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Sectoral Report of Bank Austria Creditanstalt Economics Department:
Austrian chemical industry posts record sales revenue in 2006

  • Sector turnover up by 17.7 percent to EUR 9.5 billion, output only by 4 percent, but earnings growth still lacking
  • Activity in the sector to profit from powerful economic growth at home and abroad in 2007 and 2008 as well
  • Austrian chemical industry remains competitive

The chemical sector in Austria recorded an increase in turnover of 17.7 percent in 2006. Yet this record figure did not translate into corresponding gains in earnings. This is revealed by the latest sectoral report published by the economic researchers at Bank Austria Creditanstalt (BA-CA). The high growth in sales revenue last year was mainly derived from significant price hikes, driven principally by the high raw material prices. At the same time the output of the sector rose by only 4 percent, and therefore fell short of the long-term average of roughly 6 percent recorded in the last ten years. The higher average costs throughout the sector presumably could not be offset completely with the higher prices.

"The driving force behind growth in the sector in 2006 was once again the export demand, which in light of the relatively small domestic market is a crucial factor for expansion in the sector", revealed Günter Wolf from Bank Austria. In the previous year, exports of chemical materials and products rose by 18 percent to EUR 11 billion, whereby the highest export growth was recorded in primary plastic materials (+32 percent to EUR 1.4 billion). The most significant export goods for the Austrian chemical industry for years have been pharmaceuticals; such exports rose by 17.3 percent in 2006 to EUR 4.2 billion. By contrast, imports amounted to EUR 3.9 billion, meaning the sector again made a major contribution to the foreign trade balance of chemical products.

The chemical industry will remain vibrant in 2007 and probably also in 2008, bolstered by the powerful economic growth in Austria and on the key export markets. Sales growth in the chemical sector will fall short of the result posted in the previous year, but it should at least reach the long-term average of 5 to 6 percent.

"Austria's chemical industry has successfully defended its competitiveness for years", said Günter Wolf from BA-CA. First and foremost the productivity of the sector has improved more rapidly than the EU average. Since the middle of the 1990s the output of the local chemical industry has gone up by more than 70 percent, besides a mere 2 percent increase in employment. Over the same period the average figures for the EU-25 reveal production growth of only about 40 percent and an 11 percent decline in employment. Over and above this, the long-term improvement in the foreign trade balance confirms the stable footing the sector find itself on: the trade deficit in chemical goods has fallen from EUR 1.3 billion in the middle of the 1990s to EUR 900 million.

"Despite the continued lively demand, the pressure on earnings in the chemical industry is not letting up. The introduction of "REACH" in June, an EU regulation regarding the registration of chemical substances, constitutes a new cost factor for the industry", explained sector analyst Günter Wolf. The sector estimates that 10-30 percent of the approximately 30,000 substances subject to the new regulation throughout the EU, particularly fine chemicals, will be withdrawn from the market or see their production relocated to non-EU countries.

Enquiries: Bank Austria Creditanstalt Press Office
Tiemon Kiesenhofer, Tel: +43 (0)5 05 05 52819; e-mail: tiemon.kiesenhofer@ba-ca.com