Moody’s Investors Service 1 Sept upgraded its outlook for the North American and European chemicals sector to stable from negative, indicating that the credit ratings agency “[does] not expect business conditions to change significantly” in the near future. “The North American and Europe, Middle East and Africa (EMEA) chemical industry’s EBITDA is likely to rise modestly through the end of 2017, as the benefits of modest global growth, acquisitions and cost-cutting programs are partially offset by further deterioration in a few commodity sectors,” Moody’s says. The slowdown in China is the key issue impacting commodity chemicals. Moody’s expects EBITDA for North American and European chemical makers to rise by about 1-2% through early 2018. The increase is expected to be driven by solid performance by diversified and specialty manufacturers, while commodity chemical makers lag behind. In particular, the housing and automotive markets in the US, and strong consumer demand, will drive growth, while European companies will benefit from currency impacts and restructuring. Agchems are expected to remain weak, and the ethylene chain will be hit by new capacity additions in the US – although as the US is now a low-cost producer, most firms are expected to remain profitable. Other commodities, such as chlor-alkali, titanium dioxide, and methanol, are showing signs of bottoming out, although the outlook is hardly rosy. A handful of commodities, such as styrene and polypropylene, have more positive outlooks, with polypropylene in particular remaining tight. China, however, is a “key risk,” according to Moody’s. “China is unlikely to provide an uplift to the chemicals industry n 2017 as it did during a period of demand weakness following the Great Recession,” Moody’s says. Lower growth in China has already put pressure on commodities due to overcapacity, and “any meaningful slowdown” would cause a rise in Chinese exports, putting further pressure on margins for commodities and intermediates, Moody’s says.Meanwhile, Moody’s expects M&A activity in the industry to “remain brisk.” Low organic growth and low interest rates are driving M&A transactions, although private equity firms will continue to be shut out of large deals due to high valuation multiples, Moody’s says. Sourced from Moodys website, Chemical Week, ACC Website and Platts.