The European Chemical Industry Council (Cefic) predicted the European Union (E.U.) chemical industry will grow 9.5 percent during 2010, with a 2 percent growth rate expected in 2011 compared to 2010, according to a report by Industrial Info Resources. The industry is expected to experience a period of consolidation toward the end of this year and early next year, thus explaining the lower growth rate forecast for next year.

The chemicals sector suffered under the global financial crisis and, excluding pharmaceuticals, experienced a sudden drop in production at the end of 2008 and during the first quarter of 2009. Commodities chemicals were negatively affected by underlying market factors, reports Industrial Info.

Using the production figures from 2005 as a base index, the industry suffered a 20 percent fall in production for the first quarter of 2009 when compared with the same period in 2008, which was followed by a gradual growth. Despite this recovery, the end of 2009 still showed a fall of 11.3 percent compared to 2008, and Industrial Info reports that Cefic anticipates that it will take another two years to reach the previous high levels.

Basic chemicals are registering the fastest growth recovery rates, but overall output levels are still well below rates experienced previously. According to Industrial Info, Cefic attributes much of the increase in production rates to replenishments of inventory levels and, as such, it expects the growth rates to slow until the market demand has been rebuilt.

Cefic statistics show that the production output is expected to show positive growth rates over 2010, with polymers expected to increase production by 14.5 percent compared to 2009 and petrochemicals and basic inorganics experiencing 11 percent growth. Specialty and consumer chemicals are expected to experience slightly lower growth rates of 8.5 percent and 6.5 percent, respectively.

However, these growth rates are forecast to slow to a maximum of just 2.5 percent for specialty chemicals, with polymers, basic chemicals and consumer chemicals expected to record growth rates of 2 percent, while basic inorganics and petrochemicals are expected to show the lowest growth rates of 1 percent.

Despite the gradual improvement in the global economy, there is still a degree of uncertainty in the European community; consequently, production capacity utilization levels in the chemical industry are below normal levels. The chemical sector is sensitive to economic uncertainties, and further economic downturns could have a detrimental effect on the production forecast, reports Industrial Info.