05 October 2012 19:05 [Source: ICIS news]
By Nigel Davis
LONDON (ICIS)--It will be integration in Europe that helps drive chemicals production and profitability.
Physical integration, in terms of the companies, suppliers and production distribution networks that ensure that vital products reach the required destination most cost-effectively. And the sort of capital and intellectual integration that promotes ideas and talents to allow chemical producers to grow.
And grow they will, according to recent work from the business research institute Prognos. But only as long as Germany supports the links that are so important in multiple value chains in the economy and applies its low carbon energy policies, the Energiewende transition, effectively.
Chemicals production in Germany could increase by 40% by 2030, the institute concludes in a study commissioned by the industry association VCI.
“If the politicians in Berlin are making the right decisions, chemistry in Germany will continue to grow over the next decades,” outgoing VCI president Klaus Engel says. “The chemical industry will be successful economically, and it will make manifold contributions to a better quality of life and more prosperity for our society.”
Of course, it has to be allowed to do this, so the industry is lobbying hard against an ever more burdensome regulatory environment. It is deeply concerned about the energy transition and Berlin’s plans to phase-out nuclear power.
The German chemical industry’s integrated production network, its Produktionsverbund, and value chains that snake through the national economy can, the study says, ensure solid growth.
“It is worth noting that chemistry has an essential role throughout these structures,” adds the VCI.
The Prognos study takes into account global trends and the shift of chemical markets to emerging markets such as those in Asia and Latin America.
The competitive pressure will increase, but it suggests the chemical industry can respond with a multi-layer strategy.
There is possibly nothing new here. The study suggests that innovation spending in the German industry, including in pharmaceuticals will grow by 4% a year to €18bn ($23bn) in 2030. It expects the focus on specialty chemicals to increase – current sector statistics show that the segment accounts for 43% of the total. Prognos expects the use of bio-based raw materials by the sector to increase by 50% from today.
Process efficiency is key, so the study shows raw material consumption climbing by just 15% to 2030 and energy consumption by 8% while production increases by 40%. These are stretch targets for any producer but particularly those who are expected to transform materials
However, Engel says that the EU’s goal to limit energy consumption in absolute terms is irreconcilable with future growth in the chemical industry.
“For this reason, once more a realistic approach – and not wishful thinking – should be pursued in Brussels in the ongoing discussion about energy efficiency and industry,” he adds.
The research company has developed two scenarios based largely on German industrial policy. In one, de-industrialisation scenario, value chains are broken and it calculates an overall cost of €440bn for the national economy.
“If the three cornerstones of energy policy – ie safe, clean and affordable – are no longer guaranteed, deep cracks will form in our economic system. Breaking the well-established value chains in Germany would mean serious damage to the industrial core. If we are unable to supply our customers with energy-intensive inputs from chemistry, important industries are bound to relocate elsewhere,” says Engel.
An “innovation-friendly environment” scenario provides a positive economic benefit of some €190bn over the forecast period, although the VCI acknowledges that this needs to be supported by even greater acceptance of the benefits of science and technology throughout education and nationwide and across industries and disciplines.
“It makes much more sense to strengthen Germany as a land of industry in its entirety,” it says.
($1 = €0.77)
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