Spain Petrochemicals Report Q4 2009

Spain Petrochemicals Report Q4 2009

The Spanish petrochemicals industry may have reached a nadir by mid-2009, but BMI’s latest Spain
Petrochemicals Report suggests a recovery is unlikely until H210 at the earliest, due to the impact of the
economic crisis and difficulty raising capacity limits.
With reduced demand in petrochemicals such as ethylene and PP, the industry is set to struggle. Many
petrochemicals consuming firms face falling sales, rising arrears and lack of credit are likely to go out of
business in 2009. BASF is set to close its ‘Styropor’ expandable polystyrene plant at Tarragona in
August. Spain will be supplied by the company’s facilities in Ludwigshafen in Germany. According to
BASF, the Spanish plant was too small to continue to operate economically. Dow Chemical is also
planning to permanently close its 65,000tpa PS plant at Bilbao in Q309, citing poor demand and
depressed PS margins in European markets. In June, Repsol announced plans to idle its propylene oxide
(PO)/styrene monomer (SM) plant at Puertollano, for three months due to market fluctuations and a fall in
demand. It produces 70,000tpa of PO and 160,000tpa of SM at Puertollano. But it continued to run a
larger PO/SM facility at Tarragona at maximum capacity. Meanwhile, the Dow/Repsol 150,000tpa LDPE
joint venture TDESA plant at Tarragona was shut down temporarily in June. However, in July Artenius
announced it was stepping up production at its polyethylene terephthalate (PET) lines at El Prat de
Llobregat to satisfy increased demand in the region. The larger of the two lines was restarted following
closure in May, but the other was to remain down, resulting in 70% capacity utilisation.
Although the situation in Spain has been gloomy in recent months, signs of stabilisation in the broader
economy indicate that the country’s petrochemical industry had reached its nadir. Petrochemicals has
been one of the first industries to suffer economic contraction and output doesn’t have much further to
fall. Across the industry, inventories will have been adequately drawn down in H209 to revive some
output, although capacity utilisation will remain well below pre-recession levels. However, while BMI
does not envisage that the situation facing the Spanish petrochemicals industry will get worse, neither will
it see rapid improvement, with the country’s economy set to remain in recession until well into 2010.
Spain’s construction, automotive and consumer goods sectors, which underpin petrochemicals markets,
are nowhere near turnaround. Meanwhile, the Eurozone economy remains weak and the appreciation of
the euro against the US dollar makes Spanish exports outside the currency area highly uncompetitive in a
challenging global market. Consequently, losses in the industry will mount and there may be further
closures or consolidation of smaller enterprises and facilities. Recovery is also likely to be sluggish,
although the government’s stimulus package will help ameliorate the situation facing petrochemicals.
Growth in the Spanish petrochemicals industry has been limited by capacity constraints. Spain’s high
energy costs and insufficient transport and logistics infrastructure will also continue to hinder the
chemical industry’s growth. Unless further major capacity expansions are planned in the years ahead, the
sector risks long-term stagnation even beyond the immediate downturn. BMI forecasts that Spanish
petrochemicals exports are unlikely to recover to 2007 levels, while imports are likely to exceed 2007
levels by 2013. We believe Spanish petrochemicals producers will struggle to compete on key export
markets in the aftermath of the recession, as more competitive producers in the Middle East and Asia
ramp up production. Small plant scale is a further problem – the crackers now coming onstream in the
Middle East are in the range of 1.3mn tpa of ethylene. In contrast, Spain’s crackers are still well under
1mn tpa at 280,000-735,000tpa.

Executive Summary ..5
SWOT Analysis.7
Spain Petrochemicals SWOT .. 7
Spain Political SWOT.... 7
Spain Economic SWOT.. 8
Global Market Overview.....9
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 Overview.20
Regulation 20
Table: Key Elements Of REACH...... 21
Production . 22
Spain Market Overview....23
Market Structure. 23
Table: Spain’s Polymer Capacity .... 25
Petrochemicals Business Environment.......26
Table: Western Europe Petrochemicals Business Environment Ratings..... 26
Limits Of Potential Returns... 26
Risks To Realisation Of Returns ...... 27
Industry Trends And Developments ...28
Upstream . 30
Mergers, Acquisitions And Related Developments........ 32
Financial Results 34
Algerian Gas Dispute... 35
Energy Security Concerns EU 36
Industry Forecast Scenario .......37
Table: Spain’s Oil, Gas And Petrochemicals Industry, 2004-2013.. 38
Macroeconomic Outlook....... 39
Table: Spain – Economic Activity .... 41
Company Monitor....43
Repsol YPF 43
Cia Espanola de Petroleos SA (Cepsa)..... 47
LyondellBasell .... 50
La Seda de Barcelona (La Seda, LSB) ...... 51
Country Snapshot: Spain Demographic Data ......53
Section 1: Population... 53
Table: Demographic Indicators, 2005-2030...... 53
Table: Rural/Urban Breakdown, 2005-2030 ..... 54
Section 2: Education And Healthcare....... 54
Table: Education, 2002-2005 . 54
Table: Vital Statistics, 2005-2030.... 54
Section 3: Labour Market And Spending Power 55
Table: Employment Indicators, 2001-2006........ 55
Table: Consumer Expenditure, 2000-2012 (US$) 55
Table: Average Annual Manufacturing Wages, 2000-2012 ... 56
BMI Methodology ....57
How We Generate Our Industry Forecasts ........ 57
Chemicals And Petrochemicals Industry .. 57
Cross Checks ...... 58
Business Environment Ratings 59
Table: Petrochemicals Business Environment Indicators And Rationale.... 59
Weighting. 60
Table: Weighting Of Indicators ....... 60