Contact:
Giedrius Čiupaila, Head of Marketing and Communications, PricewaterhouseCoopers, tel. +370 5 239 2300
26 May 2004
Demand for chemicals used in consumer products such as cosmetics, household detergents and paint is set to rise as the economy in the newly expanded European Union is stimulated, according to a new report by PricewaterhouseCoopers.
With the entry of the 10 new member states on 1 May 2004, the EU's internal market expanded significantly. Significant restructuring has already occurred in the chemical sector and will continue in the Central and Eastern European region.
The report, entitled
Looking Forward: The Impact of EU Enlargement on the Chemical Industry, takes a look at the current structure and performance of the sector, focusing on the new member states; how the enlargement process has already affected companies; and key opportunities and challenges.
Chris Butler, PricewaterhouseCoopers Senior Partner for Lithuania, said:
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"Producers operating in Lithuania and other new member states are looking at an excellent opportunity to capitalise on their central location and growing local markets. At the same time they face a number of challenges, the most notable being the need to comply with EU environmental regulations." |
Sector outlooks:
- Polymers - although most companies located in the new member states that operate in the polymers sector are fairly small, many should be able to hold their own in domestic markets, in large part, as they are often able to translate low labour costs into fairly competitive prices.
- Fertilisers - producers have suffered from poor market conditions in the 1990s and demand in this sector remains fairly low.
- Man-made fibres - production in the new member states will need to modernise in order to compete with larger operations in the former EU-15 and Asia.
- Detergents - a number of multinational concerns have entered the detergents arena and have achieved significant market share in a number of the new member states. While larger indigenous companies in this sector may still be able to compete, many of the small and medium-sized companies face more considerable competitive challenges.
- Paints and coatings - the market is mature and the sector has already experienced some consolidation. Demand is expected to grow, and a key issue is whether local producers or locally established international producers will capture most of the expected market growth, or whether further new entrants appear in the market.
Many chemical producers in the new member states are competitive in their domestic markets, despite the fact that they have ageing plants with much smaller capacities than those in the EU. The bigger players have also started to consolidate their operations, but some large companies still need to be restructured and there are many small or medium-sized enterprises that could face a very tough future. None of them can rely indefinitely on lower wage rates to ensure they remain competitive.
The rapid growth of local markets, the competitive threats posed by producers in the former EU-15 and elsewhere, and the continuing restructuring of the chemical sector suggest that further consolidation is likely in the future. But the biggest challenge the sector faces is meeting the EU's rigorous standards on pollution and protection of the environment - and, here, there is much still to be done.
Listed companies in the accession territories will also need to use International Financial Reporting Standards (IFRS) from January 2005.
ENDS
Notes to Editor
- The full report entitled Looking Forward: The Impact of EU Enlargement on the Chemical Industrycan be downloaded at: http://www.pwc.com/chemicals.
- „PricewaterhouseCoopers" (www.pwc.com) provides industry-focused assurance, tax and advisory services for public and private clients. More than 120,000 people in 139 countries connect their thinking, experience and solutions to build public trust and enhance value for clients and their stakeholders.
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