Europe's Chemical Volumes' Growth in 2013 Will Be 'sluggish' with Only Marginal Gains

Europe's chemical volumes' growth in 2013 will be "sluggish" with only marginal gains on 2012, global bank HSBC said Monday. 

"Our forecasts are not materially different to what the industry is expecting: the European chemical association assumes volumes in Europe to grow by 0.5% in 2013," the bank said in a report. 

Global GDP is expected to be around 3% in 2013, the bank said. 

"Barring a few pockets of strength, we expect growth to remain sluggish in most of the key end-markets," HSBC said, adding the auto, construction and steel sector would likely remain weak in Europe. 

Growth in electronics and consumer non-discretionary markets might be muted on macroeconomic worries, it added. 

And, said the bank, a slip in oil prices could hit the sector. 

HSBC's oil team forecast Brent to drop to an average $90/barrel in 2013. "In such a scenario, our product basket of 14 key chemicals prices would be likely to fall by even more than 10%," the bank said. 

Dated Brent's average in 2012 was $111.20/b, according to Platts data. 

A second downside to risk could from new supply, the bank said. 

HSBC predicts supply to outpace demand growth for most European chemicals in the medium term. 

"Products that look particularly vulnerable in 2013 include caprolactam [DSM, BASF, Lanxess], which is also likely to suffer from continuously high feedstock costs [benzene]," the bank said. The bank predicts supply to grow by 1.4% for benzene, while demand to remain flat in the period up to 2015. 

According to Platts data, European benzene recorded a gain of 36% in 2012 touching an all-time high of $1.516.50/mt FOB R'dam on September 11.