HELSINKI CHEMICALS FORUM COMPETITIVENESS – FINANCIAL CONSTRAINTS Framework Conditions for a Sustainable and Competitive Chemical Industry in Europe Hubert Mandery Cefic Helsinki, 21 May 2010

Prof. Jean-Marie Lehn – Nobel Laureate 1987 Chemistry – The Central Science in the 21st Century “ Chemistry will undoubtedly remain the central science in the 21st century. After bringing to mankind the fundamental discoveries which have changed our daily life for the last two centuries, it will now be at the heart of a new scientific era, where many sciences will merge and cross-fertilize for the benefit of innovation. Thus, chemical creativity and knowledge will be needed everywhere.” Prof. Jean-Marie Lehn – Nobel Laureate 1987 (Chemistry for Life 1997)

The European Chemical Industry: Still a Successful Global Player Contributes to 29% of the World’s chemical sales Represents 29,000 companies (96% SMEs) Employs 1.2 million people Generates € 455.8 billion of revenues Creates a trade surplus of € 42.5 billion PL 2.3% SE 1.4% AT 1.3% FL 1.3% CZ 1.1% HU 0.8% PT 0.6% RO 0.6% Others 2.3% Source: Cefic; 2009 figures; excluding pharmaceuticals

EU Chemical industry losing share in a fast growing global market Geographic Breakdown of World Chemical Sales - 1998 vs. 2008 1998: € 1095 billion 2008: € 1950 billion EU Chemical industry losing share in a fast growing global market Source: Cefic Chemdata International

High Level Group on the Competitiveness of the European Chemical Industry (2009) Recommendations on Innovation and Research 10 Regulation 3 Human Resources 3 Energy & Feedstock 5 Climate Change Policy 5 Logistics 5 International Competitiveness & Trade 8 39

EU Chemicals Trade Flows in € Billion (2009) NAFTA 20.5 32.2 Rest of Europe 29.5 19.5 Asia* 29.6 22.5 LAC** 3.1 7.0 Japan 5.3 5.1 Africa 2.4 8.0 Rest of the World 1.4 5.4 Source: Eurostat and Cefic * excl. Japan; **Latin America and the Caribbean

EU Chemicals Trade Balance with other Countries/Regions USA Japan Brazil Russia India China South Korea Middle East Asia Rest of Asia Basic Inorganics   Petrochemicals Polymers Specialty Chemicals Consumer Chemicals Chemicals (sum) EU has a trade deficit and its competitive position weakened EU has a trade surplus but its positive competitive position weakened EU has a trade deficit but its weak competitive position improved EU has a trade surplus and its healthy competitive position improved (2000-2004) vs. (2005-2009)

Trade and Competitiveness: Open Markets and Fair Competition No weakening of the current European Trade Defence Instruments EU to pursue Free Trade Agreements (Korea, India, etc. ) Address double pricing Strive for more global harmonisation of customs procedures Level playing field for access to raw materials

Smart Regulation: Still a Dream Plethora of chemical legislation: about 1000 EU legislative texts in 15 years Inconsistencies: lack of coordination (Toys Directive, RoH’s, Construction Materials, etc.) Uneven enforcement in Member States: IPPC No or weak enforcement: imported pharmaceutical ingredients REACH: publishing of notified research substances € 1 bn burnt and only few results: Biocides Directive

REACH: Unique, Complex and Ambitious Industry is highly committed to make REACH work EU substance legislations must be consistent with REACH (RoHS, Biocides, ...) Uniform enforcement within EU wanted Regulatory convergence ? Not on the ambitious level of REACH Conceptional flaws to be remedied (SIEF concept …) REACH: a barrier to trade? GPS (Global Product Strategy) – industry’s contributions to regulatory convergence and to the SAICM goals

Climate Change – a Global Challenge requiring Global Solutions Unique European ETS : unilateral burden for EU manufacturers Chemical Sectoral Agreement: no partners outside EU found Border Tax: risk of trade war Premature and overly ambitious: -30% carbon reduction goal by 2020 Action on climate change is a huge business opportunity, but Europe must get it right; Guiding principle: resource efficiency

Innovation Essentials Educating and attracting talent: meet new skills demands Topical innovation networks on key societal challenges New innovation policies and instruments Cooperation throughout the value chains and across sectors and borders Intellectual property protection & fight against counterfeiting Confidence and trust from consumers, customers and investors Smart regulation

Logistics Recommendations Further develop local cluster platforms Foster wider use of intermodal transport Revitalise railway freight transport Address the massive congestion of the road network Close gaps in the olefin pipeline network

Conclusions: Quality Cooperation between Industry and Politics needed Innovation is key for more growth with less resource consumption Smart regulation takes the competitiveness of industry into account Level playing field for sourcing energy and feedstock Open markets with fair competition