Just Published: "Romania Petrochemicals Report Q3 2016"

Romania's petrochemicals industry is finally seeing an improvement in performance following years of decline. Oltchim slashed losses and boosted profit in 2015, providing the basis for privatisation, possibly including the Arpechim refinery on which it depended for feedstock. Refinery integration and capital investment following privatisation could significantly boost Romanian petrochemicals output.

Weaker oil prices have helped Romania's downstream sectors, with refining margins improving as a result and thereby reversing the situation of regular quarterly losses. This is helping drive down the cost of naphtha feedstock used in the Romanian petrochemicals industry, reviving the fortunes of the sector.

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Romania's rubber and plastics output notched up an impressive performance in 2015, with growth of 8.7% y-o-y. However, chemicals output declined 5.0%. The growth in polymers has been supported by a recovery in volumes of troubled Romanian producer Oltchim. The company registered a preliminary net profit of RON2.3bn, due to the cancellation of debts, following losses of RON459mn in 2014. Oltchim's preliminary turnover grew by 18% to RON742mn in 2015, from RON628mn in 2014.

Nevertheless, Romania has modest olefins capacities of 200,000 tonnes per annum (tpa) ethylene and 100,000tpa propylene, feeding capacities totalling 320,000tpa polyethylene and 80,000tpa polypropylene. Romania also has 60,000tpa polystyrene and 170,000tpa polyvinyl chloride. As such, the industry is small and lacks economies of scale to compete with foreign producers.

Weaker oil prices have helped Romania's downstream sectors, with refining margins improving as a result, and thereby reversing the situation of regular quarterly losses. This is helping drive down the cost of naphtha feedstock used in the Romanian petrochemicals industry, reviving the fortunes of the sector.

In spite of the return to profitability, the government has indicated it will not privatise Oltchim in 2016. Moreover, the government's decision to assist the company is now the subject of an investigation by EU regulators for possible breach of state aid rules, according to reports in April 2016. The European Commission said it would examine the cancellation of debt and continuing provision of electricity, steam and saline solutions to Oltchim.

We have upgraded forecasts for growth in the Romanian construction sector from 4.2% to 7.0% in 2016, followed by 5.6% growth in 2017 and more subdued growth over the remainder of the forecast period through to 2025. This will help support polyvinyl chloride consumption.

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