European Chemicals industry

This came just two weeks after the American Chemistry Council (ACC) announced that potential US chemicals industry investment linked to plentiful and affordable natural gas and natural gas liquids from shale formations has topped $100 billion from 148 projects. More than half comes from non-US companies.

Cited textiles as an industry that has almost entirely left Europe due to cheaper Asian competition. Warned that chemicals could “go the same way”, despite being a $1 trillion industry with over 1 million direct and 5 million indirect jobs and one that is essential to the competitive future of many other European industries.

Strategically, and economically, no large economy should abandon its chemical industry. But Europe seems agnostic about the fate of European chemicals. Whilst intensely technical as an industry, and one of the reasons historically that Europe has been so successful, technology alone will not save it.

 
Competitive energy and feedstock costs, he continued, are crucial. Currently gas is three times more expensive in Europe than the US and electricity 50% higher. Both the US and the Middle East, where huge expansions in petrochemicals are being announced, have much cheaper feed stocks. China is building relentlessly and will start to export more soon, once it has reached self-sufficiency.
 
If the EU wants to raise industry’s contribution to EU GDP to as much as 20% by 2020, industry should not be saddled with additional policy costs. The chemicals industry has already achieved a 50% reduction in greenhouse gas emission reductions and could do more still.

In Germany, the chemicals, oil and gas industries are urging a rethink of the Energiewende, a policy that systematically favours renewable energy and is phasing out nuclear power in response to the Fukushima disaster in 2011. This was based on a study by IHS which said that the policy had led to a rise in energy prices, reduced progress on energy efficiency and led to greater consumption of coal – mostly imported – and a rise in CO2 emissions. To stay competitive, Germany needs to develop its shale gas reserves and cut targets for offshore wind power.

The German chemicals industry is also facing plans from the EC that would require Germany to phase out special exemptions from this legislation that gives rebates worth about €500 billion/year by 18 December.