30 August 1999 00:00 [Source: ICB Americas]By Sean Milmo
North-Rhine Westphalia (NRW), with its massive concentration of coal mines, steel mills and engineering plants, has traditionally been the economic powerhouse of Germany. But during the past 30 years, its steel industry has shrunk and most of the coal mines in its industrial core of the Ruhrgebiet (Ruhr district) have closed.
Now NRW, Germany's largest state with a gross domestic product of $470 billion, expects chemicals to emerge as one of the pillars of its economic future.
Despite cutbacks in its capacity, particularly for bulk products, the state is still the largest chemical manufacturing region in Germany, accounting for 41 percent of that nation's turnover in chemicals.
Investment in chemicals is considered a way to create jobs, especially when NRW has an unemployment rate of 15 percent that could surge to 22 percent after additional mines, steel plants and other industrial facilities are closed.
In the Ruhr area, chemical manufacturers, local communities, development agencies and NRW's economic affairs ministry have formed ChemSite, a vehicle for encouraging investments in the chemicals infrastructure. In the Rhineland district of the state around Cologne, companies and the public sector have launched a similar initiative called ChemCologne.
A public-private working group has also been established in NRW to encourage the construction of a pipeline to bring in propylene from Belgium and the Netherlands to end a shortage of that feedstock in NRW.
The project, called ChemVision, is backed by the leading chemical companies in NRW, including DSM, Veba Oel, Degussa-Hüls, Rütgers, Bayer, BASF, BP Amoco, Celanese, Elenac and Henkel.
"If North-Rhine Westphalia and the rest of the northwestern European chemical industry are to compete against other chemical centers such as the US Gulf Coast and Singapore, it must have proper pipeline networks," says Dieter Boos, petrochemicals controller at Veba Oel and a ChemVision official.
In the long term, ChemVision plans to provide a platform for the growth of chemical businesses in NRW. The public-private partnership may help set up joint projects like the building of a worldscale ethylene cracker, the establishment of common training and education facilities and the combining of purchasing operations.
At present, the main force for expansion in the NRW chemicals sector is ChemSite, which is effectively run by Hüls Infracor, a Degussa-Hüls services company that runs Hüls's complex at Marl.
Hüls Infracor staffs a small ChemSite office that represents the seven main chemical and associated operations in the Ruhrgebiet area, including two of Veba Oel, two of Degussa-Hüls and one of Ruetgers. Their facilities range from refineries and petrochemical plants to units for producing specialty and tar chemicals.
At the Marl site, the biggest in the Ruhr, Degussa-Hüls and other companies like BP Amoco and RWE-DEA's Condea run a training program that provides a pool of roughly 500 workers for companies at ChemSite locations.
"They are available on a temporary basis, if necessary, and will continue to be paid by Hüls Infracor if they return to the pool," explains Margarete Gersemann, site marketing manager for Hüls Infracor and ChemSite. "This is a very flexible employment scheme for the local chemical industry, which is not found anywhere else."
Hüls Infracor also provides other services for ChemSite companies, such as analytical laboratories, project engineering, maintenance work and raw materials procurement.
With the support of the NRW government, ChemSite has even drawn up a tax incentive plan to attract outside investors by enabling them to avoid Germany's high corporate taxes.
"We are advising companies wanting to invest in production capacity at a ChemSite location to set up their marketing headquarters for the project in Switzerland or the Netherlands," says Michael Czytko, Hüls Infracor's vice-president of site development. "The taxes will then be lower than those paid by an investor in the US."
Thus far, the two largest projects to be announced since the ChemSite initiative was started will both be at Marl. One is an 80,000-ton-per-year base oil unit being built by Puralube of the US at a cost of DM 80 million ($44 million). The other is a 330,000-metric-ton-per-year acrylic acid plant to be run by a joint venture between Stockhausen and Rohm and Haas.
Before the end of the year, Rütgers is scheduled to reveal details of a joint venture at its Castrop-Rauzel site between itself and a fragrance producer. The plant will make a fragrance precursor using Rütgers' aromatics technology.
"We are currently talking to around half a dozen companies about investments totalling around DM 1 billion," Mr. Czytko says. "Our objective is to reach agreements on projects worth around DM 250 million per year--around one-quarter of those we start talking to companies about annually."
ChemSite's main competitor for chemical projects is Antwerp, which is 70 to 80 miles west of it and has the advantage of being a major port. Antwerp also has a more concentrated infrastructure for chemical operations. Yet ChemSite is more centrally located within the European Union, particularly in relation to the large German market.
Being an area of high unemployment, it can also offer government aid of up to 18 percent of capital expenditure for new manufacturing and R&D facilities.
NRW also has a network of R&D institutions, comprising 50 technology centers and 26 technology agencies. These support startup companies, of which there have recently been nine in the chemicals sector. Another 40 potential new chemical businesses are being considered for financial support under an NRW small-enterprises program.
The state needs such entrepreneurial flair to maintain an expansion of its chemical industry. Small and medium-sized companies that employ fewer than 500 people account for 87 percent of NRW's chemicals operations.
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