Global trends in chemical industry

aquaaniseBiotechnology

Dec 6, 2012 (4 years and 8 months ago)

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1

Global trends in chemical industry



Conference

“Delivering the HLG results in the regions”

16
-
17 April 2009, Usti








Re


van Sloten, Cefic


2

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.

3

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


4

Chemicals are a truly globalised industry in which
competition takes place at a global level


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.

Production value growth chemicals excl pharma p.a. 2000
-

2006

Total trade growth chemicals excl pharma p.a. 2000
-

2006


Source: CEFIC, COMTRADE and BASF

5

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


6

Labour Costs


high but competitive


Labour costs in the EU chemical
industry are high.



There are large differences within
Europe.



Adjusted by productivity, ULC
levels in the EU are competitive
with most countries.



Asian countries have lower ULC.
This is a comparative advantage.



A strong Euro harms labour cost
competitiveness of the EU
chemical industry.

0
20
40
60
80
100
120
140
ULC Levels (manufacturing, 2003)
Index USA =100
Japan
USA
EU 27
Brazil
Eastern Europe
Korea
China
Source: “Unit Labor Costs, Productivity and International Competitiveness”, RuG 2005

Exchange Rate

2003: 1.13 US$/Euro

2007: 1.37 US$/Euro (+20%)

7

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).


8

Electricity prices in Europe have gone up in
recent years


9

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.

10


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)

Access to Raw Materials

Example Bio ethanol for industrial use

11


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)


Import duties (vs. Zero Tariff for API Imports into EU)

12

Trade flows indicate an eroding
competitiveness of the EU chemicals industry

13

Trade flows show a competitive position at risk for 50% of the
countries (or sectors) analysed

EU has a trade deficit and its
competitive position weakened

EU has a trade deficit but its weak
competitive position improved

EU has a trade surplus but its positive

competitive position weakened

EU has a trade surplus and its healthy
competitive position improved

Japan
9%
Rest of Asia
15%
Russia
8%
USA
42%
China
8%
South Korea
3%
Middle East
9%
Brazil
3%
India
3%
Polymers
14%
Organics
40%
Basic
Inorganics
11%
Consumer
Chemicals
12%
Specialities
23%
14



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

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杬潢o汩獥搠浡牫m瑳

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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

15

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

16

Long term outlook for the European chemical
industry


Innovation capacity


Rising demand


Strong internal
market


New competitors,
eg Asia and China


Macro economic
climate


Energy cost



Access to international
markets

Energy policy taking into
account the needs of EII

Regulatory burden and
uncertainty

New challenges in the
area of climate change,
energy, health…


?

Positive

Negative

Challenges

17

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