Most European petrochemical companies, especially finished goods producers, posted strong profitability through 2022, as easing containment measures and vaccination of the population boosted industrial production to its highest level in years.

The EU manufacturing business activity index (PMI) approached the mid-70s, the highest level in decades, as customer orders continued to rise and players are forced to replenish inventories. Disruptions in global trade flows in the pandemic era, as well as weather disruptions and plant shutdowns, have pushed profitability of some players in Europe to all-time highs.

For example, Russian SIBUR's adjusted profit rose to 70 billion dolar (USD921 million) in the second quarter, up from 54 billion dolar in the first quarter, while profitability at Poland's PKN Orlen and Hungary's MOL hit record highs. Germany's BASF posted stable profitability in the first half of the year, while Covestro forecast potentially its highest profit since 2020

A resurgence in manufacturing demand has put pressure on an already tight and disordered supply chain, with consumption rates reaching a point where supply difficulties are beginning to curb growth. According to Hartwig Michels, president of EPCA and head of BASF's petrochemicals division, the tight market is likely to drive demand and chemical prices for at least a few more months. Margins are likely to tighten as markets normalize, likely leading to an oversupply in the market by early next year. "On the demand side, we forecast a continued global economic recovery in 2023 with lower industry growth compared to 2022."

This comes amid uncertainty over the status of the pandemic and changing regulatory frameworks in Europe in response to peaks and dips in daily infection rates. Chemical executives are used to dealing with large-scale systemic shocks to the global economy over the past few decades, but Michels said a coronavirus pandemic is particularly difficult to manage. Despite increased vaccination rates, at least in advanced economies, delivery prices remain high and logistics remain highly unstable.

According to the ICIS-MRC Price Survey, polyvinyl chloride (PVC) prices remained mostly at record high levels in October with few exceptions. High world prices and unstable import supplies remain the main reasons for high prices. In September, import volumes fell seriously. But at the same time, prices in Turkey and Asia began to rise strongly, and individual producers increased export sales of PVC for the fourth quarter.


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