Romania Petrochemicals Report Q4 2009

Romania Petrochemicals Report Q4 2009

Recent government assurances of financial support for the state-owned petrochemicals producer Oltchim
Ramnicu Valcea should ensure the planned merger with Romanian refiner Petrom’s petrochemicals arm
goes ahead smoothly. This would consolidate the petrochemicals industry and put it on a more secure
footing, with BMI’s Romania Petrochemicals Report taking an optimistic stance on long-term prospects.
Oltchim has been badly hit by Petrom’s decision to idle its steam cracker unit. In response, Oltchim
reduced output to only a third of its capacity. This has been a major blow to the company, which has
adopted a development strategy through to 2012 involving EUR488mn of investments with a view to
raising annual turnover to over EUR1bn – a more than three-fold increase. According to Prime Minister
Emil Boc, the government planned to assist Oltchim to acquire Petrom’s petrochemicals plant by August,
with the government giving state guarantees for EUR50mn of the EUR70mn (US$100mn) needed in
loans. Additionally, he has said that 80% of Oltchim's long-term investment plans would be guaranteed
by the government, which may also consider transferring its debt into the portfolio of the state’s
privatisation agency, Autoritatea pentru Valorificarea Activelor Statului (Authority for State Assets
Recovery, AVAS). BMI believes the government rescue package significantly enhances Oltchim’s longterm
prospects and improves the integration of the Romanian petrochemicals industry. This will make it
attractive to strategic investors seeking to expand their European markets. However, the restructuring of
Romania’s petrochemicals industry is facing headwinds as producers reduce investment and operating
capacity in response to falling demand. This could have significant implications on operational efficiency
and the industry’s already weak positioning in the global market.
Petrochemical producers worldwide are suffering from a decline in demand, but the industry in Romania
faces significant structural challenges. Romania’s industry needs a massive amount of investment to
improve its efficiency and throughput after years of underinvestment. The petrochemicals sector was
proceeding along a course of modernisation before the recent turmoil hit, and the prolonged downturn
threatens to slow the process of economic reform significantly.
Capacity utilisation is low, owing to persistent feedstock shortages. Lower crude prices will help lower
feedstock prices, but producers still face a cost disadvantage compared with producers in the Middle East
and Asia. To compound problems, a rush of new supply is expected to come onstream this year, precisely
as the industry experiences a prolonged contraction in demand. Romania has capacities of 400,000tpa of
polyethylene (PE), 80,000tpa of polypropylene (PP) and 170,000tpa of polyvinyl chloride (PVC).
Rompetrol’s plans for a 240,000tpa PET plant and a 250,000tpa PP plant are unlikely to be realised.
Increasing integration with the markets of the EU will raise Romania’s status as a cost-effective entry
point through which to access other European economies. On the downside, the domestic downstream
petrochemicals sector is uncompetitive and in need of more diverse feedstock sources to ensure stability.

Executive Summary ...5
SWOT Analysis6
Romanian Petrochemicals Industry SWOT..6
Romania Political SWOT.6
Romania Economic SWOT..7
Romania 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 Overview..19
Regulation 19
Table: Key Elements Of REACH .20
Production21
Romania Market Overview .22
Market Structure.22
Table: Romanian Petrochemicals Industry – Cracker Capacity, 2006-2011 (‘000tpa) 23
Petrochemicals Business Environment 24
Table: Central And Eastern Europe Petrochemicals Business Environment Ratings 24
Limits Of Potential Returns ..24
Risks To Realisation Of Returns ..25
Industry Trends And Developments ...27
Refining And Olefins..27
Mergers And Acquisitions.28
Financial Results 29
Industry Forecast Scenario...31
Table: Romanian Petrochemicals Indicators, 2006-2013..32
Macroeconomic Outlook32
Table: Romania – Economic Activity..35
Company Monitor.36
Petrom..36
Lukoil Romania ..39
Rompetrol .40
Oltchim.42
Country Snapshot: Romania Demographic Data43
Section 1: Population 43
Section 2: Education And Healthcare.44
Table: Vital Statistics, 2005-203044
Section 3: Labour Market And Spending Power..45
Table: Employment Indicators, 2001-200645
Table: Consumer Expenditure, 2005-2010 (US$)45
Table: Average Annual Wages, 2006-201046
BMI Methodology .47
How We Generate Our Industry Forecasts47
Chemicals And Petrochemicals Industry ...47
Cross Checks ...48
Business Environment Ratings.49
Table: Petrochemicals Business Environment Indicators And Rationale 49
Weighting..50
Table: Weighting Of Indicators ...50