Europe’s chemical industry is doing better than it has done for a very long time but its performance has analysts and experts baffled.
Rudy van der Meer, chairman of the Dutch chemical industry association VNCI, said that the economic cycle of seven years, which had become almost a permanent feature of Europe and the global chemical industry in the last five decades, appears to be broken. Now the immediate future has become harder to predict.
He said the industry had done exceptionally well. But he was cautiously optimistic about the immediate future, citing the economic crisis in Asia as an important potential influence: ‘Both turnover and profits depend to a great extent on the way in which the Asian economies develop in the second half of this year.’
Van der Meer added that the strength of international currencies, in particular the dollar and sterling, could also affect short-term performance.
With profits up a hefty 22% to Fl7.1bn (£2.15bn) and turnover rising 14% to Fl56.9bn, the Netherlands’ chemical industry last year enjoyed one of its best years since before World War Two. And while the first quarter of 1998 is showing more modest growth (turnover up 6% on last year), VNCI said last year was exceptional, reflecting pent-up demand which has since stabilised.
Investments by the Dutch chemical industry stood at Fl3.3bn, up 3%, and this year are expected to increase 20%, reflecting the number of projects notably by Eastman Chemical, Arco and ICI which will reach the peak of their investment curves. Capacity utilisation moved from 86% to 1996 to 97% last year.
Prices last year rose by around 4.5%, on a production increase of 7% over the year, VNCI said, citing figures from the Netherland’s Central Bureau of Statistics. In the first quarter of this year, however, prices have risen just 1%. Production was up 5%.
The Dutch chemical industry has 6% of the European market, compared with Belgium’s 8%, the UK’s 12%, France’s 19% and Germany’s 26%.
Van der Meer unveiled VNCI’s annual report for 1997 at a press conference hosted by General Plastics at its facility in the Dutch town of Bergen-op-Zoom.
He kicked off with a good humoured criticism of a report by merchant bank ING Barings’ analysts who recently described the process and petrochemical sector as holding poor investment promise.
This was in stark contrast to the actual performance of the sector, said Van der Meer. He challenged ING Barings’ knowledge of the industry, and said it showed little grasp of the European process and petrochemical sectors.