TAKING THE HIGHMARGIN ROAD The European chemical industry is confronted with the prospect of a long wait before it returns to the growth rates in output it enjoyed before the 2008 financial crisis. Sean Milmo reports.
E
urope’s production of chemicals was still in the second quarter of this year around 8 per cent below its peak in early 2008 and was looking unlikely to climb back above the level of 5–6 years ago for some while. In late 2012 the European Chemical Industry Council (Cefic), the main trade association of chemical producers in Europe, was predicting a slight expansion of 0.5 per cent in output this year. But by June its forecasting panel had changed its position with a prediction of a 1 per cent decrease in output in the year mainly because of weaker than expected demand. It will be a second successive year of decline after production fell in 2012 by 1.7 per cent. Demand was particularly fragile in the first part of 2012 in the European Union’s construction and automobile sectors. Sales of new vehicles were being held back by high unemployment and low growth in incomes. The construction sector was still suffering 8 Industry Europe
from the effects of past speculative building keeping construction output at historically low levels. “The EU chemical industry is still facing headwinds from the weak European economy,” says Kurt Bock, Cefic’s president and chairman of BASF, Europe’s and the world’s largest chemical company. “The chemical industry (also) continues to be exposed to strong international competition.” In the first five months of 2013 EU chemicals production went down by 2.1 per cent compared with the same period in the previous year, according to Cefic. However there were signs of a pick-up. In May the monthly output grew by 2.7 per cent compared to April. Confidence among EU chemical companies significantly improved in June, according to Cefic. The association is expecting that a rise in demand in the second half of the year will continue into 2014 with a strengthening of
industrial production in Europe after two years of weakness. As a result it is expecting growth in production of 1.5 per cent next year. Among the main chemicals segments in Europe, fine and speciality chemicals are expected to expand by 2 per cent in volume terms and consumer chemicals by 1.5 per cent. Petrochemicals production will go up by 2 per cent and inorganic basic chemicals by 1 per cent.
High margin opportunities The industry will be looking to the chemicals segments with higher added values to achieve stronger growth rates than over the last few years. Currently – and in the medium and long term – Europe does not have the low production costs and plentiful supplies of relatively inexpensive energy to give it major competitive advantages in the production of commodity chemicals on a world scale.
