France Petrochemicals Report Q2 2016 - New Study Released

The fundamentals of the French petrochemicals market are mixed. The decline in France's industrial competitiveness over the last ten years is a fundamental issue facing the country. However, domestic automotive producers have made significant steps to improve their competitiveness, which should help assist with bolstering demand in engineering plastics.

France's petrochemicals industry has undergone a process of structural adjustment to improve cost margins. However, it has been behind the curve compared to other Western European states that have seen consolidation and capacity reductions in recent years. Resistance from labour unions has largely been responsible for the slow process of dealing with the sector's lack of integration and poor economies of scale. However, delocalisation is inevitable for the petrochemicals industry, just as it is across the industrial sector.

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The planned closure of Total's ethylene and propylene operations at Carling was completed in October 2015, marking a further blow to France's petrochemicals industry over the long term. The shutdown is part of an overall trend in the industrial sector as it restructures in the face of over-supply and poor competitiveness. France is behind the restructuring trend with the UK and Spain already having carried out the process of plant closure for similar reasons. Nevertheless, the French petrochemicals sector is enjoying the benefits of low naphtha costs as well as moderate demand growth.

The French petrochemicals industry saw more positive trends in 2015, but recovery is slow and mixed with downstream markets facing significant weaknesses in the years ahead. BMI estimates that in 2015 rubber output declined 0.5% and plastic production rose 5%. This came in the context of strengthening economic growth, which reached 1.1% in 2015, up from 0.2% in the previous year, and an overall 0.5% growth in chemicals output.

For 2015, BMI estimates that France had olefins production capacities of 2.74mn tonnes per annum (tpa) ethylene, 1.8mn tpa propylene and 445,000tpa butadiene. Polymer capacities included 1.44mn tpa PP, 1.22mn tpa low density polyethylene, 705,000tpa high density polyethylene, 560,000tpa linear low density polyethylene, 1.39mn tpa polyvinyl chloride, 330,000tpa polystyrene and 70,000tpa polyethylene terephthalate. In the fertiliser segment, France has capacities of 1.58mn tpa ammonia and 785,000tpa urea. France also had styrene butadiene rubber capacity of 160,000tpa.

In BMI's Petrochemicals Risk/Reward Index (RRI), France scores 71.9 points, up 0.1 point since the previous quarter as a result of a modest improvement in long-term country risk. It retains its fifth place in the regional RRI rankings, 0.9 points behind Belgium and 4.2 points ahead of Spain, a position that is unlikely to change in the near future.

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