OREANDA-NEWS. BMI View: The British chemicals industry as a whole is in transition to higher-value, lower-volume production, having closed many basic chemicals and polymers capacities in recent years. This should put the industry in good stead for profitability, although existing petrochemicals facilities will continue to feel the challenge of feedstock prices in competing with US and Middle Eastern rivals. The main downside risk comes from the lack of access to competitively priced feedstock in a global market facing over-supply.

The British petrochemicals industry experienced a downturn in Q116 with production indices suggesting a contraction of 1.3% y-o-y. Rubber and plastic output fell 0.7% while overall chemicals output fell 3.7%. This came in the context of a 1.3% contraction in manufacturing compared with Q115. The latest survey of business confidence for members of the Chemical Industries Association (CIA) shows that more than 88% of businesses expect sales volumes to remain or exceed 2015 levels when there was a record 5% growth, a decline of 2pp over the previous quarter. This would suggest that the industry expects a turn-around in fortunes in the rest of the year with exports leading growth; 95% expect to maintain or grow exports.