MOSCOW (MRC) -- Most of European chemical industry will face closure within the next 10 years, if regulators do not move to increase the region’s competitiveness, said INEOS' Chairman Jim Ratcliffe in his open letter to President of European Commission Jose Manuel Barroso.
"The extinction of the European textile industry happened in the 1980’s. Chemicals could go the same way," Jim Ratcliffe said.
Worldwide, the chemicals sector has revenues of USD4.3 trillion. That’s bigger than the GDP of Germany and considerably bigger than the automotive sector at USD2.6 trillion.
In Europe, chemicals and automotives share top billing with USD1 trillion each.
"But Europe seems agnostic about the fate of European Chemicals. The European textile industry was wiped out because it could not compete with Asian labour rates," he added.
Chemicals depend upon competitive energy and feedstock costs. Whilst intensely technical as an industry, and one of the reasons historically that Europe has been so successful, technology alone will not save it, he believes.
Energy, in the form of gas, in Europe is three times higher than the USA today, whilst electricity is 50% higher. There are no cheap feedstocks in Europe. USA and Middle East feedstocks costs are in another league.
Shale gas in the United States has transformed both its competitiveness and its confidence. There are USD71 billion worth of announced petrochemical expansions on the back of shale gas flowing into chemicals. This is predicted to grow to over USD100 billion.
"In contrast Europe announces closure after closure," - said Jim Ratcliffe. "In the Middle East, they continue to build in Abu Dhabi, in Qatar, in Saudi and now Iran can be added with another 6 million tonnes of ethylene capacity re-joining planet earth. In the UK, there have been 22 chemical plant closures since 2009 and no new builds."
And then there is China, which will soon be self-sufficient. China is set to become the world’s largest economy by 2020.
INEOS, one of the world’s largest chemical companies, profits in Europe have halved in the last 3 years. Profits in the USA have tripled. BASF, the world’s largest chemical company, for the first time ever have announced a strategic cutback in European investment citing stagnant markets, expensive energy and expensive labour.
As MRC wrote before, further to the earlier decision of the European Commission to continue its evaluation of the proposed 50/50 Joint Venture between Solvay and INEOS in a Phase II investigation, the parties have recently jointly agreed to put forward a revised remedy package to address any competition concerns that have been raised by the European Commission. The proposed remedy package, which was submitted to the European Commission yesterday, comprises the divestment of the PVC plants at Schkopau (Germany), Beek (The Netherlands) and Mazingarbe (France) along with the chlor-alkali, EDC and VCM assets at Tessenderlo (Belgium). These facilities are all currently operated by INEOS and are strategically important within the European chemicals sector. They have the ability to compete as successful stand-alone businesses under third party ownership.
INEOS Group Limited is a privately owned multinational chemicals company consisting of 15 standalone business units, headquartered in Rolle, Switzerland and with its registered office in Lyndhurst, United Kingdom. It is the fourth largest chemicals company in the world measured by revenues (after BASF, Dow Chemical and LyondellBasell) and the largest privately owned company in the United Kingdom.
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