Expected changes in business conditions

General business conditions

LANXESS expects a faster pace of global growth in 2014 than in the previous year and that the gross domestic product (GDP) will increase by 3.0%. In the industrialized nations, the outlook for growth should improve compared to 2013. We are also projecting a recovery in the eurozone, despite the continued existence of risk factors such as the sovereign debt resulting from the financial and economic crisis. Therefore, we anticipate slight growth of 1.0% for Western Europe. We believe that growth in Central and Eastern Europe in 2014 will be slightly higher at 2.5%. We also expect an improvement on the previous year for the NAFTA region and assume GDP growth there of 2.5%. Given the more positive construction sector environment and expanding industrial output, we believe that the United States in particular could contribute to this growth.

Compared to 2013, we also anticipate better growth perspectives for the emerging economies. In 2014, the Chinese economic region should benefit from the slow recovery of its export markets. However, growth is likely to still be comparatively restrained at 7.5%. We are also forecasting an improvement to India’s economic situation, although momentum is expected to remain muted in the midterm. On this basis, growth in India could be as high as 5.5% in 2014. In our view, Brazil should also post more dynamic growth than in the previous year, with expansion of 3.0 %.

Over and above the aforementioned risks pertaining to Europe, risks in the emerging and developing economies could impact global growth in 2014. Among these are the political instability in Thailand and the possibility of a further escalation in the territorial dispute between China and Japan. Additional risk factors could result from an escalation of the geopolitical crises in Syria and the Korean peninsula.

Expected Growth in GDP
 
Change vs. prior year
in real terms (%)1)
Gross domestic product
     
2014 2015 2016 –2018
       
Americas 2.5 3.5 3.5
NAFTA 2.5 3.0 3.0
Latin America 3.5 4.0 4.0
EMEA 2.0 2.5 2.5
Germany 2.0 2.0 1.5
Western Europe 1.0 1.5 1.5
Central and Eastern Europe 2.5 3.5 4.0
Asia-Pacific 4.5 5.0 4.5
World 3.0 3.5 3.5
1) Rounded to the nearest 0.5%
Data based mainly on forecasts by IHS Global Insight in January 2014

Future performance of the chemical industry

Against the backdrop of possible global economic recovery, we are assuming that chemical industry production will also trend better than in the previous year. We are expecting growth of 4.0% in 2014. In our view, the emerging economies in particular will contribute to this growth. We believe that growth of the Chinese economic region will come in slightly below the prior-year level at 7.5%. In our estimation, India should see growth above the previous year at 7.0%. We expect growth in the NAFTA region to be roughly level with the prior year at 3.0%. Production in Western Europe is likely to increase only slightly, by 1.0%. By contrast, growth in Central and Eastern Europe should be somewhat stronger at 3.0%.

Expected Growth in Chemical Production
 
Change vs. prior year
in real terms (%)1)
Chemical production
     
2014 2015 2016 –2018
       
Americas 3.0 3.0 3.5
NAFTA 3.0 2.5 4.0
Latin America 4.0 3.5 3.5
EMEA 1.5 2.5 2.5
Germany 1.5 1.5 1.0
Western Europe 1.0 1.5 1.5
Central and Eastern Europe 3.0 4.0 3.5
Asia-Pacific 6.0 7.0 6.0
World 4.0 4.5 4.5
1) Rounded to the nearest 0.5%
Data based mainly on forecasts by IHS Global Insight in January 2014

Future evolution of selling markets

According to our forecasts, the global tire industry will increase production slightly on the previous year for growth of 4.0%. We expect Asia to be the strongest region with growth of 5.5%. The Chinese economic region will contribute to this growth with expansion of 8.0%. Production in the ASEAN region should also substantially increase. We expect Brazil to trend similarly to the Asian markets and post growth of 5.5%. Compared to the prior year, we anticipate recovery and a 3.0% increase in production in the NAFTA region. In our estimation, Western Europe will see a marked negative trend resulting in a further deterioration over the previous year. We believe production there will decline by 5.5%.

The automotive industry is expected to post more dynamic growth in 2014 than was the case in 2013. Overall, we forecast growth of 5.0% in global automobile production, although this is likely to differ very widely from region to region. In this industry, too, we expect Asia to deliver the strongest momentum with growth of 7.0%. We see the engines for this growth in the Chinese economic region with expansion of 11.5% and the ASEAN region with 11.0%. Automotive production in Brazil could increase by 4.0% in 2014. For the NAFTA region, we are forecasting slightly weaker expansion of 3.0% compared to the previous year. We are again expecting a drop in production in Western Europe. However, the decline should be slightly lower than in the previous year at 2.0%, indicating that the industry may have reached the bottom of its cycle. By contrast, we are projecting growth of 7.5% for Central and Eastern Europe.

The market for agrochemicals should remain robust and post growth of 3.0%, although performance is likely to be slightly below the prior-year level. With an increase of 4.0% in 2014, Latin America is expected to post the strongest growth. We are anticipating average growth of 3.0% for both Asia and the NAFTA region, which would be below the prior-year level – especially in the NAFTA region. For Europe we are again projecting slight growth of 1.0%, which would be roughly on a par with the previous year. In our view, the demand for food and animal feed will continue to be the main driver of growth in agrochemicals.

Global growth in the construction industry in 2014 is expected to be more dynamic at 4.0%. We believe that demand will come from Asia in particular, with an increase of 6.0%. Above all, the Chinese economic region and India should contribute to this development. We believe that recovery will continue in the NAFTA region, where growth could reach a mid-single-digit percentage. By contrast, Europe is expected to post only slight growth. We believe that the pace of growth will increase again in Central and Eastern Europe in particular.

Expected Evolution of Major User Industries
 
Change vs. prior year
in real terms (%)1)
Tires Automotive Agrochemicals Construction
 
  2014 2015 2016 –
2018
2014 2015 2016 –
2018
2014 2015 2016 –
2018
2014 2015 2016 –
2018
Americas 3.0 4.0 0.5 3.5 4.5 3.0 3.5 3.0 5.0 6.5 6.5 3.0
NAFTA 3.0 3.0 (1.0) 3.0 4.0 2.5 3.0 2.5 6.0 7.0 7.0 3.5
Latin America 3.0 7.0 5.0 4.5 6.0 4.5 4.0 3.0 4.0 4.0 5.5 3.0
EMEA (0.5) (0.5) 1.5 3.0 4.0 5.0 2.5 3.0 3.0 1.0 2.0 2.0
Germany 0.0 0.5 0.0 (2.0) 1.5 2.5 1.0 0.5 0.5 2.0 2.0 1.0
Western Europe (5.5) (7.5) (2.5) (2.0) 2.0 4.5 1.0 1.5 1.5 0.0 1.0 1.5
Central and Eastern Europe 4.5 4.5 4.5 7.5 6.5 5.0 1.5 2.5 2.5 2.5 4.0 3.0
Asia-Pacific 5.5 7.0 6.5 7.0 7.5 6.0 3.0 3.5 3.5 6.0 6.5 5.5
World 4.0 4.5 4.5 5.0 6.0 5.0 3.0 3.0 3.5 4.0 5.0 4.0
1) Rounded to the nearest 0.5%
Data based mainly on forecasts by IHS Global Insight, LMC and other sources in January 2014