Spain recovery boosts chems as Med cluster gathers interest

Focus article by Jonathan Lopez

LONDON (ICIS)–Spanish chemical companies’ prospects look far from being derailed with a strong domestic economic recovery securing healthy demand, while the newly created ChemMed cluster is deep in negotiations with a number of companies aiming to host their operations at its Tarragona site.

The Federacion Empresarial de la Industria Quimica Espanola (FEIQUE) published on 20 October its forecast for 2015 and 2016 with average growth volumes of 3.6%. Employment in Spain’s chemical industry will finally recover from its pre-crisis level by the end of next year with almost 200,000 employees, according to FEIQUE’s estimations.

While many European chemical companies have reported challenging performances in past months both domestically and overseas, the Spanish chemical industry is going through a revival with domestic demand healthy after years in which the beleaguered economy suffered the consequences of a housing bubble burst in 2008.

“In 2016 we expect domestic demand to continue firm as the end consumers of our industy like automotive, construction or food and drinks are all growing at healthy rates of 5% or 6% [in output, year on year],” said Juan Antonio Labat, general director at FEIQUE.

According to Labat, the Spanish chemical entrepreneurial network is now posting healthier growth rates with small and medium enterprises (SMEs) being “back in the market” as they are too small to export and while demand within the country was subdued, many of them had to file for administration.

The latest GDP growth forecasts compiled by the International Monetary Fund, published earlier in October, placed Spain as the best-performing European economy among the EU members, estimating GDP will grow by 3.1% in 2015 and by 2.5% in 2016, year on year. 

The long-standing Tarragona chemical industrial park in Spain’s northeast Catalonia reinvented itself in July to be called the ChemMed Cluster, aiming to attract foreign investment to take advantage of the shared logistics and lower associated costs the park offers. Chemical majors like Dow Chemical, BASF or Covestro are some of the firms with production facilities at the park.

Teresa Pallares, the general director at Tarragona’s chemical trade group, which together with Port of Tarragona has set up the ChemMed Cluster, said advanced negotiations with two foreign chemical companies are taking place, adding their marketing activities were continuous and spun into the European Petrochemical Association (EPCA) in early October to present their business case to potential investors.

The marketing spree seems to be paying off. According to Pallares, one company is looking to set up a plant which will produce, with bioethanol as feedstock, chemicals for the food and cleaning products sectors.

“This is the type of investment which coincides with our focus on innovative projects. If the negotiations succeed and the plant is started up in Tarragona, that will highlight how the park is also open and able to receive the new generation of chemicals,” added Pallares.

Equally, she said another agrochemical company is looking at options to establish a fertilizers plant which could create up to 80 jobs. 

Although ChemMed’s general director would not disclose more details, the interest shown by foreign chemical companies since the official presentation of ChemMed in July shows how Spain is back in the minds of manufacturing executives as a place where long-term investments can be made.

However, these positive prospects could be overshadowed by external – in many cases political – factors which escape companies’ control, warned FEIQUE.

“The proposals we have sent to the all political parties [ahead of 20 December’s general election] stress Spain needs a new energy reform: it’s unconceivable our manufacturing sector is paying for energy 20% more than the European average,” said Labat.

Equally, he said overregulation from the EU regarding chemicals is aggravated in Spain as both the state and the regional governments issue “at times differing” regulations for the chemical industry, in which the industry spends 4.5% of its costs to implement.

“Spanish chems are posed for a bright future if all factors come together. It is also encouraging to see the largest growth rate happening in the specialty chemicals subsector. In fact, pharmaceuticals has been the subsector with healthiest growth over the crisis years, becoming very strong and very profitable. Cosmetics have also held up,” added Labat.