Global chemical production growth

In 2016, global chemical production showed moderate growth, although international experts believe that in 2017 this process will accelerate.

Reduction in global economic growth combined with recession of international trade resulted in positive ― although quite moderate ― yearly growth of global chemical production. This index was slightly more than 2% which is somewhat less that the last year’s figures (+2.6%).

Due to a slight increase in economic growth, the world trade becomes more dynamic, albeit the growth rates are less prominent than before the crisis. That is why the experts suggest that global chemical industry will show slight (up to + 2.8%) acceleration in 2017.

The early 2017 concerns about China’s hardlanding have dissipated, and the chemical sector hasn’t yet demonstrated any drastic slump in growth rate considering the cyclic nature of its increase and decline. Hardlanding is a term of economic science reserved for the drop in exchange rates entailing negative economic consequences.

The growth of Chinese chemical production is likely to surpass 6% in 2017. This figure is within the margin of the excessive production capacity prevention strategy. Nevertheless, the current Asian ― and especially Chinese ― projects frequently top the global rating of investments in petrochemical industry and carry inherent risks of excessive production or valuechain development.

To be more specific, China is becoming more and more self-sufficient regarding production of certain goods and this trend exacerbates the risk of altering the Europe-bound trade flows from the USA and Middle East. According to specialists, these issues render “soft” political measures aimed at protecting commercial interests of the Eurocomission (e.g., anti-dumping taxes) risky.

Figure 1. Moderate growth of global chemical production, photo WEB

Within the recent months Switzerland has showed positive growth in almost all chemo-pharmaceutical industry sectors. Significant production growth observed in chemical industry (including mineral oil processing) in the 2^nd quarter of 2016 was +10.4% and +8.6% respectively (vs the previous year). Demand for pharmaceuticals is also dynamically rising, while the prices remain unchanged in both sectors.

Notwithstanding the 2015 slump in prices, in the 3^rd quarter of 2016 they are still 2.1% lower than previous year (in chemical industry). The turnout of the chemical sector in the 2^nd quarter of 2016 was 1.4% lower vs the previous year. On the other hand, chemical production export in January—August 2016 was 5.0% higher vs the previous year. The indices of pharmaceutical production export indicate considerable growth of +16.4%. The most significant growth (up to +28.5%) was observed in pharmaceutical production export to the USA.

Figure 2. Switzerland chemical and pharmaceutical production export, photo WEB

In 2017, moderate improvement of the EU economy may positively influence the Swiss chemical sector, as the EU is a major player in this field. Pharmaceutical industry is less dependent on economic fluctuations, so similarly to 2016, 2017 is expected to bring structurally stable demand in Europe and the US.

As for Russia,its chemical industry remains the leading industry of the manufacturing sector with respect to production growth rates. According to Rosstat, in 2016 the growth reached +5.3%. It is worth mentioning that the fastest growing field is production of rubber and plastic goods.

Figure 3. Fast growth rate of rubber and plastic goods production in Russia, photo WEB

Good growth rates of Russian chemical industry in 2016 were mostly due to domestic demand as the export of chemical goods continues to reduce.

Within the last three years Russian economy has experienced recession of investments in fixed capital, although chemical industry-related investments are growing:

•  in 2015 up to +14,0%;
•  in 2016  up to +8,3%.

In 2016, revenues in this field totaled to 526.8 billion RUB, which is higher than 385 billion RUB of 2015. To explore the field of chemical industry further, we recommend visiting the “CHEMISTRY―2017” expo, which will be held in Moscow from October 23^rd to 26^th. The history of this expo goes back to 1965; it is the largest and most prominent Russian event of this type. The expo features novel Russian and international technological advances.

Review prepared by Guilia Cassoni using the materials of Credit Suisse, Federchimica, RIA Rating

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