Czech Republic Petrochemicals Report Q4 2009

Czech Republic Petrochemicals Report Q4 2009

The Czech petrochemicals industry will be heavily influenced by economic trends in Germany, the
country’s largest export market for petrochemicals-consuming industries. According to BMI’s latest
Czech Republic Petrochemicals Report, although Germany’s economy has plummeted its car scrappage
programme designed to stimulate sales could have a positive knock-on impact on the Czech car industry,
which consumes a sizeable portion of the country’s polypropylene production.
Key sectors determining output will be the construction, automotive, packaging and consumer goods
industries. These are witnessing varying levels of demand as a result of weaknesses in the domestic and
external markets for end-products. The spectacular collapse of Czech industrial production in recent
months, with knock-on effects throughout the petrochemical industry, owes primarily to weakness in
external demand. German unadjusted GDP contracted by 6.7% year-on-year (y-o-y) in Q109, and our
full-year German real GDP growth forecast is -6% in 2009 and only 0.3% in 2010. As the Czech
Republic's largest single export destination, weakness in the German economy bodes extremely poorly for
Czech industrial production.
Nevertheless, manufacturers such as Škoda Auto are already starting to feel the benefit of scrappage
schemes elsewhere in Europe. However, the boost to demand is likely to have a short-lived effect and will
not be able to offset the overall slump in demand across Europe. The Toyota-PSA Peugeot Citroën
(TPCA) facility has postponed plans to expand production capacity. This will in turn limit growth in the
supplier sector and therefore industrial demand for petrochemicals further down the supply chain.
However, by end-2013, the Czech Republic's automotive output should exceed 1.5mn units, up about
20% 2008 levels, and the industry is expected to operate at or near full capacity. In the long-term, the
automotive industry will therefore remain a key driver of demand for polymers in the Czech Republic.
The packaging and consumer goods industries are likely to follow the same pattern as the automotive
industry, although domestic demand is likely to fare less badly than exports. However, the country's
financial system remains remarkably healthy, with credit still available to households and businesses.
This should provide some measure of comfort to petrochemicals supplies to the Czech construction
industry, although the lack of domestic PVC manufacturing capacity will mean that foreign suppliers will
benefit the most from any growth in construction-related demand.
Despite short-term problems, the Litvinov cracker, which has capacity to produce 525,000 tonnes per
annum (tpa) of ethylene, is scheduled to be expanded to 545,000tpa by end-2009 with a further expansion
to 595,000tpa planned during a turnaround in 2011. A rise of 70,000tpa of ethylene capacity will provide
additional feedstock for any potential downstream development. However, the decline in demand from
polyolefins producers could lead to a postponement of cracker capacity expansion in 2009.

Executive Summary .5
SWOT Analysis..6
Czech Republic Petrochemicals Industry SWOT 6
Czech Republic Political SWOT 6
Czech Republic Economic SWOT . 7
Czech Republic Business Environment SWOT... 7
Global Market Overview ..8
Global Ethylene Capacities ... 8
Table: World Ethylene Production By Country, 2008 And 2013 (‘000 tonnes capacity) ... 8
Polypropylene. 11
Global Oil Products Market Review.. 14
Table Global Oil Prices, 2003-2013 (US$ per barrel)... 18
European Regulation Overview..19
Table: Key Elements Of REACH. 20
Production .. 21
Czech Republic Market Overview...22
Market Structure 23
Table: Czech Republic’s Petrochemical Sector Cracker Capacity, 2007-2013 (‘000 tpa).. 23
Business Environment... 24
Petrochemicals Business Environment ..25
Table: Central And Eastern Europe Petrochemicals Business Environment Ratings .. 25
Industry Trends And Developments .27
Recent Developments 27
Feedstock Issues 29
Regulation 30
Industry Restructuring .. 31
Performance In 2008 32
Unipetrol Sales Volumes, 2007 And 2008 (‘000 tonnes) 32
Industry Forecast Scenario..33
Table: Czech Republic Petrochemical Industry, 2005-2012 . 34
Macroeconomic Outlook.. 35
Table: Czech Republic – Economic Activity, 2006-2013 37
Company Monitor38
Unipetrol.. 38
Agrofert Holding 41
Spolchemie.. 42
BorsodChem MCHZ . 43
Chemoprojekt.. 44
Country Snapshot: Czech Republic Demographic Data.45
Section 1: Population 45
Table: Demographic Indicators, 2005-2030 45
Table: Rural/Urban Breakdown, 2005-2030 ... 46
Section 2: Education And Healthcare 46
Table: Education, 2002-2005 . 46
Table: Vital Statistics, 2005-2030.. 46
Section 3: Labour Market And Spending Power . 47
Table: Employment Indicators, 2001-2006.. 47
Table: Consumer Expenditure, 2000-2012 (US$) ... 47
Table: Average Annual Wages, 2000-2012.. 48
BMI Methodology 49
How We Generate Our Industry Forecasts .. 49
Chemicals And Petrochemicals Industry .. 49
Cross Checks .. 50
Business Environment Ratings 51
Table: Petrochemicals Business Environment Indicators And Rationale 51
Weighting. 52
Table: Weighting Of Indicators .. 52