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Cosmetics sector to be affected by slowdown in chemical production

By Michelle Yeomans , 20-Jun-2012

According to a European Chemical Industry Council (Cefic) report, chemical production in Europe is to come to a standstill in 2012 due to the continent's debt crisis which will no doubt affect the cosmetics industry.

The council predicts the slow down of the sector after reporting a relatively weak 1.3 per cent increase in 2011 and highlights consumer chemicals; a vast area that includes perfume, makeup, sun screen and shampoo as one sector to be affected.

Dr. Moncef Hadhri told CosmeticsDesign-Europe.com; “Consumer chemicals are produced in small volumes but nevertheless represents at least one quarter of EU chemicals sales, representing 12.8 per cent of total EU chemicals sales in 2010."

The report shows the evolution of the EU chemicals trade flows with its major partners outside the EU and stresses Europe’s debt crisis as weighing down sector production - more than initially forecast.

State of play

The EU chemicals trade surplus reached €12.4 billion in the fourth quarter of 2011, up 12.9 per cent compared with the same quarter in 2010. The year-to-date level of trade from January to December 2011 indicates, however, that the EU chemicals industry registered a modest downturn in 2011 after an exceptional 2010.

Domestic demand for chemicals will decline slightly as compared with 2011 as austerity measures in EU member states dampen business orders and inventory build-up remains flat, due to continued weak EU business sentiment,” explains director general Hubert Mandery.

Cefic predicts chemical output during the rest of 2012 will remain nearly 5 per cent below peak levels reached in 2007.

Hadri again points to wide differences in competitiveness among eurozone members who are putting strains on overall economic growth in the currency area.

US growth

Nevertheless the US economy is said to be growing, however Hadri says worryingly high and rising public debt levels could scupper longer-term growth.

Looking to emerging economies, the report says although they are currently the main drivers of world growth, China’s economy could slow as it migrates from an investment-dependent economy to one sustained more by consumer demand.

Recent downward oil price movements should foster long-run business activity, but short-term destocking could occur as firms in the petrochemical supply chain delay orders as they await lower prices.

Possibility of recovery

But it is not all doom and gloom as director general Mandery explains that growth in 2013 is expected to pick up slightly to 2 per cent despite austerity measures and continued high unemployment levels.

The EU economy should stabilise during the second half, partially compensated by overseas demand and a weaker euro boosting eurozone competitiveness. A weaker euro should also help increase EU chemicals exports.”

Offering advice on how the industry can pull things back, he says; “Policymakers must look for ways to solve EU debt problems to boost the economy and bring stability back."

 

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