Fitch sees chemicals industry poised for recovery

AP News
Posted: Dec 16, 2009 3:41 PM

The global chemicals industry is poised for a gradual recovery in 2010, with stronger demand in China and South America tempered by constrained Western European and North American markets, Fitch Ratings said Wednesday.

"The recovery in demand for chemical products will remain fragile next year with significant regional disparities in growth trends reflecting varying economic expansion forecasts," the rating company said.

Fitch expects growth rates for the North American chemicals industry in the low-to mid-single digits in 2010.

"At this rate, the industry will likely need two to three years before North American chemicals product output will match pre-crisis levels," Fitch said.

Other factors slowing the sector's recovery include excess capacity and the end of stimulus packages.

Furthermore, Fitch said new capacity coming online in the Middle East _ where lower raw material prices translate to cost advantages _ could threaten Western European and North American facilities.

The ratings agency predicted stiff competition for less advanced chemical products. Companies with a lot of these products in their portfolio will change their strategy to purely low-cost manufacturing to stay competitive. Companies with high value-adding, innovative product portfolios, in contrast, will focus on research and development.

Shares of chemical companies rose with the broader market in afternoon trading. Dow Chemical Co. shares climbed 52 cents, or 2 percent, to $27.29. DuPont shares rose 39 cents to $32.58.