EPCA '13: European petchems competitiveness exposed at EPCA

05 October 2013 12:00  [Source: ICIS news]

The Reichstag building, BerlinLONDON (ICIS)--Performance and competitiveness are the critical issues forming the backdrop to the 47th European petrochemical Association (EPCA) meeting which begins this weekend in Berlin.

The competitive position of producers in Europe is exposed by the shale gas revolution in North America and the continued growth of petrochemical production in the feedstock rich Middle East.

The performance of companies operating in the European market hinges also on the region’s on-going weak economic position.

Ethylene production in Europe in the first half of 2013 was still lower than in the equivalent period of 2007 - down by 16% - data from the Association of Petrochemical Producers in Europe (APPE) show. Propylene output was down 9% on the same basis and 3% lower than in the first half of 2012. Butadiene output was down 11% from H1 2007 and down 7% from H1 2012,

Petrochemicals output is recovering, industry economists believe, but, unusually, growth is lagging behind that of specialties. In Germany, there has also been an upswing in polymers and consumer chemicals, a report on the EPCA meeting in this week’s ICIS Chemical Business indicates.

Industry executives are also not overly optimistic for 2014. “I don’t expect a big change in Europe in 2014 which looks likely to be much the same in terms of demand this year,” president of BASF’s petrochemicals division, Rainer Diercks, said.

“Maybe towards the end of next year there could be a slight improvement in demand but even that is difficult to print,” he added. Diercks is an EPCA board member.

Petrochemical producers in Europe have cut back hard to try to maintain competitiveness in such an uncertain and low-growth environment. Cutbacks are being made from the cracker to the polyolefin plant.

But restructuring is likely to be ongoing even as Europe moves out of recession.

“There is a need for some restructuring with the present total ethylene capacity being reduced from a current 23.8m tonnes/year to perhaps 21m tonnes/year, chairman of consultants International eChem, Paul Hodges, said.

“It has to be well planned so that good plants do not disappear because of random closures. To do nothing would make things worse.”

The raw data highlight Europe’s dilemma. Capacity utilisation across the EU chemical industry was only 78% in the second quarter compared to a long-term average of closer to 82%, European chemicals trade group Cefic showed on Friday. EU petrochemicals production was down 3.0% between January and July this year compared with the same period of 2012.

But EU petrochemicals output has been rising since May, although polymers output has fluctuated in recent months. Petrochemical prices were down 4.2% in the second quarter and plastics prices down 1.4%.

Europe’s competitive position in chemicals remains under threat from the shale gas boom in the US, Cefic said. It had trumpeted the fact that the region’s export surplus was on-track to beat the record €49bn of 2012 but said that an increase in EU net chemical exports so far this year was due to a drop in imports rather than an increase in exports.

Petrochemical industry players producing in Europe are concerned about their lack of feedstock and energy cost competitiveness.

BASF CEO Kurt Bock told the Cefic general assembly on Friday that EU policymakers should focus on an industrial policy that fosters innovation and warned of the impact of unilateral climate change policies.

Bock will speak at the EPCA meeting in Berlin on 7 October, alongside SABIC CEO Mohamed Al-Mady and historian Niall Ferguson, on the topic of global leadership and the chemical industry.

By: Nigel Davis
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