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The energy to grow
5
Published: October 08, 2013
European policy is making life hard for the chemicals industry. Hilfra Tandy reports from CEFIC's AGM in Munich
Outside, Munich's famous Oktoberfest was winding up, while Germany celebrated the 23rd anniversary of its reunification with a public holiday and a re-elected Chancellor Angela Merkel, who grew up in the former East Germany, was beginning coalition negotiations to form a new government. But in the Hilton Park Hotel on 2-5 October, it was all about the AGM of the European Chemical Industry Council (CEFIC) and the parallel International Council of Chemical Associations (ICCA) convention.
At the crossroads - again?
The messages are unambiguous, wearily familiar and this time round edged with even more urgency. But do not despair, at least not just yet. European chemicals sector innovation, jobs and growth stem from the competitiveness which in turn depends on the policy frameworks 'made in Brussels.' The cost of European policies on energy and climate change cannot be passed on. Prices are increasing while competitiveness is being eroded. Europe is at a crossroads. Then again, when is it not?
CEFIC and ICCA president Kurt Bock, who is also CEO of BASF said: "Although the EU outspends industrialised and emerging countries in chemical R&D, our world market share keeps decreasing. It is essential to create policy that backs our innovation efforts in a fast-moving global marketplace."
This theme was explored further during a public debate on energy policy during which Johannes Teyssen, CEO of Germany's largest utility E.On, described EU energy policy as "becoming increasingly dysfunctional." A raft of policy good intentions, he said, had driven European taxes and levies up by 66% in five years and energy costs by 300% in 15 years.
Bock - Policy must back industry's innovation efforts
Teyssen has been a vociferous critic of European - and sovereign state - policies that are responsible for European power getting dirtier and rising CO2 content. Graham van't Hoof, EVP of Chemicals at Shell, who was speaking on the same panel, reinforced Teyssen's point, noting that just one consequence of not getting policy right was "to move Germany back to coal."
The latest US Energy Information Administration (EIA) figures show that over half of US coal exports now head to Europe. In 1H 2013, these reached 55.5 million tonnes, 28.7 million of which were imported into Europe - 5.9 million into the UK and 2.4 million into Germany, where, of course, Evonik was basically created in its original form to fund the closure of the coal mining industry.
Warming to the familiar Brussels critique, Bock said that European energy policy had been "hijacked by the climate change lobby." Teyssen was even more critical. "Europe has spent €20 billion in subsidies feeding the biggest animal in the zoo which is renewables," he said. "This animal needs to - and can - fend for itself now."
Security of energy supply is endangered and there are too many targets that contradict each other, he added. "If you are in trouble don't multiply your targets."
Share halved
At this year's press conference, CEFIC director general Hubert Mandery reviewed some uncomfortable home truths. He noted that, whilst the level of world chemicals sales has risen, the value of the EU's market share has been sliced in half in the past 22 years. The EU posted chemical sales of €295 billion in 1991 - 36% of world sales in value terms. By 2012 EU chemical sales had almost trebled to €580 billion but its share of the world's sales had crashed to 18%.
Figure 1 - EU speciality chemicals production, 2005-13
CEFIC's latest monthly chemical trends report, for September and October 2013, indicates that EU chemicals production fell by 1.4% during 2013's first seven months compared with the same period of 2012 (Figure 1). Monthly production data for July showed a 0.4% dip compared with July 2012. EU chemicals sales during 1H 2013, meanwhile, came in 4.1% lower than 1H 2012.
During July 2013, output of speciality chemicals and basic organics slipped, by 1.5% and 1.3% respectively compared with July 2012. Other sectors fared better, as monthly figures for July 2013 show output growth in polymers (up 1.4% versus July 2012), consumer chemicals (up 1.1%) and petrochemicals (up 0.6% and up for the third consecutive month). Specialities spearhead surplus
It is not all gloom, however. The latest figures, released on 4 October, indicate that the EU's widening net trade surplus in chemicals continued to gain momentum, reaching €25.4 billion by the end of June, which was up €1.2 billion on the same period of 2012. The surplus - at this rate - is well on course to top 2012's €49.2 billion.
In 1H 2013, the speciality and consumer chemicals sectors together accounted for almost 82% of the EU's total trade surplus. The EU's speciality chemicals' surplus hit €12.9 billion in 1H 2013, outpacing the same period of 2012, with €11 billion. So speciality chemicals alone contributed a whisker over 50% of the EU's total trade surplus in 1H 2013.
The 1H 2013 trade surplus for consumer chemicals reached €7.8 billion up from 2012's €7.3 billion. So the trend continues - between them the speciality and consumer chemical sectors accounted for 76% and 77% of extra-EU chemicals trade surplus in 2012 and 2011 respectively (Figure 2). Historically, speciality chemicals have led the chemical trade surplus pack. They accounted for 36% of the €41.7 billion surplus in 2011 and over 40% of the 2012 surplus of €49 billion.
Figure 2 - European trade surplus in chemicals, 2012-13
Regionally speaking, the 1H 2013 surplus was led by a €7.9 billion positive trade balance with non-EU European countries - up €700 million from 1H 2012. The surplus with Asia - excluding Japan and China - rose by €900 million to €3.7 billion. The net trade balance with China rose from €680 million to €740 million, while that with the NAFTA region was pinched back by €900 billion to €4.9 billion. More reasons to be happy
Whilst Europe chemical producers face a mass of competitive challenges - not least the shale gas advantage its US competitors are currently capitalising on - it is no time to fold the tents and migrate to more benevolent places.
"In Europe innovation is the key, not feedstock advantage. We are probably the most innovative chemical area," said Bock. "There is no reason to be fatalistic, if companies pick the right business and play to our strengths. Europe is a vibrant research area with excellent relationships between industry, science and universities. It has the ability to constantly restructure and adapt. Many companies are doing more not less on innovation."
(Departing from the usual format this year's meeting showcased eight projects illustrating 'The Amazing World of Nanotechnologies' - from carbon nanotubes with silicone for ship coatings to aeronautic applications and construction admixtures being used in the construction of the enlarged Panama Canal.)
Away from prying eyes, industry top bods and their backroom boys and girls set to hammering out the details of their Transatlantic Trade & Investment Partnership (TTIP). Washington may be temporarily closed for business but there were positive vibes in Munich. More seasoned campaigners anticipate that negotiations will probably take until 2017, slightly longer than the hoped-for 2015.
Responding to the announcement of a TTIP at June's G8 meeting, CEFIC anticipated the elimination of import duties on €48 billion worth of chemicals traded between both markets on 2012 figures. Bock said at the time that the foreseen enhanced regulatory cooperation in the agreement "could be a catalyst towards global standards setting, especially in emerging areas like nanotechnology". Table 1 - Solvay's rare earth recycling projects
The American Chemistry Council, greeting the launch of negotiations in July, estimated that the total elimination of industrial tariffs and import duties on the trans-Atlantic chemicals trade would save the industry more than $1.5 billion/year, a third of which is intra-company trade. Furthermore, enhanced US- EU regulatory cooperation on chemicals would "significantly reduce costs for government and industry - generating upwards of $2 billion in additional economic output for the US alone - while still maintaining high levels of protection for human health and the environment".
Show some Responsibility
'New lamps for old' might be theme for the overall winner of CEFIC's Responsible Care 2013 awards. Pioneered by Rhodia and developed by Solvay, the Coleop'terre project uses a recycling technology for the six rare earths contained in the fluorescent powders of used low-energy light bulbs. Preserving their functional properties the rare earths are returned to low-energy light bulb producers and reused in new bulbs.
Representing a €14 million investment the project - one of three under development (Table 1) by Solvay - is already approaching the goal of 'ensuring' Solvay's needs in europium, terbium and yttrium. Investment has been split between two French sites at Saint-Fons and La Rochelle. In terms of supply security, the project is capable of recycling 1,500 tonnes/year and potentially more of phosphor powders; as such, it represents a defensive alternative to Chinese-sourced terbium. When it comes to verifying the reality of a company's commitment to Responsible Care self-assessment too often fails to convince outsiders and third party verification may seem too intrusive to the scrutinised. A simple, cost-free peer review assessment could be the option of choice and it already is for one third of member sites belonging to the UK's Chemical Industries Association (CIA).
The winner of CEFIC's 2013 national association award, the CIA peer review process involves assessments of good practice and performance, a 12-category scorecard and a site-specific Responsible Care verification report. Whispers are that interest in peer reviews is spreading to continental Europe.
From Online Issue: October 2013
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