EPCA ’13: INSIGHT: Look out for China, Middle East, US disruptions

07 October 2013 18:39  [Source: ICIS news]

By Nigel Davis

BERLIN (ICIS)--It always make sense to challenge received wisdom periodically to at least consider some of the outlying factors that could have a major impact on business.

European Petrochemical Association (EPCA) delegates on Monday were asked to entertain a number of alternative futures posited by senior industry executives and by the historian Niall Ferguson.

The world will continue to rely on oil, gas and coal for the foreseeable future even as the use of renewables is pursued and energy efficiency improves, BASF CEO Kurt Bock said. BASF may continue to look at the possibility of processing more renewables but has calculated that it would take a land area the size on Montenegro just to replace the feedstocks needed for the giant Ludwigshafen production site in Germany with renewables.

The drive for sustainability needs to be better addressed, Bock suggested. The hydrocarbon age features strongly in the chemical giant’s thinking, its reality built around continued hydrocarbons use and conversion into the materials that a rapidly developing world needs.

From a petrochemical or chemical industry executive’s perspective, it is very much about feedstock availability, cost certainly, but also about what can be made and sold successfully in developed and developing world markets.

SABIC CEO Mohamed Al-Mady challenged Europe’s petrochemicals players to think long and hard about the parts of the business that might suit them best. Businesses related to food and healthcare perhaps, with the idea being that some fundamental chemicals processing might be better left to players with a lower cost base.

Europe does, perhaps, need to develop a more robust chemical industry and one that can capitalise better on regional strengths. Europe’s chemicals players should focus on three areas, Al-Mady suggested: research and cost efficiency; technology and innovation; and developing solutions for some of the over-arching trends affecting demand and wider society in Europe.

Expand a knowledge-driven chemical industry focused on the needs of the consumer and on the food, health and biotechnology industries was Al-Mady’s message.

There are barriers to such a move, including Europe’s difficult regulatory environment and education systems that probably are not producing the people that will be needed to drive the industry forward. The EPCA has been valiantly supporting science, technology, engineering and mathematics (STEM) education in Europe for some time.

Historian Niall Ferguson’s most direct challenge to current industry thinking was that growth of mega-cities in China and in the emerging economies would drive strong chemicals and plastics demand growth. He talked about the end of the age of petrochemicals, and suggested that “the age of plastics could end in our lifetimes”.

Bio-engineering and other break-out technologies may change the face of the chemical industry. More likely, perhaps, history may show that chemicals production, in Europe and elsewhere, suffered under the influence of shocks to global oil production, weakened China demand and slower growth in the US.

Ferguson warned that conflict in the Middle East could persist for a decade, and that oil prices could be kept high as a result. Supply disruptions would see to that.

China’s financial problem is as big as that in the US in 2007, he suggested. “When the Chinese financial crisis comes along you’ll all have to revise your projections,” he said.

However, the Laurence A Tisch Professor of History at Harvard University believes that the monetary and fiscal problems of the US are probably the most significant the world faces.

Read Paul Hodges’ Chemicals and the Economy blog
Bookmark John Richardson and Malini Hariharan’s Asian Chemical Connections blog

By: Nigel Davis
+44 20 8652 3214

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