Global trends in chemical industry
Conference
“Delivering the HLG results in the regions”
16-17 April 2009, Usti
René van Sloten, Cefic
1
Key facts and figures
EU is a leading chemicals production
platform: 29.5% of world chemicals
production (2007)
Around 29,000 companies (96 % have
less than 250 employees)
Direct employment of nearly 1.2 million
people (2007)
Indirect employment 2.4 million people
Sales of € 537 billion in 2007
Trade surplus of € 35.4 billion in 2007
Note: None of the above figures includes the pharmaceuticals.
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The main characteristics of the chemical industry
strongly influence its competitiveness
 The chemical industry has some unique characteristics which
have to be taken into account in a competitiveness analysis
Globalised industry
Innovation-driven and knowledge-intensive
Integrated along the value chain into its downstream
industries, or directly to consumers
Capital-intensive
Energy intensive
Long product development time, requiring stable and
predictable policy framework
3
Chemicals are a truly globalised industry in which
competition takes place at a global level
Production value growth chemicals excl pharma p.a. 2000 - 2006
Total trade growth chemicals excl pharma p.a. 2000 - 2006
Markets are booming around the world, with average growth rates p.a.
of trade and production of up to 25% in certain countries
More than 45% of the value of the global chemical industry is traded.
Over 35% of this world trade is intra-company in nature.
Source: CEFIC, COMTRADE and BASF
4
Global competition in the chemical industry is beneficial,
if everybody competes on equal and fair terms
 Competition in the chemical industry takes
place on all levels:
 Trade – from and to Europe
 Investment - building up a presence
sales and production
 High growth markets are mainly in non –
OECD countries
 But growth in other parts of the world is not a
zero sum game, as long as any player can
benefit from it
 Access to markets and a global level playing
field are prerequisites for fair and beneficial
competition
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Labour Costs – high but competitive
 Labour costs in the EU chemical
140
industry are high.
Europe.
 Adjusted by productivity, ULC
levels in the EU are competitive
with most countries.
Index USA =100
 There are large differences within
120
100
 Asian countries have lower ULC.
This is a comparative advantage.
 A strong Euro harms labour cost
competitiveness of the EU
chemical industry.
Source: “Unit Labor Costs, Productivity and International Competitiveness”, RuG 2005
80
60
40
20
0
ULC Levels (manufacturing, 2003)
Japan
EU 27
Eastern Europe
China
USA
Brazil
Korea
Exchange Rate
2003: 1.13 US$/Euro
2007: 1.37 US$/Euro (+20%)
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Gas prices give a clear advantage to Russia
and Middle East
 Expensive and scarce goods in
Europe, as Europe is neither a strong
gas nor oil producer country and has
to import its raw materials.
 Europe has a good infrastructure, but
inputs have to be sourced from other
countries.
 Security of supply is crucial for a
competitive European chemical
industry.
 Other countries have preferential
access to these energy sources.
Prices are lower than in Europe and
additionally unfair commercial
practices take place (e.g. double
pricing).
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Electricity prices in Europe have gone up in
recent years
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Capacity Changes and Closures due to lack of access to renwable
feedstock at world market prices
Closing Down of Production Units in
Europe
New and/or Extended Capacities
Outside Europe
(by Foreign Based Companies and by
European Producers)
Germany: Vitamins (Roche; BASF) and Insulin
(Pfizer)
UK: Citric Acid (Tate & Lyle), Astaxanthin (Tate &
Lyle), Penicillin (ACS Dobfar Ltd) and Xantham
Gum (CP Kelco)
Spain: Glutamate (Peniberica) and Lactic Acid
(Purac)
Italy: Glutamate (Biacor), Citric Acid (Palcitric; Biacor)
and Lysine (Ajinomoto)
Czech Republic: Citric Acid (Activa)
France: Yeast (DSM) and Xanthan (Danisco)
Portugal: Yeast (DSM) and Penicillin (DSM)
The Netherlands: Penicillin (DSM), Gluconic Acid &
Gluconic Derivatives (Purac) and Lactic Acid
(Purac)
Ireland: Citric Acid (ADM)
USA: Lactic Acid (CSM/Cargill; Cargill/Dow),
Enzymes (Novozymes), Lysine
(Cargill/Degussa) and Arachadonic Acid (DSM)
Canada: Citric Acid (Jungbunzlauer)
China: Lactic Acid (BBCA, Henan Jindan and
Galactic), Enzymes (Novozymes), Penicillin
(DSM), Lysine (Global Biotech, BBCA and
others), Citric Acid (DSM, BBCA, TTCA, RZBC,
Ensign), Glutamate (Meihua, Fufeng, Juhua,
Global Biotech over 500 KT new capacities… ),
Xanthan Gum (Fufeng, GCC Inc), Vitamins
Brazil: Enzymes (Novozymes), Lysine (Ajinomoto),
Citric Acid (Cargill) and Lactic Acid (Purac)
Mexico & India: Penicillin (DSM)
Chile, South-Africa & Cuba: Yeast (DSM)
Thailand: Lactic Acid (Purac) and Citric Acid
Vietnam: Glutamate and Lysine (Vedan and
Ajinomoto)
These changes and closures took place over the last five years.
This list is not exhaustive and other examples can be found.
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Access to Raw Materials
Example Bio ethanol for industrial use




Tariffs on bio ethanol are between 30 % and 60 % (10,2 and 19,2 €/hl)
EU demand for bio ethanol has been rising since it is being mixed
with fuel for reasons of climate protection (10 % of energetic content
of transport fuel has to be derived from plants by 2020)
National and EU regulations set wrong incentives in the utilization of
bio ethanol
The EU will not be able to fulfil domestic demand with domestic
production
Bio ethanol in Europe is more expensive than the world market
price
Other countries have lower import tariffs on bio ethanol for
industrial utilization which means a loss of competitiveness for EU
chemical industry (e.g. USA)
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Distortion of the APIs Level Playing Field
Factors distorting the API level playing field, causing a landslide, and
pushing EU companies out of business
Our home market: The EU
• Massive importation of low-priced Rogue APIs (= Counterfeit APIs and APIs
otherwise deliberately and severely non-compliant with pharmaceutical
regulations)
Worldwide Markets including EU
•
•
•
•
•
Export Subsidies (Exports from India, China…)
Dumping (Chinese APIs & Intermediates)
Slashing VAT Rebate of upstream intermediates / raw materials for APIs
Export Taxes on upstream intermediates / raw materials for APIs
… plus the “given factors” such as currency rates and low wages…
(Exporting to) the Asian Market
• Discriminating quality requirements for imported APIs vs.. Locally produced
APIs (China)
• Astronomical fees for analytical testing of APIs by Chinese customs
• Excessive duplicate testing by Chinese customs: Huge fees multiplicated
• Negative lists of APIs that are not allowed to be imported (India)
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• Import duties (vs. Zero Tariff for API Imports into EU)
Trade flows indicate an eroding competitiveness
of the EU chemicals industry
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Trade flows show a competitive position at risk for 50% of the
countries (or sectors) analysed
Brazil
3%
Middle East
9%
India
3%
USA
42%
Specialities
23%
Japan
9%
Organics
40%
Consumer
Chemicals
12%
Basic
Inorganics
11%
Polymers
14%
Rest of Asia
15%
China
8%
Russia
South Korea 8%
3%
EU has a trade deficit and its
competitive position weakened
EU has a trade surplus but its positive
competitive position weakened
EU has a trade deficit but its weak
competitive position improved
EU has a trade surplus and its healthy
competitive position improved
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Strengths and opportunities for the European chemical
industry
J Large integrated domestic market with strong customer industry
cluster and reasonable demand growth from industry 2.0 % p.a.
J Continued strategic restructuring efforts to adapt flexibly to
globalised markets
J High international orientation and global network to external
customer industries
J Until now availability of skilled and motivated workers and
scientists
J Strong innovation efforts will generate new growth clusters:
Biotechnology, Renewable feedstock, Efficient Energy use, health
and new materials (e.g. nanomaterials) which have the capability
to solve upcoming societal mega challenges
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Weaknesses and threats for the European chemical
industry
 Diminishing growth stimulus from external demand due to
weaker growth prospects for exports to overseas and much
stronger import penetration from polymers and
specialities.
 EU has a comparative price and feedstock disadvantage in
Olefins and its derivatives and is facing an upcoming wave of
petrochemical capacity additions, especially in ME.
 Subdued potential macro growth prospects due to elderly
population, shrinking working age classes, high saturation
levels.
 Energy markets have a “quasi” oligopolistic organisation
with much too high energy cost for consumers and industry
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Long term outlook for the European chemical
industry
Challenges
Access to international
markets
Negative
Energy policy taking into
account the needs of EII
Positive
• New competitors,
eg Asia and China
Regulatory burden and
uncertainty
• Innovation capacity
• Macro economic
climate
New challenges in the
area of climate change,
energy, health…
• Strong internal
market
• Energy cost
• Rising demand
?
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Summary competitiveness analysis
 Global competition is increasing as regards trade and production
locations. Europe’s overall competitiveness is good and the
European chemical industry has considerable strengths, but other
countries are catching up quickly
 A detailed trade analysis already shows an eroding competitive
position in some sectors and vis-à-vis certain countries
 Provided there are the right framework conditions and the right trade
policy, Europe can remain an attractive platform for a competitive
chemical industry and benefit from growth markets around the
world.
A balanced regulatory framework in Europe
Free access to growing markets
Fair competition as a stimulator for further growth
A global level playing field
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