Dutch Chemicals Body Says Recovery Still Uncertain

The Dutch chemical industry association VNCI said economic recovery was still uncertain and held  back from giving a full-year outlook, despite reporting a 21.7% rise in first-quarter production.

VNCI said on Wednesday basic chemicals in particular showed a sharp increase in demand as Dutch chemical industry production rebounded close to "standard levels," partly attributing the improved production to buyers building up stocks again.

But it said there might be continued uncertainties in the economic recovery due to higher energy costs, adding that the recovery partly depended on developments in financial markets.

"To what extent the perceived recovery is structural therefore remains uncertain," VNCI chairman Jan Zuidam said.       

The group normally provides a full-year outlook after the first quarter, but a spokeswoman said on Wednesday no outlook was currently being provided due to ongoing uncertainties.

The VNCI last gave an outlook after the first-quarter in May 2008 and said in December last year it hoped 2010 production would be stable compared with the last quarter of 2009.

Earlier this month, the German chemicals trade group VCI lifted its full-year expectations for industry sales after a surge in first-quarter output, but warned the growth would fizzle out in the remainder of the year.

Chemical industry revenues in the Netherlands increased 34.1% in the first quarter as output prices rose 12.7%, but prices and turnover are still about 20% below levels seen shortly before the global financial crisis, the VNCI said.

VNCI chairman Zuidam said although the industry was back on track, many companies are now facing margin pressure due to a rise in energy and raw materials costs, while high regulatory costs could hurt smaller companies.

Mixed signals have been heard from the industry in recent months, with Dutch paints and chemicals firm Akzo Nobel saying last month it was "cautiously optimistic" on the sustainability of the recovery.

But peer DSM warned of uncertainties in Europe, despite saying it expects a good year.

On Tuesday, Statistics Netherlands figures showed Dutch business confidence had turned positive, rising to plus 0.4 points in May from minus 1.4 points in April.

The chemical sector accounts for 7% of employment in the Netherlands.