European chemical producers expect marginal growth, but face many challenges


As Europe's chemical industry slowly exits the economic recession, a new report from IHS Chemical estimates the industry will experience marginal growth. But there are concerns mounting for industry leaders, who face increasing competition, feedstock cost disadvantages and a difficult business climate and aging infrastructure.

German chemical industry executives are concerned about the potential loss of business to more competitive regions, but, in general, they still have a slightly more optimistic outlook than the rest of European chemical operators, according to John Page, vice president of consulting at IHS Chemical. "This optimism is largely because the German economy is one of the strongest economies in the region," he said. "Germany has a much larger and more robust manufacturing base than the rest of Europe, and their facilities are more up-to-date from a technology standpoint, than the rest of Europe. Most companies expect the German chemical business to pick up in the coming months, in part due to increasing domestic demand."

"IHS Chemical forecasts an overall increase in German chemical production of 2 percent for 2014, so we are talking about sluggish growth here, but it is growth," Page said. "German chemical prices are likely to drop slightly, by about 0.5 percent, but we expect chemical sales to rise to €191 billion in 2014. Despite an expected increase in domestic demand for chemicals, however, very little is going to change in the foreseeable future regarding the German chemical exports."

Germany, Page said, has historically exported capital goods around the world. To date, with strong demand for these goods in China and elsewhere, the German economy has held up based on these exports. However, going forward, the export outlook for Germany is not as strong. German exports to countries in Europe such as Greece, Italy, Spain, Portugal and Ireland have declined due to these countries' anemic economies.
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