Industrial Investment Policy Big Money to Make a Come Back in Europe?

Editor: Dominik Stephan

Industrial investments return to the old world: As Western Europe returns to growth, especially renewable energy and technology industries offer billion-dollar growth opportunities, a new study indicates.

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The signs for industrial investment in Europe are good
The signs for industrial investment in Europe are good
(Picture: PROCESS India)

While renewable energies profit from a transformational shift driven by EU energy and climate policy, the chemical industry is lagging behind: HIS expects a marginal growth for chemical producers in 2014. While especially German companies are slightly optimistic about their market perspecticves, the industry as a whole has to adapt quickly to face remain competitive.

Over time, theEuropean chemical industry has seen a gradual change in its fortunes, with growing costs and a competitive market with many players. Faced with uncompetitive energy prices and stagnating demand, European chemical companies must adapt quickly or suffer the consequences. “European chemical companies will face continued tough competition from Middle Eastern, Chinese and, increasingly, US producers benefiting from cheap energy and feedstocks,” said Michael Smith, vice president at IHS Chemical.

Confidence Returns to European Chemical Industry

The German chemical industry’s outlook is slightly more optimistic than the rest of Europe. “Even though growth is expected to occur at a slow pace, German producers are more optimistic than others in Europe,” John Page, vice president of consulting at IHS Chemical said.

“This optimism is largely because the German economy is one of the strongest economies in the region, the country has a much larger and more robust manufacturing base than the rest of Europe, and their facilities are more up-to-date from a technology standpoint than the rest of Europe. Most companies expect the German chemical business to pick up in the coming months, also in part due to increasing domestic demand,” Page said.

“At IHS, we expect an overall increase in German chemical production of 2 percent for 2014, so we are talking about sluggish growth here, but it is growth nevertheless,” he said.

2030 EU energy and climate policy targets push energy sector reform

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The EU’s ambitious 2030 target of 40 percent greenhouse gas reduction in Europe requires continued investment in renewables and a fundamental transformation of the European energy sector amid rising concerns over subsidy costs and competitiveness. By 2030, renewable capacity in Europe is expected to grow by 297GW led by the UK and Germany.

US Shale Gas adds Pressure on Europe

The shale gas boom has shifted the global context for European energy policy, with low US energy prices adding further pressure to reduce costs of the European decarbonisation process.

Technology improvements and changes in policy and market design are necessary to support the build out and integration of renewables in a cost-effective manner in Europe as the decarbonisation policy has resulted in rising energy prices for end consumers.

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