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The Polish petrochemicals industry enjoyed a positive performance in 2011, but will come under pressure due to the worsening situation in the eurozone, slower domestic growth caused by likely hikes in interest rates and the effects of appreciation on the industrys external competitiveness. The slowdown in eurozone markets will have a knock-on effect on a supply chain that depends on exportoriented industries such as the automotive sector, a major consumer of engineering PP and polyurethane products. Despite the slight decline in automotive output in 2010, BMI believes Poland is fairly well placed to achieve production growth of 7% in 2012, and we expect the country to be producing more than 1mn units a year by 2016. This has led to a more optimistic outlook for domestic moulded plastics although our previous expectation that the industry would return to 2008 levels by 2012 now now unrealistic; we now forecast a recovery in 2013 at the earliest. Nevertheless, the slowdown in the eurozone still poses a significant downside risk.
Growth has had a positive effect on construction-related plastic production, such as PVC and PP applications. After two years of declines in 2009 and 2010, the Polish construction chemicals market saw a levelling off, which totalled around PLN6bn (EUR1.5bn) in 2011 on the back of 16% growth in construction activity. There is cautious optimism in construction and assembly firms as to the consumption of construction chemicals in 2012 with single-family housing, which is less vulnerable to changes in the market situation, playing a major role. However, strong growth in construction material consumption is unlikely. We forecast 2.9% growth in construction activity in 2012.
Demand from consumer goods and packaging industries will pick up as household demand remains firm amid improved domestic liquidity conditions. This sector is vital to the petrochemicals industry because it is an important consumer of plastic products such as PE and PET. So far, consumer spending has not suffered as severely as we initially expected. While consumer spending had started to wind down from mid-2010, still-buoyant domestic lending has prevented an outright collapse in expenditure and consumer sentiment, which should help offset the problems in the automotive sector. This should help PE margins at Basell Orlen Polyolefins (BOP)s 400,000tpa PP production facility.
BMIs risk scoring in the petrochemicals sector is based on dynamic scores that reflect on future growth as well as current capacities and the size of the internal market, along with investment risk assessments of the political, economic, and regulatory environments. Polands score has risen 0.3 points to 58.3 points out of 100. due to an improvement in its country risk score. Poland maintains its second place position in our Central and Eastern Europe Petrochemicals Business Environment matrix, behind Russia and points ahead of the Czech Republic. Petrochemicals-specific scores remain unchanged, with BMI casting doubt on any major capacity additions over the medium term. Diversification of market suppliers and increased feedstock availability could improve Polands score, although it stands little chance of exceeding Russia, which should retain its dominant position.
Click for Report details:Poland Petrochemicals Report Q2 2012