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Europe’s Chemical Industry – Adjusting to Change Peter Anderton President, ECSPP February 13th 2008.

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Presentation on theme: "Europe’s Chemical Industry – Adjusting to Change Peter Anderton President, ECSPP February 13th 2008."— Presentation transcript:

1 Europe’s Chemical Industry – Adjusting to Change Peter Anderton President, ECSPP February 13th 2008

2 2 The world chemical order is changing…  Europe has been world chemical industry leader for more than 100 years But  Centre of gravity is shifting eastwards Due to -Rise of low-cost Middle East producers -Emergence of China as a global chemical power -Imminent emergence of India as a global chemical power -Surge in chemical demand growth throughout Asia

3 3 Europe will have to find a new role for itself within the changing industry order Some plausible scenarios for Europe over the next 20 years:  Move progressively away from low-value bulk commodities to higher-value performance and specialty products  Shift from sophisticated high-tech products into ultra high-tech products  More medium/small-scale production capacity instead of world-scale plants  Consolidation and co-siting via clusters  Operational optimization through synergy maximization The European chemical industry will have to change…

4 4 Europe is also facing other challenges….. Impact of:  REACH policies on competitiveness  Emission Trading Scheme(ETS) policies  Carbon Capture Scheme(CCS) policies  Declining role as leading world exporter of chemicals  Increasing low-cost imports of commodities and plastics from new production sources eg. Middle East

5 5 Adjusting to change means doing things differently… Smarter operations are needed, not only in manufacturing but along the whole value chain:  Organization of production operations  Raw materials and feedstocks supply  Energy, utilities and services supply  Logistical infrastructure  Labour and maintenance  Health, safety and environment Clusters have an important role to play in promoting smarter operations down the value chain… The industry needs to adjust to the changing order…

6 6  The days of the stand-alone chemical plant are numbered  For operational reasons, organizing production in clusters is the smart way forward - Manufacturing synergies - Cluster integration eg. extensive outsourcing possibilities for non-core activities - Favourable investment climate eg. co-siting opportunities - Enhanced role and support of local authorities - Advantageous supply chain (infra)structure - Collaboration mindset of cluster members to collective advantage - Total cluster performance better than the sum of the individual cluster members performance on a stand-alone basis (the 1 + 1 + 1 = 4 syndrome) Clusters - Organization of Production Operations

7 7 Clusters – Raw Materials and Feedstocks Supply  Clusters offer advantageous conditions for sourcing raw materials and feedstocks -Alternative supply sources -Competitive pricing -Flexible storage and delivery solutions (eg. reduced need for captive/on-site storage) -Optimal conditions for supply continuity (eg. back-up sources close by) -Opportunities for close upstream integration (eg. over-the-fence delivery, dedicated pipelines)

8 8  Many clusters have more than one supplier of energy, utilities and other services, offering chemical producers a choice of provider for major production cost components: - Electric power - Feedstock and fuel gas - Steam - Industrial gases - Water - Waste treatment (solid and liquid)  Clusters promote smart solutions for energy, utilities and services supply - Shared infrastructure - Possibility for shared purchasing arrangements - Optimal back-up in case of supply interruption  Being part of a cluster generally leads to lower energy, utilities and services costs for chemical producers Clusters – Energy, Utilities and Services Supply

9 9  Clusters provide optimal transport and storage facilities for chemical producers -Non-coastal clusters > Direct access to at least 2 of the main “overland” transport modalities and in many cases all 4 * Road * Rail * Inland waterways * Pipelines -Coastal clusters > Direct access to deepsea and shortsea transport is also available  In both types of cluster, third-party storage and handling facilities are normally available for liquid and solid chemical products in addition to producer-owned storage, permitting outsourcing arrangements and increasing flexibility  In coastal clusters, third-party storage is generally much more extensive to cater for the large- volume seaborne traffic inbound and outbound Clusters – Logistical infrastructure (1)

10 10 Clusters – Logistical Infrastructure (2)  Clusters normally offer a diversity of logistical service providers, allowing chemical producers a choice of provider and the possibility to negotiate competitive rates for moving product to the customer  If desired, producers can explore opportunities to pool logistical requirements with one or more colleagues to find mutually-beneficial transport and storage solutions  Clusters allow maximum use of cost-effective pipeline transportation -Point-to-point pipelines -Common carrier pipelines -MultiCore pipeline bundles -Direct access to pipeline network links with other clusters

11 11  Within a cluster, chemical producers can take maximum advantage of a permanent “pool” of skilled and unskilled labour  Maintenance stops and plant turn-rounds can be planned efficiently to synchronize with stops of suppliers and avoid possible timing conflicts with colleague producers, resulting in potential shortages of casual maintenace labour  Personnel transportation can be organized together with other cluster members to cut down on traffic delays due to bunching at shift change times  Initiatives can be launched with other cluster members to promote educational and training programmes to attract new personnel into the cluster in the future Clusters – Labour and maintenance

12 12  Within a cluster, chemical producers can take advantage of knowledge and expertise of colleagues to assist in maintaining and improving own HSE standards  Fire-fighting, emergency response and crisis management activities can be organized on a communal basis  HSE standards will benefit from the element of (friendly) competition between cluster members as to who is best in class  Innovative solutions can be sought out in areas such as site security eg. joint gate security arrangements with neighbouring producers  Cluster members can share experiences and information on environmental compliance requirements eg. preparing Environmental Impact Assessments Clusters – Health, Safety and Environment

13 13 Clusters – the right way forward for Europe’s chemical industry  Europe’s future depends on adjusting to the changing situation through smarter operations  Europe’s traditional place in the world chemical order is disappearing  Europe has always led the world in technological innovation – to maintain a leading position in the world, it now needs to adopt innovative solutions along the whole value chain  Clusters are the ideal vehicle for Europe’s chemical industry to achieve maximum innovation and minimum costs in the value chain  Europe can build on its successful track-record in cluster operations to embark on the logical next phase of development = Closer collaboration and operational integration between clusters within a Europe-wide network

14 14 ECSPP – Supporting the Development of Chemical Clusters in Europe  ECSPP sees active promotion of clusters as a key way to safeguard members’ long-term interests  Ongoing ECSPP collaboration projects: -EPCA’s Think Tank studies on cluster operations in Europe ECSPP is currently assisting EPCA in Phase 2 of this project on the implementation of the recommendations -CEFIC’s Ad Hoc HLG project on European competitiveness ECSPP will give a presentation to the European Commission’s HLG on February 29th on the importance of clusters to the future of the chemical industry in Europe. ECSPP will recommend the setting up of a Pan-European Chemical Cluster Platform to coordinate the growth and development of clusters in Europe and encourage closer inter-cluster cooperation -ECRN ECSPP is keen to strengthen its collaboration with ECRN to achieve better coordination/promotion of respective members’ mutual interests

15 15 Thank you for listening !

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