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EU chemical industry production to pick up in 2017

The EU chemical industry continues to weather the impact of globalisation as well as competitiveness challenges associated with the cost of doing business in the EU. While demand for chemicals globally is increasing year on year, the EU chemical industry’s share of that continues to decline and it now stands third behind Asia and the US in terms of worldwide sales (see 2016 facts & figures). Forecast shows that despite investment leakage, the industry is holding its own to keep manufacturing in Europe.

Chemical industry Sectoral Breakdown

Flat overall production output in 2016 masks significant differences between chemical product segments. After several years of negative growth rates, basic petrochemicals production expanded slightly leveraging on the lower oil price, but still suffering from competitive disadvantages compared to other regions. The EU chemical industry is energy intensive, and additionally the cost of its main feedstock is significantly higher than in other regions. This leads, for example, to higher ethylene cash costs in the EU – twice as high as those in the US.

Growth in polymer production was supported by solid automotive demand, but also from the packaging and electronics industries. While these segments developed positively, production in basic inorganics declined significantly, partly owing to low demand for fertilizers. Weaker agricultural demand also impacted crop protection products in the fine and specialty chemicals segment.

Due to strong competitive pressure in export markets and weak global growth, growth in consumer chemicals such as cosmetics and care products was softer.

For 2017, Cefic expects overall moderate growth in a volatile and challenging environment. While overall growth of customer industries – for example the automotive and construction sectors represent the chemical industry’s biggest clients – is unlikely to accelerate, sectoral demand is anticipated to be more balanced. Agricultural demand is expected to stabilise, so fertilizer and crop protection demand should slowly recover from low base levels.

Petrochemicals continue to profit from a narrowed competitiveness gap due to the lower oil price, while demand for polymers from the automotive industry is expected to soften. However, polymers are still expected to grow more strongly than other segments due to robust demand from packaging and construction.

Specialty and consumer chemicals growth are supported by moderate demand growth from manufacturing and private consumption

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(Source: Cefic, the European Chemical Industry Council)