New Delhi [India], December 14 (ANI): In its 2024 global sector outlook report, Fitch Ratings has forewarned that global chemical issuers will grapple with continued weak conditions due to persistent oversupply and sluggish demand.
The ‘Neutral’ sector outlook provided by Fitch indicates an expectation that conditions will see no significant improvement from the bottom-of-the-cycle levels observed in 2023.
According to Fitch, the demand for chemical products is anticipated to remain restricted, influenced by economic slowdowns in major economies impacted by inflation and high interest rates.
China, a key player in the chemical industry, is projected to undergo a slower-than-expected recovery, adding to the challenges faced by the sector.
The substantial increase in global capacity in recent years has intensified competition among chemical producers, further squeezing operating rates.
This heightened competition is expected to prompt the closure of uncompetitive assets, particularly in regions burdened by elevated energy or feedstock costs.
Key risk mitigates include regional diversification and cost competitiveness. Producers in Europe and Latin America, however, find their profit margins under strain due to imports from regions with advantageous conditions, such as the US, the Middle East (benefiting from competitive gas prices), and China (with spare capacity in modern large-scale plants).
The chemical industry witnessed a series of negative rating actions in 2023, coupled with a higher share of Negative Outlooks, underscoring the ongoing challenges faced by chemical companies.
Fitch Ratings urges caution as global chemical issuers navigate through a complex landscape of oversupply, economic uncertainties, and intense competition, emphasizing the need for strategic adaptation to sustain and thrive in the evolving market. (ANI)
