Poland Petrochemicals Industry Update Quarter 1 2012

Includes 3 FREE quarterly updates

BMI’s Poland petrochemicals report examines the latest developments in the Polish domestic industry in
the context of the severe downside risks associated with the eurozone sovereign debt crisis. Furthermore,
we also scrutinise the main trends in mergers and acquisition (M&A) activity – with consolidation and
rationalisation both common themes in Poland. This report also analyses the growth and risk management
strategies that are being employed by the leading players in the Polish petrochemicals sector, as they seek
to maximise the tremendous growth opportunities that are inherent in the local market.
BMI has adopted a cautious outlook for the Polish petrochemicals industry due to the potentially
detrimental impact of the slowdown in the eurozone on investor sentiment and credit availability in the
region. Poland is unlikely to remain immune to the economic crisis that is gripping the continent.
Although it is not part of the troubled common currency bloc, a disorderly breakup of the euro would
have severe ramifications for the country (although this is not BMI’s core scenario). Furthermore,
contractions in the economies of key trading partners are already a concern for investors. Demand for
petrochemicals in the automotive and construction sectors is likely to remain depressed over 2013, which
will have a knock-on effect on the industry.

Over the last quarter, BMI has revised the following forecasts/views:
- M&A activity is leading to the rationalization of intermediates products, which should improve
margins but reduce capacity. Toluene diisocyanate (TDI) capacity is set to be cut under a noncompetition
agreement between BASF and Ciech while a planned merger of Zaklady Azotowe
Pulawy (ZAP) and Zaklady Azoty Tarnow (ZAT) could lead to cuts in capacity in the fertiliser
and nylon sectors.
- Crude prices will pose a risk, with any rise in prices likely to raise naphtha feedstock prices and
erode margins for Polish basic chemicals. BMI believes Polish producers will find it
increasingly difficult to pass on cost increases to customers, particularly when ethane-based
production elsewhere will enjoy higher margins.
- Poland’s score is held at 58.7 points out of 100 this quarter, putting it in joint second place with
Czech Republic in our Central and Eastern Europe (CEE) Petrochemicals

Risk/Reward Rating
s
(RRRs). It sits 6.4 points behind Russia and 0.9 points ahead of Hungary.