Amid brisk trading yesterday, the shares of ICI, under the chief operating officer Ronnie Hampel, fell by 34p. They later recovered to close a net 14p down at 753.5p.
The drop reflected the collapse on Friday of a restructuring plan under which Europe's producers would have set up a DM550m ( pounds 220m) fund to shut down excess capacity in ethylene, the industry's most important basic product that is used in plastics and synthetic fibres.
The plan's failure has further unsettled City sentiment towards the chemicals sector. In a circular to clients, Martin Evans of Hoare Govett said: 'Failure to restructure highlights deep-rooted problems in an oversupplied market. At best, the plan would have stabilised ethylene prices.'
Another industry expert said: 'Next year will be another very difficult year and there will not be any significant recovery until 1995, provided there is robust economic growth.'
Many believe the industry's restructuring now depends on joint ventures and asset swaps between producers. These include a mooted link-up between BP Chemicals and Enichem of Italy, and Shell and Himont, also of Italy. But after a year's discussions, the companies have yet to reach an agreement.
The plan aimed to reduce ethylene capacity by 1.5 million tonnes from the 19.4 million it is expected to reach next year. It was envisaged that those companies wishing to close plant would be able to draw on the fund to offset closure costs. However, there was insufficient support within the industry, which has suffered billions of pounds of losses over the past five years.
Petrochemicals is one of Europe's most important industries, providing direct employment to 600,000 people, and 3 million indirectly.
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