With Germany taking a slight lead, Europe's chemical industry is slowly
exiting the global economic recession. However, despite expected
marginal growth, concerns are mounting for industry leaders, who face
increasing competition, feedstock cost disadvantages, a difficult
business climate and aging infrastructure.
The outlook for the German and European chemical sectors will be among
the key topics to be discussed on day two of the IHS
Berlin Forum, hosted May 12-14, by IHS Inc. (NYSE: IHS), the leading
global source of critical information and insight.
German chemical industry executives are concerned about the potential
loss of business to more competitive regions, but, in general, they
still have a slightly more optimistic outlook than the rest of European
chemical operators, according to John Page, vice president of consulting
at IHS Chemical. "This optimism is largely because the German economy is
one of the strongest economies in the region," he said. "Germany has a
much larger and more robust manufacturing base than the rest of Europe,
and their facilities are more up-to-date from a technology standpoint,
than the rest of Europe. Most companies expect the German chemical
business to pick up in the coming months, in part due to increasing
"IHS Chemical forecasts an overall increase in German chemical
production of 2 percent for 2014, so we are talking about sluggish
growth here, but it is growth," Page said. "German chemical prices are
likely to drop slightly, by about 0.5 percent, but we expect chemical
sales to rise to €191 billion in 2014. Despite an expected increase in
domestic demand for chemicals, however, very little is going to change
in the foreseeable future regarding the German chemical exports."
Germany, Page said, has historically exported capital goods around the
world. To date, with strong demand for these goods in China and
elsewhere, the German economy has held up based on these exports.
However, going forward, the export outlook for Germany is not as strong.
German exports to countries in Europe such as Greece, Italy, Spain,
Portugal and Ireland have declined due to these countries' anemic
While the European chemical industry continues to recover from a long
and painful recession, it is doing so at a modest pace, and unlike
German producers, not all other European chemical producers can expect
much uptick in domestic demand to brighten their outlook, said IHS.
The European production of chemicals is likely to see a 1.5 percent
increase in 2014 with a modest rise in exports. However, the industry
still faces a bit of a competitive headwind as it endures higher costs
than other, more competitive regions such as North America or the
Mideast. These regions are leveraging the advantages of lower feedstock
costs made possible by the region's shale gas boom. Additionally,
European chemical producers are increasingly facing a more stringent
regulatory and tax environment. At the same time, the industry is
saddled with an aging infrastructure that is quickly falling behind the
technological curve and the advancements being adopted by other global
"Over time, the European chemical industry has seen a gradual change in
its fortunes, with growing costs and a competitive market with many
players," said Michael Smith, vice president at IHS Chemical. "Faced
with uncompetitive energy prices and stagnating demand, European
chemical companies must adapt quickly or suffer the consequences," he
said. "They will face continued tough competition from Middle Eastern,
Chinese and, increasingly, US producers benefiting from cheap energy and
"With an increased import pressure from the United States for vinyls and
caustic soda, for example, some players will choose to exit the market
in the mid-term," Smith added. "Additionally, we expect the closure of
some steam crackers in Europe as well as further merger and acquisition
activity during the next five years as the industry readjusts to the
less favorable market dynamics for much of its chemical products. This
could bring some major change to the industry in Europe, but also
globally in terms of joint ventures, such as the approved joint venture
of the European chlor-vinyls businesses of INEOS and Solvay, which will
improve the healthy competitiveness of the combined operations in
Europe, but also place a major global player in the European market,"
Smith said. "It is good to see that the European Commission's proposed
commitments are aimed at avoiding higher prices, which would negatively
affect businesses and customers in Europe."
Despite the regional challenges, some companies are making new
investments that show signs of positive growth in the European and
German chemical sectors. IHS ChemicalWeek reported 6 May 2014,
that Dutch specialty chemical company AkzoNobel, held its official
inauguration for a membrane-process chlorine plant at the Höchst
industrial park near Frankfurt. The project involved an investment of
€140 million and included conversion of a mercury-cell chlor-alkali
facility and a capacity expansion of 50 percent - to 250,000 metric tons
per year of chlorine and 275,000 metric tons per year of caustic soda.
At a briefing for journalists before the ceremony, Ton Büchner, CEO, and
Werner Fuhrmann, board member/specialty chemicals, put the investment
into context and spoke about the company's strategy. Büchner said that
AkzoNobel is on course to meet its previously announced 2015 targets,
which include a 9 percent return on sales and a 14 percent return on
capital employed, to be achieved through restructuring, cost reduction
and organic growth.
According to IHS Chemical forecasts, West European demand for chlorine
will decline slightly. West European chlorine demand is expected to
decrease to around 8.56 million metric tons (MTT) 2018 from 8.7 MTT in
2013, IHS Chemical said. Since not all of the producers will convert
their production units from mercury to membrane technology, West
European chlorine capacity will also decline, from 11 MTT in 2013 to 9.7
MTT in 2018. Chlorine is well known for its uses as a bleaching agent
and disinfectant, but it is also essential in the manufacture of other
chemicals, including polyvinyl chloride and for other plastics'
On a global basis, however, chlorine demand is forecast to grow from
64.5 MTT in 2013 to 74.3 MTT by 2018, with Northeast Asia being of
course the most dynamically growing region, IHS Chemical said.
In the case of caustic soda, between one and two million metric tons of
production capacity in Europe could be lost by 2018, and the European
vinyls business also is expected to undergo major changes, IHS Chemical
said. The price of ethylene is expected to fall given weak downstream
markets and decreasing oil prices, while ethylene demand in Europe is
not expected to improve much in 2014. The situation is similar for
propylene, noted IHS Chemical.
About IHS Forum
The IHS Berlin Forum is a gathering, hosted by IHS, that brings together
executives from related industries, finance, government, and academia to
gain insights, share expertise, and learn from IHS experts and industry
thought leaders. The IHS Forum will examine key topics around a central
theme-"Europe's Global Competitiveness: Opportunities and Pathways,"
with a particular focus on European economies, monetary policy,
stabilizing labor markets and the European energy scene. The IHS Forum
is part of an ongoing series of events to bring together leading
insights and analysis to explore relevant issues with depth and breadth,
making crucial connections across sectors.
Attendance & Registration
The IHS Forum, Berlin 2014 is being held at the InterContinental Hotel
Berlin from 12-14 May. Further information and delegate registration is
available at http://ihsglobalevents.com/forum/berlin2014/.
Members of the press can register for a complimentary pass to the IHS
Forum in Berlin by sending an email with name, title and outlet details
A full agenda and additional information can be found here: http://ihsglobalevents.com/forum/berlin2014/agenda/
About IHS (www.ihs.com)
IHS (NYSE: IHS) is the leading source of information, insight and
analytics in critical areas that shape today's business landscape.
Businesses and governments in more than 165 countries around the globe
rely on the comprehensive content, expert independent analysis and
flexible delivery methods of IHS to make high-impact decisions and
develop strategies with speed and confidence. IHS has been in business
since 1959 and became a publicly traded company on the New York Stock
Exchange in 2005. Headquartered in Englewood, Colorado, USA, IHS is
committed to sustainable, profitable growth and employs more than 8,000
people in 31 countries around the world.
IHS is a registered trademark of IHS Inc. All other company and
product names may be trademarks of their respective owners. © 2014 IHS
Inc. All rights reserved.
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