As another EPCA dawns on the Specialised Products market we thought it prudent to revisit the issue of the European region’s competitiveness and how it is performing against the ever present threat from the US and the dominance of the Middle East.
Over the last twelve months we have heard time and time again from industry figureheads that the European Chemical industry needs to diversify, consolidate and exploit new avenues to raise its global competitiveness. Jim Ratcliffe (Chairman of INEOS), no less, published an open letter to the outgoing EU Commission President José Manuel Barroso complaining about the lack of efficient policy making and how Europe will continue to lose out to the US and the Middle East until such a time as this fact is realised and steps are taken to raise the game.
Perhaps we could view this open letter as a ‘starting gun’ for a number of successive announcements from European based producers that they will be importing US based shale gas under long term time charter agreements with gas carrier operators. INEOS, who were the first, have six 27,500 CBM vessels being built, whilst Borealis has one 35,000 CBM and SABIC Europe have three 36,000 CBM. The fact that European producers are willing to do this shows how much of a theoretical cost advantage there is. Indeed, there are other measures being taken by European producers. INEOS and Solvay are consolidating their Chlor-Vinlys businesses to form INOVYN, ExxonMobil are investing €1 billion into their Antwerp refinery and Total are following suit with a similar level of investment in their Antwerp based operations. Whilst BASF have confirmed that they are to commission a new furnace in their joint venture with Total at their steam cracker in Port Arthur, Texas, increasing annual production to 1 million tonnes per year and have subsequently converted the cracker to consume NGLs therefore increasing flexibility.
The fact that these developments have occurred should not come as a surprise. CEFIC have said in their most recent ‘Chemical Trends Report’ that overall chemical production dropped by 1.2% in Q2 2014 compared to the same quarter last year, and is still 6.7% below the 2007 peak level. However, the first six months of 2014 show 0.6% growth year on year. This latter figure perhaps rings true with a stagnant yet modest growth forecast for 2014. Specifically, EU petrochemical production fell by 6.5% in Q2 2014 compared with Q1 2014, the largest production decline since Q4 2008 (measured on a Q-o-Q basis). More recently the German Chemical Industry Association, the VCI, has said that the downward competitiveness of Germany’s chemical industry has become steeper since 2008. A report commissioned by the VCI presented by its outgoing president says that “Germany is an attractive location for the chemical industry. But, the truth for the past two decades is that we have been losing share in global chemical trade and global chemical production. Politicians and the general public should realize that we are in a crucial phase as regards our international competitiveness.”
This quote has a lot of truth to it; Germany is an economic power house and has been a centre for chemical innovation and technology. Indeed, Europe as a whole has been a great innovator in this field so these figures and report are nothing short of depressing. And so, as EPCA 2014 begins we are left with the familiar sounding klaxon drone that if the European chemical industry wants to compete it needs to raise the stakes but to do that the EU needs to grease the gears and do some meaningful policy making!