Market intelligence: Europe's chemical sites seek to become more competitive

01 March 2013 09:07  [Source: ICB]

Chemical producers in Europe 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 of the latest threat to Europe's process industry base: the potential impact from shale gas-based chemicals production.

EU Chemical site

 European chemical sites must become more efficient

"A wave of competitive products will be heading in the direction of Europe - of that there is no doubt," the 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," he added.

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 was hit three years ago when US-based Dow Chemical closed its Wilton ethylene oxide (EO) 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 that 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 co-ordinator 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 the European Chemical Site Promotion Platform (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.

STRICT ENERGY CONTROLS

Europe's chemicals sites have to operate in an increasingly strictly controlled and high-cost energy environment. And European countries are moving painfully slowly to develop shale gas resources.

"Industrial parks were developed originally in Europe to make best use of local resources - and 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 said. 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 that can be appreciated by policy makers and the wider European public.

Europe's industrial sites have been moving with the times. Biofuels firm Ensus at Wilton 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.

US-based 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 co-ordinator. "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 thinking will drive some of the work for the LOCIMAP project, which will run to 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 in February, 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.


By: Nigel Davis
+44 20 8652 3214



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