ERNST & YOUNG SRL

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VIORICA LUNGU

  |  12.12.2014

A battle against losses or seeking for other business niches

A positive trend has been noted at the beginning of 2014 compared to 2013 in the European chemical industry, as a consequence of increasing orders from industry partners and due to the stabilization of the situation in the construction sector

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ERNST & YOUNG SRL

VIORICA LUNGU

VIORICA LUNGU

CONSULTANT – TRANSACTION ADVISORY at ERNST & YOUNG SRL

European context

European production growth reached 2.8% yoy in volume in the first four months of 2014 and is estimated to record an increase of 2% yoy in 2014, according to the European Chemical Industry Council (CEFIC). The positive trend is expected to continue in 2015, however at a slower pace, with an estimated growth rate of 1.5% together with the mitigation of the inventory replenishment process. CEFIC management believes that the recovery observed is quite volatile and the pace of growth is affected by the high energy prices, which unfortunately hinders the European manufacturers of chemical materials in relation to the manufacturers in North America and Middle East.

 

Romania’s chemicals industry in numbers

Based on data published by INSSE, the industrial production price index for the manufacture of chemicals fell by 4%, while the industrial production index rose by 1.5%, both variances recorded in December 2013 compared to the same period last year. Chemical fertilizers recorded the highest decrease of all chemical subcategories, the production price index falling by 16.3% in the mentioned period as well.


In terms of production, in the first four months of 2014, the chemicals output rose 6.1% and rubber and plastic grew 8.7%, compared to the industrial average of 8.2%, according to BMI data release. However, the construction sector, which absorbs a sizeable amount of Romanian chemicals and petrochemicals, as well as the performance of the automotive sector, have been comparatively lackluster, affecting engineering plastics.


In 2013, the total turnover value for the manufacture of chemicals and chemical products recorded a decrease by 8.1% compared to the previous year.


Exports of chemicals totalled EUR 2.79 billion in 2013, meaning a decrease by 5.6% yoy, but still 2.8 times lower than the chemicals imports value. Germany is the 1st EU international chemicals trade partner for Romania, based on the value of chemicals traded. (INSSE provisory data).

 

  

 

In terms of risk ratings, Romania ranks 14th in BMI’s Europe Petrochemicals Risk / Reward Ratings (RRRs), scoring 44.8 points out of 100, while a study issued in Q3 2014 by Coface indicates a medium risk for chemicals industry in Romania within the sectorial risk barometer.


The insolvency of the chemical players is among the main risks for this industry in Romania, proven by the fact that in 2013, 249 companies with the main activity manufacture of chemicals and chemical products were insolvent, while in H1 2014 this number fell to 107 entities, representing 1% out of the total insolvent firms in Romania, according to a study of insolvencies in Romania, conducted by Coface. Also, the failure to privatize Oltchim has undermined the country’s industry regulatory environment and the performance of the chemicals and petrochemicals industry, although this has been offset by improved prospects in the domestic market as a result of brightening prospects for the automotive industry.

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