BMI's Executive Summary

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Growth in Spain's petrochemical industry will be severely limited by capacity constraints, according to BMI's latest Spain Petrochemicals Report.

Spain's high energy costs and insufficient transport and logistics infrastructure will also continue to hinder the chemical industry's growth. Unless further major capacity expansions are planned in the years ahead, the sector risks stagnation. In 2007, Spanish propylene imports rose 3.7% y-o-y, while exports grew 2.1% y-o-y, according to BMI estimates. However, export growth is likely to outpace import growth over the next five years as propylene output grows by 27.5% in 2007-2012. This growth in production will help fuel the polypropylene (PP) segment, which will see exports grow by over 16% over the forecast period. Meanwhile, polyethylene (PE) imports are likely to remain at the level seen in 2006, at around 1.01mn tonnes. PE exports will rise by just under 17% over 2007-12 to reach 431,000 tonnes by the end of the forecast period, due to increased domestic output and flat demand. This will draw in more ethylene imports, which are set to rise by 20% in 2007-2012.

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. Spain scores 66.3 points, putting it at 10th place in our Global Petrochemicals Ranking, 1.0 point behind Thailand and 2.3 points ahead of Kuwait. Capacity restrictions put Spain behind its regional peers. In terms of ethylene capacity, Spain's 1.48mn tonnes per annum (tpa) is modest, both in European and global contexts. It represents just 1.25% of global capacity. The nation has two crackers that are operated by Repsol-YPF and a Dow Chemical cracker at sites in Puertollano and Tarragona. The Tarragona cracker operated by Dow has a capacity of 560,000tpa, while Repsol-YPF's combined capacity is in the region of 920,000tpa.

Spain is increasingly becoming an attractive destination for investment, as its government continues to undertake strategic steps aimed at enhancing the business environment, including tax and labour system reforms. During the 1990-2000 period, the nation's plastics sector experienced high annual growth rates of up to 30%. Such strong growth attracted investment from several key international players such as General Electric, DuPont and Eastman. Spain has become one of the biggest producers of plastic resins, and as such exports have also increased. However, while Spain has performed well in recent years, growth will be limited by capacity constraints which will lead to a sharp decline in growth in the petrochemical sector.

In December 2007, LSB announced a plan to acquire Cepsa subsidiary Intercontinental Química SA (Interquisa), which specialises in the production of purified terephthalic acid (PTA). Meanwhile, Cepsa will become one of the core shareholders in LSB with a stake of 12%. A takeover of Interquisa by LSB would help integrate its operations with its main feedstock supplier. It is also reportedly budgeting EUR440mn to acquire Australian packaging firm Amcor and intends to increase capacity in northern Europe. In Q407, LSB was beaten by Thailand's Indorama Polymers and its parent company Indorama Holdings in the bid to acquire the remaining European polyethylene terephthalate (PET) plants of Eastman: a 155,000tpa PET plant in Workington, UK, and a 200,000tpa PET plant in Rotterdam, Netherlands; both sites produce 340,000tpa of PTA. Thai press reports put the acquisition price at around EUR70mn.

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.