The Romanian petrochemicals industry is set to overcome the setback of the recession, with growth in both domestic and export markets from 2010 as well as the completion of a process of integration within the sector, according to our latest Romania Petrochemicals Report. We estimate that in 2009, chemicals output declined 15.2% year-on-year (y-o-y) while rubber and plastics output fell 5.0%. While disappointing, the results were not disastrous given the regional context and index trends clearly pointed to growth in 2010.
While the business cycle is on the upturn, we stress that the recovery in Romania’s economy will be weak and fragile, reflecting statistical base effects as opposed to a fundamental improvement in demand conditions. The outlook across domestic petrochemicals consuming industries is mixed. While we expect lacklustre demand from the construction sector, a major consumer of polyethylene (PE) and polyvinyl chloride (PVC), prospects for the automotive sector are better, boosting engineering plastics particularly in the polypropylene (PP) segment. We estimate that Romania’s automotive output increased 5.6% in 2009. The pace of vehicle production is likely to pick up rapidly as Ford and Renault expand their capacities in the country, thereby stimulating the automotive supply sector that represents a major local market for polymers.
In 2010, Romanian petrochemicals production will depend on the strength of export performance for significant growth. The competitive devaluation of the leu in 2009 should enhance the competitiveness of Romanian petrochemicals producers, giving them an advantage over regional peers in tapping into the revival in Western European markets.
Despite our improved expectations, the petrochemicals industry in Romania faces significant structural challenges. The restructuring and integration of the industry is key to its revival. Romanian oil and gas producer Petrom announced plans in December 2009 to exit the chemicals business by the end of 2010 in response to the change in the economic climate. This puts Petrom’s Doljchim subsidiary in peril, which produces fertiliser (150,000 tonnes per annum [tpa] ammonia) and methanol (230,000tpa). Meanwhile, state-owned chemicals company Oltchim Ramnicu Valcea (Oltchim) has reached an agreement on the acquisition of Petrom’s Arpechim subsidiary, which produces its olefins feedstock. The acquisition will cost EUR13mn and was expected to close some time in Q110. Oltchim, which has suffered as a result of a recent closure of Arpechim’s 200,000tpa ethylene cracker, has said it plans to invest around EUR100mn to upgrade the petrochemicals facility.
In 2009, Romania had olefins capacities of 200,000tpa ethylene and 100,000tpa propylene with polyolefins capacities of 120,000tpa high-density polyethylene (HDPE), 160,000tpa low-density polyethylene (LDPE), 80,000tpa PP, 60,000tpa polystyrene (PS) and 170,000tpa PVC. Operational capacity has shrunk as a result of Petrom’s decision to take its steam cracker unit offline in November 2008. The restructuring of the Romanian petrochemicals industry rests on Oltchim’s takeover of Petrom’s petrochemical assets, which in turn depends on regulatory approval. The future of the industry is therefore in the hands of the European Commission. If it allows the takeover, we believe that the industry will be well placed to take advantage in the revival of demand in the Romanian and EU markets.
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Romania Petrochemicals Report Q2 2010 (Business Monitor International)
The Romanian petrochemicals industry is set to overcome the setback of the recession, with growth in both domestic and export markets from 2010 as well as the completion of a process of integration within the sector, according to our latest Romania Petrochemicals Report. We estimate that in 2009, chemicals output declined 15.2% year-on-year (y-o-y) while rubber and plastics output fell 5.0%. While disappointing, the results were not disastrous given the regional context and index trends clearly pointed to growth in 2010.
While the business cycle is on the upturn, we stress that the recovery in Romania’s economy will be weak and fragile, reflecting statistical base effects as opposed to a fundamental improvement in demand conditions. The outlook across domestic petrochemicals consuming industries is mixed. While we expect lacklustre demand from the construction sector, a major consumer of polyethylene (PE) and polyvinyl chloride (PVC), prospects for the automotive sector are better, boosting engineering plastics particularly in the polypropylene (PP) segment. We estimate that Romania’s automotive output increased 5.6% in 2009. The pace of vehicle production is likely to pick up rapidly as Ford and Renault expand their capacities in the country, thereby stimulating the automotive supply sector that represents a major local market for polymers.
In 2010, Romanian petrochemicals production will depend on the strength of export performance for significant growth. The competitive devaluation of the leu in 2009 should enhance the competitiveness of Romanian petrochemicals producers, giving them an advantage over regional peers in tapping into the revival in Western European markets.
Despite our improved expectations, the petrochemicals industry in Romania faces significant structural challenges. The restructuring and integration of the industry is key to its revival. Romanian oil and gas producer Petrom announced plans in December 2009 to exit the chemicals business by the end of 2010 in response to the change in the economic climate. This puts Petrom’s Doljchim subsidiary in peril, which produces fertiliser (150,000 tonnes per annum [tpa] ammonia) and methanol (230,000tpa). Meanwhile, state-owned chemicals company Oltchim Ramnicu Valcea (Oltchim) has reached an agreement on the acquisition of Petrom’s Arpechim subsidiary, which produces its olefins feedstock. The acquisition will cost EUR13mn and was expected to close some time in Q110. Oltchim, which has suffered as a result of a recent closure of Arpechim’s 200,000tpa ethylene cracker, has said it plans to invest around EUR100mn to upgrade the petrochemicals facility.
In 2009, Romania had olefins capacities of 200,000tpa ethylene and 100,000tpa propylene with polyolefins capacities of 120,000tpa high-density polyethylene (HDPE), 160,000tpa low-density polyethylene (LDPE), 80,000tpa PP, 60,000tpa polystyrene (PS) and 170,000tpa PVC. Operational capacity has shrunk as a result of Petrom’s decision to take its steam cracker unit offline in November 2008. The restructuring of the Romanian petrochemicals industry rests on Oltchim’s takeover of Petrom’s petrochemical assets, which in turn depends on regulatory approval. The future of the industry is therefore in the hands of the European Commission. If it allows the takeover, we believe that the industry will be well placed to take advantage in the revival of demand in the Romanian and EU markets.
Read the article on CompaniesAndMarkets.com
