EPCA ’06: INTERVIEW-Europe in tough fight-Heuser

23 September 2006 17:50  [Source: ICIS news]

By Hilde Ovrebekk

 

MONTE CARLO (ICIS news)--High feedstock costs, competition from the Middle East and Asia and the future of quarterly olefins contracts are the burning challenges facing the European petrochemicals industry.

 

But the sector was still thriving and should be able to cope with these as it had in the past, Albert Heuser, president of BASF’s petrochemicals division told ICIS news on Saturday on the sidelines of the annual EPCA petrochemicals conference.

 

He said a shortage of material and engineering skills could mean some of the mega projects planned in the Middle East may become more costly than projected which could lead to delays and even some being scratched, giving the European industry some respite.

 

“In Iran there was a cancellation of some projects and we will see some more,” he said. “And the question will be how good the economics in Asia and China will develop over the forthcoming years and if they can absorb the increased capacity.”  

 

BASF has in the past few years invested $4bn in Asia and will invest another $1bn over the next three years.

 

About 10 days ago, the company signed an agreement with China’s Sinopec to increase the capacity of its Nanjing cracker to 750,000 tonnes/year from 600,000 tonnes/year.

 

This will also help the company enhance its ethylene and butadiene value chains, he said. The total additional investment at the site would amount to $500m.

 

In Europe, the industry has seen profit margins decrease in 2006 compared with 2004 and 2005, Heuser said, but added that demand at the moment was strong.

 

“Looking to the supply situation in Europe there are a number of scheduled outages and I expect that in the upcoming months we will see a margin increase,” he said.

 

Heuser said margins were also hit by the prevailing quarterly ethylene and propylene contract settlements and called for a change to monthly contract negotiations.

 

“We need monthly prices instead of quarterly prices. The market of the raw material is that volatile that it’s not a good situation for quarterly prices. That’s the case for both sides,” he said

 

“I think it’s time now to really talk about this,” he said, adding that the company already has some bi-monthly ethylene contracts in place with some of its customers.

 

Heuser said that long-term BASF would be looking for alternative feedstocks and at the supply chain and logistics for raw material supplies.

 

He said this was currently just in the research stages and no firm plans on the use of alternative feedstocks such as biofuels or coal were in place yet.

 

Heuser, who has taken over as president of BASF’s petrochemicals division from industry veteran Werner Praetorius, who retired earlier this year, said that in his new role he would develop his predecessor’s strategy further to make sure the company keeps growing.

 

“I have known Werner Praetorius for a very long time and we have worked together on many projects,” Heuser said. “I was responsible for the restructuring of Ludwigshafen, as the site manager from 2002 until last year.”

 

He said that some work has been done in the industry to improve its situation but that a lot more needs to be done in the future.

By: Hilde Ovrebekk
+44 20 8652 3214

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