Protel tracks capex project activity across the main process sectors to help suppliers win new business. In this article we aim to present a quick and easy to digest run-down of the main trends and developments in a highlighted sector of the process manufacturing industries in one of our covered regions. For more information on the areas we cover, click here.
(Source – The Chemical Industries Association)
In our previous industry outlook article, we wrote that uncertainty was starting to affect the capex outlook for the UK chemical industry. In the aftermath of the Brexit referendum result, industry sentiment was mixed. It would appear one year on that relatively little has changed.
It is clear among industry figures that while the sector is looking to ensure its global competitiveness and viability in a post-Brexit UK, many have now increasingly begun to adopt a ‘business as usual’ mindset, that has started to see capital expenditure plans begin to accelerate once more.
Overall the outlook has improved since our last chemical industry article. Strong growth in production over the last 12 months of 3.4% has shown maintained demand in the UK chemical industry and bodes well for the outlook into 2018.
Sales and export levels grew, albeit modestly; this is expected to largely continue into 2018, with a slight slowing down possible. When surveyed, 60% of industry figures expected their margins to stay the same, with moderate demand growth predicted.
Brexit is of course still one of the major challenges facing the UK chemical industry. However, we are seeing this impact more on capex plans than production levels, and the industry outlook as a whole for 2018 remains relatively buoyant. Plans for larger scale new capex have slowed over the course of 2017, with more of a focus now being placed on R&D and improvement to preserve the UK’s competitive edge in chemical production.
The reason for these plans being affected is due to three primary areas of concern for the UK chemical industry around Brexit:
Despite some capex slowing, there are areas where investment is being made. In addition to capex investment for new lines, process expansions and relocations, there are other areas attracting significant capex & opex expenditure.
As process equipment installed in the later part of the 20th century is reaching, or nearing, the end of design life, significant levels of investment continues to be committed to extending the life-expectancy of some of these plants. There are investment programmes underway to extend design life by up to 30 years in some cases and these offer significant opportunity to sub-contractors and suppliers. Protel have reported on these types of projects covering the likes of Shell, BP, INEOS & SABIC (full project details available to subscribers).
Local Enterprise Partnerships and similar organisations are actively encouraging inward investment and offering incentives for the manufacturing industry. Examples are:
Maintenance, Repair, Shutdown & Turnaround
These projects hold value and contain opportunity for suppliers as larger sites become flooded with the requisite human resource to complete schemes to tight timescales. There is particular interest for those organisations who specialise in rapid turnaround of projects or have services that aid in this endeavour.
Protel are currently reporting on approximately 255 active chemical projects with a total potential investment value of £7.8bn.
Some of the larger chemical process investments currently being tracked by Protel (data taken from our MyProtel project search engine, full details available to subscribers):
For more information on any of the organisations, projects or trends covered, including key information required to target specific projects, please contact us.