The decline in the prices for plastics and the closure of chlor-alkali plants have led to a rather cautious market sentiment. The liquid gas section was faced with a shortage of availabilities.
The chemical industry was exposed to essentially two market threats in 2017: on the one hand, the fall in the price of plastics as a result of the planned, for the second half of the year, increase in production capacity in the US. The second event was the shut-down of around 20% of European chlor-alkali plants, invoked by EU environmental regulations, at the end of 2017. As a result, the market sentiment was rather cautious. Uncertainty is becoming the new normal in the chemical industry.
The unconventional use of raw materials in Asia, the decline in competitiveness in the Middle East due to volume cuts and high prices of ethane, as well as the shale gas-based revival of the chemical industry in the USA, have been shaping and changing the entire business since 2016. In addition, mergers of the large chemical companies in competitive markets with a lower growth rate enabled the acquisition of technologies and expansion of product portfolios. These trends continued in 2017 and will continue to reshape the chemical industry worldwide in 2018.
In the liquid gas section, prices were highly volatile, although the price of crude oil varied in the range $ 50 – $ 60 by the end of October. The rising economic growth led to increased petrochemical needs. Due to planned but also some unplanned production interruptions of Central European refineries, the situation in sourcing, especially in the first half of 2017, was very tense and led to an extreme shortage of availabilities. From the middle of the year, business started to move again and the missing volumes could be compensated almost entirely in the second half of the year and marketed primarily in Eastern Europe.While the planned volume of business could almost be realized, margins were under extreme pressure due to the loss of volumes at the beginning of the main season in the second quarter, as well as increased logistic costs during this period.
The first quarter of 2017 brought a short recovery in the plastics sector. From the second quarter onwards, market sentiment became more pessimistic again, due to the high stock levels of many distributors. This oversupply of the market across Europe led to a massive price reduction, especially for standard polymers. As a result, prices for all types of polyethylene have reached new lows since 2013. New EU directives for reducing the consumption of plastic bags and the threat of volumes of plastics, coming from the USA, intensified the market‘s doldrums by the end of the year. The natural disaster in the Houston/ USA region in autumn 2017 resulted in a postponement of the planned launch of new production capacity. Nevertheless, market prices and willingness to buy remained low.
In the field of inorganic chemical products, the market was characterized by rapid price increases and lot shortage in caustic soda due to the new environ-mental provisions in the chlor-alkali sector. Nonetheless, the development was robust and with the help of good and long-standing supplier and customer relationships, we were able to achieve a significant increase in earnings within this product group, compared to the previous year.
Despite a turbulent global environment in all product areas, VAIT‘s chemicals department was able to improve its earnings in the fiscal year 2017. The development of new, regular and reliable sources of supply, as well as the expansion of our customer base will remain the focus of our activities in 2018.