Just Published: "Poland Petrochemicals Report Q3 2016"

Polish polymer output growth diminished in Q116 alongside declining petrochemicals margins, amid increased oil price volatility. However, the outlook for the rest of the year is positive, with exports set to surge as Germany's economy picks up and Polish domestic demand strengthens.

With production well under nameplate capacity, Poland has plenty of potential for high rates of growth, even without further capacity expansion. In Q116, Poland's polymer sector witnessed an overall positive performance, with polyethylene output up 1.2% y-o-y to 97,900 tonnes and polypropylene up 4.8% to 25,500 tonnes, although PVC was down 11.2% to 72,500 tonnes. However, growth rates were slower than the level achieved in 2015, indicating that the industry was facing slower domestic demand and continued to be operating well below its full potential.

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The Polish petrochemicals industry continues to draw investment and is planning for expansion. The focus will be the plans of Polish refiners Grupa Lotos and Grupa Azoty, which are considering building a 1mn tpa petrochemicals complex in Gdansk. The complex will either be centred on an ethylene cracker or an aromatics extraction plant and would be the biggest petrochemicals investment in Poland for many years. However, it is unlikely that the complex will come onstream over the forecast period, and much will depend on the direction of feedstock costs. Until there is firm confirmation of the plans, BMI will exclude this project from the forecasts.

In 2015, Poland had olefins of 760,000 tonnes per annum (tpa) of ethylene, 475,000tpa propylene and 60,000tpa butadiene. Polymer capacities include 320,000tpa high-density polyethylene, 170,000tpa low density polyethylene, 400,000tpa polypropylene, 550,000tpa polyvinyl chloride, 90,000tpa polystyrene and 120,000tpa polyethylene terephthalate. In the fertiliser segment, it had capacities of 1.4mn tpa in both ammonia and urea.

The privatisation of chemicals company Ciech is now the subject of an anti-corruption investigation, and in April 2016 investigators raided its offices and those of its majority owner Kulczyk Holding. The new government claims the price at which Ciech was sold was too low, given that it was profitable. Ciech's market value more than doubled in 2015, but declined 25% in Q116.

Poland's Petrochemicals Risk/Reward Index fell this quarter by 0.5 points to 58.7 points. This is a result of a decline in its Market Risk score as petrochemicals output growth slows and investigations are begun into corruption into Ciech. However, the country remains in a strong position regionally and, outside Russia, has the best prospects for growth in basic polymers as well as diversification of its slate of value added products.

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