Trade Resources Industry Views China's Slowdown, Margin Volatility Among Risks

China's Slowdown, Margin Volatility Among Risks

German petrochemicals producer BASF said July 24 that it expected the economic slowdown in China, margin volatility and growth uncertainty in Europe to be the biggest risks to growth for its chemicals division during the second half of the year.

The company said global economic growth was uneven during the second quarter, with only the eurozone seemingly able to benefit from the lower oil prices and weaker euro.

US growth was undermined by the harsh winter, waning investment in the oil industry and strong dollar, which curbed exports.

Chinese growth has slowed and emerging markets -- like Russia and Brazil -- have gone into recession.

As a result, BASF's petrochemical sales declined 8% year on year to Eur3.975 billion ($4.357 billion) in Q2.

Other factors which contributed to the drop were lower raw material costs, divestments and outages, the company said.

In particular, the company's European production and sales volumes were affected by an outage of the Ellba joint venture's styrene monomer Moerdijk plant in the Netherlands.

In Asia, the disposal of the company's share in the Ellba Eastern Private Ltd. joint operation in Singapore at the end of 2014 also dampened sales by 11%.

At the same time BASF said petrochemical margins in Europe have been "substantially higher," especially for steam cracker products, ethylene oxide and glycols.

Northwest European naphtha prices during the Q2 averaged $538/mt, down 43% year on year.

Meanwhile, average cracker margins, a measure of profitability for cracker operators, during the same time rose to $763/mt compared with just $113/mt in Q2 last year, according to Platts data.

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China's Slowdown, Margin Volatility Among Biggest Risks in H2 2015: BASF
Topics: Chemicals