22 February 2013 16:48 [Source: ICIS news]
By Nigel Davis
LONDON (ICIS)--Europe’s chemical producers will have to redouble efforts to reduce costs and lift manufacturing efficiencies if they are to have any success in the struggle against low cost imports.
The smarter use of energy is one strategy they are having to adopt to remain competitive in Europe’s high cost and increasingly low carbon operating environment.
A senior industry executive in the UK warned at the end of January in a local newspaper article of the latest threat to Europe’s process industry base: the potential impact from shale-gas based chemicals production.
“A wave of competitive products will be heading in the direction of Europe - of that there is no doubt,” chairman of SABIC UK Petrochemicals, Paul Booth, said. He was quoted in an online edition of the Evening Gazette covering the town of Middlesbrough and the Teesside area. “It will get harder to export into these markets if we are not able to compete on energy and feedstock prices in the long term.”
Teesside is home to one of the most important chemicals and industry clusters in the UK, which has long battled to retain the presence of the major multinationals. SABIC has a top-rated liquids cracker at its Wilton site in the area as well as important downstream units.
Wilton has seen its ups and downs but was hit three years ago when Dow Chemical closed its Wilton ethylene oxide and glycols plant. The knock-on effect was significant and led to the closure of a string of plants operated by surfactants maker Croda International, a decision which rattled down numerous product chains.
The North East Process Industries Cluster, or NEPIC, has been fighting for years to retain investment in the UK’s North East and has sought to be at the forefront of the push towards a lower carbon economy.
Now, it is the coordinator of the EU’s Low Carbon Industrial Manufacturing Parks project (LOCIMAP) which has been devised as a response to the challenge of low-cost energy economies.
LOCIMAP will involve chemical and other energy intensive manufacturers and production sites across the EU; resources and consulting companies; the business school INSEAD; and Europe’s chemicals site promotion group (ECSPP). “The project will identify the practical paths which Europe can take to grow a revitalised low carbon industrial base,” the ECSPP says.
This is more important than it perhaps, at first, sounds. “A major objective is to achieve much closer integration in manufacturing complexes so they can operate at increased efficiency both of energy and material use, and with lower emissions,” says the ECSPP.
Europe’s chemicals sites have to operate in an increasingly strictly controlled and high cost energy environment. And unlike the US, European countries are, for the most part, moving painfully slowly to develop shale gas resources.
“Industrial parks were developed originally in Europe to make best use of local resources – and they continue to play an important role in wealth creation,” the ECSPP says.
“However, depletion of primary energy sources in Europe allied to rising cost and regulatory pressures on all manufacturers, especially energy intensive ones, are increasing the need for businesses to look for new ways of operating.
“The products of the parks are essential for developing a low carbon economy in Europe – without their contribution none of the sustainable products we need to build a low carbon future can be made.”
The latter case is usually well made within the EU but industrial competitiveness remains a critical issue, particularly given Europe’s costly and not always outwardly industry-friendly operating environment.
Primary manufacturing has been under threat for decades from lower cost parts of the world but that threat has increased, in chemicals largely from advantaged energy and feedstock cost suppliers and from those operating in higher growth markets.
“With their original raison d’etre, parks possess the technology, skills and the infrastructure to re-invent themselves and provide Europe with a needed competitive boost,” the ECSPP says. The situation has become more critical given the rapid impact on US energy costs of unconventional gas.
The LOCIMAP project is expected to identify new models for integrated parks over the next 10 to 20 years. Part of the challenge is to identify practical responses to the shifting competitive threat which can be appreciated by policy makers and the wider European public.
Europe’s industrial sites have been moving with the times. The biofuels company Ensus at Wilton, for example, uses animal feed wheat to produce bioethanol, animal feed and carbon dioxide for soft drinks manufacture and food production. The plant meets one third of the UK’s bioethanol needs, according to the company and links the industrial site with the local agricultural community. It suffered in 2011/12, however, from extremely poor market economics.
Air Products is constructing the world’s largest renewable energy plant to use plasma technology at nearby Billingham. Adjacent to the North Tees Chemical Complex, the facility will provide renewable electricity for up to 50,000 homes by processing 350,000 tonnes of municipal waste. The plant creates and uses synthesis gas from waste to generate electricity. Ultimately, it could produce hydrogen for use in transport.
Increasingly industrial parks in Europe are looking at their options for energy use and for waste processing, says NEPIC’s technical director Mark Lewis.
“We have to understand where the energy is coming from. Integration and efficiency is part of the answer,” he says.
Wright is the LOCIMAP project coordinator. “Now we are looking at how the Teesside complex can be linked into the local community,” he adds. “Also, we want to look at unconventional energy sources and carbon capture and storage options.”
This sort of thinking will drive some of the work for the LOCIMAP project which will run until the end of 2014.
Manufacturing industry in Europe is going to compete by being efficient, Wright says. “We’ve got to be smart about the resources we do have.”
Industrial sites across Europe are looking at how they can manage their energy use better; how they can integrate more closely with local people, local agriculture and ultimately better manage their carbon footprint.
There was news this month, for instance, that the Krefeld-Uerdingen industrial park in Germany and utility firm Trianel had approval in-principle from authorities in Dusseldorf for a 1,200 megawatt (MW) combined gas and steam power plant. The project replaces earlier plans for a 750MW coal power plant.
The Krefeld-Uerdingen chemical park is a centre for the production of polycarbonates and polyamides and the world’s largest production location for inorganic pigments. About 7,000 are employed on the site and it is a regional hub for training.
The park can trace its roots back to 1877 but a more recent creation, the small industrial zone in Kalundborg Denmark, which is 120km west of Copenhagen, is being used by LOCIMAP as an example of how business economics have driven the development of a low carbon industrial complex.
The local community at Kalundborg benefits from the heat and power raised by the site’s industrial activity. “Over time, this unplanned industrial park has evolved from a single power station into a cluster of companies that rely on each other for material inputs,” the ECSPP says.
The project was started in 1972 and 16 inter-material contracts had been negotiated by 1994. Material and energy exchanges in 1995 amounted to 3m tonnes/year with total savings estimated at $10m a year and an investment payback time on average of six years, the ECSPP adds.
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