Europe’s chemical industry will see further erosion in its share of the world market, according to Cefic.
At today’s Cefic general assembly in Florence, Italy, outgoing Cefic president Jean-Pierre Clamadieu, CEO of Solvay, said that in the past 20 years EU chemical sales increased by almost 60% but the region’s share of the world total has fallen by half. EU chemical sales registered a third consecutive year of negative growth, down from €536 billion ($598.9 billion) in 2014, to €519 billion last year, and the overall share of the world market decreased from 17.3%, to 14.7% during the period.
The decline will continue in the next 15 years when Europe’s share of the expected total of €6.3 trillion is expected to drop to 12.0%. China will continue to dominate, raising its share from 39.9% in 2015, to 44.0% in 2030. Most of the investment is going to other world regions, Clamadieu says. In 2005-15, industry capital investment in the European Union rose by €3 billion, to €20.7 billion, and investment in the United States more than tripled from €9.8 billion, to €32.5 billion and in China it rose from €14.4 billion, to €95.6 billion.
EU spending on R&D is increasing but intensity is still very low, Cefic says. The industry invested €9.1 billion in R&D in 2015, compared with €7.2 billion in 1993. However, last year’s R&D spending as a percentage of sales dropped to 1.8%. It accounted for 2.6% of sales in 1993.
Europe needs to stay competitive, said Cefic director general Marco Mensink. “What we are seeing is what we’ve predicted for many years—Asia’s fast-growing market, coupled with the US shale boom, means that Europe needs to act fast to stay competitive,” Mensink says. He also highlighted how regulatory and energy costs hinder profitability. “Fuel, feedstock, and energy costs are Europe’s Achilles’ heel—making ethylene costs twice as much in the EU compared with the US, despite low oil prices,” he says.
However, it is not all bad news. Europe’s chemical companies will benefit from China’s robust growth trend, because it also represents an attractive market for exports and investment. “Meanwhile, despite challenges, the market is giving signals that the EU chemical industry continues to climb out of the post-global recession slump, posting a strong extra-EU net trade surplus of €43.3 billion in 2014 and now €44.8 billion in 2015. Overall, Cefic predicts modest growth for the remainder of 2016 and beyond,” Mensink says.
Newly elected Cefic president, Hariolf Kottmann—also CEO of Clariant—says that the industry needs to improve the way it operates, to improve its competitiveness. “The center of gravity of our industry has been moving continuously to the east with the Chinese market playing a dominating role today,” Kottmann says. He emphasizes the importance of innovation for Europe to remain competitive and says that at Clariant innovation is a top priority. “Clariant spends 3.5% of sales on R&D, which is a lot of money for such a small company,” he says.
A separate debate yesterday was devoted to the REACH and CLP legislation. Geert Dancet, executive director of the European Chemicals Agency (Helsinki, Finland) says that REACH and CLP have brought benefits to industry and citizens through better supply-chain communication and an improved worldwide reputation of EU suppliers as well as higher consumer confidence. However, during the current and final phase of REACH registration, due to be completed by 31 March 2018, it is paramount to ensure fair treatment of SMEs, Dancet says. He adds that it is too early to tell what difference Brexit will mean to REACH.
By Natasha Alperowicz
Source: Chemical Week
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