Poland Petrochemicals Report Q4 2009

Poland Petrochemicals Report Q4 2009

Polish petrochemicals demand should continue to slow through 2009, in line with the overall economic
trend which should see the country dip into recession during H209, according to BMI’s latest Poland
Petrochemicals Report.
Key sectors determining output will be the construction, automotive, packaging and consumer goods
industries. These are witnessing varying levels of demand. Poland’s construction industry is being fuelled
by preparations for the Euro 2012 football tournament, which should help ameliorate an otherwise poor
petrochemical market situation in Poland. These developments have partly offset the collapse in the
residential construction sector, which has been hit by falling demand for housing as well as tightening
access to credit, which is forcing developers to slow down or even suspend projects. However, we do
believe that this will be short-lived, with positive growth returning from 2010 until the end of our forecast
period in 2013. This should help support output from PKN Orlen’s PVC production facilities in Poland.
Meanwhile, the export-oriented Polish automotive industry, a major consumer of polypropylene (PP),
among other products, is affected by market dynamics in Western Europe. Export growth will only be
marginal in 2009, but should recover strongly thereafter. Production in Poland received a fresh boost in
Q109 when the scrappage incentive introduced by the German government resulted in a surge in export
demand, with Poland’s Fiat and VW assembly lines operating at full capacity, thereby helping to sustain
petrochemicals-consuming industries in the automotive supply sector.
In terms of consumer goods and packaging, demand from these industries will remain under pressure as a
result of poor household demand and tight global liquidity and debt consolidation in the private sector.
Although household demand has performed better than expected, tighter lending conditions will continue
to have an impact on household consumption of petrochemicals-based consumer-end products.
With a recovery in the eurozone not likely until 2011, BMI expects petrochemicals export demand and
industrial activity to remain relatively subdued over the medium term. Domestic demand for
petrochemicals will be mostly fulfilled by imports, in spite of Poland being one of the CEE region’s
leading producers. Polymer imports are set to decline in 2009 in line with a fall in domestic demand,
particularly for PP used in the automotive industry.
PKN Orlen, Poland’s largest company, has scaled back its spending plans in response to the deterioration
of the global and domestic economy. However, it still intends to spend approximately PLN2.5bn annually
over the next five years, with the bulk of spending being targeted at its refining and petrochemicals
business. PKN Orlen expects the investment to boost operational efficiency and increase cash flow by
2010, but, even on a scaled back level, the spending may put the firm in a precarious position this year as
the global economic crisis continues to roil the credit and currency markets. With petrochemicals capacity
being linked to the region’s leading and most sophisticated refining complex, there is scope for Poland to
emerge as a major, low-cost petrochemicals player capable of supplying other developing markets in the
CEE region. However, the recession means that the expansion of production capacity is likely to be
delayed.

Executive Summary .5
SWOT Analysis....7
Poland Political SWOT....7
Poland Economic SWOT..7
Poland Business Environment SWOT ..8
Global Market Overview9
Global Ethylene Capacities ..9
Table: World Ethylene Production By Country, 2008 And 2013 (‘000 tonnes capacity) .9
Polypropylene.12
Global Oil Products Market Review..15
Table Global Oil Prices, 2003-2013 (US$ per barrel)19
European Overview20
Table: Key Elements Of REACH...21
Production .22
Poland Market Overview..23
Table: Poland’s Cracker Capacity, 2007-2013 (‘000 tpa)....24
Petrochemicals Business Environment...25
Table: Central And Eastern Europe Petrochemicals Business Environment Ratings ....25
Limits Of Potential Returns.25
Risks To Realisation Of Returns ...26
Poland’s Business Environment....27
Foreign Investment Policy ..28
Foreign Trade Regime ...29
Industry Trends And Developments ...30
Upstream Activities...31
PKN Strategy, 2009-2013 ...33
PKN-Grupa Lotos Merger ..34
Financial Results .35
Industry Forecast Scenario ...36
Table: Polish Petrochemicals Industry, 2006-2013 ....38
Macroeconomic Outlook38
Table: Poland – Economic Activity, 2004-201340
Company Monitor...41
Polski Koncern Naftowy Orlen 41
Anwil44
J&S Energy45
Country Snapshot: Poland Demographic Data.46
Section 1: Population46
Table: Demographic Indicators, 2005-203046
Table: Rural/Urban Breakdown, 2005-2030 ....47
Section 2: Education And Healthcare47
Table: Education, 2002-2005 ..47
Table: Vital Statistics, 2005-2030.47
Section 3: Labour Market And Spending Power ....48
Table: Employment Indicators, 2001-2006..48
Table: Consumer Expenditure, 2000-2012 (US$) ..48
Table: Average Annual Wages, 2000-2012..49
BMI Methodology ...50
How We Generate Our Industry Forecasts ..50
Chemicals And Petrochemicals Industry 50
Cross Checks ..51
Business Environment Ratings.52
Table: Petrochemicals Business Environment Indicators And Rationale...52
Weighting...53
Table: Weighting Of Indicators ....53