Chemicals firms prepare as China changes future

By Caroline Jacobs

FRANKFURT (Reuters) - Western chemical companies would be wise to prepare for the future now while profitability is rising, and should bear in mind that China is only a decade from becoming the world's second-largest chemical producer, Accenture consultants said on Friday.

After seven years in the doldrums, the sector's return to growth for the last two years gives most industry watchers cause for optimism in 2006 and 2007 thanks to demand from Asia, Eastern Europe, the Middle East and Latin America.

But the landscape will change further ahead, with China changing from a net importer of chemicals to an exporter by 2015, and as a producer will rank second only to the U.S.

"2006 is the year for the chemicals industry to prepare for the future," Robert Jung, Accenture managing partner for chemicals said at the Reuters Chemicals Summit.

"The industry is at an upturn, profits are high, and we believe they will remain high," he said. "Now you need to use the momentum to invest for the future."

Accenture Ltd (ACN.N: Quote, Profile, Research, Stock Buzz) is a leading U.S. consulting company.

"It will change dramatically for U.S. and European players," Jung said.

Demand is still coming through from China as well as the Middle East, but both regions are expanding their own capacity.  Continued...