ACC Mar15aChemical production is a time-proven leading indicator for the global economy.  And as the chart above shows, it has been signalling that a downturn is underway since April.  Based on American Chemistry Council data, it highlights:

  • Global growth peaked at 5% in April and was down to 3.3% in January (black line)
  • Only the N American region showed an improvement, rising to 4.3% (green)
  • The Middle East has slowed to 4.5% (dark blue) and Asia to 3.9% (purple)
  • W Europe fell to 3% (light blue), whilst Latin America (red) and Central/Eastern Europe (orange) went negative

This worrying picture is confirmed by my quarterly survey of chemical company results for Q4.

US companies remain optimistic, hoping that oil prices will rebound and therefore continue to support their shale gas advantage.  But at the other end of the spectrum, Brazilian giant Braskem described “numerous challenges“.

As often, paint maker Akzo Nobel represents the consensus, seeing a “lack of growth in Europe and a slowdown in some of the Asian and Latin American economies“.

This sober view is confirmed by the majors, with BASF describing “substantial risks“, and Dow seeing “ongoing macroeconomic, currency and energy market uncertainty“.

Regional issues are also becoming critical as Henkel highlights “We expect stagnation in Eastern Europe in 2015 as well as further pressure on the Russian economy and currency“.

The detailed survey is below.

Air Products. ”Higher volumes, favourable cost performance, and stronger pricing more than offset unfavourable currency impacts”
Akzo Nobel. “2014 was challenging, evidenced by negative currency effects, a continued lack of growth in Europe and a slowdown in some of the Asian and Latin American economies”
Ashland. “Good time to focus instead on generating profit and cash generation from past investments”
Axiall. “heavily impacted by the lower ECU values in the industry after the significant capacity additions in late 2013 and early 2014″
BASF. “The global economy will continue to face substantial risks, in this volatile and challenging environment”
BP.  “Weak margin environment, particularly in the Asian aromatics sector”
Bayer. “Commodity prices have become so low that clients expect us to pass on these lower costs to them, meaning that prices will decline and… lead to a decline in sales”
Borealis. “Impacted by negative inventory effects in the first half of 2015 on the back of the rapidly falling monomer prices, and Borouge’s profitability will be lower due to the lower oil price environment”
Braskem. “The entire Brazilian petrochemical sector grappled with numerous challenges in Q4 2014, primarily as a result of low GDP growth and contraction in industrial production”
Celanese. “Swung to a year-on-year loss in the Q4″
Clariant. “Economic environment was challenging and characterised by a continued lack of growth in Europe”
Croda. “Europe continues to be challenging and we have implemented a series of initiatives to streamline, simplify and reduce our cost base in the region”
Dow. “Against the backdrop of ongoing macroeconomic, currency and energy market uncertainty, we continue to see positive underlying demand fundamentals”
DSM. “Focus on operational performance, complemented by accelerated actions to improve efficiencies and reduce costs”
DuPont. “Currency headwinds from a stronger dollar”
EQUATE. “Not having opportunities for growth and expansion”
Evonik. “New group structure allows far more differentiated management of the various business and more targeted development”
Henkel. “We expect stagnation in Eastern Europe in 2015 as well as further pressure on the Russian economy and currency”
Honeywell. “Remain cautious in our planning with regard to the global economy”
Kemira. “Sales volumes across most business units grew”
LG Chem. “Expects better product spread at its basic materials and chemicals segment as feedstock prices should stabilise”
Lanxess. “Restrained orders due to customer destocking in the rubber business in light of falling oil prices”
LyondellBasell. “Anticipate that margins will ease from the records of 2014 as crude oil prices decline”
Methanex. “A steep drop in oil and related downstream product prices lowered the affordability for methanol”
Novozymes. “Bioenergy was the strongest growth driver”
OMW. “Decreased market prices and a weaker performance of the polyolefins business”
Occidental. “Reacted to the lower oil price environment by planning to cut 2015 capital spending by 33%”
Orlen. “Margin came in at €844/tonne compared with €736/tonne a year previously”
PPG. “Overall global economic activity remained modest”
PTT. “Inventory losses following sharp declines in crude oil prices, decline of aromatics performance 73% from prior year as [the] spread of paraxylene significantly decreased from the oversupply situation”
Petronas. “Lower refining, petrochemical and petroleum product margins”
Phillips 66. “Domestic O&P chain margins were in line with Q3, despite the lower commodity price environment”
PetroRabigh. “Inventory losses caused by steep declines in crude prices”
Polyone. “Weaker business conditions in Europe and unfavourable foreign exchange rates”
Praxair. “Earnings were hit by one-off charges”
Reliance: “Aggressively sold down stocks to maintain optimal levels of inventory”
Repsol. “ better international price environment resulted in higher sales volumes and improved margins”
SABIC. “Lower feedstock costs failed to offset lower sales prices”
Shell. “Plant outages at its Moerdijk site in the Netherlands bit into capacity availability”
Sherwin-Williams. “Higher paint sales volume in Sherwin-Williams’ Paint Stores Group”
Shin-Etsu. “Concerns over US monetary policies and the EU’s financial problems. In addition, the future direction of emerging economies was uncertain”
Solvay. “Sharp fall in the price of oil registered in the last six months will overall have positive consequences”
Synthomer. “Sales fell on the back of weakening exchange rates and a generally difficult economic environment in Europe”
Synthos. “Supply outpacing demand in global markets”
TOTAL. “Higher refining and petrochemical margins”
Tronox. “Selling prices for pigment and mineral sands remain at trough conditions”
Ube. “Difficult operating environment in the chemical industry”
Unipetrol. “Profitability supported by declining prices of crude oil, and the weaker rate of the Czech crown”
Versalis. “Improved product margins and restructuring initiatives”
Vopak. “”xceptional losses from impairments and business realignment”
Wacker. “Both sales and earnings increased”
Williams. “Commissioning of its Geismar, Louisiana, cracker helped grow revenues”