BMI's Executive Summary

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The Hungarian petrochemical industry performed strongly throughout 2007, but capacity constraints will limit the pace of export growth over the next five years, according to BMI's latest Hungary Petrochemicals Report.

Results from Hungarian petrochemicals producer TVK in 2007 reveal that the industry was operating at or above capacity throughout the year. Over 90% of olefins production and 28% of polymer production was sold domestically –– Hungary's petrochemical sector is adding value for export. TVK's results show that high-density polyethylene (HDPE) accounts for nearly two-thirds of polymer exports, with polypropylene (PP) representing 25% and low-density polyethylene (LDPE) contributing 10%.

Hungary's position in BMI's Emerging Europe Petrochemicals rankings has fallen from third place to fourth due to a revision in our scoring method to include long-term economic and political risk. It scores 56.9 points; 4.7 points above the regional average and just 0.3 points behind Poland. Hungary's accession to the EU has proved to be a boon for the nation's chemical and petrochemicals industry. Growth has primarily been driven by exports to West Europe, even as consistent efforts have been made to consolidate and restructure the domestic chemical and petrochemicals industry. There are no new plans for an increase in cracker capacity over the forecast period, leading to a steady decline in ethylene exports and a rise in propylene imports as the polyolefins sector grows. Hungary's PP and polyethylene (PE) capacities total 930,000 tonnes per annum (tpa), which is just two-thirds of Poland's total. Combined PP and PE capacity is likely to remain at this level over the next five years. However, Borsodchem's expansion in intermediate and polyvinyl chloride (PVC) production capacity will enable Hungary to keep up with the pace of regional output growth.

Recent expansions in cracker capacity to 610,000tpa have helped reduce ethylene feedstock imports to virtually zero. Meanwhile, PE exports are set to accelerate at a fast rate due to increased capacity. Total annual PE exports are set to rise by 28% in 2007-2012 to 565,000 tonnes. With PP capacity set to remain at 320,000tpa, PP exports are forecast to fall by 8% in the period to 110,000 tonnes. The Hungarian petrochemicals industry's ability to expand its exports will be constrained by capacity.

Hungarian oil and gas company MOL is employing various strategies to ward off a hostile takeover from Austrian rival OMV. However, in December 2007 it emerged that shareholders in both OMV and MOL were showing interest in a merger of the two companies. However, the MOL board and the Hungarian government still consider the approach hostile. In October, EU regulators threatened to sue Hungary over a law that may help the government shield MOL and other former state companies from foreign takeover. Hungary's parliament ignored the warning from the European Commission and passed a bill aimed at protecting strategic companies such as MOL from foreign takeovers. Strategically, a merger may be attractive over the longer term. OMV's statement after its share acquisition that it was focused on prepositioning itself for future industry consolidation highlights broad concern among mid-sized European companies about their competitiveness as the EC attempts to enforce greater market liberalisation.

Contents

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Chapter 1 - Executive Summary

Market Overview

Acquisitions and Finance

Projects and Expansions

Industry Forecast

SWOT Analysis

Hungarian Petrochemicals Sector SWOT

Hungary Economic SWOT

Hungary Business Environment SWOT

Chapter 2 - Market Overview

Table: Hungary's TVK Cracker Capacity Data and Forecasts (000 tpa)

Chapter 3 - Industry Trends And Developments

Business Environment

Acquisitions and Finance

Projects and Expansions

Chapter 4 - Industry Forecast Scenario

Table: Hungary Petrochemicals Sector Data and Forecasts

Chapter 5 - Economic Outlook

Table: Nominal And Real GDP

Chapter 6 - Company Monitor

Magyar Olaj-és Gázipari Rt (MOL)

BorsodChem (BC)

Tiszai Vegyi Kombinat (TVK)

Chapter 7 - BMI Forecast Modelling

How we generate our industry forecasts

Chemicals & Petrochemicals Industry

Cross checks

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.