Presentation on theme: "1 Global trends in chemical industry Conference Delivering the HLG results in the regions 16-17 April 2009, Usti René van Sloten, Cefic."— Presentation transcript:
1 Global trends in chemical industry Conference Delivering the HLG results in the regions 16-17 April 2009, Usti René 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. 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
14 Strengths and opportunities for the European chemical industry Large integrated domestic market with strong customer industry cluster and reasonable demand growth from industry 2.0 % p.a. Continued strategic restructuring efforts to adapt flexibly to globalised markets High international orientation and global network to external customer industries Until now availability of skilled and motivated workers and scientists 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. Europes 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