France Petrochemicals Report Q3 2016: New research report available at Fast Market Research

From: Fast Market Research, Inc.
Published: Thu Jun 16 2016

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.

In 2015, rubber output fell 3.2%, while plastic production rose 4.8%, indicating mixed results for France's petrochemicals industry as it recovers. The same trend was observed in Q116, with no sign that plastic output was peaking or that rubber was bottoming out. The automotive industry has been a key driver of local plastic and rubber consumption, but from 2016 growth will slow, putting downward pressure on engineering plastics. However, improved growth in household consumption should generate more demand for plastic used in packaging, such as polyethylene (PE) and polyethylene terephthalate (PET).

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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 polypropylene (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.

The near-term focus for investment will be Total's complex in Carling, which in 2015 saw 400,000tpa of ethylene capacity closed. Instead, the company is seeking to add value to output to downstream activity by spending EUR160mn on upgrades at the site for two PP compounding lines that are due to start production in mid-2016 and serve the automotive industry.

In terms of long-term prospects, BMI does not believe France's petrochemicals sector has gone through a sufficient process of structural adjustment to improve cost margins and efficiency, in large part due to the protectionism of the government. We caution French petrochemicals output, in the medium term, could decline as a result of plant closures. This makes it more vulnerable to market shocks and a rise in naphtha costs.

In BMI's Petrochemicals Risk/Reward Index, France scores 71.9 points, unchanged since the previous quarter as observed trends have not changed and no new plans have been announced in relation to capacity changes. There is modest upside risk for growth in consumption, but a likelihood of some basic chemicals plant closures in the medium term as the industry continues to restructure.

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