,” Bonarius explains. “The underlying base energy prices were moving up, which encouraged consumers to buy ahead of consumption needs as the only practical hedge against rising prices.” Petrochemicals and plastics showed the greatest price gains in 2010, up 18% and 12%, respectively, through October, according to CEFIC.

Also driving growth were chemical exports. The European Union’s trade surplus with the rest of the world rose 9.5% through the first nine months of 2010, according to CEFIC. Domestic demand remains weak, but a strong Asian pull for European goods has buoyed chemicals growth.

And the industry sectors that led the decline—basic inorganics, polymers, and petrochemicals—have also been the fastest to recover.

The regional look masks a varied country-by-country picture. Already, Poland and Belgium have returned to production levels seen in 2007, thanks to their strong dependence on basic chemicals. Germany and France are also showing strong year-on-year growth, at 18.9% and 11.8%, respectively, for 2010. But chemical production in the U.K. is down 2.4% from the first 10 months of 2009, and growth in Italy and Spain remains below the regional average. Such divergent trends suggest that this year will be challenging for many firms.

“For 2011, all bets are off,” Bonarius warns, citing austerity measures in several countries and particular concern for the financial stability of Portugal, Italy, Greece, and Spain.

Chemical & Engineering News
ISSN 0009-2347
Copyright © 2011 American Chemical Society
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