This Czech Republic Petrochemicals Report examines the competitiveness and potential of the country’s well-integrated petrochemicals sector. However, the reports also warns that there will be a deterioration in the outlook for industry and that companies operating in the sector are likely to register weak margins over the coming year.
The report assesses the strengths of the Czech petrochemicals sector and looks at its transformation into one of Central Europe’s leading exporters of basic chemicals and polymers, as well as its position as a significant supplier of the domestic automotive and construction sectors. It also assesses the strategies being employed by petrochemicals producers to improve competitiveness and protect margins, and counter the effects of the downturn in the eurozone.
The Czech industry is facing stagnation with the risks firmly to the downside in 2012 after weak margins and low demand damaged the performance of the Czech petrochemicals industry in 2011. In this adverse economic environment, BMI does not anticipate a significant rise in petrochemicals capacity over the medium term. The market will be dominated by basic chemicals, despite efforts towards diversification.
Furthermore, the raw materials base is weak, and practically all primary and secondary raw materials have to be imported, placing the industry in a vulnerable position. Consequently, the Czech petrochemicals sector will struggle to compete with the massive new capacities in the Middle East. The long-term scenario is more promising as dominant petrochemicals producer Unipetrol closes its unprofitable refinery and fertiliser capacity and focuses instead in investing in polymers. Over the last quarter, BMI has revised the following forecasts/views:
Refining and some downstream capacity looks set to shrink thanks to unfavourable economics with Unipetrol closing its loss-making urea unit by end-2012 and the small-scale Paramo refinery is set to permanently shuttered.
Polyethylene capacity is set to rise by 180,000 tonnes per annum (tpa) to 500,000tpa in 2016 as Unipetrol plans to replace an high density polyethylene (HDPE) unit at its Litvínov site
In BMI’s Petrochemicals Risk/Reward Ratings (RRRs) for CEE, the Czech Republic scores 58.7 points out of a maximum of 100, up 0.6 points as a result of an improvement in both country and market risk. The increase in its rating means that it has overtaken Poland in the regional rankings to regain second place. Plans for an expansion in polyethylene capacity and improvements to long-term external risk and institutional ratings have raised the score this quarter.