Hungary Petrochemicals Report Q3 2012

BMI’s Hungary Petrochemicals report examines the continuing diversification of the sector, but warns of severe short-term challenges caused by a downturn in the domestic market and headwinds from the eurozone crisis, which will impact key consuming industries.
The report focuses on the effects of Chinese investment in local diisocyanates production, which has secured Hungary’s place as a major European supplier of methylene diphenyl diisocyanate (MDI) and toluene diisocyanate (TDI), and whether their demand in polyurethane applications, such as automotive seating, will be affected by the market downturn. In 2011, Hungarian petrochemicals producer MOL’s olefins output fell 2% year-on-year (y-o-y) to 1.95mn tonnes, while polymer output rose 2% to 1.17mn tonnes. Low density polyethylene (LDPE) output was up 13% y-o-y to 244,000 tonnes and polypropylene (PP) was up 5% to 537,000 tonnes. High density polyethylene (HDPE) fell 7% to 388,000 tonnes, caused in large part by a 30% fall in output in Q411. Polymer demand was stable over the year, increasing 2% y-o-y to 1.5mn tonnes – due to growth in the automotive, construction and packaging industries. In 2011, Hungarian total refined products and petrochemicals sales, which had driven expansion in 2010, grew just 1% to 4.83mn tonnes.
BMI anticipates that in 2012, Hungary will have olefins production capacities of 660,000 tonnes per annum (tpa) ethylene and 400,000tpa propylene. The country will have polymer capacities of 400,000tpa HDPE, 210,000tpa LDPE, 650,000tpa PP and 440,000tpa polyvinyl chloride (PVC). In the fertiliser segment, Hungary is forecast to have capacities of 380,000tpa ammonia and 195,000tpa urea. With no new investment planned, BMI does not expect any new petrochemicals plants to come onstream before 2016. There is no reason to expect Hungarian petrochemicals producers to enlarge refining and petrochemicals capacities appreciably during the forecast period. Expansions in cracker capacity – to 610,000tpa – have helped reduce ethylene feedstock imports to virtually zero, with 90% of olefins output consumed within Hungary. Over the long term, the Hungarian petrochemicals industry’s ability to boost its export volumes will likely be constrained by capacity.
BMI has revised the following forecasts/views: 􀂃 BMI has revised down overall petrochemicals output growth for 2012 from -3% to -10%. This is on the basis that H211 levels of production are unlikely to be exceeded in 2012, due to the effects of the eurozone debt crisis and continued lacklustre demand.
􀂃 In BMI’s Central and Eastern Europe (CEE) Petrochemicals Risk/Reward Ratings (RRRs), Hungary scores 57.8 points out of 100. This puts the country in fourth position, 0.3 points behind the Czech Republic and 9.3 points ahead of Turkey.