Plant engineering is making a small comeback in Europe. But how viable is the trend? — In 2018, European investment projects saw a mini-boom: 134 new plants in the first eight months show the potential in the industry. But now, thanks to trade conflicts, the Brexit and oil price rises, growth is coming to a standstill — is chemistry running out of steam?
After an exceptional start in 2018 for European chemical producers, sales in the 673 billion euros sector are stagnating, albeit at a high level. International trade conflicts and the looming Brexit dampen the optimism and cloud the perspective for one of the most integrated and export oriented industries. Correspondingly, trade associations are reducing their production forecasts: The German Chemical Industry Association VCI is now targeting a 3.5 % increase over the course of the year.
And yet: plant engineering is alive and well. In 2018, 134 new projects were announced or started, a research in the large-scale engineering project database GROAB shows. Of these, 25 are basic and bulk chemical plants, twelve each plastics or oil and gas production sites. Paints, coatings, specialty chemicals as well as refineries and downstream projects follow with eight or seven announcements, respectively.
Although Europe lacks the impulses stimulated the shale gas boom in the US, top players are still ramping up capacities. Chemicals behemoth BASF for instance plans refurbish the vitamin A production complex at its headquarters in Ludwigshafen, Germany: By 2020, additional capacities of 1,500 tons per year will be added, a factor that promises plenty of business for its component manufactures and suppliers, as 4,000 pipelines and 5,000 measuring points will be needed, the chemical giant explains.
BASF is also gradually expanding capacities at its second-largest site in Antwerp, Belgium. By 2025, the production capacity of the World-Scale surfactant plant is expected to increase by 25 %. The company is also evaluating the possibility of strengthening ethylene oxide capacity by expanding production at the site. The final investment decision shall be made in 2019, company speakers stated.
Major Investments Projects in Europe's Chemical Industry Underway
Meanwhile, Arlanxeo wants to capitalize on the growing demand for CR rubbers with a major overhaul of its chlorine reactor in Dormagen, Germany. By 2019, production capacity shall be increased to 70,000 tons per year. Together, the companies at the Chempark site want to invest a whopping 446 million euros during the year.
Less dependent on the overall economic situation than on the expiry of the last mercury-based chlorine production plants in southern Europe comes the decision of the Portuguese company CUF-Químicos to build a 68,000-year-long chlorine electrolysis plant in Torrelavega, Spain.
The new facility shall use a state-of-the-art membrane process from Asahi-Kasei. The whole facility, including a brine preparation, sodium hydroxide evaporation and a sodium hypochlorite plant, will be planned, built and delivered under a turnkey contract by CAC (Chemieanlagenbau Chemnitz).
Why Capacity Expansions and New Technologies Fire the Engineering Boom
Plans of Polish oil company Orlen to invest about two billion euros in Płock and Włocławek in 2018 caused a particular stir: The Poles are aiming for a stronger integration of their refinery and petrochemical segments for the further diversification, speakers said. Orlen is already investing around 100 million euros in a metathesis unit for the production of polymer grade propylene in Płock, which will provide an additional capacity of 100,000 tons per year.
The announced investments are expected to increase PKN Orlen's petrochemical production capacity by around 30 %. The new products would be sold on the local Polish market to improve the trade balance, Orlen CEO Daniel Obajtek said.
Find more than 4200 international engineering projects in GROAB, the database for major plant engineering and construction.
Industry experts expect the market volume for petrochemicals and base plastics to double by 2040. Correspondingly, international revenue growth also helps to offset the slight decline in domestic sales for European producers. However, these too are currently clouded by foreign policy risks such as the Brexit and the impending trade war between the US and China. The industry also critically observed the sharp rise in oil prices, which weighed on margins.
“Because of these mounting risks, we expect the upward trend to continue to weaken in the second half of the year,” comments the former VCI-President Kurt Bock. Is the boom over before it began? Time will have to tell.