INSIGHT: EU eases in to high-level chemical view

13 September 2007 17:49  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS news)--Does the fact that the EU has established a High Level Group on competitiveness in chemicals show how important its politicians and bureaucrats believe the sector is to the EU economy? Or does it mean that there is growing concern about the sector’s longer-term future?

The group met for the first time this week and will over the next year and a half look at competitiveness issues in areas including innovation, logistics, energy and regulation.

Whether they like it or not, producers' actions are increasingly influenced by political decisions, the most damaging recently being the adoption of the draconian Reach chemicals registration and authorisation rules.

Without doubt, years of lobbying by industry groups - as well as the clamour of the greens and other NGOs about chemicals - have lifted the industry’s profile.

The good news following the first chemicals HLG meeting this week was the broad consensus on what needs to be discussed.

The EU’s HLGs are not simply talking shops: there have been high-level groups for aerospace, automobiles, shipbuilding textiles and pharmaceuticals as well energy, environment and competition.

The chemicals HLG is populated by members of the European Commission, including the commissioners for industry, environment, science, trade, energy and transport; members of the European Parliament (MEPs), representatives of the members states, chemical sector executives and representatives of academia and NGOs. It has a 10-20-year time horizon.

Reports from the HLG will be taken seriously. At the second meeting of the group, scheduled for 18 December, the views of an HLG working party on innovation will be discussed. It will make recommendations for action.

Reach is off the agenda as far as the chemicals HLG is concerned but regulation generally is not.

Chemical companies feel aggrieved about Reach but they should watch the results of HLG talks carefully.

Europe is not likely to go it alone on other measures of such importance just yet but the full consequences of other decisions of largely a political nature - such as those relating to energy and climate change - have a considerable impact on chemicals.

The European Commission acknowledges that Europe’s lead position in chemicals is at risk from the shift of production capacities to Asia and the Middle East and the fact that emerging countries are the new drivers of growth in the industry, with Asia particularly dominant as the manufacturing hub.

To remain competitive and to keep a high level of employment in chemicals, Europe has to retain the ability to attract investments, the EC says, in its thought starter for the new group.

How can Europe modernise and keep existing petrochemicals capacities, it asks. That is a critical point given the fact that there has been little investment in the segment in the EU over the past 15-20 years. The average cracker size is 450,000 tones/year compared with what is currently widely seen as world-scale – 1m tonnes/year.

It accepts that administrative and regulatory costs need to be kept under control. It would help if best practice were spread more widely across the sector, it says. The chemical industry needs a highly skilled workforce. Europe relies heavily on small to medium sized chemical enterprises.

So will the chemicals HLG light any fires? Possibly not.

It gives the big EU chemicals producing countries - Germany, France, the UK and Italy - a chance to voice their concerns for the future. It will highlight the fact that chemicals is a diverse and complex business: the many sub-sectors have different drivers and dynamics and policy requirements.

It will, however, come to conclusions that will affect chemicals in Europe for many years. Future competitiveness is a subject not to be taken lightly. If the private and public sectors can work more closely topgether to create more wealth and provide more jobs more sustainably, then all the better.

By: Nigel Davis
+44 20 8652 3214

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