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MOSCOW (MRC) -- Business conditions for
chemical manufacturers are expected to improve in 2021, albeit with some
first-half difficulties due to the resurgence in COVID-19 cases in much of the
world, reported Chemweek with reference to
an outlook report from Moody’s Investors Service (New York, New York), a credit
ratings agency.
Demand growth is expected to be strongest in Asia, where
the pandemic has been brought under control more quickly than in Europe and the
US in most countries.
Moody’s characterizes the outlook for credit
quality as ‘stable,’ reflecting an improving operating environment but
“sustained recovery in the global economy (that) is delayed until 2022,” the
ratings agency says.
Commodity chemical makers saw the sharpest declines
this year, and are expected to see the strongest bounceback next year, Moody’s
says. “However, we do not expect that EBITDA for most commodity producers will
return to 2019 levels,” Moody’s adds. “We view (second-quarter) 2020 as the
trough with a number of companies benefitting from higher commodity prices and
volumes in the third and fourth quarters as several sectors rebounded, including
autos, construction and housing.” Continued strong demand for packaging will
also prop up polyethylene prices.
For specialties producers, the rebound
will be less pronounced, as the downturn was less severe. The demand outlook is
strong for coatings, cleaning and sanitizing chemicals, food and nutrition, and
pharmaceutical ingredients, all of which showed resilience this year. “Most
specialty chemical producers will return towards or even exceed their pre-COVID
EBITDA levels in 2021,” Moody’s says. However, companies with major exposure to
the automotive, energy and aerospace sectors, which will see weaker recoveries,
are the exception, although automotive production is expected to gradually
increase.
Regionally, APAC is expected to outperform the rest of the
world, with China leading the way. China’s recovery has been ‘v-shaped’
according to Moody’s, while other countries have been more varied, although the
general trend is positive. Europe has the weakest outlook, due to a very large
increase in COVID-19 cases, a strengthening euro, and uncertainty related to
Brexit.
Longer-term, environment, social and governance (ESG) will weigh
more heavily on chemical makers, as challenges around climate change and
recycling cut into demand in some sectors and factor into investor risk
assessments. “The impact over the next 12-18 months is focused mainly on
corporate decision-making for major capital investments and M&A,” Moody’s
says. “Over a longer horizon, we expect that ESG-related factors will undercut
demand growth for certain chemical products, especially single-use
plastics.”
As MRC wrote previously,
chemical production is rebuilding momentum after shocks linked to the global
COVID-19 pandemic, according to the American Chemistry Council’s (ACC) Year-End
2020 Chemical Industry Situation and Outlook. US chemical production volume
excluding pharmaceuticals is expected to fall by 3.6% in 2020 followed by growth
of 3.9% in 2021. The US decline is the sharpest since 2008 and 2009, during the
financial crisis.
We
remind that Russia's output of chemical products rose in October 2020 by
7.2% year on year. At the same time, production of basic chemicals grew in the
first ten months of 2020 by 6.3% year on year, according to Rosstat's data.
According to the Federal State Statistics Service of the Russian Federation,
polymers in primary form accounted for the greatest increase in the
January-October output. October production of polymers in primary form grew to
857,000 tonnes from 852,000 tonnes in September. Overall output of polymers in
primary form totalled 8,340,000 tonnes over the stated period, up by 17%
year on year. |
