France Petrochemicals Report Q1 2009

France Petrochemicals Report Q1 2009

French petrochemical producers are faced with a challenging economic environment characterised by a
slowdown in the construction and automotive industries, volatile raw material prices and the negative
impact of the euro’s appreciation against the US dollar. The slowdown has affected both domestic and
foreign markets and industrial and household demand. BMI’s latest France Petrochemical Report
anticipates a severe contraction in the sector, based on our forecasts for key export markets and domestic
demand.
By the beginning of 2009, France had petrochemicals production capacities of 3.47mn tpa of ethylene,
1.8mn tpa of PP, 2.27mn tpa of PE and 1.39mn tpa of PVC. France’s chemical industry association,
Union des Industries Chimiques (UIC) estimated that French chemicals production fell by 0.7% year-onyear
(y-o-y) in volume in 2008, with a further 0.8% decline forecast for 2009. UIC believes that the
slowdown in exports in 2008 will be followed by a low rate of growth in 2009. BMI’s assessment is more
pessimistic. Our forecast of a fall in output in 2009 is due to the industry’s vulnerability to massive
increases in capacity in the Middle East and Asia. In order to sustain production, French petrochemicals
producers will have to ramp up R&D, improve their products’ value added, and exploit niche and
speciality markets. At the same time, restructuring, streamlining and integrating operations will be crucial
to boosting profitability. New efforts are expected to involve partnerships with clients, new innovation
sources and higher integration with refining.
A stagnating domestic market and pressures on external competitiveness mean it is unlikely that the
French petrochemicals sector will expand in the years ahead and BMI foresees problems of overcapacity
in some segments, particularly PVC. France’s petrochemicals trade is likely to deteriorate in 2008 as new
petrochemicals capacity comes online in the Middle East and Asia.
The French petrochemical sector is also facing the prospect of a contraction in polyolefins production
owing to supply problems and costs. In July 2007, Ineos announced that it intended to end two out of
three PP lines at Sarralbe in France, claiming they had become unsustainable owing to feedstock issues,
among other problems. PP production on Line 2 (amounting to 165,000tpa) was expected to cease by the
beginning of 2009 and production on Line 1 (50,000tpa) is expected to cease by end-2009. Meanwhile,
BMI expects Arkema to divest or scale back vinyls production in France, with the potential for the
closure of at least one of its PVC plants.
France scores 73.7 points and sits in third place on BMI’s Western European Petrochemicals Rankings,
1.5 points behind the United Kingdom and 1.8 points ahead of the Netherlands. The country’s
petrochemical sector needs to overcome deterioration in external competitiveness and stagnation in
domestic demand to justify any further expansion in production capacity.

Executive Summary ....5
France Political SWOT..... 6
France Economic SWOT... 6
Global Market Overview....7
Global Ethylene Capacities .... 7
Table: World Ethylene Production By Country, ‘000 Tonnes Capacity..... 7
Polypropylene..... 10
Market Overview..14
European Overview...15
Regulation.... 15
Table: Key Elements Of REACH. 16
Production ... 17
France Petrochemicals Business Environment18
Limits Of Potential Returns... 18
Risks To Realisation Of Potential Returns .... 19
Industry Trends And Developments 20
Industry Forecast Scenario ...23
Table: France – Chemicals And Petrochemicals Sales Growth (y-o-y) ... 23
Table: France – Petrochemical Industry Historical Data & Forecasts ... 24
Economic Outlook.....25
Table: France – Economic Activity... 29
Company Monitor30
TOTAL S.A.... 30
Arkema.... 32
Country Snapshot: France Demographic Data .34
Section 1: Population 34
Table: Demographic Indicators, 2005-2030. 34
Table: Rural/Urban Breakdown, 2005-2030 35
Section 2: Education And Healthcare..... 35
Table: Education, 2002-2005 ..... 35
Table: Vital Statistics, 2005-2030..... 35
Section 3: Labour Market And Spending Power . 36
Table: Employment Indicators, 2000-2005... 36
Table: Consumer Expenditure, 2000-2012 (US$) ..... 37
Table: Average Annual Wages, 2000-2012... 37
BMI Forecast Modelling..38
How We Generate Our Industry Forecasts .. 38
Cross Checks ..... 39