Companies see confidence ebb away as China slows, US cost advantage weakens
on December 3, 2014

flat arrowIt feels like the end of an era, as we survey the usual quarterly update of chemical company results.  For several years, there have been 3 or 4 key dimensions:

  • US companies have been very profitable due to shale gas
  • Asian companies have done well with volume, due to Chinese demand
  • Middle Eastern companies have done well due to low feedstock costs and Chinese demand
  • European companies have cut costs, whilst Latin American companies aimed to grow output

In addition, there has always been an over-riding belief, or should one call it hope, that business was just about to recover.  Around a year ago, this confidence began to ebb outside the US. But US-based companies and investors suddenly became even more confident that everything was finally about to go right.

In Q3 2014, however, non-US companies have seen growing evidence China’s economy is going in a new direction.  Sinopec’s complaint about the problems caused by imports highlights this change very well.  China was, of course, the motor for the global recovery since 2009, so the fact its recovery was built on sand, as I discussed yesterday, is a major blow to confidence.

US companies are also considerably more cautious as the shale gas advantage finally begins to disappear, with oil prices finally starting to return to more normal levels.  Wiser heads are already worrying about the potential difficulties of selling all the new US production currently planned.

The sad thing is, that if one goes back 5 years and reviews Q3 2009, not a lot has really changed in the underlying health of the global economy.  We have gained very little lasting result for the vast sums spent by policymakers.  The overall results of their $35tn has been patchy at best, and now it appears to have been largely temporary as well.

 

Air Liquide. “Solid demand for its gas and services business in the Americas and Asia”
Air Products. “Announced a major restructuring of our company!
Akzo. “Conditions continue to be challenging, but we have a resilient strategy”
Arkema. “Cautious given the volatility of the macro-economic environment”
Ashland. “Substantial increase in general expenses and a more than 31% rise in cost of sales”
BASF. “We assume that the environment will remain volatile and challenging”
BP. “$444m charge on reorganisation …lower aromatics margins resulting from ongoing oversupply in the market”
Bayer. “Improved performance across its businesses”
Brenntag. “Sales improved across all business regions”
Celanese. “Impact of our own productivity initiatives as well as unplanned industry outages”
Clariant. “For the last three years we have been guiding for a low-growth environment, 0% in Europe, fairly close to 0% for the US and 4-5% in emerging markets”
DSM. “Currency rates have developed favourably towards the end of the third quarter but currencies remain volatile”
Dow. “Higher prices associated with high demand in key regions”
Dow Corning. “Record Silicones segment sales in the quarter”
DuPont. “Sluggish global economic growth and prevailing headwinds from the agriculture sector”
Eastman. “Q3 net income of $210m, down almost 32% from $308m because costs rose faster than sales”
Ecopetrol.  “A drop in prices, as well as reduced output”
Elementis. “Overall pricing and contribution margins across the businesses remained relatively stable”
Evonik. “The stepwise recovery in the “global economy is increasingly stalling”
ExxonMobil. “Earnings rose 17% year over year to $1.2bn, primarily because of higher margins”
Honeywell. “Higher volumes and productivity… some price raw materials headwinds in resins and chemicals”
Huntsman. “Broad earnings growth from multiple products across our division”
Idemitsu. “Poor margins for its paraxylene and styrene monomer products”
Indorama.  “Expects lower oil prices will help increase demand for fibres and PET”
Kemira. “Earnings benefited from higher sales volumes and positive currency effects”
LG Chemical. “Profit slumped by 34.2% year on year”
Lanxess.  ”Higher utilisation rates and the absence of inventory write-downs”
LyondellBasell. “Tight US ethylene market helped drive earnings”
Methanex. “Methanol market fundamentals remain strong and methanol pricing has been resilient”
Mexichem. “Weaker Latin American currencies, challenging operating conditions in Europe, conflict in Ukraine”
Nova. “Higher sales prices and record third quarter sales volumes”
Novozymes. “Uncertainties remain in a number of markets and in the macro environment”
OMV. “Margins are expected to remain at similar levels to 2013″
Odfjell. “Downward trend in prices for oil products also seems to hamper trade and the activity”
Olin. Shipments of chlorine and caustic soda combined were down about 9% during Q3″
Oxychem. “Lower caustic soda prices and higher ethylene and natural gas costs”
PKN Orlen. “Continue to focus on operational excellence and group-wide optimisation efforts”
P&G. Earnings are heavily contingent on the variation of foreign exchange impacts”
PPG. “US saw continued moderate economic expansion, European sales improved slightly, but results remained mixed”
Pemex. “Higher output in the company’s propylene and derivatives chain”
PetroChina. “Weakness in chemical markets and poor demand for petroleum products”
Petronas. “Challenging market conditions and issues at upstream facilities”
Polyone. “Business conditions in Europe should continue to be a challenge for the rest of the year and going into 2015″
Praxair. “Volume growth was mixed, with N America growing quite well, Europe grew modestly, experienced slowing volume growth in China”
Reliance. “Expect recovery in downstream demand and improvement in global operating rates”
SABIC. “Lower volumes, despite a lower cost of sales in the third quarter of the year”
Sahara. “Shutdowns at plants belonging to the firm’s subsidiaries”
Saudi Kayan. “Higher selling prices of products, as well as foreign exchange gains”
Shell. “Chemicals manufacturing plant availability decreased to 90% from 96% for the third quarter 2013″
Sherwin Williams. “Higher architectural paint sales volumes across all end markets due in part to aggressive expansion”
Sinopec. “Increasing volumes of imports and new start-ups weighted down the gross profits”
Solvay. “Vigilant about the uncertain and challenging macro-economic and geopolitical context”
Tasnee. “Operational profit was down by 28.5%”
TOTAL. “Environment for petrochemicals also remained favorable during the quarter, particularly in the US”
Trinseo. “Lower sales and higher costs”
Tronox. “Gains in North America were offset by declines in Europe, Asia and Latin America”
Unilever. “Price deflation in Europe and slowing emerging market growth weighed on company earnings”
Versalis. “Backdrop of continued weakness in commodity demand and increasing competition from Asian producers”
Vopak. “Exceptional losses related to business realignment”
Wacker. ““Demand has remained robust in numerous sectors and regions”
Westlake. “Increase in net sales was partially offset by lower sales volumes for styrene and ethylene co-products”
Yansab. “Higher cost of sales due to increase in some of the feedstock prices and the increase in zakat [Islamic tax]“

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