Chemical Processing - January 2008 - (Page 20) BASF, Ludwigshafen, Germany, had based its original 2007 economic outlook on three factors: annual global economic growth of 3.5%, an average oil price of around $70/bbl (for Brent crude), and an average exchange rate of $1.35/€. In October, Kurt W. Brock, its chief nancial ofcer, observed: “On the basis of what we’re seeing today — and I would like to stress the word ‘today,’ — there’s nothing to suggest that we should be pessimistic about the nearer future. Of course, we are looking at what is happening with regard to the larger picture in the United States, and we expect growth there to slow somewhat. Nevertheless, we should not forget that this means that U.S. growth will still be around 2%. That’s a growth rate we didn’t dare to dream of only a couple of years ago in Europe.” The company says it won’t make any further statements before its nancial outlook for 2008 is released in February. A building concern Meanwhile, an October 2007 report from the Institute of Supply Management (ISM), Tempe, Ariz., showed that the U.S. manufacturing sector expanded for the ninth consecutive month. At the same time, however, this growth was the lowest for eight months. “It does appear that the slowdown in the nancial, housing and transportation segments has spilled over into manufacturing,” commented Norbert J. Ore, chair of the ISM’s manufacturing business survey committee. The ACC agreed. “Overall it’s clear that sub-prime and related problems have affected housing and are now affecting manufacturing,” states its November “Chemistry and Economic Trends” newsletter. ACC points out that, on average, the housing sector purchases $8 in chemicals for every $1,000 of output, and more than twice as much indirectly for products such as pipes, coatings and sealants. Construction spending in the U.S. in 2007 was worth $1.163 trillion, estimates the U.S. Department of Commerce’s Bureau of the Census, Washington, D.C.. However, this represents a year-on-year rise of just 0.3%. The view from Brussels The relatively modest growth expected in the U.S. is prompting serious concerns in Europe. For instance, the Brusselsbased European Commission (EC) in its autumn economic forecast predicts growth moderation in Europe, from 2.9% in 2007 to 2.4% in both 2008 and 2009. Issued in November, the report takes account of “turbulence in the nancial markets that has caused tighter nancing conditions and increased uncertainty.” The analysis assumes that the nancial distress will gradually peter out. However, it warns: “Some segments of the nancial markets are still malfunctioning, and a more prolonged period of uncertainty cannot be ruled out.” “Clouds have clearly gathered on the horizon with this summer’s turbulence in the nancial markets, the U.S. slow- >> 35 30 25 20 15 10 5 0 New driving forces % Contributions to real GDP growth 2006 2007 China India United States Euro area Russia Japan Brazil Figure 1. China and India now are propelling much of the world’s growth in gross domestic product. Source: IMF WEO. down and the ever-rising oil prices,” said Joaquín Almunia, economic and monetary affairs commissioner. As far as chemicals, the European Chemical Industry Council (Ce c), Brussels, is predicting industry growth — excluding pharmaceuticals — of just 1.9% in 2008. That compares with 2.1% in 2006 and an expected nal 2.6% in 2007. In terms of growth in gross domestic product (GDP), Ce c believes that only North America and Japan will fare worse, with South America (up 4.8%), Eastern Europe (up 5.6%) and the emerging Asian markets (up 7.6%) driving worldwide growth (Figure 2). Ce c’s forecast also comes with a proviso with regard to the region’s sensitivity to a number of downside risks: “First, the continuing U.S. dollar weakness against the euro weighs more and more heavily on the export performance of E.U. [European Union] industry. Secondly, continuously high oil prices, though they have apparently so far had only a limited dampening effect on the overall macro-economic environment, will lead to higher production costs and lower consumer and business con dence. Last but not least, the nancial crisis in the U.S.A. could have a stronger than expected impact on the world economy.” Ce c won’t comment at this point on how it might revise its forecasts given the continuing weakness in the U.S. Emerging markets Developing countries, particularly China and India, clearly provide the bright spots in the outlook for the next several years. The construction sector is driving growth in India. Just 10 years ago the market for construction chemicals was nonexistent, notes Frost & Sullivan (F&S), Mumbai. It says the market is worth 10 billion rupees today and predicts it will rise to over 40 billion — or just over $1 billion — by 2013. “Construction chemicals account for only 2% of overall construction costs but the bene ts are in multiples; rising awareness, changing lifestyles and, most importantly, the increasing spending power of the end users will be the key 20 • January 2008 www.chemicalprocessing.com http://www.chemicalprocessing.com
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