MEDIUM RISK for entreprises
A recession was avoided in 2019, but no rebound is on the cards for 2020.
Inflation expectations are best revealed by those who have skin in the game.
For every drop by 1 percentage point in interest rates, savings rates increased by 0.2 percentage points in Europe.
What to Watch?
Chemicals is a cyclical business closely to GDP as many chemical products are used up in early stages of the manufacturing supply chain. Upstream chemicals like petrochemicals usually depend upon the dynamics of their respective main end market (e.g. manufacturing) while downstream chemicals like cosmetics are driven by on big trends in consumer spending.
Driven by global economic growth and pass-through of rising naphtha prices onto downstream chemical product prices, global chemical sales went up by 9% y/y in 2017, to reach USD3.8tn. We expect continued sales growth around 6%-8% (CAGR 2018-19).
European chemical players closed the margin gap to US peers due to a focus on specialties enjoying higher margins; yet the sustained economic growth across Asia (particularly China) and in the U.S. is the prime volume and price driver. Only agrochemicals may continue to face headwinds, from weak crop prices which have led to revenue decline in farming as the most important end market.
Basic chemicals: It has a close relationship with the cycle of industrial production as its products are used further down the supply chain
Soaps, detergents, cosmetics: All attached to chemical products, they are affected by trends in consumer spending
Agrochemicals: It is closely tied to global food prices and to farming revenues
These assessments are, as always, subject to the disclaimer provided below.
This material is published by Euler Hermes SA, a Company of Allianz, for information purposes only and should not be regarded as providing any specific advice. Recipients should make their own independent evaluation of this information and no action should be taken, solely relying on it. This material should not be reproduced or disclosed without our consent. It is not intended for distribution in any jurisdiction in which this would be prohibited. Whilst this information is believed to be reliable, it has not been independently verified by Euler Hermes and Euler Hermes makes no representation or warranty (express or implied) of any kind, as regards the accuracy or completeness of this information, nor does it accept any responsibility or liability for any loss or damage arising in any way from any use made of or reliance placed on, this information. Unless otherwise stated, any views, forecasts, or estimates are solely those of the Euler Hermes Economics Department, as of this date and are subject to change without notice. Euler Hermes SA is authorised and regulated by the Financial Markets Authority of France.
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