20.11.2013

Sectoral Report of Bank Austria Economics Department:
No growth expected for chemical industry in 2013

  • Sales volumes steady at EUR 14.1 billion
  • Activity in sector expected to gain momentum again in 2014
  • Rising producer prices signal improved sales conditions next year
  • Despite foreign trade deficit of roughly one billion euros, Austria's chemical industry still competitive in long term and numbers among the most innovative industries in Europe
  • The long-term production growth forecast of an annual 2.2 percent, half the rate from a decade ago, will still exceed the EU and industry average

The chemical industry, which has lost momentum over the last two years, managed to stabilise in 2013 at a low level. Sales volumes are set to hover around EUR 14.1 billion. Over the entire year, however, neither the production output of the industry nor sales will rise, as illustrated by the latest sectoral report by the economists at Bank Austria. "Austria's chemical industry is still suffering first and foremost from the sluggish economic activity in the main export markets. At any rate, the rising producer prices from the middle of the year in parts of the industry again signal a modest improvement in the sales situation", analysed Bank Austria economist Günter Wolf.

Austrian chemical industry proves competitiveness
The chemical industry is very reliant on exports and generates 60 percent of its revenue abroad; the average export ratio for industry, by comparison, is 55 percent. Chemical products also have to be imported, since many procedures and products can only be applied and manufactured efficiently in large volumes. Available production capacities in Austria are too low to cope with the growing demand for products. Bank Austria economist Günter Wolf: "The main reason for the relatively high foreign trade deficit with chemical products totalling roughly one billion euros is the import of consumer goods and some basic chemicals. In spite of the high deficit, the Austrian chemical industry is still competitive in the international arena, particularly in the segments of technical plastics, fertilisers, man-made fibres and parts of the 'other chemical products' segment. Exports of these products have risen almost continuously since the middle of the 1990s, and in the last ten years have contributed to a gradual improvement in the sector’s foreign trade balance".

The chemical industry has not been able to elude the temporary sales difficulties in the market. In 2013 the sector will probably experience a slight drop in exports because of the ongoing lull in activity on the key sales markets, with a best-case scenario of maintaining the previous year's levels. The foreign trade deficit will rise to over one billion euros. Only in 2014 is export demand likely to rise again, bolstered by the expected recovery in the economy in parts of Western Europe, particularly Germany. Fifty-six percent of Austrian chemical exports are supplied to the EU-15, with more than half of this volume sent to Germany. Additionally, economic growth is picking up in Eastern Europe, which accounts for a further 23 percent of sector exports.

High innovation spending strengthens the outlook
Austria's chemical industry numbers among the most innovative sectors in Europe, and for years has come in just behind the leading pack in EU surveys on innovation, which traditionally comprises the German and Irish chemical industries. "Eighty-two percent of Austrian chemical companies are 'innovation active' within the meaning of the EU innovation survey, which means they pushed through product or process innovations between 2008 and 2010. The companies being strong innovators makes the chemical industry more competitive", revealed Günter Wolf from Bank Austria.

The chemical sector remains a growth driver for industry with its generally high-tech product ranges that are difficult for lower-priced rivals to replicate at the same quality. The German chemical industry association expects to see production in the chemical and pharmaceutical industry rise by an average of 4.5 percent per year worldwide until 2030, and by 1.9 percent per year in the EU. According to this forecast scenario, Austria's chemical and pharmaceutical products should grow by 2.2 percent per year. This is only half as fast as the growth registered ten years ago, but is still quicker than the EU average and industry overall. The analysis of the Austrian foreign trade in chemicals reveals a clear competitive advantage for segments that generate products with relatively high and improving quality levels. Overlaps with international forecasts are seen primarily in the speciality chemical business and the manufacture of technical plastic products.

Enquiries: Bank Austria Economics & Market Analysis Austria
Günter Wolf, Tel.: +43 (0) 50505 - 41954;
E-Mail: guenter.wolf@unicreditgroup.at