HOUSTON (ICIS)--The European chemicals industry needs to adapt to survive in a region caught between multiple challenges, Versalis CEO Daniele Ferrari said on Wednesday.
"I think Europe has been showing in the past from its history that it's capable of adapting to change," he said during the IHS Chemical World Petrochemical Conference.
The challenges to overcome include high operation costs, low operational efficiency, economic stagnation, regulations, feedstock challenges and being squeezed between the cost-advantaged US and Middle East, he said.
Rather than "one magic solution" to these problems, Ferrari recommends an approach which focuses on innovation while balancing costs with demand.
Innovation can result in products that add value and serve new and growing markets, for instance with advanced polymer nano-composites and acrylonitrile butadiene styrene (ABS) for 3D printers, he said.
Partnerships can enhance a company's ability to innovate. The chemical industry can team up with bio-technology and crop science companies. Partnering with licencees allows both companies to benefit from the experience of production, he said.
In balancing costs with demand, the European chemicals industry has been able to increase efficiency and improve flexibility, Ferrari said.
Europe's chemicals industry has reduced its energy intensity by half in the last 20 years while simultaneously increasing production, outpacing efficiency of all other European sectors, he said.
Even so, regulations under discussion to further reduce greenhouse gasses (GHG) would make it difficult or impossible for a significant portion of these efficient manufacturing plants to continue operating, he said.
"No large economy can afford to abandon its chemical industry," he said.
At the same time, industry has to be ready to abandon projects that are not the right size for demand. In the last 10 years, 1.5m tonnes of ethylene and polyethylene capacity has been cut off in Europe.
Flexibility can be a major factor in balancing cost and demand, allowing companies to use a wider-variety of feedstocks.
"The cost of feedstocks needs to be kept in mind when doing investments," he said.