Europe to suffer from lack of shale gas extraction

Interview article by Jonathan Lopez

ANTWERP, Belgium (ICIS)–Europe will suffer in the long term for not using its shale gas resources as shown by the recent influx of investments into the US and making Europe’s chemical industry “stagnant”, according to Antti Salminen, vice president for supply chain management at Finland’s Kemira, on Monday.

Salminen said the chemical industry in Europe is not in decline but “stagnant” as a consequence of the shift in demand patterns, which are turning into developing economies, or the shift in manufacturing, which is turning into the US on the back of the shale gas boom.

“Although it is much riskier to start those operations [shale gas extraction] here in Europe, I personally think in the long term we’ll be suffering from it,” he said.

Although he admitted, on the other hand, the challenges the industry would potentially face in Europe, and cited how the shale gas reserves in the US are in uninhabited areas while Europe’s are under densely populated ones.

“In any industry there are two factors which are the main contributors to company’s decisions on where to locate their manufacturing. One is the demand, the proximity to customers, and demand in Europe is stagnant as it comes more from Asia-Pacific.

“The other factor is the cost of manufacturing. In some industries is dictated by labour cost but in the chemical industry is dictated by the cheap raw materials, and those are not in Asia, not in Europe, but in North America at the moment,” he concluded.

Nevertheless, and although the picture could look “grim”, Salminen said the chemical industry could still find in Europe a lot of pockets for potential growth, citing the paper industry.

While the paper industry overall is not doing well, more and more paper consumed in the world is recycled, where the use of chemicals is intense.

“What happens within the paper industry is that you have more requirement to use more recycled fibre, instead of virgin wood fibre. The more recycled the paper, the poorer the raw material, so to get more quality you need to add more chemicals into the process like bleaching agents, retention agents and so on,” he said.

Therefore, although the paper industry is declining the dynamics within it could create more demand for chemicals.

Kemira‘s Salminen spoke to ICIS on the sidelines of Logichem 2014, a conference on logistics and the supply chain in chemicals being held between 20-22 May.