Market Monitor - Chemicals performance - Netherlands

Market performance snapshots

The Netherlands

• Growth expected to pick up again in 2015
• Higher investments than in previous years
• Growing competition from the US and China

Chemicals is one of the leading business sectors in the Netherlands and is part of one of the strongest chemical clusters in the world: the interconnected Antwerp-Rotterdam-Rhine-Ruhr Area (ARRRA). About two thirds of sales account for basic chemicals (such as petrochemicals, fertilizers and polymers). Due to its economic importance, the Dutch government has named the industry one of the national long-term growth champions.

According to the Dutch chemicals association VNCI, in 2014 chemicals businesses benefited from a weaker euro exchange rate and the lower energy prices. The chemicals industry recorded modest growth in the first three quarters of 2014, as production increased by more than 2%. However, Q4 of 2014 was not that positive, especially due to several maintenance stops in December. Turnover, production and margins decreased in the last three months of 2014. Overall production decreased 0.5% and turnover declined 3% in 2014.

However, in Q1 2015 the chemicals sector recorded a turnaround, as production increased by more than 4% compared to Q4 of 2014 and exports increased again. As a consequence, business confidence has improved, and more chemicals companies expect higher production and increased sales prices in 2015. Additionally, it is expected that Dutch chemicals businesses´ investments will increase in 2015 compared to 2014. This is a positive sign, as investments made in the last couple of years were considered to be insufficient. In 2013 and the previous years, the chemicals industry invested maximum EUR 1.5 billion per year, while the necessary level of investments should have been EUR 2 billion in order to tackle necessary innovations.

At the end of 2014, the Dutch Minister of Economic Affairs and representatives from the major Dutch chemicals companies agreed on measures to strengthen the sector´s competitiveness.

The package includes measures to reduce governmental regulatory burdens and further strengthen regional chemical clusters.

Dutch chemicals companies have diversified their exports to overseas growth markets, which makes them less dependent on economic developments in Europe. The sector also benefits from previous cost saving measures, and lower energy prices.

All this makes the Dutch chemicals industry moderately optimistic about their future foothold in the global market. However, competition especially from Chinese and Middle East chemicals businesses is growing, and strongly oil-based segments feel the competitive disadvantage to their US competitors, which benefit from lower production costs due to cheap shale gas and oil. This hampers further investment in Dutch facilities and continues to add pressure on businesses´ margins.

The level of payment delays and insolvencies has been low in 2014, and this is expected to remain the case in 2015. Businesses in the sector generally show low levels of indebtedness, and banks are willing to provide loans. Therefore, and due to the improved business outlook for 2015, our underwriting stance remains generally open for this sector. We monitor business performance by seeking the most recent financial information from buyers and asking our customers to notify us of their trading experience, orders on hand and outstanding payments.