Summary
Many analysts, having failed to spot last year's downturn, are now making the opposite mistake and hoping to spot a quick recovery in chemical demand. But a large number of companies reported this week, and only China's Sinopec saw any sign of strong demand ahead. BASF, the world's No 1, was even worried things could get worse again.
Analysis
This week's chemical company results have been keenly awaited, as the industry seeks to form a view on what happens next to demand and profits. Many analysts claimed to see them as indicating that a V-shaped recovery was now underway. But a close look at the actual words used by the companies themselves, reveals no sign that any real upturn is underway, except in China's 'bubble' economy:
Akzo Nobel, "With the exception of some emerging markets, we see little significant recovery of growth," CEO Hans Wijers.
BASF, "Capacity utilisation rose from below 60% in the first quarter to slightly above 60% in the second - there was no reason why the second half would show an improvement on the first, and could possibly be worse", CFO Kurt Bock
Bayer, "The bottom of the cycle has been reached, but there is still no sign of a sustained recovery in demand," CEO Werner Wenning.
BP Chemicals, "The outlook continues to be challenging"
Celanese, "We're not seeing signs of a widespread strong recovery," CEO David Weidman
Dow, "Second-quarter operating rate was c75%, with overall demand still below last year and excess capacity remaining", CEO Andrew Liveris.
Dow Corning, "Global economic recession continues to dampen demand", CFO J Donald Sheets.
DuPont, "My concern is the true demand recovery. Are we going to be bumping along the bottom," CEO Ellen Kullman
ExxonMobil Chemicals, "Q2 prime product chemical sales fell 6.7% versus 2008."
Mitsubishi, "Ethylene production in the quarter fell 13% year on year"
Olin, "Precipitous decline in caustic soda pricing and the continuation of weak demand," CEO Joseph Rupp
Reliance, "Attributed its rising margins to the fact the industry was operating on a low level of inventory, and the depreciation of rupee against the dollar".
Rhodia, "Demand in emerging countries returned to 2008 levels and customer de-stocking in Europe and North America was essentially completed," CEO Jean-Pierre Clamadieu.
Shell Chemicals, "Reduced global demand for chemical products significantly impacted the chemicals manufacturing plant utilisation rate, which dropped to 68% from 84% in Q2 2008"
Siam Cement, Thailand, "It remains to be seen what path the recovery process takes and over what period."
Sherwin Williams, The "past three years have erased a decade of growth in the coatings market", CEO Chris Connor.
Sinopec, "Mainstream ethylene plants were running at full capacity from January to June 2009. We haven't seen signs of demand falls and will keep high production".
Wacker, "Customers are still cautious about placing orders. They are ordering smaller quantities or concluding contracts with shorter durations".
BASF, "Capacity utilisation rose from below 60% in the first quarter to slightly above 60% in the second - there was no reason why the second half would show an improvement on the first, and could possibly be worse", CFO Kurt Bock
Bayer, "The bottom of the cycle has been reached, but there is still no sign of a sustained recovery in demand," CEO Werner Wenning.
BP Chemicals, "The outlook continues to be challenging"
Celanese, "We're not seeing signs of a widespread strong recovery," CEO David Weidman
Dow, "Second-quarter operating rate was c75%, with overall demand still below last year and excess capacity remaining", CEO Andrew Liveris.
Dow Corning, "Global economic recession continues to dampen demand", CFO J Donald Sheets.
DuPont, "My concern is the true demand recovery. Are we going to be bumping along the bottom," CEO Ellen Kullman
ExxonMobil Chemicals, "Q2 prime product chemical sales fell 6.7% versus 2008."
Mitsubishi, "Ethylene production in the quarter fell 13% year on year"
Olin, "Precipitous decline in caustic soda pricing and the continuation of weak demand," CEO Joseph Rupp
Reliance, "Attributed its rising margins to the fact the industry was operating on a low level of inventory, and the depreciation of rupee against the dollar".
Rhodia, "Demand in emerging countries returned to 2008 levels and customer de-stocking in Europe and North America was essentially completed," CEO Jean-Pierre Clamadieu.
Shell Chemicals, "Reduced global demand for chemical products significantly impacted the chemicals manufacturing plant utilisation rate, which dropped to 68% from 84% in Q2 2008"
Siam Cement, Thailand, "It remains to be seen what path the recovery process takes and over what period."
Sherwin Williams, The "past three years have erased a decade of growth in the coatings market", CEO Chris Connor.
Sinopec, "Mainstream ethylene plants were running at full capacity from January to June 2009. We haven't seen signs of demand falls and will keep high production".
Wacker, "Customers are still cautious about placing orders. They are ordering smaller quantities or concluding contracts with shorter durations".
Sentiment may well continue to push financial markets higher in the short-term. But these Q2 results show no sign of anything better than stabilisation in core end-use markets such as housing, autos and electronics. It therefore seems unlikely that the second half of the year will meet the expectations now being raised.
Paul Hodges consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
