INSIGHT: No more 'business as usual' for Europe

30 September 2007 17:44  [Source: ICIS news]

By Nigel Davis

European markets are changingBERLIN (ICIS news)--It can never again be “business as usual” in the European petrochemical industry, EPCA president and CEO of SABIC Europe, Boy Litjens, said on Sunday on the sidelines of the industry's annual meeting.

“You have continually to work on your cost profile. But eventually this comes to an end," he said, neatly expressing the reality facing all petrochemical producers based in this mature but increasingly complex market. Click here to hear the interview.

“You more and more have to focus on the high end,” he added, referring to European producers move into specialised markets and away from commodities that can be produced more cheaply in feedstock advantaged parts of the world.

The European industry faces three major challenges, Litjens believes: increasing capacity in the Middle East; increasing environmental pressure; and an increasing legislative burden. But it can survive and in many respects flourish if it meets these challenges head on.

Demand for petrochemical derivative will continue to grow, Litjens suggests, but Europe’s share of the market will change as will supply/demand balances over time. Europe's petrochemical exports will diminish. The trick will be to balance new capacity - scrap and build he has said - with changing, but growing, demand.

The European petrochemicals picture will become more complex with companies having to focus further on logistics; security of supply; routes to market and corporate sustainability, among other factors. The European petrochemicals business is sustainable; it’s just that business life is going to get more difficult.

Companies such as his own with a “dual leg” strategy, with access to low-cost petrochemicals production in the Middle East, will be most successful, he suggests. It is difficult to think in this respect where he could be wrong.

A new cracker for Europe would be “a challenge” but not impossible. “It’s difficult to make the construction of a cracker feasible," he says but eventually the construction market will cool down.

Give it two or three years and it will be possible to look at cracker investment in Europe in a more reasonable light. But by that time the view will be from the petrochemicals trough and not from the industry's current plateau.

By: Nigel Davis
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