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 and Europe can be a front runner again, say experts. However, the groundwork for that must be laid now itself.
The chemical industry was essentially a basic materials industry till the 70’s, an industry that developed diverse products from one raw material. From the 1980’s the age of value chains began. Consolidation and focus on the core business influenced the period till the 90s. Around the turn of the millennium if someone wanted to be ahead, they did not get around with high value products: The age of life sciences brought another specialization for high value products on a smaller scale as compared to the essential drivers for the growth for chemical industry. Even today the strategy of many companies is this, as seen in the case of Bayer. The decision of the company from Leverkusen to separate from its material division Material Science (now Covestro) was expected for long in stock exchanges. The focus on the higher-yielding businesses like pharma and agricultural chemistry offer great opportunities for business. But it is a strategy with risk because where there are high returns, there are high risks. No one knows this better than Bayer as they were battered by the Lipobay-scandal ten years back.
The Age of Application
According to the analysts at Roland Berger, its the dawn of new age: The age of applications — or analogous to the ongoing digitalization in the industry, Chemicals 4.0. Experts say the optimal uses of all raw materials and the customer added value are in focus. “The new challenges are relevant to the entire value chain of the chemical industry”, explains Roland Berger Partner Alexander Keller. “In an application driven environment, the understanding for the customer and the collaboration with the customer will be more important than ever to create added value and to be competitive in the long run.”
Sounds like we have heard all this before. However, this time the change will comprise all areas of the value chain. Raw materials, process intensification, digitalization and mass customization for a flexible production. So it is clear that the brave new world of the chemical industry will require a complete rethinking of development, production and value chain cycles. The European industry could be predestined for this. Chemical companies in Europe have been condemned for innovation for years just like today, to be able to keep up with the low cost production abroad or cheap raw materials in crude oil and gas-producing countries.
Analysts believe it will be decisive how quickly and extensively the companies engage in the concept of industry 4.0. If companies succeed in combining the process technology and discrete production and in responding to ever more dynamic and specific customer requirements, the field has a real chance. Europe is still not out of the race; a 5,600 billion Euro market should be reason enough to look forward.