As reported by Atradius, Chemicals appears to be a strong performer, with continued growth in most sub-sectors, good payments performance and relatively low default rates. And, while being sensitive to the volatility of the price of a commodity and of global economic development, firms in this sector generally benefit from higher entry barriers than in other industries. Demand for chemicals is high across all sub-sectors and among all consumer segments. However, there are some signs of change on the horizon, especially for European companies: some segments are starting to struggle due to growing international competition, especially from China and the USA. The shale gas boom and the surge in liquid derivatives has transformed the US chemicals sector into one of the lowest-cost producers in the world, benefiting from lower prices of energy resources. putting pressure on selling prices. At the same time, European chemical companies are faced with the fact that the level of capital investment in American chemicals has steadily increased in recent years, with a significant competitive advantage over competitors.
In the international scenario, Belgian chemicals benefit from a very high degree of specialisation. They include a wide range of segments, from basic organic and inorganic products, biotechnology, agricultural products, paints, glues, detergents, cosmetics, rubber and plastics, representing about 23% of the Belgian manufacturing sector, with approximately 87.000 people employed directly and 144.000 in related industries. Over 75% of production is exported (30% of total exports). According to theEssence Association, during 2014 the turnover of Belgian chemical products increased by 2,4%, to 64,2 billion euros, thanks to both increased volumes and higher selling prices. Investments amount to 1,78 billion (30% of the total) with an average of payments equal to 30 days and a relatively low level of insolvencies and expected to remain so also in the course of this year (below 6%) . At the same time, level of growth set to continue throughout 2015, aided by euro weakness, lower oil prices and rebounding eurozone economies. However, despite the solid momentum, the Belgian chemicals sector also holds some critical points: competitiveness is weakening due to the fact that labor costs are among the highest in Europe and competition from China has increased. At the same time, high dependence on exports makes Belgian chemicals susceptible to international political risks, such as a potential further escalation of the Ukraine crisis and in the Middle East, or a return of the eurozone recession (be it a Greek exit or a deflationary spiral with a liquidity trap).
