The indirect effects of the US sub-prime crisis along with higher oil prices and the weak dollar will combine to make 2008 a very tough year for chemicals. These tough times could, however, provide a perfect opportunity for larger cash-rich companies to prey on smaller struggling companies to make some bargain acquisitions. Manufacturing is already slowing in both the US and the EU -almost 85% of what the chemicals industry produces is sold to the manufacturing sector. In the UK, this slowdown could see the chemicals sector lose as many as 4250 jobs, according to David Pattison, chief analyst at Plimsoll Publishing. Tobias Mock at Standard and Poor's is more upbeat, however, predicting another strong year for chemicals in 2008, albeit somewhat weaker than 2007. He does agree, though, that the US sub-prime mortgage crisis could have significant indirect effects on the industry. This is something that needs to be watched very carefully, he said. 'At the moment, Lucite is the only Europe based chemical company for which S&P sees a risk that the weaker housing market in the US could have an impact on its rating.'
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