CCR Magazine

You are here  :Home arrow News arrow Two sectorial assessments updated due to impact of lower oil prices
Contact Us Newsletter Signup RSS Feeds

Latest News Headlines


Commercial Credit News


Two sectorial assessments updated due to impact of lower oil prices PDF Print E-mail
Thursday, 16 April 2015

The recent drop in the price of oil has had knock-on effects for company credit risk around the world. Among the 14 sectors analysed, Coface has identified one big winner and one big loser, with the corresponding assessments revised upwards or downwards.

Loser: North American energy sector affected by an imbalance in supply and demand

Following the clear improvement in sectorial risk in North America at the end of 2014 (3 sectors reclassified “low risk”: Textiles and Clothing, Transport and Chemicals), Coface has responded to the fall in crude oil prices by downgrading the Energy sector to “medium risk”.

The output of shale oil and of crude oil continues to rise, whilst prices have halved since the summer of 2014, reflecting excess supply over demand. The oil storage facility in Cushing, the largest in the United States, reached its saturation level of 77% of capacity at the end of March 2015. With the extraction costs for non-conventional oil remaining high (between $50 and $70 a barrel on average), investment is falling, hitting contractors to the oil industry. Layoffs and merger-acquisitions are now taking place within the industry, with the aim of delivering synergies and reducing costs.

“North America has been particularly hard hit by the fall in crude prices which is undermining the viability of many shale oil investment projects. Whilst the increase in risk is not uniform, depending on whether one is located upstream or downstream in the sector, the situation has an impact on all its components, as the price of crude oil determines margins for both producers and operators. So the “majors” are seeing their profitability fall, which in turn affects their relations with subcontractors who then suffer as the “majors” cut back on investment because of the falling returns on investment”, explains Guillaume Baqué, Economist at Coface..

Winner: European Chemical industry regains competitiveness

If there is a sector that is truly benefiting from the decline in oil prices, it is the chemical sector in Europe. Lower prices are helping to reduce the competitiveness gap with US industry (assessed as “low risk”) and to restore margins. The depreciation of the euro, which favours European chemical exports, is also making a positive contribution. In France the sector’s performance improved significantly, with a +1.9% increase in sales in 2014 in the export and domestic markets.

Taking these positive indicators into account, Coface has upgraded the European chemical industry to “medium risk”.

Other sectors are also benefiting from this ongoing trend, but are not subject to revision. This is specifically the case for sea transport, as its production costs fall. Any upgrading in its assessment would seem premature, however, as the continuing economic slowdown in China is dragging demand down. Another sector set to potentially benefit is the European automotive industry as it continues to recover – a recovery symbolised by several successive months of increasing new vehicle registrations.

(Source - Coface Press Release)  


 Forums International Ltd

Forums International Ltd

 Attendance at your first meeting is free of charge, and please quote reference 'CCR2016' to receive the special 10% discount off of your first annual subscription.

Find out more here.

latest issue

CCR Cover

The latest edition of CCR Magazine, the leading editorial publication in the UK credit industry, is out.

Read the latest issue online


CCR is the premier magazine for consumer and credit professionals. It provides an independent voice to the industry, breaking major news stories and running in-depth features.

As a magazine, it works with and campaigns on behalf of the credit industry to promote its importance as a centre of potential profit and business development to the wider business world.

Subscribe to CCR Magazine

CCR World Magazine


Providing information and analysis for thousands of senior credit professionals worldwide, every quarter.

Find out more

GTS Media Ltd
81 Cambridge Road

Registered in England No: 05483197