Gas cuts kill Ukraine's petrochemical sector

Fascinating new petrochemicals report out, seen on pr-inside.com which shows how badly the country's industry was hit by the dispute with Russia over gas exports. It talks about a "collapse" in January. I remember someone at the ICIS team trying to get these figures at the time but we were told everything was just fine.

Here are some key excerpts: at the bottom you'll see how football offers a ray of hope!

"In Q109, sales by the chemicals and
petrochemicals industries totalled UAH8.76bn, including UAH6.62bn of chemicals and UAH2.13bn of rubber and plastics products. Output of plastics totalled 76,500 tonnes in Q109. However, the plastics industry has recovered from the January low, when the petrochemicals sector effectively ground to a halt during the Russia-Ukraine gas dispute. Plastics output rose 36.6% month-on-month (m-o-m) in March to 32,100 tonnes. However, for Q109 as a whole, output was still down 38.7% year-on-year (y-o-y)."

The country's macro-economic outlook is also bleak:

"Despite the petrochemicals industry's recovery from the January low point, Ukraine is gripped by a severe economic downturn and prospects are dire: real GDP is set to contract by 10.2% in 2009; the banking sector is on the verge of collapse; the hryvnia is week; both external demand and credit markets have deteriorated; and international risk aversion has elevated.

"The Ukrainian petrochemicals market will follow the overall economic trend, which means a deep contraction in 2009, followed by a slow upturn in 2010 when GDP is expected to grow by 2.4%. With the kind of economic growth rates seen in 2000-2007 unlikely to be repeated, the petrochemicals industry will be more heavily reliant on export markets.

"Russian economic growth is not likely to be remarkable over the forecast period and the market is at risk of over-capacity owing to additional planned capacity due to come online. Consequently, Ukrainian producers will be more reliant on the eurozone for sales. The petrochemicals industry is set to receive a temporary domestic boost from increased construction activity ahead of Ukraine's hosting of the 2012 UEFA European Football Championship."