Business conditions

GDP and Chemical Production in 2013
Graphic: GDP and Chemical Production in 2013

The economic environment

Global economic growth in 2013 was relatively modest at 2.1%, which was slightly below the prior-year level. Europe saw weak development overall given the need to consolidate public budgets, coupled with restrained consumer spending. However, the situation varied slightly from region to region. In Western Europe, the economy stagnated in light of zero growth. Germany’s gross domestic product grew by just 0.4%, while the economies of Central and Eastern European countries expanded slightly by 1.3%. The United States was unable to fully exploit its growth potential because of the renewed budget crisis and the automatic spending cuts this entailed. Nevertheless, the country contributed to economic growth of 1.7% in the NAFTA region. On account of the weak growth in the industrialized countries, the emerging economies also posted more modest growth rates. The Chinese economic region expanded by 7.3%, buoyed by incentives to counter a temporary phase of weakness in the second quarter. In India, the pace of economic development slowed against the backdrop of lower consumption and declining business confidence. Nevertheless, the economy still expanded by 4.6%. Brazil posted economic growth of 2.5%, supported by a rise in investment but only a moderate increase in consumption.

The fluctuations in the exchange rate between the euro and the U.S. dollar were less pronounced in 2013 than in the previous year. With an expansionary monetary policy and extremely low interest rates in both currency zones, the euro started the year at US$1.32. Until mid-year it moved between US$1.28 and US$1.36. While the prevailing conditions remained largely unchanged, the dollar began a continuous slide against the euro, which was worth US$1.38 at the end of the year. This represented a decrease in the value of the U.S. currency of around 4.5% in 2013. The euro’s average rate for the year was US$1.33, up from US$1.29 in the previous year. Due to the regional positioning of our business, a weaker U.S. dollar generally has a negative effect on our earnings. Centralized hedging activities limit any impact that cannot be neutralized by ensuring that production and sales take place in the same currency area.

Value of the U.S. Dollar against the Euro
Graphic: Value of the U.S. Dollar against the Euro

On the raw material markets, prices declined over the course of the year. We are particularly affected by the prices of petrochemical raw materials, as they have a material impact on our production costs. The price of our most important strategic raw material, butadiene, declined substantially against the prior-year period – especially in the middle of the year – reaching its lowest level in September . Until the third quarter, price decreases in Asia were more pronounced than in Europe and North America, so prices trended more favorably toward Asia during this period.

The chemical industry

The general economic trends had an impact on the chemical industry as well, where production grew by 3.5%. The Chinese economic region posted the strongest growth at 8.3%, whereas expansion in other regions was somewhat more restrained. Against the backdrop of the ongoing positive situation in the NAFTA region’s end markets, production there increased by 3.3%. In Brazil, production grew by 1.7%, just slightly more than in the previous year. In Western Europe, on the other hand, the customer industries for chemical precursors were impacted by a weak economic dynamic, resulting in a decline of 0.2%.

Evolution of major user industries

In contrast with previous years, global tire production increased by just 3.1% in 2013. This growth was centered on the Chinese economic region, which expanded by 9.3% due to higher exports to the United States following expiration of punitive import tariffs. In the NAFTA region, production declined by 2.0%. The trend in the original equipment business was largely in line with automobile production. Outside Europe, the market for replacement tires in general proved robust. In the heavy-duty commercial vehicle sector, demand for replacement tires declined in the NAFTA region but expanded in Europe and Brazil.

The pace of growth in global automotive production slowed significantly to 2.7% in 2013, compared with 4.9% in 2012. The Chinese economic region was the strongest performer with an increase of 12.0%, which significantly contributed to expansion of 4.0% overall in Asia. By contrast, India posted very weak development, with production declining by 12.6%. Latin America and the NAFTA region saw growth rates of 7.5% and 4.7%, respectively. With many countries in the eurozone facing the need to consolidate public budgets and reduce debt levels, automotive production in Western Europe remained weak and shrank by 2.3%.

Global production of chemicals for the agricultural industry expanded by 3.4% due to continued high demand for agricultural products for the manufacture of food, animal feed and biofuels. Output in the NAFTA region was up 7.3% on the weak prior year, which had been impacted by drought. Whereas Latin America posted growth of 2.5%, Asia expanded output by 3.5% in line with the overall market trend. By contrast, production in Western Europe dipped slightly by 0.5%.

The construction industry worldwide posted growth of 2.6%. The Chinese economic region especially saw positive development, with expansion of 8.8% driven by infrastructure projects. Compared to a weak prior year marked by the crisis, the construction sector in the NAFTA region grew by 3.1%, despite cuts in public budgets. Residential construction in particular proved robust. In Latin America, too, construction was up 2.9%. By contrast, Europe continued to feel the effects of the financial and sovereign debt crises, which saw the construction industry in Western Europe contract by 1.3%. At 5.8%, the decline was even more pronounced in Central and Eastern Europe.

Evolution of Major User Industries in 2013
 
Change vs. prior year
in real terms (%)
(projected)
Tires Auto-
motive
Agro-
chemicals
Con-
struction
         
Americas (0.2) 5.3 4.5 3.1
NAFTA (2.0) 4.7 7.3 3.1
Latin America 5.0 7.5 2.5 2.9
EMEA (0.6) (2.4) 1.8 (1.2)
Germany (0.2) (1.7) (4.1) (1.0)
Western Europe (4.1) (2.3) (0.5) (1.3)
Central and Eastern Europe 4.6 0.9 7.4 (5.8)
Asia-Pacific 5.8 4.0 3.5 5.7
World 3.1 2.7 3.4 2.6