BMI's Executive Summary

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The process of consolidation in the British petrochemicals sector in 2007 saw a number of mergers and acquisitions which will improve vertical integration in the petrochemicals chain and improve competitiveness in the long run, according to BMI's latest UK Petrochemicals Report.

In November 2007, Akzo Nobel shareholders approved the acquisition of ICI. The shareholders' approval paved the way for the GBP8.1bn (US$16.5bn) deal to go ahead in January 2008. The new Akzo group will feature three business divisions; decorative paints; performance coatings; and specialty chemicals. ICI's specialty polymers and regional and industrial activities will move to Akzo's newlyformed specialty chemicals division. In December 2007, Eastman Chemical Company entered into agreements with Thailand's Indorama to sell its PET facility and related businesses in the UK, in addition to both its PET and PTA facilities in the Netherlands. The transaction is expected to amount to EUR226mn (US$330mn) and is expected to close in Q108. The sale includes Eastman's polyethylene terephthalate (PET) facility in Workington, UK, but not its acetate tow production at the same site. 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. The UK scores 75.2 points putting it in fourth place in our Global Petrochemicals Rankings, 1.2 points ahead of Saudi Arabia and 2.2 points behind China.

The UK has a privatised energy sector operating under EU guidelines. There is a major, but mature and highly competitive upstream oil and gas segment, featuring most key national and international companies. The downstream oil segment is also competitive and deregulated. International and domestic operators control gas distribution and supply, as well as electricity generation and distribution. The UK has 2.89mn tonnes per annum (tpa) of ethylene manufacturing capacity, divided between five facilities. It is ranked 11th globally, with a 2.6% share of the world's total ethylene supply. The UK is positioned third among EU producers, after France and Germany. The country's chemical industry produces and sells products worth GBP50bn (US$87bn) annually, of which exports account for about half.

In the UK, no major cracker expansion is planned over the forecast period this decade, and no significant additions have been announced. Cracker utilisation rates are expected to rise as the domestic and regional economic climate improves, leading to continued export growth. In 2006, polyethylene (PE) and polypropylene (PP) imports fell slightly, with domestic production able to keep up with demand growth. Ethylene exports fell by 2.9% to an estimated 1.0mn tonnes, while propylene exports rose 13.1% to 370,000 tonnes. Ethylene exports are likely to decline sharply from 2008 due to demand for feedstock from the new low density polyethylene (LDPE) plant in Wilton. This will be partly offset by the net reduction of 125,000tpa of polymer production capacity at Grangemouth. BMI believes that polyethylene (PE) exports will remain negligible, while additional PP capacity at Grangemouth will see PP exports rise throughout the forecast period.

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.