Browse the complete Report on: Romania Petrochemicals Report Q4 2010
The Romanian petrochemicals industry is making a slow return to trend growth, but the operating environment remains unsettling, according to BMI’s latest Romanian Petrochemicals Report. There were strong signs that the industry had stabilized by H209 as the economy bottomed out, with growth returning to the sector in H110 although principally due to base effects and restocking. Although Romania’s National Institute of Statistics’ chemicals production index showed some slippage in January when it fell to 69.4 points (100 = 2005 average), the lowest level since the previous January, it exhibited a recovery in the following three months, reaching 122.4 points in April. The trend is influenced by seasonal factors, but within this there is evidence of trend growth returning. On this basis, BMI estimates that chemicals output was up by around 12% in the first four months of 2010 and with the rate of output likely to be sustained around this level throughout the year, growth should amount to around 15%. However, rubber and plastics production index indicated little overall movement since 2009 in the first four months of 2010, with the index averaging just 0.3% above the same period in 2009, Part of the reason is the reduction in prices, but demand from the domestic durable goods and automotive industries also showed signs of weakening.
With the Romanian business cycle appearing to have reached an inflexion point, we hold to our view that the economy will return to positive growth in 2010. While a weaker currency will bolster the export sector and a limited private sector debt load will support domestic spending, we nonetheless warn that the government’s fiscal consolidation programme could significantly weigh on the pace of the broader economic recovery and therefore the fortunes of the Romanian chemicals and petrochemicals industry. Nevertheless, confidence remains high for long-term prospects with Rompetrol planning to increase capacity at its HDPE plant in Navodari by more than 70% from 60,000tpa to 100,000tpa by March 2011. The expansion marks a reversal of the contraction in operational capacity seen in recent years with 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, BMI believes that the industry will be well placed to take advantage in the revival of demand in the Romanian and EU markets. In June 2010, the government expressed optimism that the EC would approve the take-over.
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