Moody\'s: Stable outlook for Russian chemicals sector despite slowing demand in
By: ICN Bureau
Last updated : March 06, 2018 8:18 pm
Despite slowing demand in Europe, the outlook for the fundamental business conditions in the Russian chemicals sector in the next 12-18 months is stable, says Moody\'s in a Special Comment report published today.
Despite slowing demand in Europe, the outlook for the fundamental business conditions in the Russian chemicals sector in the next 12-18 months is stable, says Moody's in a Special Comment report published today.
"While we expect demand from Europe to slow due to ongoing economic
uncertainty, demand in Asia -- particularly China and India -- and Latin
America remains robust," says Julia Pribytkova, a Vice President --
Senior Analyst in Moody's Corporate Finance Group and author of the
report. "We would revise downwards our outlook for the Russian chemicals
sector if Chinese economic growth were to slow to less than 5%," adds Ms
Pribytkova.
Moody's expects that demand for fertiliser will remain strong, supported
by emerging markets and a growing domestic market. Again, the rating
agency anticipates some slowing of demand from Europe, but believes
domestic demand will increase. Risks are posed by cheap feedstocks in
North America, increasing production of nitrogen-based fertilisers in the
Middle East, where input costs are even lower than in Russia, and a
ramp-up in Chinese domestic production. However, Russia remains
competitive on cost.
In addition, Russian chemicals producers will benefit from planned
increases in polymer production. Russian domestic demand currently
outstrips supply, with Russia importing mostly high-value-added chemical
products. Moody's believes demand will be supported by strong growth in
the Russian retail and construction sectors, which the rating agency
expects will continue to grow in the next 12-18 months.
Ongoing investment will benefit the sector, but has delayed deleveraging.
With the exception of NKNK, which completed its large-scale capital
expenditure programme in 2010, players in the sector, such as Acron and
Sibur, won't begin to see a contribution from new projects for another
18-24 months, when Moody's would expect them to deleverage and generate
free cash flow.
Russian chemicals sector
First Published : December 21, 2011 12:00 am