BMI's Executive Summary

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The petrochemical industry recorded lower than expected growth in 2007, prompting BMI to forecast stagnation in the sector in 2008 in its latest Germany Petrochemical Report.

The petrochemical segment performed below par with output up by 1.5%, despite a 3.0% rise in polymer production; this was below BMI's forecast of 2.0-2.5%. German producers will have to work hard at maintaining growth in emerging markets outside Europe. BMI believes the industry will face a slump in 2008 due to lower rates of economic growth in both the domestic and export markets and increased competition from Asian and Middle Eastern producers as a result of an expansion in capacity and the appreciation of the euro. This has prompted German petrochemicals major BASF to shift its attention to increasing capacity in China in preference to expanding domestic capacity.

BMI has revised its method of risk scoring in the petrochemicals sector, introducing dynamic scores that reflect on future growth as well as current capacities and the size of the internal market, along with investment risk assessments of the political, economic and regulatory environments. Germany scores 82.2 points putting it in second place in our Global Petrochemicals Rankings, 4.8 points ahead of China and 10.3 points behind the US. Germany's total ethylene capacity remained static at 6.22mn tonnes per annum (tpa) in 2007. Basell crackers in Wesseling account for 986,000tpa of the total ethylene capacity, while BP crackers in Dormagen are likely to account for 950,000tpa. The expansion of OMV's Burghausen complex will boost total cracker capacity to 6.91mn tpa by 2010, providing feedstock to a new 330,000tpa PP facility.

Germany's petrochemical sector is relatively open and encumbered by regulation, while remaining within EU norms. However, the Verband der Chemischen Industrie (VCI, Chemical Industry Federation) has called for further improvements to the regulatory structure to enhance Germany's competitiveness in the petrochemicals sector and support research and development. It has also called for an 'ideology-free' environmental policy, with the stress on cutting back bureaucracy and a balanced tax policy. More transparent rules governing company taxation are needed to help strengthen the investment climate. The VCI has criticised the government's slow pace of reform, claiming that the proposed changes in company tax introduced on January 1 2008 'fall short of the objective of net tax relief for business.' The VCI is seeking the following assurances on taxation: the total burden on companies and corporations must not exceed 25-30% at most; a comparable tax relief measure needs to be taken for profits retained by commercial partnerships, and; the assessment base should not be extended or broadened. BMI doubts that the VCI will get all its demands met, primarily due to the political situation which requires consensus between coalition partners.

Competitive Landscape for Emerging Europe Petrochemicals Reports: Sample of Companies Ranked

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Comparative company analyses and rankings by US$ sales, % market share, employee size, registration date and ownership structure. Company SWOTs (Strengths, Weaknesses, Opportunities, Threats) on all leading international and national operators in each market, including competitive intelligence in the following: Overall geographic presence, competitive positioning against local companies; production capacity, sales and market share; joint ventures, foreign direct investment, projects and acquisitions strategy.