Risk of recession has increased in the Finnish chemical industry

The expectations of the chemical industry deteriorated sharply during summer 2008. Production in the Finnish chemical industry is still increasing, although the outlook for many customer sectors has deteriorated.

Fairly good figures but sour prospects

According to the Volume Index of Industrial production, total production in the Finnish chemical industry was almost 6% higher during the first seven months of 2008 than during the corresponding period in 2007. The Research Institute of the Finnish Economy (ETLA) has issued a forecast according to which the Finnish chemical industry will grow by 2.5% in 2008. In 2009 the growth rate is expected to fall to 1%.

According to the Business Climate Survey of the Confederation of Finnish Industries, the expectations of Finnish companies in the chemical sector declined sharply in summer 2008, positioning the chemical industry among the most pessimistic sectors of Finnish manufacturing. Still, the chemical companies expect production to increase and employment to stay at present levels.

Basic chemicals: no growth in sight

Production volumes in the basic chemical industry have been high during recent months. Still, production of pulp and paper started to decline a year ago and the decline has accelerated recently. If this recent trend continues, it will have a negative effect on demand for pulp and paper chemicals.

Long growth trend in paints to a halt?

Production of paints and colouring materials has been boosted by the favourable situation in building construction and in the metal and engineering industry. It seems that in the building construction sector the growth trend has come to a halt. The consequences may soon be reflected in demand for paints. Production is still growing or staying on a high level in sectors most important for the demand for industrial coatings.

Growth in the plastic products industry stalled

Production in the Finnish plastic products industry grew rapidly after autumn 2007. The upward trend stalled during the first quarter of 2008. Now it seems that production has turned down. Declining production in the building materials industry will have an impact on demand of plastic building materials. The growth rate of private consumption will be lower in 2008 than in 2007. This will cut demand for plastics packaging materials.

The outlook is based on material from the Economic Outlook of the Finnish chemical industry, which was published on 1st October 2008. The Finnish chemical industry covers petroleum and coal products, chemicals and chemical products and rubber and plastic products.

Additional information

Kari Teppola, tel. +358 9 1728 4315
Pasi Ahde, tel. +358 9 1728 4307

Economic Outlook of the Finnish chemical industry September 2008