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Chemicals 2015

Chemicals 2035: The 5,600-Billion-Race is On

| Author / Editor: Dominik Stephan* / Dominik Stephan

Five Against Europe

Even when the years of unabated boom are over and the growth curve in Asia levels off, the European chemical industry will find it difficult to fight back because the market trends that promote the rise of booming markets have a highly negative effect for Europe.

  • Raw materials: Europe cannot keep pace with the low cost energy prices in the US or the strong integration in downstream in the Middle East. And the new markets leave nothing to chance. Companies like Sabic and OCI are not only building enormous petrochemical clusters in immediate vicinity of the sources of raw materials, but are also securing additional market shares with strategic purchases and investment projects. Even the European heavyweights are looking overseas. BASF is planning a methane-based propylene production in USA with another US $ 1.4 billion.
  • Chemical clusters are growing worldwide: New world scale production sites are making emerging markets less and less dependent on imports. In India, probably by 2016, more polyethylene will be exported than imported for the first time. China on the other hand is reaping benefits of a development started ten years ago: Megaplants and an integrated downstream value chain along with a policy focus on import independence will ensure plenty of gains from exports for the country.
  • Unequal framework conditions: The game for the big treasure trove of the international chemical industry may be the same — but the rules are not. To produce chemicals in the EU you have to deal with extensive rules for safety, environmental and labour protection. Since 2008 alone, the scope of the branch specific rules and regulations has grown by more than half, estimate industry experts.
  • The industry in the EU is shrinking: The manufacturing industry in particular cannot keep up with the growth rates worldwide. Europe’s economy is thus focussing on services. With the migration of textile companies or consumer goods manufacturers to Asia, the chemical industry has lost important customers. In response, chemical companies in EU are increasingly focussing on branches like pharma, agricultural chemistry and life sciences which promise a higher value creation.
  • Changed demand: With changed requirements for sustainability, other global markets and value chains and chemicals-on-demand, the chemical industry simply cannot continue along the old line. The chemical industry is faced with the fourth age — a development that could see Europe as a front runner again, experts say. However, the groundwork must be laid now.

The industry in the EU is shrinking. The manufacturing industry in particular cannot keep up with the growth rates worldwide. Europe’s economy is focussing on services. With the migration of textile companies or consumer goods manufacturers to Asia, the chemical industry has lost important customers. In response, chemical companies in EU are increasingly focussing on branches like pharma, agricultural chemistry and life sciences which promise a higher value creation.

Additional Information
 
Key Success Factors for Chemicals 4.0
 
The Writing on the Wall

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