CEFIC and the American Chemistry Council (ACC) have delivered strikingly similar reports, allowing for differences in methodology, of the chemicals industry’s performance in the past year and projections for the near-term future. CEFIC’s report covered Europe, the ACC’s the whole world, though with the focus on North America.

Both reports showed that there has been a massive decline in demand and output this year. Every region of the world has been affected to varying degrees since the financial crisis bit in Q4 2008, triggering the deepest recession since the 1930s. This has seen a global GDP fall that is expected to be 2.3-2.5% this year.

Although the chemicals industry hit the bottom of the trough in June, according to both organisations, the subsequent recovery has been very fragile. The right government policies will be crucial to ensuring that the eventual recovery can be sustained.

Neither CEFIC nor the ACC expects a ‘double-dip’ fall in demand but the continuing recovery that both anticipate for next year that will come nowhere near to making up the loss. Their prognostications for the speciality chemicals sector are rather different though, as ever, different definitions play a major part in this.

According to CEFIC, output of chemicals excluding pharmaceuticals in Europe will fall 12% on 2008 levels in 2009. This is far higher than was foreseen in May, when the last six-monthly report was issued, reflecting the fact that the 2H recovery in demand “has been relatively muted” when compared to the huge fall in 1H.

For 2010, CEFIC projects further slow recovery, with the caveat that government-backed incentives such as car scrappage schemes have brought forward some demand that must inevitably be lost. Moreover, with unemployment continuing to rise, a further deflation of demand is likely.

Hardest hit by far in 2009 in Europe have been the basic inorganics and polymers sectors, both of which are around 20% down. Speciality chemicals declined less than all other sectors bar consumer chemicals (9.3% down) and are expected to show slightly growth than average (6.0%) in 2010.

CEFIC believes that 2010 production levels in the chemicals industry will still be 11% below the peak in Q1 2008, having fallen by 20.3% in the year between then and Q1 2009. “This implies that the industry is operating far below its optimal capacity utilisation level, which in turn means lower production efficiency and reduced margins,” it added.

The industry will, conversely, be well placed to respond to higher demand once confidence returns and downstream customers restock their inventories – which did not happen on any significant scale in 2009. However, CEFIC cautioned, “it is likely to be several years before previous peak levels are regained”, even though 2011 and 2012 should see “greater underlying momentum and a return to more normal conditions”.

The ACC, likewise, sees a recovery in the $3.7 trillion global ‘business of chemistry’ in 2010 and 2011 after a major decline this year. Total global output is projected to be 4.6% down, with China and India virtually alone in enjoying continued growth, although Ireland bucked the trend in Europe.

The entire developed world saw declines of varying degrees of severity: North America (-6.2%), Western Europe (-8.3%), Japan (-10.8%), Emerging Europe (-10.3%). The Asia-Pacific region (-3.2%), Latin America (-3.9%) and African and the Middle East (-2.8%) were least affected.

Within this, production volumes in the US ‘business of chemistry’ including pharmaceuticals is projected to fall 6.2% this year after a 4.7% fall in last year. Excluding pharmaceuticals, the falls were 6.5% and 9.4%. The recovery has been more pronounced than in Europe, aided by more significant levels of restocking and strong growth in exports, driven by the weak dollar.

The following three years will see growth of 3.4%, 4.0% and 4.2% respectively, the ACC forecasts. Even so, this will not be enough to make up the lost ground. Pharmaceuticals will not be such a motor of growth as it was in the past, though it will still be one of the stronger sectors in the coming years and will reach its previous peak in 2011, earlier than almost every other sector.

The ‘specialties’ segment is projected to have declined by 14.4% this year, though this reflects mainly a 21.5% fall in coatings, which have been hit disastrously by the downturn in the automotive and construction sectors.
‘Other specialties’ are expected to see an 11.2% fall to follow a 3.2% fall in 2008. This sector as a whole is projected to see slower than average recovery until 2012, when 5.0% growth in anticipated. Even most basic chemicals did not suffer this badly, though they suffered very bad years, with falls of 8-10%.