expected to be more affected by the downturn than others. “Most chemical sectors have been impacted by the slowdown, but in particular the basic chemicals, plastics, and construction chemicals sectors,” he says.
“We expect the paints and coatings sector to be severely affected by the slowdown in two of the biggest end-user markets: automotive and construction,” Huebel says. “As a result, the sector will see growth of 11.2% in 2009, compared with an average
19.3% during 2005-08.”
Nevertheless, certain sectors are expected to continue performing well. “The slowing of growth will be much less dramatic in the soap, cleaning, and cosmetic segments, which are expected to
grow at a rate of 8.3% in 2009 compared with an average 8.9% from 2005 to 2008,” Huebel says. “The agchems sector will also remain relatively stable with the growth for pesticides forecast to be around 5.6% compared with 6.6% during 2005-08.”
Experts are unsure of the potential effectiveness of the Chinese government’s economic stimulus measures, given the scale of the downturn in other major economies. “The Chinese government has provided economic and fiscal incentives for the slowing economy and these measures might stimulate China’s consumers to demand and spend more,” Huebel says. “But it would be very optimistic to assume that this will compensate for demand losses in the U.S. and Western Europe, and it remains to be seen how well [the stimulus package] can soften the landing.”
—DEEPTI RAMESH
The shocks from commodity prices and financial turbulence are expected to bring Japan’s economic expansion to an end in 2009. Japan’s GDP is expected to decline 0.9% this year after a modest gain of 0.5% in 2008, according to the Organization for Economic Cooperation and Development (OECD; Paris).
Japan’s chemical makers will be hurt in 2009 as the substantial appreciation of the yen hurts the country’s export sector. Japan’s exports of goods and services in 2009 is expected to slip 3% in 2009, after averaging growth of 5%-10% over the past three years
“With falling exports, activity is projected to remain weak through 2009, pushing up unemployment and reducing headline inflation to near zero,” OECD says. “A recovery in domestic demand is projected to lift output growth to around 1% during 2010.”
Shin-Etsu reported last month that earnings for its fiscal year ending March 31, 2009 will be lower than previously forecast due to the sharp deterioration in business conditions in late 2008. “The market environment in a wide range of businesses is quickly worsening, mainly in the electronics and electrical, and automotive industries,” Shin-Etsu says. “The company has
continued to strive to overcome the effects of the worsening market. However, the effects of the severe downturn in market conditions since November have gone far beyond the limits of the company’s management efforts.” —ROBERT WESTERVELT
The Indian economy is expected to slow this year as a result of the global economic and financial crisis. Indian GDP growth will be about 6.5%, down from 9% in 2008, the Asian Development Bank (Manila) says. The slowdown is having a substantial effect on India’s chemical industry, analysts say. “The Indian chemical industry has been growing 10%-12%/year over the past few years, but 2008-09 will witness a slowdown in line with the global scenario,” says Mamta Wadhwa, senior director/chemicals, materials, and foods practice at Frost & Sullivan (Mumbai). “It is, however, difficult to predict the growth rate due to the volatility in the market and the fluctuating oil price.”
Major players in the Indian chemical industry are also concerned about the year ahead. “The recent turmoil in the financial and commodity markets has had its impact on the domestic chemical industry and the industry is also facing competition from low-cost imports from overseas, particularly China,” says R. Mukundan, managing director of Tata Chemicals. “Under these conditions, we expect the industry growth to be flat or negative for the coming year, unless some form of government intervention helps in reviving the demand again,” Mukundan says.
A recent Federation of Indian Chambers of Commerce and Industry (New Delhi) survey indicates that enterprises of all sizes operating in the Indian chemical sector are planning to cut production by an average of 25% in the next six months, experts say. “According to some recent surveys, Indian chemical companies are planning to cut production during the next six to 12 months,” Wadhwa says. “But there are other big projects announced by companies such as Essar and Tata Chemicals, which are likely to go onstream as per their original plans. Hence, there is still hope for the chemicals sector in India to rebound and grow faster than the rest of the manufacturing industry.”
Certain sectors of the Indian chemical industry that are not linked to crude oil are still growing at a steady rate and will continue to grow in 2009, analysts say. “Value-added performance chemicals, pharmaceutical intermediates, agchems, additives, and ingredients that go into food and beverages are all growing and will continue to grow,” Wadhwa says. “However, all sectors linked to hydrocarbon feedstock like oil and naphtha are seeing a downfall. Exports of plastics, textiles, car components, and consumer goods have gone down, and all the sectors associated with these will see a slowdown,” he says.
Tata Chemicals, which is a leading manufacturer of inorganic chemicals and fertilizers in India, expects growth in demand for fertilizers this year. “While it is unlikely that the inorganic chemicals sector will see any growth in 2009, fertilizer consumption in India in 2009 is likely to grow, as fertilizer prices in India are subsidized and usage of fertilizers depends more on availability and climatic factors,” Mukundan says. —DEEPTI RAMESH
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