The European chemical sector to face tough H1

(ICIS) -- The European chemical sector is expected to experience a challenging start to the year, with a fall in chemical prices, destocking, and the possibility of a recession in 2012 pointing to a discouraging short-term outlook, analysts at global bank HSBC said on Wednesday. However, HSBC said that the chances of a turnaround in the industry's prospects in the second half of the year could improve, as low stock levels in several end-markets might lead to some restocking once economic uncertainty clears, particularly in Europe. ⌠Our near-term outlook for the European chemicals sector remains cautious, but it looks like 2012 might turn into a year of two halves, the analysts said.

⌠The sharp drop in chemical prices and lead indicators across the world, as well as our economists' view that Europe will be in a recession in 2012, do not bode well for the sector's prospects for the next couple of months. On top of that, the sector is up against tough comparables, as the first half of 2011 was one of the best periods the sector has ever experienced, they added.

⌠However, reduced inventories as well as an improvement in cyclical leading indicators - PMIs [purchasing manager indices] and chemical prices might have bottomed out - fuel hopes for restocking and for that matter a more encouraging second half of the year, the analysts said.

HSBC's analysts said that global PMI in December (PMI being an indicator of the economic health of the manufacturing sector, based on new orders, inventory levels, production, supplier deliveries and the employment environment) had stabilised, and it therefore looks like November might have been the bottom of the trade cycle. This stabilisation in the PMI points to expectations of restocking, particularly in the second half of 2012.

⌠This seems to hold true for numerous upstream chemicals, as several petrochemicals producers stated during the Gulf petrochemical forum in mid-December, but also for some end-markets such as electronics/semiconductors. Furthermore, the recent recovery in soft commodity prices should go some way to restore the confidence of farmers, and therefore demand for fertilizers, the analysts said.

MRC

(ICIS) -- Global demand for caustic soda will drop because customers will likely cut alumina and aluminium production in the coming weeks, executives at US-based metal producer Alcoa said on Wednesday. The Alcoa executives are in Houston this week to ask caustic soda producers to give them some relief from rising prices. Alcoa's estimates that around 85kg of caustic soda is used in the production of each 1 tonne of alumina, from which aluminium is made.

As little as USD10-20/tonne is the difference between profitability and making a loss at some smelters, one of the executives said. He declined to make an exact estimate of caustic soda's share of production costs, but said it was in double digits as a percentage.

The US caustic soda contract price for November settled at USD445-470 dry short ton (EUR347-366/DST), level with October but up 128% from the start of 2011. Capacity shutdowns in the global alumina industry erased around 260,000 tonnes of caustic soda demand in the second half of 2011, according to Alcoa. ⌠We have an industry that is broken, Mark Chrisman, the company's global director for strategic raw materials, said to ICIS.

On Monday, Alcoa announced a loss from continuing operations of USD193m in the fourth quarter, caused by charges associated with the scaling back and closing high-cost production, lower aluminium prices and continued market weakness. That compounded a loss of USD172m in the third quarter and compared with a profit of USD258m in the fourth quarter of 2010.

MRC

(ICIS) -- Trade of polyethylene (PE) and polypropylene (PP) has come to a standstill in Nigeria, as most businesses remain closed during the nationwide strike against fuel price hikes, a producer based in the country said on Wednesday. Nigerian unions declared an indefinite strike on 9 January after the government's removal of a fuel subsidy effectively doubled fuel and transport costs. Nigeria is one of the four biggest PE/PP markets in Africa, the others being South Africa, Egypt and Kenya.

Business transactions have come to a standstill, the producer source told ICIS via email: ⌠The year has not started well in Nigeria. Right now, the economy is paralysed. ⌠Banks, ports [air and sea], schools [and] offices are all closed. Right now, it's a fragile situation.

A Europe-based distributor that regularly exports to Nigeria said: ⌠Customers have not been working for two days. It is very new, and it will have an impact, depending on how long it lasts. It could change overnight.

The producer expressed its concern that the issue would not be resolved within a few days: ⌠It looks [like] it will take some time. We need better luck, and plenty of it.

Slow demand from the key market of Nigeria could push prices down in the western African region, market sources said. According to ICIS assessments, prices in the region are in the range of USD1,330-1,520/tonne (EUR1,037-1,186/tonne) CFR (cost & freight) for three different PE film grades.

MRC

(Plasteurope) -- As part of the ongoing process of streamlining its flexible foam operations, Belgian polyurethane foam specialist Recticel (Brussels) on 10 January 2012 announced its decision to close its comfort foam converting plant in Bladel/The Netherlands by mid-2012.
The decision will affect 51 employees. Recticel said it expects the estimated costs of the closure to be largely neutralised by the expected capital gains on the sale of the plant's assets.

At the end of last year, the Belgian PU foam specialist had shut down its foam converting plant in North Shields/UK.

MRC

(Plasteurope) -- US specialty chemicals producer Cabot (Boston, Massachusetts) says its new range of high performance elastomer composites is designed to provide increased durability in wear resistance and vibration isolation applications. The ⌠Transfinity products are made from elastomer latex and reinforcing particles, such as carbon black, and through the addition of curing agents can be moulded or extruded and vulcanised to create shaped elastic parts.

The elastomers are suitable for applications in the mining, defence, automotive and aerospace industries. In automotive applications, their use can allow the design of smaller suspension components, reducing vehicle weight and improving fuel economy, Cabot says.

The elastomers can also be used to extend the range of rubber pads or tracks on military vehicles, allowing tanks to travel further without service, and to improve the service life of components in airplanes and helicopters. In mining operations, they can be used as protective liners for mineral processing equipment.

MRC