EU chemical industry: slowdown in 2005

Better prospect for 2006

09-Dec-2005

According to its year end "Economic Outlook", Cefic, the European Chemical Industry Council, expects output in the chemical industry (excluding pharmaceuticals) to grow by only 1.6% in 2005, compared to 2.6% in 2004. The year 2006 may show a modest improvement, possibly reaching growth of 2.3%.

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The European chemical industry experienced a slowdown in production growth in 2005. External demand for chemicals was less dynamic due to a deceleration in global economic activity. Domestic demand in Europe could not compensate for the fallback in foreign demand. High crude oil prices (57 USD/bl) had put pressure on private consumption. Therefore, industrial production was weak. In the EU chemical industry, the business climate illustrated a loss of confidence during the first half of 2005. The assessment of the production situation was less favourable, and business expectations worsened. But this downturn trend was only temporary, as the business climate has been improving since September 2005 and this positive trend is likely to continue through the end of 2005.

The various chemical sub-sectors are impacted to differing degrees by the weaker economic situation in 2005. This year shows a sharp increase in production for basic chemicals, especially petrochemicals and inorganics production. By contrast, after having performed very well in 2004, specialty & fine chemicals activity decreased as a consequence of weaker global demand, intensive international competition and cost increases (e.g. oil prices).

The chemical industry expects better business developments in Europe in 2006. Encouraging signals from business and consumer confidence and more export opportunities should contribute to a recovery of the domestic economy. For 2006 as a whole, Cefic expects a production increase of 2.3% (excluding pharmaceuticals). Chemical production including pharmaceuticals will grow by 2.6%. Most chemicals sectors will show this improvement.

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